Lyft’s IPO disclosure shows it’s not close to profitability
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It has never been impossible to run a company by injecting money into it to cover the difference between how much customers 'value' the product versus what it costs to provide the product. But the dot com days showed that without a point in the business model where the value exceeds the cost by enough margin to keep the business going, such businesses don't survive.
What neither Lyft, nor Uber, has yet provided is a credible 'size' at which they would be a going concern (covering all their costs), nor a really good idea of how being larger scales revenues more than costs in sufficient measure to become profitable.
I would love to see a document that describes the 'per driver' costs that these companies incur on a location basis (so costs per driver in Los Angeles CA, and per driver in Minot ND) vs revenue expectations per driver vs total available livery miles (how many people would have to want to go somewhere to support those numbers). Then you could at least see if there were any islands of profitability in that solution space.
So far, I've yet to see anything where the answer is net positive. Worse, any positive solution will be very fragile by definition because the barrier to entry is zero and so a third party can unilaterally drain profits out of a ride share company by starting up an unprofitable competitor and funding it out of pocket until it has done the required amount of damage.
On my employee orientation a few years ago, we were shown charts from the finances team with breakdown of gross income vs the various cost centers and they were talking about how established cities were profitable and new cities were not due to various reasons (see my other comment downthread)
My personal take on this is that eventually the world will run out of cities for Uber to expand into and every city will either be profitable or deemed not worth entering.
I don't really buy the argument that any fat slob willing to burn money can displace Uber in an established market in any significant way. The stealing marketshare strategy only works while all parties are still growing in a given market. Once the growth stops, it's a race to the bottom, and I don't think any investor wants that.
Uber has a lot more leeway in how it can reallocate resources if one local competitor decides to spring up in some random market, just from its sheer scale, and at some point, the law of diminishing returns will probably make it not worth for someone else to try to be the third or fourth competitor in a given market.
At that point, if I were investing, I'd be pressuring those companies to either partner up, be acquired or cut some sort of exclusivity deal, giving Uber a share of profits.
And from history, that's exactly what has been happening. Uber left China by cutting a deal to take a cut of the pie, it partnered in Russia, and now there's the rumour about the Careem deal.
The risk is not an unprofitable competitor it’s a lower margin competitor. Large cities have long supported multiple cab companies which caps Uber’s profit per city, and worldwide their are not that many large cities.
Really, they would need to be making 100+ million in profit just in just NYC to avoid that crash. But, those kinds of profits would clearly attract competitors long term.
Where I think Uber has a competitive advantage is the multitude of spin-off services it provides. Cab companies only compete on a fraction of the transportation market. Uber has its hands on a lot of different segments and it's a household brand at this point. We'll see what the market thinks when the IPO happens, I guess.
Rides are a bit like diamonds: The only thing keeping the prices up was a cartel.
So, the end-game is driving competitors out of local markets, by using profits from other markets?
This sounds like a great argument for Uber getting broken up, as a monopoly - if it actually achieves this endgame.
Is Linux dumping on Windows?
I find the romance sub-genres delightful; not so much to read them (although maybe I should), but just that they exist makes me smile and appreciative of humanity.
I think that romance gets so little respect even from people who appreciate other "pulp" genres like SF or horror, has a lot to do with assumptions about genders of readers. SF has a very "unsavory" past too, but has been "recuperated" somehow. Romance stuff is just books too. I like books, and I'm glad that people still read them!
The taxi situation in most cities was awful before rideshare came long, and the taxi cartels' rent-seeking behavior produced produced some gross externalities (the lack of any train lines going to LGA comes to mind), so this has perhaps been a net benefit to consumers. But Uber and Lyft are not charities, and that fact has no bearing on their viability as businesses.
Their costs, other than taking a haircut on the ride, doesn't seem entirely clear, or obviously large.
A 2017 number says Lyft completes about 360 million rides per year. For fun, let's say they make $1 per ride, are they really not able to run their front-end operations with around 1,000 employees? (assuming an employee costs about $250k-300k/yr)?
That seems crazy to me, but I don't know what hidden costs there are. From an outside PoV it appears they need to run a more or less static website, about 4 smartphone apps with some back-end routefinding and accounting systems.
What am I missing?
Uber's margin is probably under 5% which simply isn't enough.
Customer service - Uber seems to have decided it's cheaper to just allow a few no-questions-asked refunds for cancellations than actually getting humans involved every time
Office space (in SF!) to hold all those employees
"some back-end routefinding" becomes hideously complex once you factor in:
- real-time road closures
- lyft line matching
- traffic modelling
- time-of-day turn restrictions
- normalizing data from various regional map providers
- routing itself is NP-hard
If you're a taxicab company and your non-driving staff is making that, you've definitely screwed up somewhere.
If you take their current numbers, and set the amount of money they pay drivers to 0. Are they profitable?
While you could imagine that money going to the service instead, the missing piece there is that the drivers own (or lease) their cars and absorb that cost, so does what the driver makes cover the costs associated with owning the vehicle? (gas/energy, depreciation, maintenance, insurance)
Does doing this at scale have better margins than say an individual offering their self driving car as a livery service during the 'off hours' and keeping all the money it generates?
On the current market with human drivers, there are some odd incentives to the contrary though. Using driver-provided vehicles probably helps make the "they're independent contractors" legal argument. There's also the storage yard problem-- if you own a fleet, you're going to have to provide a place for the drivers to come to, park their own cars, and get into yours. I also suspect it lets them cast off the "unknown unknowns" -- damage and insurance claims, underpriced routes. And yes, there are likely opportunities to exploit new recruits by paying below their actual costs.
