If you're planning on buying Uber stock can you walk me through your reasoning?
Can Uber capture 10% of that combined market opportunity with the efficiencies that come from globally optimized routing of all those trips?
Can Uber inside-out the company so others can execute on its platform, with Uber taking a cut?
If so, then an $80 billion present value seems low.
[1] https://news.ycombinator.com/item?id=10735610
[2] https://www.fastcompany.com/1710460/chinese-math-or-1-mistak...
[1] Even "Chinese Soda" has not entered common usage enough to justify calling it "the" or "a standard" term for it.
How exactly does the "fallacy" apply to Uber, a company that thoroughly understands how difficult it is to carve a big chunk out of entrenched competitors?
Since they've already demonstrated the ability to steal a sizable percentage of the taxi and car rental markets, it's good for Uber that they didn't listen to all the smart guys on HN.
Which is what I was using it for.
>How exactly does the "fallacy" apply to Uber, a company that thoroughly understands how difficult it is to carve a big chunk out of entrenched competitors?
To clarify, that part is not the problem with the comment. That is a legit argument for why Uber can justify its valuation.
The problem is trying to amplify the persuasiveness of the argument by appealing to "small percent of huge = big". That deceptively makes the argument more appealing than it deserves to be, and is a lazy form of justifying a valuation. It plays tricks with human intuition on big numbers to (as you note) underplay the difficulty of getting a small number.
Hence why it's a "reach for my revolver" type situation.
Be careful not to equate "they have, independently of this argument, a good case here" with "therefore it's not the Chinese Soda fallacy to mention the percentages."
I can find only one other reference to it and it's on HN.
Basically every other episode of Shark Tank.
Seems to me that as soon as Uber find out how to turn a profit thats when copycats can jump on board with their app and start taking a slice of ubers cake. Afterall they wont have long term investors to repay so their prices could be lower than Ubers, making the value proposition of uber even worse.
Up until this point Uber has been a hot investment ticket for VCs, and the existing investors have been incentivized to pump up the valuation to improve their position. This strategy involves self-driving cars and helicopters and edgy vaporware - basically creating these tactical hype moments for the Uber brand.
Now with public investors, the hype strategy isn't sustainable and the board will need to turn a profit (eventually) or be ousted by public owners who don't want to see their shares in a company be destroyed.
If their goal is to go very global, very quickly, it'll take more than a decade of burn.
If the unit numbers work in established cities, and they are spending on direct expansion, then it's good.
That said, much of their 'expansion' has been into other things, and their unit economics are questionable, though on the later ... when Lyft and Uber settle down into a nice duopoly in most cities prices will inch up a little bit if need be.
I believe that they do provide value, and have kind of a network and brand effect.
I believe there's some margin for Lyft/Uber to exist.
How big it will be? Who knows. Maybe not enough to support their gigantic valuation, but probably some valuation.
I think many of these IPO's are simply way overvalued and are going to have trouble maintaining value.
They might crash if there is a stock market tumble as the wind comes out their sales.
The difference between now and 2000 however is that these are actually viable business at least on some level.
Uber may not faceplant quite as badly, but look to Lyft's IPO to see what's likely in store for them. This IPO screams "cash out and give the bags to retail investors"
Then there are also electric bikes and electric scooters (4 or 5 platforms).
And there is DriveNow, a on demand rental offering of BMW.
Just saying: local competition seems 'too easy' (as platform one could even use libretaxi.org or tagmytaxi.com)
The question is not how much market share, but how much sustainable profit they can make. In the mobile phone market there are several bigger suppliers that are making no profit.
Another thing to keep in mind: VC's and other investors are in it for the money. If there was more money to be made by keeping the company private, they certainly would do that. They decided to do a IPO because it will make them more money then not doing an IPO.
I also don't believe self-driving will be anything more than tech stuck in R&D for the next 10 years. If I were an investor have preferred Uber sell ATG before this IPO.
You might argue the market will remain irrational, but this is unlikely to be the case for 25+ years. This should mean that most people set against the Uber IPO should hold a short position with at least a small portion of their net worth. Doesn't seem like this is the case.
Tip: if you want to short via options (when options trading becomes available) wait a few hours to let the market makers settle their positions. Source: I've shorted BYND and paid a higher than necessary options premium because I was impatient.
1) make money more expensive and harder to justify subsidizing rides
2) increase the supply of drivers.
3) decrease the demand
Less demand, more supply, but possibly higher overall prices due to subsidy withdrawal feels like a dangerous thing
On top of that regulatory pressure to treat drivers as employees could decimate Uber at any moment.
Not shorting because gambling on the stock market is not worth the effort. God could declare the true present value of a company’s future cash flows to be $10/share and I still wouldn’t count on the market to get it right- among other bothers.
The basic reasoning here just boils down to market consensus that Uber is worth $x billion, and I don't really have any reason to think that I can outguess the market consensus.