Uber Risky
August 26, 2016 8:25 AM   Subscribe

These days, everybody's betting on Uber. In the firm's seven years of existence, it has attracted nearly $15 billion dollars in funding via a nearly-unprecedented 14 rounds of investment. While Uber's management have made it intentionally difficult for small investors to own shares of the company, big investors are betting on Uber in droves. All this led Quartz's Steve LeVine to wonder — What if they're wrong? Can somebody make the opposite bet? Is it even possible to short Uber? [Spoiler: Basically, no.]. Earlier this year, Uber announced its expansion into subprime lending, and on Thursday, announced that it had lost $1.2 billion in the first half of 2016.
posted by schmod (83 comments total) 13 users marked this as a favorite
 
OP Note: I do not share Steve LeVine's optimism that "Self-driving technology is indisputably on its way." It's likely another, separate, hype-bubble.
posted by schmod at 8:26 AM on August 26, 2016 [7 favorites]


Surely we knew they were spending more than they make in order to own the market? I don't think describing this as a "loss" is particularly meaningful.
posted by grahamparks at 8:30 AM on August 26, 2016 [2 favorites]


Yeah, having ridden in an Uber in a few different cities the people getting screwed are the drivers. The backlash on this in the long run is going to be huge in 2020 when many of those cars all need to be replaced and they aren't finished being paid for. Cheap rides? Sure, but recently I've switched back to traditional taxis when I am on the corporate dime because I believe it is honestly more sustainable when the taxi company is more responsible for maintaining their fleet.

Yeah, it is fucking over to some extent the individual Uber driver, but by decreasing demand hopefully some won't make the choice of becoming indentured servants to an auto loan they will never be able to afford.
posted by Nanukthedog at 8:37 AM on August 26, 2016 [19 favorites]


Interestingly, it looks like the largest portion of their loss came in the Chinese market, which they have now gotten out of. They spent $1.6 billion subsidizing rides in China to try to compete with Didi Chuxing (per the final link). Apparently their U.S. subsidies are much smaller.
posted by skewed at 8:38 AM on August 26, 2016 [1 favorite]


Maybe this is too obvious to state, but Uber is making a monopoly gamble. The reason they are burning all this cash is they are trying to lock up this new market for private car hires. In the US, that means driving competitors like Lyft out of business by lowering prices and subsidizing rides. Once they succeed at driving competitors out of business, Uber will then be free to raise prices as much as they want. Uber's history of avoiding regulation may mean that cities won't succeed in dictating Uber rates, either.

A preview of this monopoly plan was demonstrated in China recently. Uber lost a brutal war of prices racing to the bottom. They finally capitulated to Didi, the Chinese company. Didi now has no meaningful competition. The next day prices nearly doubled as the companies stopped subsidizing ride prices.

As a passenger, I love the Uber service. But the business is ugly in all sorts of ways.
posted by Nelson at 8:38 AM on August 26, 2016 [29 favorites]


Uber used to advertise on the radio here, talking about how being a driver was awesome and they'd help you get a car and everything. They used the phrase, "That's life-changing money!" which is something you only hear in time-share pitches and late-night ads for sketchy financial products. This is not the phrase a healthy company uses for recruitment.

The way they came into town by basically declaring, "Screw your laws, we'll run our service and bail out a driver if you arrest them for doing something illegal" left a pretty bad impression and very little they've done since has improved it.

I will say that most drivers I've talked to say that a motivation for doing it is to go out and meet people, but surely there is a better way to find connection in our isolated, terrible world than taxi role-play in the service of a scummy "disruptor."
posted by fifteen schnitzengruben is my limit at 8:43 AM on August 26, 2016 [18 favorites]


It's NYC only so far, but we've started using Juno, and it's pretty fantastic. Every driver we talked to about it was much happier with Juno than Uber. And yeah, the whole guiding philosophy of Uber is deeply fucked up; I don't know that they have much goodwill left to burn.
posted by phooky at 8:44 AM on August 26, 2016 [2 favorites]


OP Note: I do not share Steve LeVine's optimism that "Self-driving technology is indisputably on its way." It's likely another, separate, hype-bubble.

Well it depends on the time horizon, no? I do think it's more likely that self-driving technology that actually works in the vast majority of real world conditions is more likely at least 20-30 years away at the earliest, not the 5-10 years that some proponents are suggesting.
posted by gyc at 8:49 AM on August 26, 2016 [2 favorites]


Nelson is right. Part of Uber's business strategy is to be a monopolistic intermediary.

The other part of their business, of course, is what someone smarter than me referred to as "legal arbitrage," as alluded to by fifteen schnitzengruben upthread.

In short, their whole business revolves around getting other people to take financial and legal risks for them. I don't see how the whole self-driving car angle fits into that approach, unless other people are going to own the self-driving cars and be on the hook for the liability.

But from a technological standpoint, what they're doing isn't that hard. After Uber and Lyft abandoned Austin (due to a city regulation they didn't like), a host of alternatives appeared like mushrooms after the rain. I understand they're not all operating perfectly smoothly, but I understand the same to be true of Uber. And with Uber taking as big a cut as they do, they're inviting more competitors to undercut them. The technology is only going to get cheaper.
posted by adamrice at 8:51 AM on August 26, 2016 [5 favorites]


I used to be a fan of Uber but now I get a creepy and sinister every time I open up the app. I just use Lyft now.
posted by bleep at 8:52 AM on August 26, 2016 [3 favorites]


I don't see how the whole self-driving car angle fits into that approach, unless other people are going to own the self-driving cars and be on the hook for the liability.

Bingo. The argument is that what they would do is use your car at times when you're not, paying you a fee for doing so.
posted by NoxAeternum at 8:57 AM on August 26, 2016


In NYC there is no comparison. FUCK UBER IN THE EAR.

Commissions taken from drivers:

Uber 35% !! - owned by a randian fascist. Fucks drivers in race to bottom.*
Lyft 33% - better, but part owned by GM
Juno 10% + eventual stock ownership/possible employment status. Prices currently BELOW uber/lyft due to discounting - which screws the drivers a little, but they still make more than from the other services.