Once you have self-driving, many of those incentives vanish. Your biggest win comes from calling up GM and ordering cars 10,000 at a time, which a new-to-market entrant can't afford to do.
I know that a lot of people think the drivers generally are that stupid, but I'm skeptical.
Here is another way to look at it. Someone who rents their apartment on AirBnB for one week a month which generates enough revenue to pay their rent, and they live in the apartment the other weeks of the month. This arbitraging of costs is similar to what Uber drivers do.
If Uber were to shift completely to self driven cars, all of their arbitrage ability would be lost, as the full costs of the cars would then be on their books. Now if the business model of having cars available 24hrs a day and there was no drivers fee allowed them to be profitable, that would be an interesting model. Of course one of the things that is going to happen in self driven cars will be things like drunk people throwing up all over the car, resulting in the car being out of service while someone cleans it. Or being defrauded when someone steals a phone and tells a self driving uber to drive them to the next state so they can sleep in the back seat. Then you are back to a security guard who is watching cameras of cars, but how many do you need of those? What do they get paid, are they 'contractors' or employees?
I'm rooting for them to change the world for the better but I've been unable to guess at a business model that would allow them to be profitable yet.
If you're away for the weekend or a business trip, there's very little $$ cost associated with renting out your condo for the weekend (ignoring the risk of a bad renter). It's arguably (almost) free money, again, depending on how you quantify the risk.
The cost of a car, on the other hand, is mostly related to how many miles it's driven, not over how many years it's driven. There are some time-based costs (taxes, insurance mostly, rust in snow states, having older tech) but it's mostly distance.
Easily. They paid ~$8bln to drivers last quarter. They merely lost ~$2bln in 2018.
Many people use Uber because they don't want to drive when they go out, but if their car can drive itself, why bother with Uber?
what stops anybody from spinning up a p2p solution for car sharing that cuts out Uber?
The problem is that there's no significant economies of scale to the taxi industry. You don't make drivers much more efficient by having more of them, and there's an induced demand problem where the limitations of cities and traffic mean that you just cannot scale up to infinity.
This is by the way why there's no enormous single individual taxi company in the existing market. Taxi business tends to be small and competitive for this very reason. It's an extremely ill suited environment for a technology startup.
If self-driving tech really becomes so good that it will make tons of money, then why let Uber etc have that market? There is zero that differentiates them. Everyone can put a booking app together and optimise it over a few years (see the many international copy cats who have done just that).
Then why wouldn't a self-driving-manufacturing leader (whoever that will be, Tesla, GM, BNW, a Geely or other Chinese player, doesn't matter) run fleets themselves? It's not like there's much human cost involved. (and manufacturers already got their service networks and charging networks together where self driving vehicles could go at night to be charged/serviced)
We'll see how it plays out, but I don't think that's true. Maybe it's what Uber wants, but I think car companies and consumers will disagree.
In the long term, self-driving decrease the need for even owning a car. Why make that huge investment when a car can always be available to you within minutes with a few clicks in an app? It then would make more sense for those large investments to be made centrally by the Ubers, Lyfts, Waymos, Teslas, Apples, etc of the world. In the distant future I would bet driving eventually ends up like flying is today with only the ultra-affluent and hobbyist owning their own vehicles and everyone else just paying per use.
Uber could still lobby against competition, but that's a whole different level and we'd be pretty much back at a classical taxi situation.
- You don't have a self driving car.
- You don't have a car, period.
- You're stranded somewhere or don't have your car with you.
- You don't want to deal with parking.
Also, with a self-driving car the driver doesn't have to deal with parking because the car can take care of it.
You pay per use with AWS instead of buying physical servers right?
So it probably depends on the individual's financial situation and where a car ride falls in terms of buying bulk vs incrementally.
A lot of the expense about physical servers is also the maintenance and having employees' time to manage them. A car requires some maintenance but arguably less so than that, so perhaps not the closest comparison.
Because it's cheaper over the long run.
"Why own a car when you can just Uber" makes sense for people who live in areas where they don't have to (and don't want to) drive very much, but I think the assumption that most people fall into that group is pretty shaky. I think it's probable this will change over time, but that time span is almost certainly going to be decades, not a few years.
It will go public at an inflated price and hold that valuation for a quarter or two and then people will start asking where either the profits or growth are and Lyft will need to start growing or erasing their huge operating losses right at the same time Uber is trying to grab as much ride share as possible gearing up to their own IPO.
So at a time when the market will be starting to really pressure them to cut losses, probably by cutting the driver's portion of revenue and raising prices, Uber will be trying their best to inflate their own ride share metrics by giving drivers more and cutting ride costs.
What is the story you can tell that paints Lyft as a good investment over the next 2 year period?
Then there is Lyft's dual share structure will get it kicked out of many ETF's. This locked in money is a godsend to most companies as they help buoy the stock price by having locked in holders of teh stock during turbulent times. I think MSCI will put Lyft into some of its indexes given that it just put in 8-10 Chinese companies with dual listing share structures
One thing I do like in Lyft's favour is that they could be a counter cyclical stock, ie they do well when the rest of the market isn't, due to people using Lyft to replace a second car or a lease that they've given up.
We just haven't had a recession while ride sharing was a main stream thing.
> Zimmer, Lyft's cofounder, went on to assert that private car ownership would “all but end in major U.S. cities” by 2025.
Given that people are currently signing leases and payment plans for cars that won't expire by then I'd say this is a bit of a stretch:)
Any company that is working on self-driving cars will want to acquire Lyft: Google, Apple, Tesla, GM, etc
Any company that is in logistics space will want to acquire Lyft: Amazon, DoorDash, Grubhub, etc.
