Uber and Lyft Investors Are Looking for Signs of a Détente
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Not familiar with all this, can someone ELI5 what are the "costs related to the initial public offering" ?
Why do you think investment bankers paddle IPOs so much? Like sure, they take underwriting risks, but they also set the IPO price, so they control the demand. In other words, imagine if you have 100 pieces of gold. I come to you and tell you: I guarantee to sell this gold for you. You don't know the price until (a day before) I sell it. You still have to pay for my services.
Also underwriting costs should be proportional to the IPO value.
Lawyers.
At least they seem to have had a lot of marketing folk that were laid off shortly after the IPO
And food delivery in cities has been around long before the Web. Not sure having brochures from the local pizza places and chinese restaurants and making a phone call is all that different from doing it at a computer.
Problem is, you should've paid $15 for this to even make sense, but here $5 comes from investor subsidies. Eventually the money runs out and the scheme collapses, until next company can convince next round of investors to again try selling $10 bills for $5.
Further, the radius of delivery tends to be smaller allowing a driver to make more deliveries per hour lowering costs.
Any chance you use dabbawalas? I saw that on BBC and it was such an amazing informal logistics network.
Starting with the late 90s, techies (good people, smart people, people who built things) got rich in a new, very fast way. Whether they were early investors in Netscape, employees of Microsoft, or one of the many who started companies which were then bought by giants, the result is that they came into money so big that they literally had it to burn.
After the "how many Ferraris can I own" phase wore off, they continued doing what they loved - building and being involved in tech projects. This resulted in more financial successes, and more money.
Early windfalls put them into new positions as investors. And frankly, by investing in a selection of start-ups, the outcome was almost certainly that at least one investment would pay off 1000x or more. This created more money.
However, in many cases, these gains were artificial. The stock market creates play money which big companies can use to buy smaller companies, thereby "increasing" their perceived value - and thus their stock price, and thus their ability to go buy more. This is not sustainable, because eventually there isn't something big enough to buy to keep up the appearance of growth and increased value.
My favorite example of this was WorldCom https://en.wikipedia.org/wiki/MCI_Inc. MCI, for those old enough, was once a booming telco with the strongest internet backbone in the US. The got bought by a little Southern US company run by an aggressive CEO - Bernie Ebbers, who learned that acquisitions paid for with stock would increase the "value" of the company, which would increase the future buying power of the stock. I enjoyed a brief and completely ineffectual period of employment with MCI-Worldcom and got to see the dysfunction of the collection of gathered companies. Unfortunately for Ebbers, it was getting difficult to find companies big enough to buy that would make a measurable increase in perceived value. Sprint was the last big target, but that sale was blocked by the US because it would have created an internet monopoly. MCI-WC happily offered to buy Sprint without their internet component, but Sprint rejected that. Once the deal was off, the drag of poorly integrated companies all under one umbrella slowed the MCI-WC train to a stop. Then the investigations began, and we know how that turned out.
I see this repeating, but starting with the early tech-millionaires. They have so much money, and they seek similar % returns, so they're willing to dump more money into more ambitious (or asinine) projects. But as those of us outside the madness can see clearly, it won't work.
That's not to say that new ideas should get investment, and that's not to say that 1/10 success rate is bad. But keeping some sense is important, and it really appears that the "successful SV investors" have totally lost their sense. In the end, they won't be hurt; the foolish stock market investors will, as usual. They follow trends, they buy into unicorns when they're allowed to, and they usually come out losers.
I would like to see a real shift in behavior from the current tech investment system. First, the supposed race to returns which causes some companies with a good idea to make terrible short term decisions (under pressure from VC partners) needs to stop. That is just a screwing and fleecing of other people which only serves the VCs. Second, if a company cannot become profitable in a few years (depending on the type of product/service), then the investment should stop or the company should make a huge pivot. Third, that VC money should be distributed more widely across education. There are a lot of very talented, motivated young people who could do great things if given some opportunities.
I’m making no claims on how profitable either company will be but I think they have added value to the transportation industry that isn’t artificial.
Disclaimer: I work at Lyft.
It will be interesting to see what happens now that investor money won’t flow freely post-IPO and how much prices can be raised until passengers jump onto the next subsidise scheme. Grab in Singapore is the exact same story. More and more billions put into a market that already has a solid taxi industry.
You're probably right. San francisco's problems - or even america's are not "the entire world's problems"
Personally I'm fine with Uber/Lyft costing about what taxis do. I admit I don't use them much though and almost exclusively for business.
Maybe it was inevitable that this had to become about competing on price, but these services would have been attractive to many even if they hadn't undercut cabs because cabs are so often horrible.
If I’m ever in London and need a quick cab I’ll always choose Uber. It’s a “good enough” knock off and way cheaper. There isn’t a ton of value in memorizing the city streets in the age of smartphones and google maps anymore.
Disclaimer: had a London cabbie really take me “for a ride” from heathrow and took a very poor route on purpose. Almost 90 quid later I was not a happy camper.
That is the exact description of Amazon in the 90s though.
They're not really a tech company at all, they're an oversized taxi business that redistributes money from investors to software developers and executives.