(I spoke to a driver for Uber in NYC that got $1.50 for a 40 min ride due to "discounts". $1.50!!!!)
posted by lalochezia at 8:59 AM on August 26, 2016 [7 favorites]


I refuse to use Uber because of the stench of predatory Ayn Randian ideology that permeates it.

In the UK, there is an app named Karhoo, which aggregates the services of a number of taxi and minicab companies, with Uber-style booking/payment. There's also Hailo, which deals with taxis.
posted by acb at 8:59 AM on August 26, 2016 [12 favorites]


Can anyone elaborate on what's meant by "While Uber's management have made it intentionally difficult for small investors to own shares of the company"? I'm under the impression that, until a company goes public, only accredited investors (i.e. a net worth of over $1 million) are legally permitted to invest in any such company. But this restriction is put in place by the SEC and not company management. Is there some news item about management actions I'm missing?

Thanks!
posted by enamon at 9:00 AM on August 26, 2016


hurf durf uber rider
posted by escabeche at 9:03 AM on August 26, 2016 [4 favorites]


I use Lyft, because they (supposedly) treat their drivers better, and the Lyft app gives me an option to tip my driver, which I always do.

I live in the San Francisco Bay Area, home of notoriously awful taxi service - if you called a cab it was a gamble as to whether it would actually show up. And the card readers were always "broken." The only way to reliably get a cab was to hail one in the street, which is not always or even mostly an option.

And the Lyft drivers actually keep their cars clean - no smells of smoke, BO, or worse. No random Cheetos or soda bottles rattling around.

When I call Lyft, I get someone actually showing up, and in a pretty short amount of time, not if and when they damn well please. There is a reason Uber, Lyft, etc. have taken off so hard in so many areas.
posted by Rosie M. Banks at 9:09 AM on August 26, 2016 [11 favorites]


I'm under the impression that, until a company goes public, only accredited investors (i.e. a net worth of over $1 million) are legally permitted to invest in any such company.

Two or three things.

1. You can also be an accredited investor based on combined family income of over $200k per year for three years. That's a lot easier bar to clear than the net worth one.

2. The article's main hook (once you scroll scroll scroll scroll, they need a better editor) is about how you can/can't short despite the fact that the shares aren't publicly trded. They're not permitting secondary sales even to people who are accredited investors.

3. "small investor" in this context, I think means more "people who aren't multi-billionaires" rather than "my uncle who has $5k in an IRA.
posted by Jahaza at 9:09 AM on August 26, 2016 [3 favorites]


All I have to report is that Uber self-driving care are crawling all over the place in Pittsburgh. I see at least 4 a day.
posted by soren_lorensen at 9:10 AM on August 26, 2016 [8 favorites]


When I needed a ride to the airport in Indianapolis, a coupon for Lyft appeared while I was bringing up Uber and I compared prices and thought, eh, why not? One things that struck me is that Uber says tipping is absolutely not necessary and Lyft has a tipping option right in the app. (I think I still prefer to cash tip in both cases for the same reason I cash tip in most restaurants.)
posted by Karmakaze at 9:11 AM on August 26, 2016


Nelson: As a passenger, I love the Uber service. But the business is ugly in all sorts of ways.

Then you are DIRECTLY the problem. Like, do-not-pass-Go part of the problem. How is this not obvious? Anyone with a conscience would never use Uber. This isn't an "I wish I didn't have to shop at Walmart"-type problem where sometimes there are no other options available. Don't use Uber. Just don't use it.
posted by chonus at 9:13 AM on August 26, 2016 [44 favorites]


Can anyone elaborate on what's meant by "While Uber's management have made it intentionally difficult for small investors to own shares of the company"? I'm under the impression that, until a company goes public, only accredited investors (i.e. a net worth of over $1 million) are legally permitted to invest in any such company. But this restriction is put in place by the SEC and not company management.

I'm pretty sure that the final JOBS Act rules could allow Uber to make offerings that don't have the accredited investor requirements. But Uber would have to choose to make offerings that complied with the rules.

Gimlet Media is a podcasting company that released a bunch of podcasts about the starting of the company. They addressed the JOBS Act a little in their episode announcing that they were looking for listener-owners. Gimlet's timing was a little weird because they were raising while some of the JOBS Act rules were in place, but before the accredited investor changes came through.
posted by sparklemotion at 9:13 AM on August 26, 2016 [2 favorites]


Then you are DIRECTLY the problem.

Yup. Wait until you hear about the non-fair-trade coffee I drink.
posted by Nelson at 9:15 AM on August 26, 2016 [32 favorites]


And the Lyft drivers actually keep their cars clean - no smells of smoke, BO, or worse. No random Cheetos or soda bottles rattling around.

Because the company gives them no choice, and because the cost of doing so is borne by the driver, not the company. Alter either of those two things, and I'd bet you'd see a lowering of the cleaning.
posted by NoxAeternum at 9:29 AM on August 26, 2016 [2 favorites]


I've been using UberPool and Via to get to work without melting in the NYC summer heat and I don't get how Uber's model wins. They've raised something like $15B, broken the regulatory and legal regimes that protected the taxi industries, taught passengers to expect excellent service in air-conditioned cars, and recruited drivers with cash incentives and financing for vehicles – but now those drivers are competing with them by installing other apps and picking up Via customers for $5 shared rides and Juno customers for 35% off.

Where's the network effect that would make Uber's loss-leader business model make sense? What's the advantage to me as a passenger of using Uber for a given trip just because you do? Or to the driver of picking up an Uber passenger rather than a Via passenger if the payout's better?

Absent that, where's the barrier to entry? When Uber with its deep pockets "wins" the price wars and the other services fold and Uber raises prices to a profitable level, what stops new local or national competitors from raising $10M, writing (or buying) an app and API, and recruiting drivers and passengers?