Any ridesharing company will want to acquire Lyft: Uber (defensively), Didi, Ola, probably not Grab, etc.
There will likely be a bidding war for Lyft because that's the only reasonable path towards competing against Uber unless you think self-driving car is < 5 years away.
To me this is like expecting Netflix to want to acquire Blockbuster ten years ago. The investments Lyft has been making into self driving cars are mostly for show. Blockbuster was investing in the web back in 2009, but they were never close to catching up. If Lyft was far along in building self driving cars, they would be far along in other AI applications too. Everything Google and Amazon does that pushes the boundaries of AI makes them more capable of building a network of self driving cars. Google, Amazon, Apple, Samsung, Microsoft, or IBM might not build a self driving car network themselves, but if they're the kingmakers, will they want to help Uber or Lyft or other companies with more resources?
It’s certainly plausible that at some point, the companies simply burn through all their cash, and investors give up on expecting a return. That would kind of suck, but why keep throwing good money after bad?
[0] https://www.bloomberg.com/news/articles/2018-08-16/to-get-re...
I'm of the opinion it's literal fantasy. Maybe in 50 years, heck, maybe in 30. 5-10? I can't see it.
I'd back "self-driving, in-traffic, no-safety-driver taxi service available to the public in 5 cities in 10 years" at even money any day of the week (so long as it doesn't mean losing half of any money in escrow to inflation...)
1) Navigation. The D.C. street grid literally changes daily due to closures, detours, and construction. Google Maps does not keep up with these changes in real time. If self-driving tech can't understand when a construction worker is hand signaling drivers through a single lane for both directions of traffic, it won't work at scale.
2) Weather. Apparently, self-driving tech relies on following lane markings, which routinely are invisible during/after snow.
I don't think it's a strong statement. I'm taking the other side of the "everyone will be flying in supersonic airliners in 10 years" bet in 1960. There is a huge difference between tech that kinda works, and tech that works reliably enough to serve as a basis for transportation infrastructure.
Using VC money to subsidise minicab rides (which for some reason is called ridesharing) isn't.
That said, I doubt that self-driving technology will be their AWS (the way that Amazon ended up being profitable). Self-driving technology is incremental as it is dependent on extensive, expensive mapping.
There are no examples of the working rideshare buisness anywhere in the world. It’s very strange, given that cabs are well understood. It’s even more surprising that rideshare companies are promising profitability on autonomous vehicles that don’t exist, and won’t exist anytime soon.
Self driving car companies be able to offer competing service for 70% cheaper per mile. Riders will migrate for the drastically better price.
There's no long-term defensible asset in the Lyft driver network, and switching costs for riders are minimal.
Customer acquisition in ride sharing space is a fairly well-trodden path - start with a high promotional credit for signups/referrals, gradually lower those as desired metrics are met.
I guess in that sense an acquisition makes sense when the target is priced below the cost of customer acquisition, but I doubt that is the valuation Lyft/Uber are hoping for.
Google even promotes this by having the ride hailing part of maps.
The scooter business amplifies this even further, very few users or charges have a strong preference to a single brand.
While YouTube had advantage in content, Vimeo had targeted commercial content, but very low stickiness.
Google might have smart engineers, but their user experience leaves a ton to be desired IMO.
I'm no expert, I just see this narrative parroted all the time.
1. Driver network. This will go away with self-driving cars.
2. Rider network. This might take some time for Google etc. to acquire, but probably not nearly as long since they'll have a one-sided market (while Lyft/Uber had to deal with a two-sided one.) This might sell for a pittance relative to their current market cap.
3. Routing technology. Lyft & Uber have gotten much, much better at routing than they were just a few years ago – especially when it comes to multiperson rides. I could see this being pretty valuable, there's no need for Waymo to spend years duplicating the same thing when they could just buy it.
i had to chuckle at that. i've had multiple experiences where my driver had to loop hack toward my origin to pick up someone else, literally passing my pickup point in some cases. other times drivers were expected to swerve off of a freeway with seconds' notice to pick someone else up.
i think they have some ways to go in that regard. sure, they have a lead on an unprepared/undercapitalized competitor, but i'm not sure they'd have a lead on google (who also owns waze).
Google's track record for consumer-facing services is abysmal. Acquiring Lyft is a deft business move for Google's Waymo unit. At the very least, a partnership agreement is in order.
Boom. They instantly have a bigger market share than Lyft. And, for Google, maybe even Uber.
I would say Uber's biggest challenge is if Google and/or Apple decide to commoditize the ride hailing marketplace. The ride itself is already a commodity.
They're both more or less testing this already.
I could definitely see a foreign company buying Lyft, though.
I haven't looked at the balance sheet, but it seems like, if their path to profitability were anywhere close to being as easy as that, then you wouldn't have Horan saying that there is, "nothing in the document that suggests how that could be fixed."
Not saying he's wrong, but I would take anything he says with a grain of salt. Especially considering it's pretty clear that Lyft is in a hyper-growth state, with huge revenues and their only major overhead is labor, hardware and the cost of entering a new market.
Two of those are not going to go away. And the cost of entering a new market should be relatively low for a company like Lyft. The nature of the business means they don't need to make any huge up-front investment in new real estate or equipment. It's mostly just running promotions to attract business and drivers in the new market.
Last year they lost $911M on $2,160M of revenue. If handing out incentives really represents over 30% of their costs, which is what would be implied by the "they'd be fine if not for trying to grow so quickly", that would be pretty worrisome. It would imply that they're in the business of selling dollar bills for $0.75. That's not the kind of business that becomes more profitable as you attract more customers.
