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Comment by CamelCaseName | Hacker News Reader

The idea that one could lease a vehicle from Uber, at a significant loss to Uber, then turn around and use that vehicle to drive for Lyft, is absolutely hilarious.

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It's the sharing economy.

Yet another example of VC ending up subsidizing America. We could just cut out the middleperson and go to basic income paid for by VCs.

Somebody needs to pay for the next Uber of Avocado Delivery

I'm sure you actually meant Avocado Toast.

No the delivery company is an infrastructure play while the toast company is scaling the b2c interfaces.

Its "Not Hotdog" all the way down.

And we could promise the VCs 100x returns in the afterlife.

Now, as a thought exercise: who do you think subsidizes VCs? (I.e. who are the biggest LPs)

For people who don't want to look it up... Some of the biggest are pension funds! It's not just high net worth individuals or companies, it's also mom & pop retirement funds.

https://www.quora.com/Who-are-the-biggest-investors-limited-...

it is a big circle of value extraction by as many members of the capitalist class as possible...

>Now, as a thought exercise: who do you think subsidizes VCs? (I.e. who are the biggest LPs)

The Fed, with their policy of Quantitative Easing over the past 5 years.

The Fed QE policy was over about 5 years (late 2009 to late 2014), but not “the past 5 years”.

Which doesn't disprove the gp. The Fed still has $4.5 trillion in assets on their books, when they had < $1 trillion pre-QE1. The Fed supported $3.5 trillion in risky assets long-term.

The Fed has paid US banks to hold onto currency reserves that were injected into them, effectively subsidizing more risky investments throughout the economy. This includes equity growth, equity distributions, low bond yields, kept the capitalization rate (ignoring Fed injections into banks) low, etc. Without keeping QE on the books, these other current market investments wouldn't have been possible.

QE has allowed risky debt to continue to float around the entire financial system without market forces quickly drowning the riskiest. Effectively the Fed is subsidizing the risk and the average person will pay when inflation finally picks up. Just because we still don't fully understand the new "laws of finance" while we are in this QE bubble doesn't mean the old laws of finance won't still apply when QE dissolves.

But Fed is not just giving money for free. VCs will need to return them eventually.

The Fed isn't giving money directly to the VCs (atlest that I know of). The fed is keeping interest rates low on Treasury Bonds low. The rationale for this is: if investors get a small return on a riskless investment, they will be willing to take bigger risks for less rewards. Theoretically this should increase the investment in Venture Capital firms.

Sure, plus there is another money flow: low long term borrowing costs, with borrowers looking for a way to invest with higher return.

But in both cases these people (investors, borrowers) will want to get their money back eventually..

The quantitative easing FUD on HN is getting pretty tiresome. It gets blamed for everything from VC subsidies to house prices and just about everything in between.

All three rounds of QE in the USA focused on mortgage-backed securities and Treasury securities. Are you suggesting there were a bunch of VCs who were neck deep in the MBS or CDS/CDO rackets in the mid 00's?

See https://en.wikipedia.org/wiki/Quantitative_easing#US_QE1.2C_...

I'm not making any kind of judgement to the effects of QE policy, simply stating a fact.

> Now, as a thought exercise: who do you think subsidizes VCs?

Everyone who pays taxes on non-capital income.

How does the money get from taxes to VCs?

The point is that money _doesn't_ get from VCs to taxes. At least not in the same percentages as normal income.

All tax breaks are government subsidies. Tax rates that are lower on one class of income than another are tax breaks.

It's a good start, for a basic income I mean. Not that I'm necessarily advocating we take away retirement funds, but a 5% return on pension assets distributed to the American people yearly would be more than $3000 per person. Include some other assets and we could move make UBI less basic and more income.

From 2009: >Banks have $96trillion in assets, investment funes hold $22trillion, insurance firms have $21trillion and pension funds $19 trillion.

http://www.wealthmanagement.com/blog/fun-fact-day-know-and-t...

Except in this instance, the beneficiaries are those unable to acquire a car loan. So a very different demographic from the usual crowd benefitting from VC largesse.

I don't think the irony should be lost.

Well, you have to give the car back (early) to trigger the loss. Or do you mean the driver somehow finding the car on the secondary market afterwards and buying it?

No you could literally lease it from uber and work 20h a week at uber and 20h a week at lyft in it.

Oh. The lease terms are crappy for the buyer as well. So, yes, funny in that Lyft would benefit in that scenario. The driver certainly doesn't though.

Actually, clearly the driver DOES benefit, if Uber is losing $9,000 per car. That's money that the lessee should have paid in an economically fair transaction.