(And self-driving cars aren't going to happen in Manhattan until they can pass a Turing test – or all other cars are banned. If you can't credibly pretend that you are willing to hit or be hit by other cars you can't drive in midtown traffic – and self-driving cars have to drive defensively. I'm picturing a stationary Uberbot with a fuming passenger trapped in the back while an unending stream of laughing cab drivers cuts it off...)
posted by nicwolff at 9:33 AM on August 26, 2016 [11 favorites]


So they are pouring money into subsidizing drivers, and also screwing over drivers at the same time? There's clearly a massive transfer of wealth going on here, but it's not completely clear to me who it's from and who it's to.

Let's say Uber keeps draining money at a billion or so a year, and the money eventually runs out. What was the major money transfer? Mostly from wealthy investors and mostly to drivers in India and (previously) China? Or... where else is it going? If Uber fails, those wealthy investors surely gave away their money to somebody.
posted by clawsoon at 9:34 AM on August 26, 2016 [4 favorites]


By paying drivers less per mile than the cost of gas + maintenance, Uber really is functioning as a payday loan against the driver's equity in their vehicle.
posted by rustcrumb at 9:34 AM on August 26, 2016 [20 favorites]


In Austin, we're still Uber-free and hey! the city hasn't sunk into the lake yet! (I'm still extremely angry about the way they tried to rewrite local safety legislation to suit themselves, and hey! we still rejected that bullshit. Suck it.)

I'm really interested in Ride Austin, which is supposed to be a nonprofit rideshare company designed to be.... well, Uber but less evil and designed to return as much profit as possible to the drivers, not the company. I see they've finally got their damn app on Android, which was the main reason I haven't used them in an emergency yet--awesome! In the meantime Fare seems to have taken over the local market, but I've never used it.
posted by sciatrix at 9:35 AM on August 26, 2016 [11 favorites]


nicwolf, That might be true until the self-driving cars get the ability to issue traffic citations. With all their high-fidelity sensors, it should be easy for them to upload a complete 3d representaiton of a moving violation, complete with photos of the license plate, cab #, driver's face, etc.

Think that sounds outlandish? In SF, this is already happening via busses.
posted by rustcrumb at 9:37 AM on August 26, 2016 [9 favorites]


I've seen Uber's self-driving cars a few times here in Pittsburgh, mainly in the Strip District. Basically, if they can learn to reasonably drive here they'll be able to drive anywhere given the urban layout.
posted by splen at 9:40 AM on August 26, 2016


Here in Burlington I have a friend who drives for Uber, but only when there is a surge rate (pretty frequent). In contrast to larger cities, Uber did fill an unsatisfied market niche. As a small city with a large student population there is highly variable demand for taxis both on a daily, but also seasonal basis. There were times when traditional taxi services had a 90 minute to 2 hour wait - in an area where the length of trip is general 10-20 minutes. Which is patently absurd. There were also problems that the driver supply was so small that even taxi reservations (say to get to the airport in the morning for a flight) would occasionally be last-minute canceled.

Because of this demand, and the relative lack of drivers to passengers, Uber has been able to lower rates some, but not so much as in other areas. Thus, it remains reasonable to be a surge fare driver.

tl;dr: I'd love to have competitor options for Uber, but they haven't been totally horrible for this market. Corollary: this market is a blip in the overall system, and shouldn't be the basis for overall policy/response.
posted by meinvt at 9:41 AM on August 26, 2016 [4 favorites]


It doesn't sound outlandish, it sounds legally problematic. Even the SF Muni system raises questions, and it's mounted on a government owned vehicle.

I don't think the answer is deputizing automated cars.
posted by NoxAeternum at 9:42 AM on August 26, 2016


A lot of this discussion seems to assume that Uber and Lyft drivers are two different populations. But I can't remember the last time I saw a car with one sticker and not the other.
posted by gottabefunky at 9:51 AM on August 26, 2016 [4 favorites]


Hey! A guy I know runs Equidate, which was mentioned in the article (Samvit, not Sohail).

....

The first thing they had to do, basically, when founding the company was to get lawyers. MAXIMUM LAWYERS EVERYWHERE. Chief legal officer gotten immediately. MUCH LAWYER. MILLENNIUM LAWYER HYPERDRIVE ON. So they knew what they were getting into. I wished him luck.
posted by hleehowon at 9:54 AM on August 26, 2016 [2 favorites]


This article strikes me as maybe a little embarrassing. Of course it's challenging to short, literally, the illiquid shares of a privately-owned company, because shorting generally requires (a) "borrowing" the asset and (b) an agreed-upon valuation at cover time, neither of which is easy to achieve if the asset isn't traded on a public exchange. It's very risky to short level 3 assets; you're taking on not just the underlying risk of performance, but the risk of the valuation not reflecting that performance, since there's no objective reference like an exchange price. While I'm sure Uber and its major investors are quite glad not to have its valuation subject to the vagaries of the stock market, even in pre-IPO companies that do allow restricted secondary trading, I don't think you'll see much shorting action. Valuation is too uncertain, and also depressed by whatever restrictions on trading are baked into the shares. So I don't think this represents a particular scheme by Uber, rather than the natural consequences of private ownership.

But if finance has taught us one thing, it's that you don't need to literally own an asset to participate in its economic performance.

(a) The answer eventually, far too painfully arrived at: write CDS on the company's bonds (or an index that includes the bonds, or a CDO that bought the bonds (if such exist)). Classic maneuver. This not only doesn't require that you own Uber shares, it doesn't even require that you own Uber bonds. The price of a bond is, if not always easy to determine (I doubt these bonds are trading constantly), at least easier to determine, and of course a default is a relatively objective measure, if it gets that far. But bond prices are also affected by factors external to the company's performance (e.g., variations in interest rates). And bond prices don't necessarily correlate perfectly with company performance.

(b) A total return swap with a willing owner. A TRS involves one party making set payments to another in return for the other granting that party all the returns on a given asset. Actual ownership does not change hands, so restrictions on trading would not apply. This would be an unusual TRS as it would have to be drafted to account for the fact that there are no literal returns until an IPO. But doable (expensive) if you have the courage of your convictions.

