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Comment by yalogin | Hacker News Reader

Feels more like Uber and Lyft reached a point where they cannot raise private capital anymore and so jumped onto the public markets to fool random investors. If they cannot be profitable now, what makes them think they will be profitable with SDCs?

I challenge the fundamental premise that SDCs will make them profitable. There is no stickiness to their business model. Moving on to another ride sharing service is frictionless today. Most people I know use both Lyft and Uber. So if tomorrow SDCs become popular and offer a cheaper rate, people will move to them in droves. Nothing stopping them. We know Uber and Lyft are way behind on SDCs compared to Google on that front. It also looks like GM and Ford could there before these two. So what makes them a good investment either in the short or long term?

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Uber won't survive the wait for self driving cars, it's simply to far way, even if we take the most optimistic estimates. Uber is burning cash they do not have, trying to make self driving cars work. People seems focused on how much revenue Uber has, but Uber doesn't need revenue, they need profit to finance their R&D.

After the IPO I'd give it a year before the investors starts to demand slashing drivers pay, and cancelling the self driving car project.

Aren't most index funds, almost by definition, required to buy their shares? If Vanguard owns a piece of every listed company, they're going to buy Uber at pretty much any price, right?

>Vanguard owns a piece of every listed company

I doubt this is true, at least not across their primary stock market index funds. For example, VTSAX only holds about 3500 stocks [0].

I don't know how the fund usually treats new, large IPOs, but I highly doubt that they would just blindly buy it at "any price"

EDIT: I just checked the holdings of VTSAX [1] and VGT [2], neither holds Lyft.

[0] - https://investor.vanguard.com/mutual-funds/profile/portfolio...

[1] - https://investor.vanguard.com/mutual-funds/profile/overview/...

[2] - https://investor.vanguard.com/etf/profile/portfolio/VGT/port...

The link for VTSAX says the portfolio data is current as of 02/28/2019, which was before Lyft's IPO (3/29/19).

Good catch, guess we'll see when they update.

If it falls within fund's target they should just buy it, without thinking. That's the point of low cost ETFs.

There's even a known arbitrage opportunity with things like S&P500. When the S&P committee decides to include a new stock (and delist some other stock) you can front-run the purchases by the giants like SPY or VOO, slightly inflating the stock's value just when the ETFs buy it from you.

They don't hold Lyft because of their dual-class share structure.

Yes, Vanguard will buy at "any price" and will buy more at a higher price -- the funds try to replicate the breakdown of the underlying indices on a market cap basis.

I wonder about this too. What if I, as an index fund holder do not want the fund to buy up junk like lyft and uber?

The purpose of an index fund is to buy the entire market, under the assumption that an active fund will not outperform the market (after costs). If you want to avoid certain companies, you should buy an actively managed fund.

There are different types of index funds. There are market capitalization weighted index funds that fit your description of buying the entire market, but there are also small cap funds, sector funds, value funds, etc. You can avoid certain companies (e.g. FAANG stocks) by buying certain indexes (e.g. a value index).

I think that’s where “socially responsible” investing comes into play. ie https://www.morningstar.com/funds/XNAS/VFTSX/betaquote.html

Index funds are required to buy shares if the index it replicates (e.g. S&P500) includes that stock.

Are you kidding? True AVs will make Uber/Luft even MORE profitable because they won’t have to pay out or worry about human drivers. AVs are the end game for these companies.

They will have to pay out and worry about the cars, so this is true only if the cost of buying and maintaining the AV is less than the cost of paying a driver, and I’ve seen no evidence yet that this is or ever will be the case.

They don't have to buy the cars they use today, what makes you think they'll have to buy them when they're self driving?

I can’t tell if you’re joking? Today the drivers buy the cars. A driverless car can’t buy itself, so some entity will have to, and if it is not Uber itself buying the car whoever did buy it will want to get paid just like today’s drivers do.

I'm not joking, and you seem to have missed the entire reason people think of self driving cars + ride-sharing services as being a game changer.

Today people drive others around for money. Tomorrow people let their cars drive people around for money. No one thinks Lyft and Uber are going to be buying the cars, people just won't need to be physically in them to make money from Uber and Lyft any more.

Just because self driving cars are a game changer doesn't mean that all (or even any) of the benefit accrues to Uber. Who holds pricing power in this scenario? The company that makes the car, the person who owns the car, the agent (Uber/Lyft/etc.), or the rider? I think there's a reasonable case to be made that the agents are the most commodity-like element. Tesla e.g. has already shown a desire to use value-based pricing to capture their share of the money-making potential of the cars they sell. Any owner will prefer to rent their car via the agent that pays them the most. Any rider will prefer to rent it through the agent that charges the least.

While I disagree, that's at least a valid argument. You should start with that instead of asserting that the capital requirements of buying up a bunch of cars will be the limiting factor.

True AV are not possible right now nor for the foreseeable future. The technology has plateaued progress has slowed after the first rounds of demo technology showcases by all the big players. New research breakthroughs are needed and more robust and cheaper sensors. Throwing more money/people at the problem doesn't solve this and betting on AVs to make Uber profitable is a very long bet.

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