One of the big subtexts here is that the standard tech "hyper-growth" business strategy is designed for businesses with very high fixed and very low incremental costs. Lyft has just the opposite: Low fixed and high incremental costs.
That's 100% incorrect. Entering new markets is insanely expensive, because they can't get drivers unless they guarantee income until the market is successfully built.
> The nature of the business means they don't need to make any huge up-front investment in new real estate or equipment. It's mostly just running promotions to attract business and drivers in the new market.
Again, you're missing the biggest expense in entering a new market: labor. Nobody is going to drive around in a Lyft with no customers. So Lyft guarantees them some degree of pay while they expand. That can take time and is addition to the promotional costs with entering a new market, particularly one already saturated by Uber.
> Last year they lost $911M on $2,160M of revenue. If handing out incentives really represents over 30% of their costs, which is what would be implied by the "they'd be fine if not for trying to grow so quickly", that would be pretty worrisome.
Worrisome? That would be ideal. Growth companies should be spending money quickly. We have a name for it (burn rate). I think a lot of people seem to be confused on what an IPO is. It's a funding round, unless the company is doing it because they have to (investor count is too high).
> It would imply that they're in the business of selling dollar bills for $0.75.
The implication is that when they go to a new city they are selling dollar bills for $0.05. What remains to be seen is whether a saturated market can be a profitable market.
> One of the big subtexts here is that the standard tech "hyper-growth" business strategy is designed for businesses with very high fixed and very low incremental costs. Lyft has just the opposite: Low fixed and high incremental costs.
They only have high incremental costs when they expand into a new region. What are their incremental costs when they've successfully saturated a market? Labor (which gets cheaper as a fixed cost over time, as your market size increases) and hardware, which does the same.
Again, I'm not suggesting they are going to be profitable, I'm suggesting that the idea that they should be making money while entering as many new markets as they are is a crazy position. In order to do that they would have to slow growth substantially, which is literally just dying to Uber.
What is different about Lyft is that they've structured things such that they don't have to pay their drivers much when business is really slow - they're guarantees like, "If you complete 5 rides in one day, we'll guarantee you earn at least $100 on those rides." When you consider that drivers have to pay for their own cars and fuel, that probably doesn't even come close to minimum wage where I live. Meaning that their initial labor costs are probably cheaper than McDonald's.
I stand by my claim: The cost of entering a new market should be relatively low for a company like Lyft.
Similarly for the rest: You're trying to think about Lyft as if it were a tech company, and that seems to be leading to a distorted view of how their business works. Lyft is not a tech company. It's a taxi company that happens to be based in San Francisco.
I also get the impression that the costs of rides are artificially low right now. Lyft is subsidizing them to encourage use. If the true cost of a Lyft is about the same as a cab, I can say personally I'd be more inclined to take public transit or a cab than I am now.
There are plenty of actually profitable companies that return decent dividends. There's no proof that profitability will result in an increase in share price.
If they're not profitable today, I don't think they'll ever be profitable. It's a signal from the marketplace that 'on demand ride services' business segment is over saturated for market demand. They are not meeting an unfulfilled niche in the market, they are losing money to trying to become a dominant player.
Unless the landscape drastically changes and people no longer actually have their own cars (which is their near-term pipe dream), they're going to lose a bunch of other people's money.
Why not also just hand wave that Lyft is a mere messaging app company that provides communication between people who need rides and drivers willing to give them?
You can criticize the company many ways, but whatever they're doing is working because they're making $2.2B in revenue and growing rapidly. They're positioning themselves as a demand-provider to service the upcoming self driving markets, which is smarter than vertically integrating like some other hype machines out there.
> Why not also just hand wave that Lyft is a mere messaging app company that provides communication between people who need rides and drivers willing to give them?
If this was their actual business model, they might actually be able to turn a buck. Drivers can pay a small monthly fee to be enrolled in the service, lyft takes a small cut + payment processing fee. Drivers paid weekly or after X amount of revenue, whichever comes second.
And very few can scale it to spend $0.50 to make $1.00. We aren't talking about a company selling a product for half what they pay. They are investing overwhelming amounts of money into growth.
> If this was their actual business model, they might actually be able to turn a buck.
Yes, just oversaturate the market with drivers and not enough passengers and you'll for sure make tons of money, constantly dealing with overages and shortages since you aren't managing supply in any way.
But I do expect you end up with pricing similar to taxis.
Citation needed on how this statement is applicable to lyft. At least go look at their financials to see how, again, their billion dollar revenue is growing much faster than their operating expenses.
And a subscription model charging the drivers is a terrible idea unless you're trying to squash growth. In two-sided markets you don't charge both.
That's not what they're doing. Their numbers for 2018 are spending $1 to earn $1.05. Of course, they also spent $0.80 to tell people about it and another $0.30 in R&D to develop new businesses which puts them firmly in the red. But there's at least a business there that is generating positive cash flow. It's an open question if they can cut R&D/Advertising and/or expand their revenue enough to become profitable.
So their numbers for 2018 aren't spending $1 to make $0.50, they're spending $1 + $0.30 + $.80 = $2.10 to make $1.05, which is, I believe: $1.00 to make $0.50.
This line of thinking is the reason a lot of people lose money investing. If investors are confident a company will one day be profitable, the price will trade at a value that is very close to what it will be when it hits those numbers. The market takes into account future cash flows.
In order to beat the market, you have to either know, or guess correctly, something that the rest of the market doesn't know. So, usually, you need luck or insider trading.
No it's not because the market takes this into account.
I simply don't see how Lyft can turn profitable without loosing marketshare when competing against a rival that has profitability it can reinvest from elsewhere.