(c) Unlike most private pre-IPO companies, Uber has obtained leveraged loans. It would take too much research for me to figure this out, but it's entirely possible that some of that money came from CLOs. You could write a CDS on a CLO that held an Uber leveraged loan. Again, this requires no ownership of Uber stock or debt. But of course the performance of the CLO wouldn't be dependent on the success of Uber alone, but also on the other companies whose loans the CLO holds.

But, you say, these activities are unlikely to add much in share price discovery, which is the major public contribution of the short!

Yes, I say, yes. Stock prices of private companies are largely imaginary. Now you know. Fortunately, if Uber share valuations do turn out to be too high, it will primarily affect big private investors, for whom I weep not. From the point of view of the welfare of humanity, I would worry primarily about whether any public pension funds ended up in seeping in there via some arrangement with private equity, which is hard to tell. If the valuation means that the company insists on a high opening price for its IPO, and individual doofus retail investors insist on overspending then, they'll do it on the basis of the disclosures a publicly-traded company offers, and that's on them.
posted by praemunire at 9:58 AM on August 26, 2016 [14 favorites]


As the article notes, ridesharing has a ridiculously low barrier to entry, and Uber are far from the only player in the driverless car game.

Losing $1.6 billion really is shocking, because Uber has virtually no fixed or recurring costs. Scaling upward has only proportionally increased the bleeding, which is really the opposite of what you'd ideally want to see in this kind of business.
posted by schmod at 10:03 AM on August 26, 2016 [3 favorites]


But if finance has taught us one thing, it's that you don't need to literally own an asset to participate in its economic performance.

Uber isn't relying on its technological audacity to break the back of organized driving labor and car manufacturers for profit. It isn't even relying on its legal audacity and deep pockets to break the back of labor regulations and the social contract for profit.

Uber is relying on its business audacity to break the back of institutional Wall Street investors and transfer multiple billions to . It's a long Trump-style con—fuck over labor and capital at the same time—on a worldwide, singularity-style scale.
posted by infinitewindow at 10:12 AM on August 26, 2016 [3 favorites]


"You won't find too many technology companies that could lose this much money, this quickly," said Aswath Damodaran, a business professor at New York University

CEO then points out this shows they are better at everything.

(ya ya, they'll make it up in volume)
posted by sammyo at 10:13 AM on August 26, 2016


But Wolff says that no one has figured out how to short the company. Indeed, the most direct nay vote for now might simply be not to buy Uber shares, he said.

Done.
posted by sninky-chan at 10:24 AM on August 26, 2016 [2 favorites]


I am curious to see how regulation will affect Uber's bottomline (something I note they fought hard against if it will mean liability as an employer), as it will soon be in Malaysia (along with its biggest Southeast Asian competitor, Grab*, which will be part of an integrated taxi transformation programme, along with existing taxis)

*And it seems for the non-Uber apps, the road ahead seems to regional partnerships (this includes China's Didi). For eg, Grab and Lyft are SEA-USA partners.

(personally, I much prefer Grab. It gives a better cut for the drivers, actually charges a flat rate based on estimated distance (for non-taxis), AND I can actually book taxis with it -- that was originally its intended purpose before expanding to private cars in anticipation of Uber's regional expansion)
posted by cendawanita at 10:32 AM on August 26, 2016


I've seen Uber's self-driving cars a few times here in Pittsburgh, mainly in the Strip District. Basically, if they can learn to reasonably drive here they'll be able to drive anywhere given the urban layout.

But are the cars programmed to perform the Pittsburgh left?
posted by peeedro at 10:34 AM on August 26, 2016 [2 favorites]


I think I would be short Uber, if I could, or was the kind of person who shorts companies. I just don't think there are enough barriers to enter their market. Now that they've gone and had all of these expensive regulatory fights with various governments around the world, anyone who can figure out the insurance side of thing and code up an app can stand up a competitor. Their tech is not *that* complicated. Even if your routing algorithm was 80% as good as Uber's, if you could cut your prices to consumers and/or offer better payment to drivers, I don't think it would be that hard to compete with them. All the drivers and customers already have smart phones, and all they'd need to do is install your app.
posted by Aizkolari at 10:41 AM on August 26, 2016 [1 favorite]


I appreciate the posting of this thread and especially the comments that followed, because I had thought I lived in some kind of minority who have become more and more uneasy using Uber. I have too much empathy for the drivers so I tend to shun the $5 NYC pool in favor of a more expensive "regular" Uber X or XL and I overcompensate for their dwindling pay by tipping more heavily. While that solves that one specific trip -- and by that I mean I buy off my conscience -- the sentiment resonates with me that I represent "that guy" that continues to feed the problem. If all y'all say that Juno in NYC may present a more sensible, scalable, and humane way to engage in ride-sharing, count me in. I have zero interest in ever owning a car, or riding in one without a driver, so I enjoy hearing the alternatives.

Separate note, I do wish someday I, too, can receive hundreds of millions of dollars so I can lose billions later. What an American Dream.
posted by Conway at 10:44 AM on August 26, 2016 [1 favorite]


Then you are DIRECTLY the problem. Like, do-not-pass-Go part of the problem. How is this not obvious? Anyone with a conscience would never use Uber.

