Quote:
Originally Posted by Alan C. Lawhon
Minirra:
I'm curious as to your opinion concerning Ryan Felton's "Uber Is Doomed" blog post. (It's the second link in my OP.)
I suppose it's possible Mr. Felton is biased and/or just doesn't like Travis Kalanick and his "Ayn Rand" mindset. I suppose it might be possible that Uber is another Amazon-in-the-making. However, Felton points out some fairly compelling reasons for why Uber may never be profitable. (I'm no Harvard MBA, but the argument that Uber probably will not be able to achieve massive economies of scale - the way Amazon achieved massive economies of scale - seems plausible.)
I suppose the real question concerning whether or not Uber is doomed will boil down to this: How much patience (and money) will VC and billionaire investors be willing to sink into Uber before they say "To hell with it!" and pull the plug?
Also, I have a hard time believing savvy businessmen like Frederick Smith at Fed Ex and the crew running UPS are going to sit on their hands doing nothing while Travis attempts to destroy their business. (If the net long term effect of an [ultimately] "successful" Uber is to raise everybody's shipping costs on everything, I'll be happy to see Uber fail.)
Sorry I missed this - I agree with his take on the challenges, that's certainly consistent what I've seen. Seems to be a bit of bias but the reasoning is sound.
One of the problems I see is that Uber apparently positions themselves to be a super-affordable transportation option that anybody will use, where I suspect they'd be better off pricing themselves away from the bottom a bit and serving a smaller crowd who is willing to pay more. In some case they're cheaper than riding a bus which in the near- or medium-term is questionable to me.
He leaves out a few things going for Uber I think:
First, by far - over the past few years, investors have thrown cash at all kinds of similar contractor driver models and (badly) oversaturated the market, and we're seeing that money dry up now. Whoever's left should be in a better position to make adjustments price-wise, and face less competition for the drivers. This could be a big part of why Uber is being so price-aggressive right now.
Second we know related models can work and be profitable. Taxi companies do it on a local scale and manage, and they don't have the tech efficiencies with say routing or customer generation that Uber does. (Note: They also don't tend to **** around with their cash the way Uber has done).
Third, again, the market is massive and people want the service. I could pick at pricing strategies and whatever all day, but the bottom line is that people will use an app and pay to ride places. They need to find their sweet spot and iron out the approach but there's one there somewhere.
I'd add a possible small fourth in the case of rideshare companies, which is the potential to partner up with state and local governments as a replacement for government-subsidized transportation and maybe get some of those subsidy dollars themselves. I would certainly argue that the service contributes to productivity at least a bit.
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As for the drivers themselves, I'm not really sure what there is to say there. It's a job that virtually anyone who for applies will get, provided they pass a simple background/MVR check and have a SSN + suitable vehicle. I can't speak for all of them but many companies have no in-person interviews, one of us did that trying the application process for Lyft and never spoke to a human, was never asked for a reference or work history either.
While I definitely take issue with some of the earnings claims you see in ads, beyond that they're on their own...a lot of them figure to have weak work histories and are terrible at math. Another factor is that taxes and other things aren't deducted for contractors, and I suspect there's a very high number pocketing all of it and delinquent on their taxes. Given how many industries are abusing the IC model I expect that problem adds up to quite a bit.