Another problem is waiting for a car. I got robbed once while waiting for an Uber. One solution might be to wait for the Uber driver to arrive and then go outside. I tried this once the other day, not for safety but so I could hang out with friends. The Uber left less than a minute after I got messaged, and I got charged the $5 fee, so that isn't practical. It feels safer to be walking to a bus or rail stop, or to be waiting at a stop, than it does to be standing on a corner waiting for a car.
The idea that Uber/Lyft is going to replace private car ownership for everyone because it's replaced it for some is ludicrous. Public transit has done more to replace it for me (car-free by choice for 5 years) than Uber/Lyft. I usually only use Uber/Lyft when I'm in a hurry, and the cost Uber/Lyft rides just about cancels out the time savings.
Self driving cars might one day replace it, but I don't think that Lyft or Uber is going to be at the forefront of it. If they are it will make me more frustrated with how the tech industry operates, because it will show that the value of investment and brand far outweighs expertise. Uber/Lyft contain a tiny fraction of the deep learning, automotive, and transportation expertise that will be needed to pull off such a thing.
Finally the term "major cities" brings up the "no true scotsman" fallacy a lot. "Rent is high in major cities." Oh yeah? Dallas isn't a major city? If I don't live in a high rise downtown I'm not really living in Dallas? Eventually every major city will be eliminated in an argument and it will turn out that for the sake of the argument, there aren't any major cities in the world.
Functional, competent self driving cars are not here yet. As we get closer, I think we will find few will want to own them. Why bother?
There are reasons, but those are few compared to those readons for cars we drive ourselves. We are likely to find, people will question the number of cars and share them a lot more.
But that state is still a very long way off.
The current slump in sales is both economic (way too many Americans buying used because new is not worth it, given tepid income)
...and a wait for EV cars to really arrive at price points worth buying new.
Looks like private car ownership is on the wane, but not really, not yet.
My .02
Out of curiosity, do you have children? I know that my desire to own a vehicle has gone up considerably after having children. Right now in my car I have:
- Diapers and wipes for the baby
- A change of clothes for both kids
- Car seats for both kids
- A booster seat for use in restaurants
- A stroller
- Some towels (just used one yesterday to clean up a wet kid)
- Snacks
- DVDs for long rides
- Spare jackets for both kids
- Shopping bags
Sure, I could carry all of that around in a bag, but that would be a huge heavy bag, and where would I put it when I got where I was going? To say nothing of the need for car seats. Even as the kids get older and I don't need all those supplies, I can still see the value in owning the car and having all their stuff in it, whatever that may be (sports equipment, musical instruments, etc.). I imagine I'll need my own car until they are at least teenagers.
Owning a car is a big deal with kids, and you are spot on with why.
I will counter with a lot of that stuff consolidating into carry bags and backpacks. Once I worked that out, getting people into and out of cars was not such a big deal.
And in the end, a lot of that stuff goes with them. Set the norms for people to carry their stuff, manage it, and a lot of good effects come from that.
Kids prep for the day, grab their bag and jump into a car. Happens all the time now.
Now, your list:
Diapers, wipes, clothes treats, other goodies go in the road bag. And that bag goes where the kids go.
I won't put a DVD in a car. When they get older, they can have a phone. Otherwise, long rides are car game, interactive time. I did that and am very glad I did. We had a lot of fun on those, and the conversations! Awesome.
One of our favorites was, "What is worth what?" and or "Nothing is free." Those chats were often wide ranging and sometimes profound.
So, it's not quite the benefit you are putting here, not that I'm disagreeing. I am not.
What I am saying is people can and will find options. With self-driving cars available to call, many will call them.
If the cost makes sense, that is. It may not. In that case, owning cars will still be the norm.
This time around, the only pain in the ass is the carseat and stroller. Those are nice to have in the car, but they also get moved more than one would think too. Who rides with who?
As they pass 3, you don't need the stroller anymore, leaving the seat.
Road or day bags work well, and my little one has her own backpack. She's got stuff she wants in there, and we make sure some necessary items are in there too. She will actually check her bag at 3 and very frequently gets it right when it's not properly stocked.
Lastly, if the cars are self-driving, the ownership is less of an attraction. If they remain human driven, people will continue to own cars, with the slump right now being more largely related to the wait for EV and such making used cars a lot more attractive right now.
One place where I think we'll have to agree to disagree is on the attraction of ownership of a self driving car. I like having my own car that is my space. It's got my dirt and germs and the seats are the way I like and I understand all its quirks. I don't see how self driving changes that.
My car already has adaptive cruise and lane keeping. It only makes me enjoy the car more. The more it "self drives" the more I enjoy it.
In fact, when it is self driving, that just means even more stuff in the car that I will want to be customized to me, because I'll be spending more time using the amenities in the car instead of driving it. I'll want my own blankets for sleeping, my own books for reading, my own movies for watching, my own keyboard for typing that isn't covered in other people's grime, and so on.
Sure, once we get to a point where self driving is ubiquitous I suspect owning a car will only be for the ultra wealthy as it just won't make sense otherwise, but none the less I will still want to own one.
It's like with planes now. I'd love to own a plane that someone else flies where I want it to go with my stuff inside. But it's just not cost effective.
I think the best argument you can make against ownership is that it will be far more cost effective to rent instead of own. But the desire to own will always be there.
While that is true, yeah own a car.
Leasing is kind of like that now, as is apartment living.
I dislike both because I can't generally do what I want.
In a home, I will build, modify, etc... same for a car, only just modify. I love better quality used cars for this reason.
I do not want to worry about resale value, just use value.