I come for the information, but I stay for the judging.
posted by the sobsister at 10:46 AM on August 26, 2016 [16 favorites]


In NYC there is no comparison. FUCK UBER IN THE EAR.

there's also Gett which everyone i know is suddenly using
posted by poffin boffin at 10:49 AM on August 26, 2016


self-driving cars aren't going to happen in Manhattan until they can pass a Turing test

this is more or less true everywhere, except maybe some highway of the future with carefully structured traffic and embedded feature tags and sensors. remember that once you solve all the hard problems, you still have to have > 99% QoS. i've yet to see any argument that "self-driving car" isn't a "hard" AI problem ie. machine translation, none of which are going to be solved by souped-up perceptrons. but this applies to all of the AI hype: the underlying technical argument seems to be that Bayesian statistics + multi-level neural-nets is magic.

as to $14 billion: imagine all the fucking cool and useful robots you could build with that kind of capital. now, add every other unicorn in silicon valley plus the defence budget and you can get a sense of what a totally alternate dimension might be like.
posted by ennui.bz at 10:51 AM on August 26, 2016 [4 favorites]


Nelson: "The reason they are burning all this cash is they are trying to lock up this new market for private car hires. In the US, that means driving competitors like Lyft out of business by lowering prices and subsidizing rides. Once they succeed at driving competitors out of business, Uber will then be free to raise prices as much as they want. Uber's history of avoiding regulation may mean that cities won't succeed in dictating Uber rates, either."

Historically cab companies weren't able to maintain a monopoly even on cost recovery rates absent regulation (medallions, taxi licences, or something else to limit the number of taxis). The barrier to entry is just so low that even remaining profitable is difficult let alone maintaining an exploitative monopoly. And it's not like the Uber app locks in the user as Lyft and other local competitors show already.

Nominally the whole reason for taxi regulation is the need to limit providers to enable operators to make enough money to have safe and clean equipment.

PS: I really need to look into how Uber is making out here. In BC your car needs to have a bi-annual safety inspection if providing rides for pay (even theoretically paid car pools) and you need a more regulated class of licence. It would be very easy to sting drivers and seriously impact Uber's availability of occasional surge only drivers.
posted by Mitheral at 10:52 AM on August 26, 2016 [3 favorites]


So, has anyone wrote an app that just allows drivers to post availability? Let them keep the fair, just charge for posting availability to drive?

Seems the proper way to do a "Sharing Economy".
posted by The Power Nap at 10:56 AM on August 26, 2016


"there's also Gett which everyone i know is suddenly using"

My issue with Gett is that, when I last checked, if somebody wanted to drive for them then they'd have to sign an exclusivity contract with them. So if you're a driver and you sign up with Gett then you can't drive for other services. Has that changed?
posted by I-baLL at 11:08 AM on August 26, 2016


Uber is relying on its business audacity to break the back of institutional Wall Street investors and transfer multiple billions to .

I'm not a fan of Uber, for many reasons, but in this case I'm not sure what this business audacity vis-a-vis institutional investors consists of other than...talking its book? Institutional investors aren't being compelled to sink their money into this particular pre-IPO company. As the article itself points out, later investors have almost certainly negotiated far more favorable terms for themselves than the early investors/employees are getting (including the type and depth of disclosure of information). The ultra-high valuation of Uber is, in fact, literally an artifact of the price investors have been willing to buy in at to date, as those headline numbers are computed by the crude method of assuming that the company's entire equity costs as much per share as the last round of shares did.

We're talking finance, so of course there is always a considerable possibility of various kinds of deception and fraud. That would change the story. But, for now, Uber is basically froth churned up by the mad search by big fish for returns in a very-low-interest-rate environment. It's not doing anything particularly clever, audacious, or new (again, vis-a-vis the investors). It's negotiating deals with a relatively small number of sophisticated investors; if those investors aren't making good deals, it's not a tragedy for America. Unlike RMBS, Uber isn't woven into the fabric of the economy. (The size of Uber's capital raises each year would be covered by maybe three or four RMBS issuances of the magnitude of the old days.) If it blew up tomorrow, some rich people would take some losses, but the economy would keep functioning. Of everybody touched by Uber to worry about, the institutional investors (assuming, again, we're not seeing public pension investment) are the very last.
posted by praemunire at 11:08 AM on August 26, 2016 [2 favorites]


Uber seems to be assuming that it will become the "winner take most" because of brand identification and because other successful tech companies become the peerless dominant player.

The problem as far as I can tell is that their only unchallenged advantage is their brand name. An alternative with less adept analytics than Uber isn't really operating at that much more of a disadvantage. Uber can simply cut prices to drive any upstart competitors out of the market, though, so they have the advantage that they can survive a race to the bottom.

I've consistently said that all they have is the potential for driverless cars. Absent that, their drivers can't sustain themselves over the long term, and they have a limited amount of time before they run out of suckers willing to become drivers until they realize they can't make money of it.
posted by deanc at 11:27 AM on August 26, 2016 [2 favorites]


Uber is relying on its business audacity to break the back of institutional Wall Street investors and transfer multiple billions to [themselves]

My understanding is that Uber has tapped out VCs and institutional investors and is now chasing after accredited investors, family trusts, and other non-traditional sources of capital for a pre-IPO tech company. It's Trump-like in that it relies on finding untapped sources of suckers who don't know enough to have lost trust in the company as well as people willing to throw good money after bad. Any current investors giving them money at their current valuation are basically hoping that by the time the dust clears in the hired-car industry,Uber basically has an almost total market share and has vastly expanded the market for it with driverless cars that people start using for their daily commutes and errands.
posted by deanc at 11:37 AM on August 26, 2016 [1 favorite]


There's clearly a massive transfer of wealth going on here, but it's not completely clear to me who it's from and who it's to.

From investors to users of the service, in some ways, the same as Amazon for many years. Otherwise, it might well be just wasted money in various money (mostly to wages, I'd imagine so the wealth is transferred to employees).
posted by ssg at 12:00 PM on August 26, 2016 [5 favorites]


Uber 35% !! - owned by a randian fascist. Fucks drivers in race to bottom.*
Lyft 33% - better, but part owned by GM


This is exactly why i get so confused when EVERYONE i know is like "idk... uber is gross, i just use lyft now"

None of them can really defend in any way how or why it's so much better, but they love to fight about it or ad hom or whatever.

You're eating the same mystery meat if you use either. How exactly is lyft even the lesser evil, in a way that isn't basically a wash? It reminds me when there were walls of stories going "apple is so evil! look at their manufacturing in china and how their production contractors treat workers!" when... everyone else is using the same damn companies.

