Uber IPO

[Bronzeage]

Okay, here's my idea. I want to borrow your car, but I want you to drive if for me. It's just to give someone a lift and I'll tell you where to go. I'll chip in for gas, but if you do the math on the cost of operating a vehicle, you're losing your ass. I'm losing money too, but I'm not sure why.
Anyway, after I have lots of people loaning their car to me, and driving it for me, too, I'm going to sell stock in this idea. I'll use the money to buy cars that don't need drivers.

I know this sounds crazy, because drivers are the only reason this idea actually works in the first place.

 

[ZiprHead]

Aaah, now I get where your FB post was going.

 

[Deepak]

Say, are your wrist tired from squeezing juice out of fruit by hand? Well I've got the solution for you...

 

[phands]

Okay, here's my idea. I want to borrow your car, but I want you to drive if for me. It's just to give someone a lift and I'll tell you where to go. I'll chip in for gas, but if you do the math on the cost of operating a vehicle, you're losing your ass. I'm losing money too, but I'm not sure why.
Anyway, after I have lots of people loaning their car to me, and driving it for me, too, I'm going to sell stock in this idea. I'll use the money to buy cars that don't need drivers.

I know this sounds crazy, because drivers are the only reason this idea actually works in the first place.

That was the whole point. The taxi industry was idiotically corrupt. Garret and Travis set out to put the power back with the drivers and passengers. They succeeded.

Garret is the reason I'm in the US at all...he hired me from Ireland to SFO to work for his first startup - anyone remember StumbleUpon? We had Uber credits as part of our comp.

 

[Tom Sawyer]

Okay, here's my idea. I want to borrow your car, but I want you to drive if for me. It's just to give someone a lift and I'll tell you where to go. I'll chip in for gas, but if you do the math on the cost of operating a vehicle, you're losing your ass. I'm losing money too, but I'm not sure why.
Anyway, after I have lots of people loaning their car to me, and driving it for me, too, I'm going to sell stock in this idea. I'll use the money to buy cars that don't need drivers.

I know this sounds crazy, because drivers are the only reason this idea actually works in the first place.

The business model for Uber is actually less evil if drivers are out of the picture. Right now, the company offloads a lot of their cost savings onto independent contractors who then need to pay all this extra stuff for their personal vehicles. If they have a fleet of automated cars which they own themselves, then all of that counts as their own expenses.

Also, if you want an automated vehicle to rape its drunk passengers, you really need to go out of your way to program that functionality in and that's an extra layer of dickishness which is hard to justify financially for the development time involved.

 

[Bronzeage]

Okay, here's my idea. I want to borrow your car, but I want you to drive if for me. It's just to give someone a lift and I'll tell you where to go. I'll chip in for gas, but if you do the math on the cost of operating a vehicle, you're losing your ass. I'm losing money too, but I'm not sure why.
Anyway, after I have lots of people loaning their car to me, and driving it for me, too, I'm going to sell stock in this idea. I'll use the money to buy cars that don't need drivers.

I know this sounds crazy, because drivers are the only reason this idea actually works in the first place.

The business model for Uber is actually less evil if drivers are out of the picture. Right now, the company offloads a lot of their cost savings onto independent contractors who then need to pay all this extra stuff for their personal vehicles. If they have a fleet of automated cars which they own themselves, then all of that counts as their own expenses.

Also, if you want an automated vehicle to rape its drunk passengers, you really need to go out of your way to program that functionality in and that's an extra layer of dickishness which is hard to justify financially for the development time involved.

Less evil and less viable. The Uber business model depends upon drivers making a capital investment in the company, which can never be recovered. If Uber goes to driverless cars, they instantly lose their largest base of investors, while at the same time, purchasing a fleet of automobiles, to replace the cars that drivers let them use.

 

[Tom Sawyer]

Less evil and less viable. The Uber business model depends upon drivers making a capital investment in the company, which can never be recovered. If Uber goes to driverless cars, they instantly lose their largest base of investors, while at the same time, purchasing a fleet of automobiles, to replace the cars that drivers let them use.

Unless they get into the market first and brand themselves as the driverless car service. That's coming over the next decade or two and somebody is going to profit off of it. Uber is in one of the best positions to do so at the moment and then the 80% or so of the fare which currently goes to the driver will be going to the company instead and can be used to pay for the capital investment in automated vehicles as opposed to being lost money which does nothing but get dumped into the pointless black hole of "employees".

 

[Bronzeage]

Less evil and less viable. The Uber business model depends upon drivers making a capital investment in the company, which can never be recovered. If Uber goes to driverless cars, they instantly lose their largest base of investors, while at the same time, purchasing a fleet of automobiles, to replace the cars that drivers let them use.