Good exchange here.
The poor already live in a life with children and a lack of vehicles. So, ~30% of parents do have children and are getting along.
But other than that, yes I see your point. As long as fleets are ubiquitous, I can see car ownership falling.
I have been asking people about this. Many will just build the wait into what they do, and will count on software minimizing that with predictive behavior.
Personally, I have zero desire to own a self driving car. I could potentially own one with that option, but the expense will get in the way. Just not worth it.
Younger people will just adapt, meaning longer term ownership trends will not be good.
Except for classic, you drive cars. Demand and value will grow nicely as people maintain them.
Frankly, they will have to be legislated off the road.
Well off people will own, but that will be a minority case.
The exception will be those in the city where it’s a pain to find parking.
I agree with you having it as a feature. People will want to own the car.
When they no longer control the car, but make requests, that subtle difference will cause a lot of things to play out very differently, IMHO.
If there’s no monopoly then you want to sell as many cars as possible and that means personal ownership.
Watch GM do a similar thing.
Yes, they want to sell and for the reason you gave.
I am saying they will not do anywhere near as well with fully self deiving cars. The ownership incentives are very different.
With that said, car leasing is on the rise.
https://www.fool.com/investing/2018/06/08/why-rising-car-lea...
So Zimmer's prediction is still at play here.
The S1 shows that Lyft on the other hand is loosing a significant amount of money on all trips through its position as the second player in all markets its in.
How is it supposed to decrease that loss?
There's only one: it gets acquired
Well Lyft ha a good product and plenty of customers and is currently being crushed in terms of market share.
Wait till you hear about this company call Uber. They are 5x the size of Lyft and are capable of outspending Lfyt until Lyft is bankrupt.
Anyone who is signing up for payment plans that stretch 6 years is crazy and buying a vehicle beyond their means.
Also that these are full recourse loans, the bank gets the auction value of the car and has the defaulter in collections for at least the remaining (before depreciation) amount
* Which provided $8B worth of rides in a single year
* Didn't hurt anyone
For crimes which amount to:
* May cost some IPO underwriters money
* May not make all of the employees rich
* May cost VCs money
The worst thing to really say about such a company is "I enjoy their convenient rides but I won't buy their stock".
Instead, the article attacks the founders for their age (too young), ridicules their visions of the future, and compares them to other young founders. Bewilderingly, the author compares the founders to Zuckerburg, which doesn't fit the point of the article at all. Not content with all of that, the author takes a shot at Musk for selling fantasies, when he has done more than many people thought possible.
It's not clear that Uber or Lyft are net positives to society. They are disruptive, but not necessarily in a good way.
Yes, they provided $8B worth of rides. But before that people still got around. What the world might have been like without Lyft is impossible to know, but the way it's changed the job landscape isn't exactly a huge net positive. It's put a lot of cars on the road and it's set to new "floor" for jobs in general. Uber, Lyft, Taskrabbit, DoorDash have created a new kind of serfdom.
I'm not saying it's a bad thing, necessarily, but I wouldn't say that they didn't hurt anyone. They definitely hurt social progress.
This is cool if true. Does it show up in accident statistics?
Why are people driving/tasking/delivering for these platforms? They all have their reasons. The value of just doing some work casually to get some quick cash is amazing. It can mean the difference between getting evicted and supporting one's family. They don't need to negotiate a schedule with an employer, apply for a job, get fired if they need to miss work. They just log in or don't.
One group of people who are universally harmed are taxi drivers. Their outcomes as rideshare drivers are worse, e.g. they must drive for 20% more hours to make the same amount of money.
> Why are people driving/tasking/delivering for these platforms?
Everyone acting according to their self interest doesn't necessarily lead to overall optimal outcomes. See e.g. prisoner's dilemma. I'd hope we as a society strive for something better. Worst case would be power imbalances getting so bad we'd have a race to the bottom occur on the labor market with people competing to starve less slowly. Thankfully that seems far off. And not that this would be caused like Uber & co, they're probably more of a symptom.
But hey, maybe it is like you say and those drives actually don't want reliable income and value their freedom more than having to by themselves shoulder all the risks and investment that a company usually embraces for its employees. I wonder what hourly rate Uber would offer on an employment contract. But them not doing so gives me a good guess who is getting ripped off here... and I have a hard time than seeing this as anything better than another step towards the bottom.
Certainly the crush of additional cars double-parking in bike lanes, making illegal turns constantly, and driving poorly on unfamiliar streets has reduced the quality of life in SF -- speaking as someone who has lived there for nearly ten years.
* May cause public to lose their hard earned money
because of the hype surrounding the IPO.
I don't see how self driving cars are going to help them. Waymo and Tesla are both the farthest along, and they're going to run their own networks - competing against Lyft and Uber.
I've seen several people say this but I don't understand why, can you explain a bit further?
https://citywireusa.com/professional-buyer/news/crown-duals-...
I think it's important to note that many ETFs aren't index-tracking so even though index providers may exclude the issuers with several share classes that doesn't mean the stock will be shunned by all ETFs.
Edit: Prohibited was the wrong word, looked down upon was probably better.
- https://www.cii.org/dualclass_stock - https://citywireusa.com/professional-buyer/news/crown-duals-... - https://www.washingtonpost.com/business/dual-class-shares/20...
I do think data is a competitive advantage right now. But I find it really hard to believe that 10 years from now it will be harder to build a self driving system than today. That's just not how tech is. Building YouTube was a herculean endeavor 15 years ago, but today you can hack a YouTube clone together in hours.
Not just will we have more off the shelf software and hardware, but maybe you can license the data too.