Identity politics smdh
posted by emptythought at 12:00 PM on August 26, 2016 [4 favorites]


Lyft may be evil, but it hasn't revealed itself to me as such so blatantly as Uber.
posted by benbenson at 12:14 PM on August 26, 2016 [2 favorites]


Mitheral: The barrier to entry is just so low that even remaining profitable is difficult let alone maintaining an exploitative monopoly.

It's ironic, isn't it? The company's whole business justification is to achieve a monopoly in an industry in which they've just finished proving that it's now impossible to achieve a monopoly.
posted by clawsoon at 12:16 PM on August 26, 2016 [2 favorites]


I guess what bugs me is that it gets very trump-defender-logic-like. Basically every larger city has options that are neither(for example, i often use car2go unless i'm drunk which is cheaper than both, and there's other not-yellow-cab-taxi-app options).

It's just that it's somehow a super binary thing. Not lyft is less evil, but like... Uber is evil and lyft is not. And when taken to task it turns in to "well they kicked puppies!", and when you point out the other guys just kicked less puppies it shifts from not being about issue Y, but issue Z.

I'm really not trying to bring some stupid crap from elsewhere here, but i've seen it here and it's even happened a bit right in this thread. Basically any time someone says "i just use lyft now" i'm like ????.

Yea, there are small-medium cities where those are the only two options. I get that, that's the walmart issue. But an awful lot of mefites and friends of mine are in big cities chock-o-full of various rideshare/apptaxi stuff.

Basically, do you care about doing better? Or do you just care about not using uber because it's uncool and squicky now to be associated with. This is enough of a thing that buzzfeed very poignantly roasted it in their post/neo-hipster questionnaire recently.
posted by emptythought at 12:22 PM on August 26, 2016


If you're needing a ride to or from an airport, I've found Wingz to be a good option.
posted by Thorzdad at 12:34 PM on August 26, 2016


As somebody who did say "I just use Lyft now"; of course I would like to do better but:
*I live in the San Francisco area so I guess there are other options but I've never heard of them and I like to think of myself as pretty tech-aware.
*Im not personally aware of Lyft being evil. Not doubting it but the stories didn't hit my radar.
*I know there's Flywheel and just hailing cabs but I'm really sick of grumpy yellow cab drivers and how they don't want to go across the bridge. Their business is literally none of my business. I offer to get out of the cab every time and they don't take me up on it. Here in SF regular cab drivers always seem to be giving me an attitude no matter what, even when I was using Flywheel, and I don't understand why. I'm a good customer, I go the ATM before hailing a cab and I'm not rude or inconsiderate. I don't need anyone to be my best friend but if you have nothing nice to say then don't say anything.
*When I lived in Chicago I was able to get rides with yellow cabs via the Uber app which seemed like best of both worlds to me. I never had the issue with grumpiness either. San Francisco doesn't allow that.

Unfortunately we all have to do the best we can with what's at hand.
posted by bleep at 12:56 PM on August 26, 2016 [6 favorites]


>Anyone with a conscience would never use Uber.

It's so very kind of you, chonus, to inform me [a disabled person who needs to get to medical appointments, for whom public transit (i.e. the buss) isn't an option (see disability) who lives in an area not serviced by cabs (again, see disability)] that I don't have a conscience. That clears up why I never feel guilty going through the '12 items or less' lane with 13 items.
posted by mattbcoset at 1:13 PM on August 26, 2016 [15 favorites]


This isn't an "I wish I didn't have to shop at Walmart"-type problem where sometimes there are no other options available

Oh, the sanctimony! Yes, there are other options available, except when the shitty city bus just straight up fails to come and I still have to get to work if I want to have a job.

Basically every larger city has options that are neither

I guess Denver doesn't count as a larger city, then. In fact, local governments are doubling down on Lyft.
posted by zeusianfog at 1:19 PM on August 26, 2016 [2 favorites]


But an awful lot of mefites and friends of mine are in big cities chock-o-full of various rideshare/apptaxi stuff.

Serious question for the LA area: are there other options for taxis? Is Lyft really better? Because Uber does make me queasy, but sometimes the bus doesn't come again for an hour and a half and the taxi company says in a vague tone that they'll have someone there in 20-25 minutes and meanwhile you're stuck in a gas station alone on the PCH at dusk. And last time they charged you fifty dollars to go ten miles. (The issue is not having access to a car, but those interstitial times where driving would be a hindrance and the buses don't run there.)
posted by jetlagaddict at 1:54 PM on August 26, 2016


Thanks Thorzdad for the Wingz recommendation. I literally only use Uber when I have to be at the airport by 5 am or what have you, as I've been burned too many times by cab no-shows. My next work trip is Sunday, with a pre-dawn flight, so I get to test it out!

I agree with the already-pounced-on statement above that we're part of the problem for using Uber. I don't get the backlash against a statement like this, no matter what the reason. We can be part of the problem even if we're justified using Uber by circumstance. I've gotten to the point where I talk with Uber drivers about their experiences anytime the ride's long enough and, man, no one says anything good. All the drivers I talk to report feeling just as trapped by the convenience and ubiquity of the questionable service arrangement because of their circumstances. It's one of these situations in which a lot of people can commiserate, since we all understand idiomatic expressions like "gallows humor."
posted by late afternoon dreaming hotel at 2:01 PM on August 26, 2016 [2 favorites]


Just yesterday an incident between an Uber driver and two passengers was shared around FB in my home state, and the whole thing has a great degree of WTF involved.

Local blogger Mark Marynard attempts to understand what the hell is going on here.

It may be pertinent to say that the post shared on FB is problematic; anti-Muslim sentiment and racism and possibly an unreliable narrator (it's not dark at 8pm in SE Michigan, many people have no issues with cell service there, etc.). I'm intentionally being measured in my words here, but I assure you this is because I never trust the internet on principle, and the heavily biased language starts flashing a red "MOTIVE!" flag in my brain.

The idea that a gang of human traffickers is "hacking" Uber seems highly unlikely, but just plausible enough that people reading that post may think twice about using the service.
posted by custardfairy at 2:01 PM on August 26, 2016


POSSIBLY an unreliable narrator?

