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Comment by brianmcconnell | Hacker News Reader

A prediction about "sharing economy" companies. Almost all of them are tacking on a thin rind of web/mobile UI and smart dispatch technology to an existing service. The long-term winners will be companies like Flywheel that recognize this and focus on providing that service to existing operators, much like payment processors. This, of course, is perceived as a smaller market since they can't count revenue the same way.

EDIT: on the other hand, an advantage is they don't have to worry about acquiring customers, drivers, etc, nor the regulatory overhead of the underlying business, but instead just focus on customer experience, schedule/dispatch, etc.

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Absolutely, however another "advantage" of many "sharing economy" companies is that they skirt regulations that incumbents must adhere to.

The real question to ask in this case is whether those regulations should be there in the first place.

Disregarding the competitive aspect, it's absurd to me that people praise banning Uber and Tesla for the "consumer safety" of taxis and car dealerships.

There is a significant consumer safety element to the way Taxis are regulated. The fact that this is used to protect a monopoly is a separate issue and I agree that it is a real problem.

The Tesla analogy is perfect, though. I've never felt like car dealerships being independently owned was a useful benefit. I don't see any reason why both models can't coexist.

> I've never felt like car dealerships being independently owned was a useful benefit

Eh, it was useful for car manufacturers when they were first getting going: they didn't have to put up the capital to open shop. The regulation came in when a dealership showed that a given region had high demand for the company's cars, so the company would move in across the street and undercut the franchised dealer. Obviously the franchised dealer had more clout with local politics than the auto manufacturer did - this is why all the dealership laws are state laws. It was kind of a legitimate regulation back /then/, but really has no bearing on things now (especially for a car company that has never franchised any dealers).

If by "legitimate" you mean "useful" or "good" (as opposed to the law not being passed through the established legislative process, because that criticism wouldn't make sense), then even then it was illegitimate. If the manufacturer can come in and undercut the dealer, they should. Unfortunately, the dealer was local and the manufacturer often wasn't. The same reason any protectionist measures are created.

I think taxi regulations are there to deal with a world way before mobile computing. The regulations addressed at it's heart an information asymmetry between taxi drivers and riders, especially with tourists.

With current ride sharing apps, a lot of that goes away. You don't worry about tampered meters and being driven the long way around, because the trip is GPS tracked on both sides for example. You don't have to worry about getting in a random car in a city with a complete stranger, because reputation systems have pre-vetted your drivers and your driver's cars. a If taxi drivers get angry at you for using credit cards or for short trips, you can complain to a central agency that will deal with it. In developing (and some developed) nations, these ride sharing apps have a better safety margin than the local regulations do. Inefficient systems like taxi lineups at airports are not necessary anymore.

The international nature of these ride sharing apps also give you a universal set of rules as you travel, and make it you can communicate your destination without being able to speak the language. The advantages go on and on. The companies making and creating these things don't really matter, but the general app really does and we shouldn't smother them with regulations.

> There is a significant consumer safety element to the way Taxis are regulated.

Whatever those safety elements are, I've certainly never experienced them. Theoretically they're there, I guess, but my (admittedly anecdotal) experience has been that Uber is safer in every way than taxis are.

Well, I'd say they're twofold:

* Obviously, whether the guy is going to try and kidnap you. Well, Uber has rating, but the background checks are pretty flimsy. Still, I'll concede that it may well be just as good.

* The second thing affects non-customers and it's ensuring the roads aren't congesting with a glut of taxis driving around looking for fares all day (with all the attendant problems that causes). While the average car spends 2 hours or less on the road in a day a taxi or an Uber is going to spend a lot more than that. I'm not really convinced Uber has an answer to that.

There are also issues like insurance/liability and so on that are rarely encountered, but are something of a big deal if they do come up. And there's the worker protection aspect of it.

> it's ensuring the roads aren't congesting with a glut of taxis driving around looking for fares all day

Ever hear of this thing called supply and demand?