Uber does not have unit economics like this.
Many reports of the lives of cab drivers, much too old to be PR submarines for Uber, tell the story: https://www.nytimes.com/1995/04/09/nyregion/driving-a-taxi-d...
Uber is not a good company, and I'm hoping they go away now that we have competitors. But this idea that they ruined the working conditions of drivers is just propaganda.
What it needs is an open source system that stitches them all together, but let's the drivers choose whatever company they want. I use one app, every company has the chance to make money, drivers go with what works for them.
But I think that's about as realistically as me only needing one subscription to watch all the TV and film I actually want to see.
The USA is not some 'blood and soil' country with a history of aristocracy. We subsidize the national defense and drug R&D costs of your entire continent. Freedom lovers of all ethnicities recognize America's unique nature as the sole proponent of freedom, and they flock here.
In my defense, it does not come from some innate desire to boss people around. The reason I mention governments often is simple: in a problem of prisonner's dilemma nature (so-called "coordination problem"), where a bunch of actors make rational decisions in their short-term interest at the detriment of everyone's long-term interest, the only way to force coordination and realize the long-term benefits is to have an external party enforcing the coordination, by penalizing the choice of short-term benefits.
You'll observe that a lot of problems in the society have this nature, and usually the solution is government or other body that can set the rules recognized by all involved parties (and dispense punishments for breaking them). This is the classical solution to prisonner's dilemma (a mob boss punishing snitches), overfishing (regulatory body dispensing quotas), etc.
It's not about what's European or American. It's about effective solutions to problems. In our times, we know enough about the dynamics of people interacting with each other at scale to recognize some common failure modes, like coordination problems, and ways to solve them.
In fact, it is. We have very different ideas about how to achieve outcomes (i.e. Old World vs. New World) we commonly share as goals. I absolutely disagree that "the solution is government." Europe hasn't achieved GDP growth over 1% for 20 years, and one has to wonder if it's because they over tax their middle class.
I do not discount your sovereignty, only your right to assert it over our sovereignty. One size does not fit all, and many Americans are being fooled by the subsidies others receive.
I appreciate your civility, and contributions to HN over the years, but also recognize the unAmerican nature of your ideas. What concerns me is that your ideas are infecting our young people.
I recommend Democracy in America written by Tocqueville in ~1840. It's available for free on the internet.
Call that payback for American ideas infecting whole generations on the "old continent" :). My generation grew up watching US television shows.
Seriously though, HN may hosted by a US company, but the community is thoroughly international. Ideas from all around the world are present here, and are free to mix. That's, in my opinion, for the better. Neither Europe nor the US are perfect places, so one shouldn't be too attached to their current form and tradition. I believe that the job of each generation is to try and make the world better for next generations, and that involves exploring ideas to see if some may work better than the status quo.
BTW., while you say I have European perspective, and I can't deny having some European bias by virtue of living there, the ideas I'm pushing I developed reading American thinkers. I really don't read much of our "domestic" stuff, and probably 90+% of my media and knowledge consumption is American. So you may be surprised that many of the things I say are already considered by people in your country. They're not "European" in nature.
If I can take this chance to infect your mind with another idea, consider this: as an American, you care about your freedom (particularly the so-called "negative liberty"). But the free market doesn't care about your freedom at all. It cares about profits, and optimizes very strongly for that. It's not guaranteed that letting the market maximize profits unencumbered also maximizes the liberty of US citizens. The market doesn't care, and will just as happily give you liberty as it will take it away.
This idea that the US is somehow specially "free" is more mythology than reality. We mostly have different regulations, that's all.
More government = less freedom, by definition. We need diversity in governance (maybe a citizenship swap?).
This is a general problem - for taxis, public transportation services, ordering food, e-commerce, movie streaming services, etc. Companies fracture the market on purpose, in hopes of exploiting the inconvenience of managing multiple service subscriptions or accounts.
What we need is some pressure[0] to force companies to relinquish the user interface. In a perfect world, all these services would be consuming API calls, and would be independent of the actual means users use to place orders. There should be a separate market for services, and a separate market for interfaces to those services.
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[0] - which probably would have to be regulatory, since it goes against the short-term interest of any company.
Like what? Like the footnote about pressure likely needing to be regulatory, because there's literally no way the market will do the right thing on its own?
> Patience is a virtue; I'm sorry free enterprise (and liberty, in general) is not fast enough for you.
It's more that it never happens when it should. Proper balance is achieved - if at all - when a piece of technology becomes boring so commercial entities don't care, because they're busy balkanizing a newer technology. So yes, it takes too long, human lives are too short, and I'd like the world to move to the point where new technologies aren't kept in perpetual state of sucking until they're bled dry of profits.
> The ends do not justify the means, no matter how great your intentions.
Come on, we're not talking about killing people here, just about discouraging greedy behaviour. Also, what you consider "fascist" I'd consider leveling the playing field and allowing smaller actors to participate. At the very least, I'd like to see legal protections around IP and terms of service weakened, to promote what EFF calls "adversarial interoperability".