Unless they get into the market first and brand themselves as the driverless car service. That's coming over the next decade or two and somebody is going to profit off of it. Uber is in one of the best positions to do so at the moment and then the 80% or so of the fare which currently goes to the driver will be going to the company instead and can be used to pay for the capital investment in automated vehicles as opposed to being lost money which does nothing but get dumped into the pointless black hole of "employees".

It sounds good on paper, but this is the paperless age.
The conventional taxi industry is a business model nightmare because it rolls all the retail service sales problems into one dense package. Connecting the customer with the server is difficult. It's the last business where a person stands on the curb and waves their hand to get service. The average transaction fairly small and payment to be handled at the point of service. It's likely that the return trip is an empty haul. All the possible inefficiencies pile up.

Uber eliminated most of that. The connection and the payment are seamless, and best of all, the cost of marginal sales is almost zero. This means, once Uber covers the cost of operation, every sale beyond that point should be almost 100% profit.

But, they have yet to make a profit.

As they say in my neighborhood, "You're just an out of work car mechanic. What the fuck do you know about it?"

The problem I have with the idea of Uber paying for driverless cars with the money currently going to drivers is, that money is not enough to pay for operating a driven car. I don't see how economies of scale, or any other economies is going pay for a fleet of driverless cars.

 

[Tom Sawyer]

The problem I have with the idea of Uber paying for driverless cars with the money currently going to drivers is, that money is not enough to pay for operating a driven car. I don't see how economies of scale, or any other economies is going pay for a fleet of driverless cars.

How about by increasing the amount of revenue they get from each trip by 500%? That could help.

 

[Bronzeage]

The problem I have with the idea of Uber paying for driverless cars with the money currently going to drivers is, that money is not enough to pay for operating a driven car. I don't see how economies of scale, or any other economies is going pay for a fleet of driverless cars.

How about by increasing the amount of revenue they get from each trip by 500%? That could help.

Okay, that has to be a move in the right direction. What percent increase in the cost of vehicle operation will they take on? Right now, that cost is zero, and after going driverless, it will be 100%, so using percentages might not give an accurate picture of the situation.

 

[Tom Sawyer]

The problem I have with the idea of Uber paying for driverless cars with the money currently going to drivers is, that money is not enough to pay for operating a driven car. I don't see how economies of scale, or any other economies is going pay for a fleet of driverless cars.

How about by increasing the amount of revenue they get from each trip by 500%? That could help.

Okay, that has to be a move in the right direction. What percent increase in the cost of vehicle operation will they take on? Right now, that cost is zero, and after going driverless, it will be 100%, so using percentages might not give an accurate picture of the situation.

I don't know because I haven't run those numbers due to not caring and not having the skill or knowledge to do so (mostly due to not caring, though). Uber has entire divisions of accountants who have run those numbers because they do care and they have apparently come to the conclusion that this is a profitable investment. If you want to talk numbers, please show their error.

 

[Alcoholic Actuary]

Okay, here's my idea. I want to borrow your car, but I want you to drive if for me. It's just to give someone a lift and I'll tell you where to go. I'll chip in for gas, but if you do the math on the cost of operating a vehicle, you're losing your ass. I'm losing money too, but I'm not sure why.
Anyway, after I have lots of people loaning their car to me, and driving it for me, too, I'm going to sell stock in this idea. I'll use the money to buy cars that don't need drivers.

I know this sounds crazy, because drivers are the only reason this idea actually works in the first place.

I'm not sure I follow. Are you saying that both Uber Corporation and Uber Drivers (independent contractors) are losing money? Also if I have a fleet of say 20 vehicles, it has to be cheaper for me to set up a garage and maintain the whole fleet centrally rather than outsource maintenance to 20 different people (particularly if I don't have to pay anyone to drive them) right?

eta: I think if everyone is losing money it's because of the independent contractor model, not in spite of it.

aa

 

[Bronzeage]

Okay, that has to be a move in the right direction. What percent increase in the cost of vehicle operation will they take on? Right now, that cost is zero, and after going driverless, it will be 100%, so using percentages might not give an accurate picture of the situation.

I don't know because I haven't run those numbers due to not caring and not having the skill or knowledge to do so (mostly due to not caring, though). Uber has entire divisions of accountants who have run those numbers because they do care and they have apparently come to the conclusion that this is a profitable investment. If you want to talk numbers, please show their error.

If Uber had ever shown a profit, I would be inclined to believe it was a profitable investment, too.