You're missing the point, which is that the costs are not borne by customers but by everyone on the road. Supply and demand is not a mechanism to solve this kind of problem

In the case of using the "independent contractor" loophole to avoid paying UI, social sec tax, minimum wage, etc, it's an issue of making sure everyone plays by the same rules. Operators who abide by these rules should not be punished for doing so.

The quote from one of the lawsuits suggests that the 'independent contractors' really weren't very independent...

"Cleaners are unable to provide any additional information before jobs are assigned. For example, a Cleaner cannot tell Homejoy that while she may have picked different zip codes or cities as part of her territory, she only wants to stay within one zip code, or within one small part of a zip code, each day. Instead, if a Cleaner chooses Oakland and San Francisco as part of her territory, Homejoy alone determines whether the cleaner will stay in Oakland on a given day, stay in San Francisco on a given day, or travel in between the two cities multiple times on a given day. Furthermore, Cleaners cannot tell Homejoy whether they want a little or a lot of down time between each job, or each job start time or end time. Cleaners cannot tell Homejoy how much driving they prefer to do, whether the jobs need to be near public transportation, whether the Cleaners prefer to be stuck in rush hour traffic or instead on routes that are reverse commutes, how many jobs the Cleaners want to perform each day, or whether or not they want to return to a previous customer."

http://arstechnica.com/tech-policy/2015/03/startup-workers-s...

I can't wait until Uber starts scheduling drivers at min wage plus bennies and makes even more money.

Are you implying that taxes/regulations are punitive?

No I am implying that companies that avoid paying them are getting an unfair advantage versus the companies that treat their workers as employees.

Regulations exist for a reason, some maybe old or irrelevant but they all evolved in response to the industries they regulate.

There's a such thing as regulatory capture.

Agreed, but that doesn't discredit all evolved regulations.

If that was the question, then these companies would be lobbying to get rid of those regulations. Far too many of them see their ignoring of regulations to be a competitive edge.

Lobbying is expensive and time consuming. If you ignore regulations and do a good job, the population will lobby for you, for free.

Exactly. The new entrant into a market isn't the one who can afford to get into the lobbying game.

> The long-term winners will be companies like Flywheel that recognize this and focus on providing that service to existing operators, much like payment processors.

I don't think this creates a very big moat - that's essentially what Uber started out as (dispatch for private driving companies that already existed); they started letting anyone drive in order to meet demand.

If all the services are interchangable (and now, at least for ridesharing, it seems like they are), the winner will be the app that's used by default.

Uber is different than Homejoy.

You would use the same house cleaning professional over and over again but you will likely never ride with the same Uber driver again. This means that the Homejoy house cleaner can bypass Homejoy but the Uber drivers/users can't do without it.

> you will likely never ride with the same Uber driver again.

In theory, having your "own" driver would not be a bad thing. But the main difference is in scheduling.

With taxis and Uber, you want a car to show up in 10 minutes at any time of the day without advance booking. This requires a large pool of drivers on standby and a middleman to handle the communication.

A cleaner can visit pretty much any time during the week, and is usually pre-booked for every week indefinitely into the future. This doesn't need a middleman, since you can arrange the details directly.

Defaults can change really quickly. Unlike Facebook Uber has basically zero network effect between cities. So, a competitor can win one or two small cities and just keep growing.

Consider there are only 40,000 taxi drivers in New York.

All it takes is for a company to find the top 5-50% of Uber/Lift drivers in a city offer them a minimum income of a few k/month assuming they take A% of rides and work y hours and boom instant driver network. Sure, doing it now when Uber is flush with cash is a bad idea, but after it pop’s there is no way they can stay competitive without paper thin margins long term.

If Uber "pops" it will be because the ride sharing industry died. There is no scenario where Uber becomes MySpace to a competitor.

> There is no scenario where Uber becomes MySpace to a competitor.

Sure there is - the IRS says their drivers are employees and they need to provide multiple years worth of backpay/benefits. Any competitor that's been doing that already wins.

It's debatable whether the ride sharing industry can survive if drivers are classified as employees (which is why Uber and others are working on self-driving cars).

It's not debatable; there are plenty of companies that do it already.