In all fairness, a bunch of people are paying a little too much, while a small minority are getting most of the benefit, e.g. people who default on their loan, or who drive the car into the ground in three months and then return it. But, that in a nutshell is why sub-prime leases are really expensive on the open, non-VC-subsidized market to begin with.

The fact is, the vehicle portion of a hack business is a non-negligible portion of the cost. Most professional drivers replace their car every 2-3 years, after driving the old one to near-zero value by putting 150k+ miles on it. UberX's pricing is pretty much predicated on the fact that people aren't sophisticated enough to amortize their vehicle cost into their profit calculation. Works fine, until you kill your first car and it's time to buy a new one to keep driving ...

>Actually, clearly the driver DOES benefit, if Uber is losing $9,000 per car.

The drivers that exit the lease early benefit in that they are able to without huge penalty. They didn't net much out of the whole relationship though. How much do they make a day after subtracting $17/day just for the vehicle, plus whatever fuel costs are, self employment tax, commercial insurance, etc?

For drivers that keep the car for a long time, the subprime terms eat into an already paltry income. That was the portion of drivers I meant weren't benefiting.

I agree that the entire enterprise might be a bad deal for buyers, BUT:

- for those who returned the car after months, this is an option that just isn't available in an ordinary lease - in some cases, death is not enough to cancel a lease. These folks would have been left making all of the payments on the car for the rest of the term. Plus, ordinary leases have very low mileage caps. They may not have made much money, but they would have lost thousands if they had a conventional lease.

- for those who keep the car say 3 years and put on 200k miles: they would pay a total of $18k and return the car with a couple thousand dollars of value. If the purchase price was say $22k, then they got a completely fair deal.

That's the thing - I don't think the terms were sub-prime at all, they were simply priced to only appeal to serious professional drivers working 50-60 hours and 1500 miles per week, which is not atypical for cabbies and limo drivers (mileage might even be low).

Ahh, I see why we aren't on the same page. My reading was that the cars leased in this program were used cars, with values substantially less than $22k.

https://www.uber.com/drive/vehicle-solutions/leasing/

"The majority of eligible vehicles will be pre-leased and/or pre-owned inventory"

Given Uber's pretty tight standards for cars, I would assume that these are late-model low-mileage pre-owned cars, which still hover i the $20k value range.

I think they also wanted to reserve the right to re-lease cars that came back as early returns under the leasing plan.

So apparently it's the passengers who benefited in the end? That is, if the drivers who put lots of miles on the cars didn't make much off it, this was an indirect way of subsidizing lower rates.

Yup. Most of the story of ridesharing (and the sharing economy in general) is a massive shift of profit out of the hands of monopoly rentiers (cabbies (or more accurately, medallion owners), hotel owners) and into the pockets of consumers.

We're all paying much less for car rides than we were a few years ago, but the basic underlying cost of providing those rides has not changed much at all.

All that crazy VC money benefits the users. Blue Apron is the same thing with food. I got free food, no plans to subscribe. Thanks for the meal!

(Not literally me, I never used Blue Apron, but a lot of people have)

No, you can't. You can lease it from uber and drive 40h/week for uber and 60h/week from Lyft, but even that is a stretch. When you lease from a ridesharing company you are committing to that ridesharing company.

I am not saying that isn't the case, but the article made mo such indication. What is your source for this?

Technically, Uber has the loss even before the car is returned, since the asset value has already declined. Businesses are supposed to report losses and profits when they occur, not when cash changed hands. Companies are supposed to "mark to market" assets that are on the books at an inflated rate. But, most companies resist doing this until an auditor or government agency forces them to do it. This was the crux of the financial meltdown, banks were reporting mortgages on their balance sheets that were effectively worthless, given risk of non-repayment and depreciation of the collateral, as full-value assets. Thus, they were not seen as being insolvent.

That's the general accounting principle, but accounting is pretty hard. Leases get pretty complicated quicky. For example in a sale and leaseback under IAS17 even 'profits' you make at the outset (let's call them economic profits), you are only allowed to recognize proportionally to the time of the contrary. Here the precautionary nature beats the realisation principle.

Here's an example of how accounting is hard with differences between US GAAP and IFRS [1]. Uber loses half it's revenue under a new US GAAP principle...

[1] https://www.ft.com/content/74447ca2-6b0b-11e7-bfeb-33fe0c5b7...

one year ago today I had to take a long uber ride, and the driver was excited that it was enough to cover his lease, and he could switch back to Lyft.

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