 

[Bronzeage]

Okay, here's my idea. I want to borrow your car, but I want you to drive if for me. It's just to give someone a lift and I'll tell you where to go. I'll chip in for gas, but if you do the math on the cost of operating a vehicle, you're losing your ass. I'm losing money too, but I'm not sure why.
Anyway, after I have lots of people loaning their car to me, and driving it for me, too, I'm going to sell stock in this idea. I'll use the money to buy cars that don't need drivers.

I know this sounds crazy, because drivers are the only reason this idea actually works in the first place.

I'm not sure I follow. Are you saying that both Uber Corporation and Uber Drivers (independent contractors) are losing money? Also if I have a fleet of say 20 vehicles, it has to be cheaper for me to set up a garage and maintain the whole fleet centrally rather than outsource maintenance to 20 different people (particularly if I don't have to pay anyone to drive them) right?

eta: I think if everyone is losing money it's because of the independent contractor model, not in spite of it.

aa

Let's assume the cost per mile to operate a vehicle is independent of who owns the vehicle. If the current revenue does not exceed that operating cost, it doesn't matter who owns the vehicle. The income it produces is insufficient.

 

[Alcoholic Actuary]

Okay, here's my idea. I want to borrow your car, but I want you to drive if for me. It's just to give someone a lift and I'll tell you where to go. I'll chip in for gas, but if you do the math on the cost of operating a vehicle, you're losing your ass. I'm losing money too, but I'm not sure why.
Anyway, after I have lots of people loaning their car to me, and driving it for me, too, I'm going to sell stock in this idea. I'll use the money to buy cars that don't need drivers.

I know this sounds crazy, because drivers are the only reason this idea actually works in the first place.

I'm not sure I follow. Are you saying that both Uber Corporation and Uber Drivers (independent contractors) are losing money? Also if I have a fleet of say 20 vehicles, it has to be cheaper for me to set up a garage and maintain the whole fleet centrally rather than outsource maintenance to 20 different people (particularly if I don't have to pay anyone to drive them) right?

eta: I think if everyone is losing money it's because of the independent contractor model, not in spite of it.

aa

Let's assume the cost per mile to operate a vehicle is independent of who owns the vehicle. If the current revenue does not exceed that operating cost, it doesn't matter who owns the vehicle. The income it produces is insufficient.

Ok. But independence is the assumption I'm challenging. I buy 100 tires, all the same size and model, has to be cheaper - per tire - than you buying 4. With efficiency, can't I get the revenue to exceed the operating cost at some point? (I don't know if this is Uber's plan or not - just hypothesizing).

aa

 

[Bronzeage]

Let's assume the cost per mile to operate a vehicle is independent of who owns the vehicle. If the current revenue does not exceed that operating cost, it doesn't matter who owns the vehicle. The income it produces is insufficient.

Ok. But independence is the assumption I'm challenging. I buy 100 tires, all the same size and model, has to be cheaper - per tire - than you buying 4. With efficiency, can't I get the revenue to exceed the operating cost at some point? (I don't know if this is Uber's plan or not - just hypothesizing).

aa

The thing to remember, Uber is not offering something new. People have been riding around in cars for more than a century. What Uber wants to do is sell a new way to pay for it.

Yes, there are some savings to be had through mass purchasing. We can ask Wal-mart about that. Whether you can get revenue to exceed cost with these savings is the real question. Not only are you buying tires, you are buying the car, too.

Rental agencies buy a lot of cars. Enterprise Rental puts their customers in a car that's no more than 2 years old. This is because their fleet is put up for sale after 30,000 miles. It's no coincidence that the basic bumper to bumper warranty expires at 36,000 miles. This means they don't spend money on repairs for things like power window motors and air conditioner compressors. The sale of used cars recovers some of the original investment and life goes on. They certainly don't buy a lot of tires.

I don't think Uber can take advantage of this cost saving strategy. If you had a driverless car and wanted to sell it, so it could be replaced with a newer one, who is going to buy it? Other than wear and tear on the driver's seat covers, there's no cost savings in fuel and maintenance, over the driven car.

There is another limit on driverless car revenues, which they share with every service industry, and that is time. There are only 24 hours in a day. There is a finite limit of how much service can be provided in that time and the arithmetic is fairly simple. The market determines the revenue per minute and the clock determines the charge. The answer to your question, "Can revenue exceed operating cost at some point?" depends on the market.

Increasing service(longer hours, more cars, etc) works only up to a point. Too many cars means less for everyone. Starbucks learned that lesson. Raising prices makes alternative transportation more viable. Apparently Starbucks has not learned that lesson.