That post is one bigass fearmongering racist lie that reads like a chain email that angry old people pass around. C'mon.
posted by destructive cactus at 2:13 PM on August 26, 2016 [4 favorites]


Anyhow, commenting on the actual articles in the post - I was incredibly shocked by the weekly payments in those leases. Paying nearly double the value of the car in a three-year lease, then more if you'd like to own the poor overused vehicle afterwards?

I know that not everybody has the option, but about a year ago I decided that I needed a new car (current one was starting to fail and require repairs that would have been expensive had I not done them myself), and spent this year concurrently increasing my credit score and saving for a down payment so that I wouldn't be forced into some horrible scheme like those subprime loans. I did it, but it'd be cool if that wasn't something I (or anybody else) had to worry about. This is a world in which the rich literally prey upon the poor.
posted by destructive cactus at 2:20 PM on August 26, 2016 [1 favorite]


Uber's valuation makes no sense. They're in a business with lots of competitors, with practically zero barrier to entry and pretty small economies of scale. Ride-sharing services are here to stay, but there will be 5 different big ones in every city, and they'll take a 3% cut instead of a 35% cut.
posted by miyabo at 2:46 PM on August 26, 2016


The genius of Lyft is that it only needs to be marginally less-evil than Uber to be successful.

On that count, it's a massive success. They're the protest vote of ridesharing.
posted by schmod at 2:57 PM on August 26, 2016 [1 favorite]


Uber came about at the right time, with a combination of cheap technology, cheap oil, underemployed people and frustration with the entrenched ride-share model (taxis, writ large) which had grown woefully outdated.

Good for ride sharing in general.

That said, Uber (and others), will be just fine until (a combination) of the following occurs:

1. Cities / states enact registration/taxes/license fees upon drivers;
2. Insurance companies raise rates on Uber drivers, or refuse to insure them;
3. Drivers start bailing due to low reimbursement;
4. The economy continues to pick up and drivers leave the 'gig' economy;
5. Drivers realize that the wear and tear on their vehicles isn't worth the income;
6. Some economic event that removes willing new investors


Of course there are complaints, but nobody is forcing Uber drivers to work for them. Clearly there are people for whom this is a great side/full time gig. For others...not so much.

Uber's leasing program makes great sense...for Uber. It's the modern equivalent of the 19th century "Company Store" concept that lasted long enough for people to realize that they were getting screwed and for 3rd parties to muscle in on the profits and provide competition to drive down prices.

I agree - they're moving hyper-aggressively to corner the market. Ride rates are artificially low and the wage and legal arbitrage will only go on for so long. At some point this advantages will go away - and surely Uber knows this, hence the speed with which they're moving.
posted by tgrundke at 3:04 PM on August 26, 2016


The genius of Lyft is that it only needs to be marginally less-evil than Uber to be successful.

On that count, it's a massive success. They're the protest vote of ridesharing.


I'll venture to say that 98% of ride sharing customers don't think about this for one second of their day. The dislike of the pre-existing taxi monopoly is so strong that anything is better.

Protest vote? Perhaps on MeFi, but that's about the extent of it. How many people here cried about the outrageous fees many immigrants paid to own taxi cab medallions? Not many, I suspect.

This hatred is the same reason why I have argued repeatedly that when the day comes that automakers can sell directly to consumers in a fixed price format that there will be absolutely no cost savings to the buyer. If anything, we will pay more for cars than we currently do - and the mass market will adopt this with open arms.
posted by tgrundke at 3:09 PM on August 26, 2016


I don't get the backlash against a statement like this, no matter what the reason. We can be part of the problem even if we're justified using Uber by circumstance.

My elderly mother uses a walker and has dementia, so I occasionally use Uber when she would otherwise have to walk too far or wait too long for an alternative. I think the backlash was spurred by this hot take: "anyone with a conscious would never use Uber." Part of having a conscience is having compassion.

meanwhile you're stuck in a gas station alone on the PCH at dusk.

A few weeks ago I was so tired I accidentally got on the Malibu bus and didn't notice until we got to PCH. By then it was 5:30am, and I'm supposed to relieve my mom's nighttime caregiver at 6:00 am. The next bus back was an hour away and a taxi would have been unreliable and prohibitively expensive. Using Uber I got there on time. (If it didn't involve making the caregiver wait an extra 1.5 hours I would have just waited for the bus.) Now that Lyft doesn't require a fb account I will try them, but no, I can't think of any other alternative.
posted by Room 641-A at 3:15 PM on August 26, 2016 [4 favorites]


Uber can exist only as long as the economy is poor enough that desperate people are unable to find real jobs that have real benefits including health insurance, vacation pay, sick pay, retirement funds, unemployment insurance, disability workman's compensation, and social security. The "sharing economy" is really the "you're on your own" economy.

So Janet Yellen today announcing that she's about ready to raise interest rates is a nod to companies like Uber that she is on guard to make sure that they never run out of desperate workers.
posted by JackFlash at 3:28 PM on August 26, 2016 [2 favorites]


For everyone asking if Lyft is really any better or less evil, just ask your drivers. I use Lyft because driver after driver asked me to. Uber, in NYC and the bay area at least, imposes horrifying rules and restrictions on drivers that Lyft does not. I don't fully understand all the details of it, but when drivers have volunteered this idea so often to me, I just start listening. Uninstalled Uber entirely, and haven't had any drivers complain to me about lyft's treatment the way they did about Uber since.

How many people here cried about the outrageous fees many immigrants paid to own taxi cab medallions? Not many, I suspect.

Thank god you said it. I can understand why many people don't know what trying to become a taxi driver is like, it's not like it's widely spread information. But everyone who thinks riding a taxi is the kinder service for drivers should go look up what it's really like. It's just slightly on this side of the line between freedom and indentured servitude.
posted by shmegegge at 4:22 PM on August 26, 2016 [1 favorite]


How many people here cried about the outrageous fees many immigrants paid to own taxi cab medallions? Not many, I suspect.