In the end, I don't see the moat around a self driving cab company. If someone has a good app and a single car that operates in my area, why not switch to them?
Sure there are wait times and availability in odd places. But that doesn't inhibit a startup getting early adopters. You could literally just do the same commutes every day and have a profitable business.
Lastly, I expect the variety in vehicles and "mobile spaces" will provide a huge landscape of opportunity that a single company will not be able to fill. Just like there is not one "housing" company, there won't be one mobile housing company either. Too much variation in taste and preference.
Ha, good one.
Would your clone have large scale spam, fraud, and abuse systems in place? Would it work on all browsers, mobile devices, TVs, set-top boxes, etc? Is your streaming tech cost-efficient and can it deliver reliability across all regions? Will you be able to respond to DMCAA takedown requests and comply with IP laws across states and countries?
I can go on and on.
Simply put, serving a video over the internet isn't rocket science. Building YouTube...is much more like rocket science.
See every yellow cab in NYC, as an example, is the same make/model of car.
Make a tesla Y vehicle and have the rideshare payment subsidize the car. So X% of every single ride goes to tesla to finance the car. And guess what they get as defacto: the data.
Let people qualify as a driver and put down a deposit, and the car must meet a quota of rides per month, which is tracked and displayed as the car is simply a 'device' at that point... and must be used to pay it off. Tesla doesnt care where the rider bookings come from, lyft, uber, whatever.
If the car is used for private purposes - then the owner is charged some function of the car's time as his "car payment"
Simple.
This model would be better suited for car rental companies, not manufacturers, to utilized unused assets (which I think some have already piloted).
Even with leases, the lease holder is paying with debt up front and is on the hook to fulfill payments, otherwise they're legally liable and their credit suffers. A rideshare rev split (or affiliate model) doesn't ensure the driver will cover the cost of the car and the manufacturer is on the hook with the risk of a depreciating asset not making money. If you do tie this to credit: - i.e. the driver pays in debt and loses if they don't fulfill rideshare payments - then you're just creating a lease with more strings attached.
Banks, ostensibly. That's what banks do, buy credit risk.
Or Tesla might just take the risk themselves, they continue to be in a reasonable position to raise cash. That's not typical for them though, they've traditionally relied on banks for consumer financing.
This is speculation now, but I get the vibe from Elon that he is interested in a revenue share in the ridesharing world, but that he doesn't think Tesla should be own its own fleet. That puts them into a much more airy fairy financial model, and I think Elon likes the economics of selling cars. Tesla is already a hard enough sell on Wall Street as it is, without a big fleet of cars depreciating on the books.
Tesla has issues with cash and liabilities at the moment, and I highly doubt that any type of scheme like you're describing would be floated by them in the near future.
No-voting-power stock for a company that's losing money? No. Companies that have done that before, such as Google and Facebook, were profitable before the IPO. That's when you want to keep the management team. With Lyft's numbers, firing the current management might not be a bad idea. They've had their growth phase; now they need to move to profitability.
If you haven't read an S-1 before, you skip all the happy talk and go directly to "Consolidated Statements of Operations".
What do you imagine they'll do? Are there other, better paying jobs these people can be doing? If there are, what are they waiting for? Would the collapse of ride sharing somehow create new, better paying jobs elsewhere?
Have you actually been a driver? I can assure you that having been one, in the Bay area, even, the income was quite livable.
Having never driven for them, I can’t verify whether this is true, but just a quick back-of-the-envelope guess seems like drivers in the Bay Area could average $40 - $50 an hour. That doesn’t seem like minimum wage level to me.
[1] https://newsroom.aaa.com/tag/cost-of-operating-a-vehicle/
These costs also assume depreciation based on buying cars new. Costs would be quite a bit lower if they were based on buying 3-5 year old used cars, for example.
Snap was valued around $20b in its F round in 2016. And it's valued now around $12.5b.
For a long time the public market has been viewed as the dumb money -- but for some of these companies it may actually be the late round investors that are caught standing when the music stops.
It's almost like it's a rigged system. Someone in Wall Street gets paid off, you IPO at such and such a price, that gets you into the institutional holdings.
More interestingly, despite the relatively small ownership stake they nearly majority vote control Lyft through dual-class shares with a very unusual 20 to 1 vote ratio versus the normal shares.
Dumping even 2% of that $150M would give you enough to retire.
Actually, I could think of dozens of places I'd rather retire in, over the Valley.
The founders created a company which delivers value by connecting over 1 million rides a day. Those riders benefit from Lyft. Additionally, riders on Uber benefit from lower prices due to competition. The IPO profits to the founders and investors are their reward for delivering this value.
If you assume each ride has $1 of consumer surplus, then they are delivering over $350M a year of consumer surplus a year.
As for the employees, first of all they all received base salary and benefits. They may not receive millions in the IPO, depending on when they joined, but that is the risk of working at a pre-IPO company. They all had the option to work at Google for a more predictable income.
It sounds logical, but it's in fact just another way of a few marginally deserving people taking a disproportionate amount of the proceeds of a group effort.
If neither of those appeals to you, you can start your own company. There are ideas that generate predictable income comparable to a day job, or you can go for your own start up home run.
If you think the Lyft founders are undeserving, then go out and start your own Lyft!
I wouldn't touch this at all. Or short it if you're brave :)
That said, it's better for society if the unprofitable cities are served by competing ride sharing services. It's kind of like how the US Postal Service makes money in the cities and loses it in rural areas.
