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Comment by slg | Hacker News Reader

These ride-sharing companies are still in their mailing DVDs phase of their business. The ultimate goal is clearly to use self-driving tech to cut the costly human labor out of the system and that remains the most obvious path to eventual profitability. The questions then just become which is the first company to get this tech safe enough to deploy to general consumers and which players can survive being unprofitable long enough to make it there. It remains to be seen which companies in the ride-sharing space are the Netflixs and which are the Blockbusters.

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So let's stipulate for now that this idea (all self-driving cars) is their "end game" for the sake of argument.

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?

If the drivers made less than it cost them to maintain their vehicles, they wouldn't be doing it.

I know that a lot of people think the drivers generally are that stupid, but I'm skeptical.

Even if every driver knew for certain that the income wouldn't cover the longterm cost of wear, there would still be drivers who needed money now enough to trade the future value of their car.

Which I imagine happens a lot. I expect a lot of/most drivers have at least a vague sense that a decent chunk of their earnings are going to get eaten up down the road in new tires, maintenance, etc. But they have rent due next week so...

You miss the obvious driver who is not an Uber driver only but one who is an Uber driver as a side hustle. This person owns a car for their own reasons, they want to drive around and have access to a vehicle. They 'rent' that expense to Uber which comes out of their compensation.

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.

The cost equation for AirBnB and robo-Uber--when used in the sense of renting out personal property as a side hustle--are different though.

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.

> If you take their current numbers, and set the amount of money they pay drivers to 0. Are they profitable?

Easily. They paid ~$8bln to drivers last quarter. They merely lost ~$2bln in 2018.

The payments they made to drivers included the cost of ownership of the car, fuel, insurance, etc. Labor is the most expensive piece, but is not the only piece of that.

If done right, it's probably always preferable to own the fleet yourself. You can presumably get better economies of scale on purchasing, fueling, maintaining, and insuring the vehicles.

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.

Won't self-driving cars only make the problem worse?

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?

Why buy a 10-100k car when you can pay the incrementally per use?

You pay per use with AWS instead of buying physical servers right?

> Why buy a 10-100k car when you can pay the incrementally per use?

Because it's cheaper over the long run.

Not if you have access to public transit but need "last mile" support.

Conversely, bulk buying saves money -- you buy toilet paper and paper towels in bulk, buy a bag of 20 lbs of rice instead of 2 lbs at a time, etc.

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.

AWS is extraordinarily expensive when it comes to bandwidth pricing. The same could be applied to a car - it depends on your use case. Do you haul goods? Go in the mountains? Live out of a major city with poorly mapped roads?

Uber is an alternative not just to driving but to owning a car. Why bother owning a car when you can just uber?

If I wanted to use Uber to commute to work five days a week, the average ride even with UberPool would be around $19 one way. Assuming I go somewhere else that's of comparable cost just once a week (in practice, I tend to go out for dinner several times a week and go fairly long distances on weekends, but never mind), that's 26 days a month spending ~$37 per day, for nearly $1000 a month. My car payments, insurance, and fuel per month are almost certainly hundreds less than that.

"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.

a very San Francisco way of thinking which would already break down in LA, let alone other places with long driving distances and lower parking costs than SF (and hence a wayyyyyy different value proposition between owning a car and ubering)

In a world where self-driving capabilities are in almost every car, car ownership will be vastly reduced. Most trips will happen through some variety of Uber. The exceptions will be people who need to store things in their car like car seats or work equipment.

> In a world where self-driving capabilities are in almost every car, car ownership will be vastly reduced.

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.

Where exactly does Uber get the cars for this? Are they just going to maintain all of this, then they're literally a robot taxi company and I have no idea why that is so much more lucrative than being a human taxi company, especially given that urban traffic is probably not going to be fully autonomous for a long, long time.

what stops anybody from spinning up a p2p solution for car sharing that cuts out Uber?

Yeah, they (or someone who replaces them) are a robot taxi company. They own and operate a large fleet so their costs of acquisition and maintenance are much lower than a P2P solution.

if that's actually the plan then the next question is what the differentation is. Everybody can buy robot cars (and probably will), and they'll all compete themselves to death as they already do.

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.

Absolutely agree. I don't buy this whole 'Robot cars' will make Uber / Grab / Lyft profitable stuff.

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)

I'm guessing not a manufacturer. They haven't historically wanted to get into fleet management beyond some side investments. But the rental car companies (both long-term and short-term) seem likely players as soon as self-driving is reliable off-the-shelf tech. Which I expect to be a long while in the areas dense enough for taxi services to work well.

So you're saying my car will become vastly more powerful, and therefore I won't buy one? What? Is that how it worked with, say, cellphones? Or automobiles, for that matter? When automobiles became vastly better quality and more useful, people bought fewer of them?

Maybe:

- 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.

I didn't say nobody would use it, I'm just saying a large portion of people using Uber wouldn't need it if they had a self driving car of their own.

Also, with a self-driving car the driver doesn't have to deal with parking because the car can take care of it.

It isn't going to be a immediate and simple switch with everyone suddenly having self-driving tech at their fingertips. It will come into the market slowly and very likely at the top of the market. There are going to be plenty of people who simply can't afford to purchase a new self-driving car but would be happy to use one through a ride-sharing app.

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.

Pretty sure Uber and friends will lobby lawmakers on why private ownership of self driving vehicles isn't safe. Forced maintenance and computer updates, proprietary car-to-car comms, etc.

Every single major car company is working on this tech. There is no way they can keep it to themselves. Plus put aside private ownership, those car companies will just become other Uber and Lyft competitors.

Private car ownership is less of a threat. Currently connects many drivers with many riders. A competitor has reach critical mass one both sides. Getting rid of drivers would significantly weaken the current leaders network effect and thus make it a lot easier for competition. Windows mobile might still be alive if their app store wouldn't have been a wasteland :(

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.

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