The only thing Uber did that is worth admiring is fixing the "get a ride" situation. Skirting regulation is not ok if you believe in rule of law. If the law is bad, then money can be spent to improve that law. Uber's approach (and Airbnb's, for a long time) just shifts problems around. Yes, there are some benefits for some people for some time, but it is not the way society and civilization should behave.
Microsoft did this for years in the 90s. They would steal technology and then pay the occasional pittance of court judgement to the rightful owners. meanwhile, they gained dominance by some degree of theft.
All these companies are just proving that laws don't matter if you have enough money. That kind of system is, as we say, unsustainable. If left to continue its course, it will result in some of the tech-dystopian societies which make for fascinating dark books and movies.
I don’t want to snark on that idealism, but it is noteworthy that this didn’t happen. Instead everyone suffered in silence about horrible taxi systems until Uber changed everything.
In some places in the US. And whatever improvements happened, were only side effects. The problem with Uber is that they applied the same disregard for law to every market they entered; it was never about improving things, it was about anticompetitive behavior sustained by investor money and moving fast enough to stay inside local regulators' OODA loops.
I remember there being others, but the only one I can find right now is related to Spyglass (which you could argue was not theft, but was instead breach of contract or deception) https://en.wikipedia.org/wiki/Spyglass,_Inc.
There were other stories in the 90s, but now I can't find them (so they may have been just stories). Regardless, and considering some of the other practices of MS in the 90s and 2000s, Microsoft was a very different company from the one some of us actually like and respect now.
Every time someone says that I'm reminded of a pre-uber taxi driver telling me a "funny" story how a previous customer said he'll complain about some issue - "But what will he do? I'm just a contractor renting a radio. He can call the office all he wants."
Now we've got driver ratings. And the drivers are concerned about them. And I'm happy that giving a terrible/unsafe ride 1 star will have some impact.
There was little question that the existing taxi system was bad, but Uber didn't roll in to right the wrongs, it rolled in to "disrupt" and take the market.
Ppl have been saying this for years now. They said the same ting about tesla as far back as 2010 and the stock has increased 10x since then. They said the same about amazon a decade ago. Not saying that Uber is like Tesla or Amazon but that the media's track record at predicting this sort of stuff is really poor. People underestimate the ability of these companies to raise money and turn things around.
Uber can keep raising moeny by selling more stocks or selling debt. There is a lot of enthusiasm still about it, similar to Tesla.
The point of a company isn't to raise money or to generate enthusiasm, it's to generate profit, and on that front exactly none of those businesses have turned anything around, and the only thing the media got wrong was underestimating how generous softbank is in playing lender of last resort.
That said, the odds of that happening any time soon or that Uber / Lyft are the first to do it are pretty low - but markets can be irrational for a long time!
Not where I’d put my money, but plenty of folks have more than me to burn up.
Driver wages are a cost to Uber, but the drivers supply the cars, so they're also a source of working capital. A driverless taxi company would save on the wages, but would have to put up all the capital for the cars itself. This is not a slam dunk.
And yes, Uber is a bit more complicated because they often finance drivers' purchases of cars. But since they make money doing that, you can't make Uber more profitable by taking that out of the equation!
But on the gripping hand, we are not going to get replacement-level self-driving cars within the next decade, so whether Uber could make money with such cars just doesn't matter.
I ride with rideshare/taxi 10+ times per week for work, I try to make all 10 of those rideshare. I'll keep doing it if Uber starts to cost more than taxi.
Every time I have to get in a taxi, I'm reminded why it was so easy to disrupt in the first place. Shitty cars, rude drivers, 'broken' card machines, drivers have no idea where to go and inexplicably try to avoid using GPS. Taxi driver picked me up from the airport in my home city and tried to take me on a 20+ min out of the way route until I told him I'm going to my fucking house. 'Oh sorry I thought this way is quicker because of the traffic'. This doesn't happen with rideshare, and drivers are usually much nicer. I'm happy to pay extra for that.
People who keep saying that the only thing Uber did was undercut the existing taxi industry, have no clue what they're talking about.
No problem. Cabs still suck compared to ride apps. It's not even a comparison that's fair to make under your stated conditions. That I can summon a ride at any time, any place and have a near accurate estimate of the cost so I can plan ahead and not have to negotiate with the driver (happens sometimes) is way better anyway.
That's one of the problems that ride apps solve - ubiquity of service. No matter where you go in the world - and I come from a very remote place so I should know this - uber is there and it sometimes even delivers food for less than a dollar and in about 1 hour!!!
Taxis on the other hand don't always have apps and can't bring you goods like food.
But it seems obvious that Uber and Lyft need to both raise their prices--with of course no collusion involved /s. That does get into the question, as the article, touches on of what happens to the market for these services if you double (or whatever) what they cost. Presumably fewer riders which means longer waits, fewer areas where the density makes them viable, etc.
So higher prices/worse service. I think these would still work in cities for when people would have historically taken taxis. Probably works less well for casual use and when people are using to replace public transportation or car ownership on a daily basis.
Maybe we just end up with Taxis 2.0. Mostly local businesses with a very low cost structure.