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Comment by jondubois | Hacker News Reader

I don't think it's fair to compare Lyft with Intel in terms of innovation.

Ride-sharing is not an area that can be monopolized. As soon as companies like Uber and Lyft stop subsidising rides, competitors will spawn up like mushrooms.

Unless Uber/Lyft manage to create fully automated self-driving cars AND find a way to OWN all those cars, they will never have a monopoly.

The people who own the cars will have the freedom to switch to any ride-sharing network they like (or even multiple networks).

Then there will be new kinds of ride-finder apps which will allow people to select between multiple providers/networks - A bit like how Expedia lets you select between multiple airlines.

The Airline business is very competitive and low-margin these days, I think it will be the same for companies like Lyft and Uber.

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> Ride-sharing is not an area that can be monopolized

It is very close. There are massive network effects and it will be hard to unseat an incumbent.

The more riders there are, the more revenue is available for the service provider (eg drivers). More riders means average waiting time is lower because more vehicles will be around. More riders means less downtime between riders since the next rider will be closer. More time in revenue service lets you spread fixed costs over more riders, reducing the fixed costs per ride (economies of scale).

This all means an incumbent will provide better service especially as reduced waiting times, and will be able to provide that service more cheaply due to greater utilisation. Their drivers/owners will also make more money due to greater utilisation. Newcomers will end up providing worse service (longer waiting times etc) and cost more!

Many drivers will work for multiple companies in parallel, e.g. Lyft and Uber at the same time. Even if they only get 10% of their rides from Lyft, it isn't a huge cost to the driver. As a result, from the driver perspective, the network effect protection is relatively poor.

This battle will play out city by city, which just reduces the barrier to entry for smaller operators. All in all, I think Uber's defensibility is fairly poor.

> ... from the driver perspective, the network effect protection is relatively poor

I disagree. A driver will prefer as little time between the end of one ride and the beginning of the next, since they don't get paid for down time. Whichever service has the most riders is most likely to have the next closest rider.

You are right that at the end of the first ride, the driver could examine all services to see who has the closest next rider, giving a new service a shot, although the new service riders are far less likely to be the closest one. Uber (incumbent) for example already counteracts this by giving drivers bonuses for picking up more riders in certain timeframes, so the driver picking the less popular service will also be giving up on those.

>A driver will prefer as little time between the end of one ride and the beginning of the next, since they don't get paid for down time.

There are also penalties it seems for not picking up the next ride that requests you as soon as possible. I'm not sure how hard it is time-wise for the drivers to switch between the apps and add up to consistent time and money but I would think you would try and batch your time for each. An hour or an hour there.

As with any measured system, people will always try and game it for their own goals. The first article I found is from 10 months ago: http://www.sfchronicle.com/business/article/Uber-incentives-...

"In one offer, Uber is now guaranteeing $2,000 a week in gross earnings for new drivers who work 60 hours a week. Another, more-extensive program for existing drivers promises bonuses based on how many trips they complete. For 100 trips in a week, they get an extra $350, for instance."

If a driver can already easily meet those then great. But it wouldn't be that great to spread yourself amongst the services and avoid the incentives. And remember the larger incumbents have more wiggle room in terms of incentives and changing them based on real world driver behaviour.

We'll see. This business is becoming massively commoditized, which will eventually minimize network effects in the face of competition and price (for drivers and riders). We lost Uber/Lyft in Austin less than a year ago, and there are now several new services (Fare, Fasten, etc) that do exactly the same thing here, with a little less of that moneyed polish. Drivers and riders alike are using them just like before. One hardly even notices a difference except the name of the app.

How mismatched are the new services in terms of size? If they are all roughly similar then network effects won't make much of a difference. But for example if one is ten times the size of the others, then I stand by my claim that network effects will result in

* shorter wait times for riders (better customer experience)

* more money for drivers (shorter waits between riders, so more paid time)

* cheaper fares (fixed costs spread over more riders, reducing per rider cost)

* more effective loyalty programs (improved ways to earn and spend on them)

A larger incumbent can be attacked, with the simplest way of doing it to go more niche - eg serving a smaller area better. Even then the incumbent should have greater ability to react.

The Austin services are not comparable when it comes to wait times. I've found it very hard to get a Ride or Fasten on several occasions even in high density areas, and you can't really count on being able to get a Ride at all times in all parts of the city. I'm definitely eagerly awaiting the return of Uber/Lyft.

Google maps at least on Android is already showing fares from both Uber and Lyft when you ask for directions.

>> "...freedom to switch to any ride-sharing network they like (or even multiple networks)."

The hardware manufacturer/owner will fight tooth and nail to prevent this. They'll probably write a clause into the user's contract that says "If you use an unauthorized ride share network, we will delete your account with us and remotely disable your hardware."

It's the same school of thought as Google deleting your gmail for reselling a Pixel phone at launch.

If I'm not mistaken Tesla might have already written this clause into their contracts.

>> Google deleting your gmail for reselling a Pixel phone at launch.

Any reference for this? I think you are referring to [1], but that was not because somebody sold their Pixel phone, but because a company was reselling a large number of Pixel phones from New Hampshire to avoid sales tax (which is against the ToS, and probably borderline illegal).

Also:

"Many of the accounts suspended were created for the sole purpose of this scheme. After investigating the situation, we are restoring access to genuine accounts for customers who are locked out of many Google services they rely on."

https://www.theguardian.com/technology/2016/nov/17/google-su...

  >> "The people who own the cars…will have the freedom to switch to
  >> any ride-sharing network they like (or even multiple networks)."

  > "The hardware manufacturer/owner will fight tooth and nail to prevent this"

At the moment, there's no hardware to speak of. Uber/Lyft don't make the cars. They don't make the handsets that the apps run on. Without a monopoly/control of the hardware, their leverage is just the network effect.

  > "It's the same school of thought as Google deleting your
  > gmail for reselling a Pixel phone at launch."

An action which they reversed [1]. That's also more of an issue for Google because their services are so diverse - not an issue to consider with Uber/Lyft unless their business model changes significantly.

  > "If I'm not mistaken Tesla might have already written this
  > clause into their contracts"

The Tesla clause relates to self-driving usage: "using a self-driving Tesla for car sharing and ride hailing for friends and family is fine, but doing so for revenue purposes will only be permissible on the Tesla Network" [2].

[1] http://www.techtimes.com/articles/186353/20161119/google-sus...

[2] http://thenextweb.com/insider/2016/10/20/tesla-dont-use-your...

That was the central premise behind Karhoo - an idea with a good long term future only to be seriously mismanaged at the senior level leading to failure.

     Ride-sharing is not an area that can be monopolized

I bet people said they said thing about silicon chip market in the 80's. But look where Intel is now. They have monopolized the desktop, server, and super computer markets.

There's a lot of cost in designing and making a modern microprocessor - many billion so it's hard to set up as a rival to Intel. Writing a taxi app less so. (https://news.ycombinator.com/item?id=13342415)

Every single comment in that thread proves my point.

Agreed. With available open source libraries/tools, I could build a basic Uber clone on my own with no funding in maybe 2 or 3 months.

I could not build a clone of an Intel chip in any amount of time - Even with a team of 100 engineers - The capital cost is just too massive.

Well, you could probably build a clone of their early chips (like the 8086 and such), but nothing "modern"

> I could build a basic XYZ clone on my own with no funding in maybe 2 or 3 months.

People said the exact same thing about Twitter (and every other popular app), but it isn't true. There's a lot more to building a successful company.

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