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Comment by frankbreetz | Hacker News Reader

Could you ELI5 for this?

Think on how much cheaper rides are with Uber, Lyft, or any similar service, compared with an ordinary taxi cab. The reason for that is that you're splitting the fare with a venture capitalist.

The reason why VCs were willing to do that was that they anticipated that Uber (in particular) would monopolize ride-sharing. After that, they intended to replace the drivers (who are still the most expensive part of the ride) with self-driving cars. I spoke with a Google employee, about two years ago, who told me that everyone in the self-driving business hoped to have some big advances ready by 2021.

Turns out that autonomous vehicles are a lot harder than anticipated, so the ride-share companies have had to pivot. That explains Uber Eats.

As sketchy as Uber has been, I have no sympathy for the traditional taxi cab companies. They refused to adapt in the face of a new situation staring them in the face. The New York City medallion-owners just expected to continue farming from the cab drivers with zero effort. Parasites.

I spoke with a guy who had recently come to America and needed a ride. His friends couldn't drive him, for some reason, so they tried to arrange a cab. While they bickered, trying to find a cab company phone number, this guy downloaded the Uber app, punched in his credit card info, and his ride showed up before his friends had finished finding a cab company.

Nevertheless, Uber is a sketchy company and desperately needs regulation.

The article says they take 30% of each fare, but we are splitting it with a VC? This does not add up to me.

You get an Uber. The overall cost of your trip should be $15 once you figure in all the various costs and overhead.

But you get charged only $10. Uber has already eaten $5 of the fare for you. That money has to come from somewhere. The 30% they take on the $10 isn't covering what they've already knocked off the price.

That money has to come from somewhere. That somewhere is the VC.

The 30% they take is really only stemming the bleeding.

That's what I don't understand. What are the various cost and overhead? If a trip cost $10, the driver gets $7. You are telling me $3 to uber doesn't cover overhead? Overhead to me seems extremely small, what is the marginal cost on an uber ride to uber?

Other costs include vehicle depreciation, insurance, maintenance, gas, etc.

Hubert Horan is an analyst who goes into these costs into detail. http://horanaviation.com/Uber.html

Isn't all this offloaded to the driver though? e.g. not Uber's $3 cut

There is a huge amount of Uber right now that needs paid for but is out of sight, though. Developers for the app and infrastructure, but also entire offices of engineers dedicated to R&D for driverless cars. Eats into that $3 quick.

> If a trip cost $10, the driver gets $7. You are telling me $3 to uber doesn't cover overhead?

Your mistake (I think) is that you are connecting the costs to the prices on a per-trip basis.

In the hyper-growth phase where the objective is to gain mindshare and market share, their VC and IPO cash can be used instead of charging reasonable prices.

For your scenario it’s entirely possible that the price of the ride is $10 but the cost of the ride to the driver is $12.

That's a different discussion.

I'm not the one telling you that the $3 doesn't cover overhead. Uber is. Taxis that cost more are.

Uber is charging less than fair market rates for the services it provides. It's using money from other sources to prop up parts of the business that can't support themselves.

But their cost to run servers/app should not be costing them 30% of each ride. They should be making good profit. They are blowing a lot of money in other areas if you look at charts that outline this.

The cost of the servers, no. But there are processing fees, employee salaries, etc. If you have a link to those charts outlining where they're spending their cash, I'd actually like to look at them.

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