There is no scenario that's rather optimistic of you.

Don't get me wrong there currently very popular and profitable so they don't need to worry about a Pets.com style crash. However, the barriers to entry are relatively low just look at Lyft. Eventually investors are going to want to get their money back, so they either start issuing dividends or face a hostile takeover.

>and profitable

Are they? Everything I've read indicates that they are not.

http://www.bloomberg.com/news/videos/2015-06-30/uber-loses-m...

Actually, everything I've read says they are in mature cities. Leaked numbers say they're stupendously profitable in their oldest markets: nyc, sf, etc. They are losing money overall because they subsidize drivers when they move into new markets. But the key is always to look at existing markets.

The quickest numbers I could find were leaked in 2014.

   est yearly rev run rate  city
   =======================  ====
   $212+mm                  sf
   $312 mm                  nyc
   $141 mm                  dc
   $150 mm                  chicago
   =======                  =======
   $815 mm                  total

http://www.businessinsider.com/uber-revenue-rides-drivers-an...

edits: made table

I guess the larger question is how do drivers respond when their rates get dropped after a market is mature. I imagine the answer is different depending on the market.

Those above cities are, I believe, post rate drops. Also other leaked numbers have said Uber continues to grow. My guess is driver happiness doesn't impact Uber's business much; our economy seems to generate enough desperate people that they have a nearly never ending stream of people willing to drive for $5/hour (a reasonable estimate of an UberX driver's true net comp.)

Seems like much of that short-term profit would easily be negated by increased frequency of maintenance due to wear-and-tear on driver vehicles.

Saying the barriers to entry or low is completely uninformed. The incumbent has a massive advantage in driver/rider liquidity that is nearly impossible to overcome. Lyft is the perfect example in that it still massively trails Uber in every one of its markets despising having very deep pockets and for many, a more attractive product.

IMO, Lyft's mistake is attacking more than one market at the same time. Spending 100M to just get NY is a good investment and there are far smaller cities out there with lower barriers to entry. Further, if you can demonstrate that Uber only raises rates after they show up you can build up a lot of hate in the driver’s community.

AKA: Uber pays a lot to get ex: NYC and LA drivers, wins both markets, lowers payouts to make money. New competitor shows up in NYC so Uber dramatically raises rates in NYC and not LA. Then, before that competitor moves to LA a lot of drivers are going to get pissed there stuck with low rates. Basically, by attacking one city, Uber is forced to either raise rates in all its cities’ which it can't afford or piss off all their drivers.

If they play it smart Uber will never die, but I've seen lots of companies fail because a competitor showed up and forced them into a vicious cycle of cutting quality to keep profits up, which drove out customers, etc.

If the good drivers stop working for Uber because Uber is squeezing them, for example, Uber may get a reputation for having poor drivers.

I think ride sharing companies like Uber are a bit different though because the dispatch system (the element of coordination and availability) is critical for that type of service.

This is different from cleaning because people don't need down-to-the-minute availability. Homejoy had to find a way to lock their cleaners into ongoing agreements to prevent them from bypassing them.

I agree that it's natural with these services for consumers to want to 'bypass' the middleman if possible.

Unfortunately, under capitalism, creating value and capturing it are two very different things. There are a lot of business ideas which have potential to create amazing value for society, but these businesses will not be able to exist because they are not capable of capturing that value.

There is a great deal of schlep involved in generating supply and demand, and more importantly developing good technical controls to promote quality and reduce fraud, and the human support to handle the disputes and quality issues that slip through the cracks. There is nothing thin about the layer. Interchangeable maybe, but Uber et al are not going to be replaced by pure software anytime soon.

Dispatch services where by design you interact with a variety of vendors work because there's no value in building long-term relationship on either side.

But dispatch services where worker-customer relationship can evolve into long-term are indeed not adding much value outside of the original lead generator.

Nope. The Uber/Lyft experience is so far superior, for both drivers and riders, that it is the obvious eventual winner. How drivers are employed/compensated is a mere technicality. Uber could pay some drivers minimum wage + benefits and probably make even more money.

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