That's pretty location specific. The only English-speaking places in Europe I've known that to be a problem are London (still a huge issue, and with the London Taxi Drivers Association campaigning all out against minicabs (livery companies), especially Uber, which is how it operates in the UK) and Dublin (there was a huge outcry about the city releasing more licenses about a decade ago, as prices had increased to 6 figure levels. Think it's eased somewhat.)

But Uber's everywhere, regardless of how broken the taxi market is. It's interesting.
posted by ambrosen at 4:33 PM on August 26, 2016


I refuse to use Uber because of the stench of predatory Ayn Randian ideology that permeates it.

I wonder if the fog of Ayn Rand mystification associated with the company is precisely what is leading investors to overvalue it. If you wanted to create a Potemkin company that was designed to bilk billionaire investors my flattering their ideological biases, you could hardly do better than Uber.
posted by jonp72 at 8:18 AM on August 27, 2016 [3 favorites]


I wonder if the fog of Ayn Rand mystification associated with the company is precisely what is leading investors to overvalue it.

Nobody is being forced into Uber servitude. The sharing and gig economy is something that is still in its infancy. Uber is playing by the rule book as it currently exists, and I hardly have much sympathy for the taxi companies who have had a virtual monopoly, complete with specific governmental/legal protection for the past 100 years.

Part of Rand's objectivism that many conveniently forget is that she had faith that overall, people would choose rationally what was best for them. She also despised government choosing winners and losers. Suggesting that Rand advocated for a 'survival of the fittest' mentality is a simplistic interpretation. Rand would argue that it is good that Uber developed something new and productive. She would argue that it is good that it provides competition against the entrenched interests (Taxi companies), and she would argue that those who like it should be allowed to use it, unfettered, and those who don't should simply go elsewhere without raising a stink.

Now, if Uber went ahead and started to acquire government and other legal protections to prevent/limit competition, Rand would likely then argue that Uber's actions had become immoral and unsupportable.
posted by tgrundke at 8:42 AM on August 27, 2016 [1 favorite]


Uber is playing by the rule book as it currently exists.

Except Uber isn't playing by the rule book as it currently exists. It has broken laws in cities all over the U.S. and the world. Rules such as insurance requirements, drug testing, fingerprint background checks, licensing, etc.

Uber doesn't go in and work to change the laws. It simply brazenly disregards existing laws and then puts it's lawyers to work while they continue to violate the laws.
posted by JackFlash at 8:57 AM on August 27, 2016 [13 favorites]


Exactly that; Uber is showing you can run roughshod over local legislation. It's awful.

OTOH, some of the laws they ran over deserve to have been overthrown. Particularly the various US municipal laws that kept taxi companies in a monopoly position, providing terrible service and maintaining their status with various forms of petty corruption. Fuck them, and I'm delighted for Uber's competition. (My perspective in San Francisco may be part of this. By contrast taxis in the UK are amazing and I see no need for Uber there.)

OTGH, Uber is also running over good laws requiring adequate insurance, compensating employees correctly, providing services for the disabled, etc. I feel confident they will also run roughshod over laws trying to regulate rates just as soon as the competition is out of the way. We are heading to monopoly price gouging. Surge pricing is one preview of it, as is the situation in China with Didi.
posted by Nelson at 9:25 AM on August 27, 2016 [8 favorites]


Not to mention the ADA violations: Uber sued for allegedly refusing rides to the blind and putting a dog in the trunk

On preview, Nelson touched on it. FWIW, last night I took a Lyft for the first time and the driver said she used to drive for Uber but drives for Lyft now because the company treats her better, so I'm happy to start using them.
posted by Room 641-A at 9:36 AM on August 27, 2016 [3 favorites]


Not to mention the fact that the founders of Uber are just Randian assholes as human beings.

For their own entertainment they would mine rider data to identify individuals they called the "walk of shame" or "ride of glory." These were women who Uber dropped off at a location late at night and picked up at the same location early the next morning.

Uber also hired private investigators to pry into the private lives of legal opponents and member of the press who wrote unflattering stories.

Uber -- awful people with awful ideas about society and economics, feverishly working to making the world a worse place.
posted by JackFlash at 9:50 AM on August 27, 2016 [14 favorites]


I wonder if the fog of Ayn Rand mystification associated with the company is precisely what is leading investors to overvalue it.

So what you're saying is that Uber is to Objectivist apex-predator-wannabes what Thomas Kinkade was to evangelicals?
posted by acb at 5:16 PM on August 27, 2016 [4 favorites]


ennui.bz: i've yet to see any argument that "self-driving car" isn't a "hard" AI problem ie. machine translation, none of which are going to be solved by souped-up perceptrons.

Indeed.
posted by sneebler at 7:38 PM on August 27, 2016


if Uber went ahead and started to acquire government and other legal protections to prevent/limit competition

This is the only way Uber's business model makes sense to me.
posted by alexei at 7:52 PM on August 27, 2016


I wonder if the fog of Ayn Rand mystification associated with the company is precisely what is leading investors to overvalue it.

Nobody is being forced into Uber servitude. The sharing and gig economy is something that is still in its infancy. Uber is playing by the rule book as it currently exists, and I hardly have much sympathy for the taxi companies who have had a virtual monopoly, complete with specific governmental/legal protection for the past 100 years.


I wasn't making a comment about Uber's labor practices. I was saying that I think the company is overvalued. In order to earn the necessary "multiples" for what investors have pumped into it, the company is going to need to expand into global markets like China, India, etc. The problem is that these markets don't have the taxi monopolies that the U.S. has & thus Uber doesn't really add much of value in foreign markets where the taxis are already fairly unregulated to begin with. Uber cannot sustain the growth it will need to sustain to earn back its investor's money. And the reason that the investors parted with their money is that Uber's Ayn Randian branding is just marketing B.S. that is useful for flattering VC investors but doesn't actually improve the business model.
posted by jonp72 at 3:45 PM on August 28, 2016


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