So, in a world where we are all used to Uber/Lyft and there's no turning back, the only way forward is for fares to go up, close to - if not the same - to conventional cab fares. Which will decrease usage, which will decrease the size of Uber/Lyft and therefore their market cap. Sounds like 1999
But on the consumer side, we're used and hooked to the Uber/Lyft experience and prices. The experience can be duplicated with tech, the prices... not so much.
Here's an interesting blowback twist: let's say that on unrelated news TSLA crashes (I am a TSLA investor, so.. not wishing it), it would have ripple effect on the entire tech segment, closing the IPO window for a while. So, then what for Uber/Lyft?
We live in interesting times!
I agree with your basic point, especially in the areas dense enough to make taxi-like services work well.
Every driver I have seen is driving for both services and would add a third if someone told them about it and it payed equitably, so I think all the work uber and Lyft have done to make a market can be leveraged by third party competitors if they start dialing up prices to become more profitable. And I think they will need to do that to meet their valuations.
This isn’t like Facebook where a larger network acts like a moat keeping competitors out. Instead, I think it actively makes a market for competitors- the friction for drivers is pretty small, and I don’t know the friction involved for getting users to download another app but I imagine it’s pretty low. Because the drivers are the same it’s a commodity, and switching between apps costs me nothing.
Disclaimer: I probably don’t know what I am talking about.
Lyft's market share is as high as it is because they invented the ride sharing category. Uber's market share is higher because the Uber Black service was present in more cities, so it could use its existing operations staff and rider network (and lobbying presence).
Since they have infinite investor cash (for now), they can do that in many countries at the same time (hence the costs).
All this will eventually crash, and/or Uber will be forced to comply with labor/taxi/etc. laws.
For the most part, established cities are profitable (at least for Uber, I don't know the story for Lyft).
Uber, on the other hand, has several verticals, and also enough muscle to be able to strike profitable deals w/ local competitors, as it has already done in various countries.
I remember back in the pre-rideshare days, trying to call a cab ahead of time, and having them simply not show up, with no warning or notification.
Luckily I was near a train station and it was still early enough the buses were running, so I knew which transfers to make and which bus to get on without needing a map.
Still I thought about how only a decade ago, I could be on this same street and hold up my hand and flag down a Taxi. Today if I really wanted a taxi, they're pretty much only in the city. I'd have to hunt around for a payphone and would need change too.
If I didn't know my public transport routes back home or if it was late enough the trains stopped running, I'd be kinda SOL. I realize Taxis not just driving around saves on fuel consumption, but have we lost something by simply not being able to hail a cab without a charged phone or laptop with a Wi-Fi point?
I wonder if Uber or Lyft will start putting out kiosks people can use to flag down rides when their phones or out.
You just happen to live in one of the few cities where this used to be possible. For most of the country, even a decade ago, it would be very unlikely to find a cab by just waiting on the street. Maybe in downtown areas, but not on most streets.
I've never lived in a place where I could rely on a taxi driving by when I need one. It's always been "Call a taxi on the phone".
This app is for everyone at https://libretaxi.org (non-profit, open source)
Disclaimer: I'm founder
- LCCs (Low Cost Carriers can come in and disrupt your fragile net profit, if you get close to it in a quarter)
- Always pretty much operating in the negative.
- Consumers find a lot value in the company even though the operating cost are insane.
- The only way to solve the issue of airlines being in debt for years was time to slowly cut operation cost and scale, massive scale (albeit, there are a couple exceptions today now).
- Local market competition in cities are hell to forecast and balance out operating cost to how profitable you can be vs competitors. Which create cities you grow dominant and via reputation and government policies.
- They piss off investors because they have to trade off and invest in the operating cost (fleet or employees) some years, which can effect the companies earning for years.
I get they the rideshare industry is vastly different than the airline industry in many ways (for example, oil price influencing one more than the other), but I think they are similar in important ways.
Uber and Lyft will have to start taking out pages from LCCs in Europe to get ideas on how to become profitable (and probably piss off customers by nickel and diming them) and any ideas they haven't from the taxi industry that they may have over looked. Hell maybe even adapt into the rental space. I don't know the answers, but just sounds like an industry I've seen before that will have to move mountains to been profitable.
Sidenote: I will not be surprised just like American, Delta, and United that Lyft and Uber will soon see government sponsored competition (China, Russia, Middle East countries) in future and be pissed because of how unfair they are because they can operate in the negative without consequences of failing.
Our results of operations vary and are unpredictable from period-to-period, which could cause the trading price of our Class A common stock to decline.
If this is the case, I wonder how do they can they even predict their future growth? How much credence can be given to the data they present or expect about their growth?
Google would have no need to buy Lyft. Google Maps has a much bigger install base and already has ride share integration. Lyft does have technologies that would be useful like matching riders and drivers and Lyft Line. Creating that back end is not trivial task for Google but it not a 20 billion dollar one either.
Waymo is going to buy and retrofit and provide 1.4 million cars?
or areas/weather conditions which they know are difficult for their autonomous cars to navigate.
If they bought Lyft, they wouldn't have to do that all at once; they could just insert self-driving cars as they were available into the pool.
Optimistically with economies of scale you can get that down, but even without it's within the realm of possibility if they've got the technology working.
2) 1 human driver != 1 autonomous car. While cars need servicing, they don't get hungry or tired or have a family to spend time with
Ads is how you make money. All lyft needs to do is incorporate ads into its platform and it will start printing money.
Are they "earning shares per mile" or anything like that?
If not - then screw both companies, and I hope they do poorly in the IPO -- even though ridesharing is such a wonderful service - I really hope they do right by the literal foundation of their existence, which is the drivers.
Not commenting on the practicality, but when choosing between traditionally cab companies, I preferentially go with ones that are driver/employee owned.