I was in India recently. The driver said that when Uber started out, they'd give each driver Rs. 60K/mo (about $1000/mo) just to sign in for 10 hours/day, even if they did not give a single ride. Now, Uber pays by the number of rides and not a portion of the actual fares. So, for example, he said that Uber pays them Rs. 3500 for 17 rides. Most of my rides were about Rs 100 each; so Uber was taking a loss on each ride. But their system of paying by the ride is a genius idea: it removes the incentive for the driver to dick around and do a TSP around the city to drive up the fare. Now its in their interest to get the ride over with as quickly as possible, so they take the most direct route.

Edit: Sorry, "Rs" is the Indian currency, Rupee. There's about 65 Rupees to the USD.

The strategy I've seen in response to this incentive scheme is to work 4 14-hour days, ensuring that they hit the incentive no matter what. The money made off the actual ride is peanuts ($1/ride, maybe) so they absolutely need to finish 15 rides to get $75. Working 4 days a week, 16 days a month nets the driver $1200/month. Which is an incredible income by Indian standards considering most graduates from good colleges make a lot less.

With GPS, drivers can't do this.

Padding by 300% is a challenge, but a bit isn't.

This comparison strikes me as bizarre. The medallion racket is lobbying politicians to use the force of the law to prevent competitors from doing business. What discordorama describes is paying people money to install and sign into your app. This is... either a poorly designed incentive system that was then fixed, or a clever campaign that gets a lot of future drivers through the earliest hoops and puts them in a position where it's easy to incentivize them to start driving. (Clever to the extent that that works.)

I can't see why you think there's a similarity, other than that you think they're both underhanded, and that they're both done by companies providing taxi-like services.

They have to ensure supply while they bring on new customers (has associated acquisition cost) if they acquire a customer and that customer isn't able to purchase anything from them due to lack of supply (or in the case of uber the price is too high because of surge kicking in) then that customer will churn forever, and potentially share their negative experience with their friends.

So basically, nail supply, grow customers, don't run out of cash before the whole thing is working.

If Uber's incentives for drivers result in a better experience for riders (shorter rides), isn't that a good thing?

Uber also offers bonuses if they complete a set amount of rides per day. There was a problem recently due to this when a driver fall asleep and the passenger had to drive the car. [0]

I have also experienced Uber drivers asking for a new ride to somewhere nearby using the Cash option after I completed a ride just so that they can increase the number of completed trips.

[0] http://thelogicalindian.com/story-feed/awareness/watchread-u...

Paying with cash has the same distribution of money (more or less), it's just handled differently.

The only strategy I can see with the absurd amounts they are raising is that they are trying to get enough money to sustain the subsidies until they kill all existing competition, at which point they can raise their prices and people will have no choice but to pay them - much like Standard Oil did. In today's world though, I'm not sure that such a strategy can work.

It will be interesting to see what happens. Perhaps there is a chance of success. But if Uber were a public company, personally I'd be shorting every share that I could.

There doesn't seem to be evidence of that.

Uber is apparently profitable in its mature markets (mainly the US).[0]

The money is mostly used to prop up new markets, where you have to give lots of incentives to get both sides of the market in place fast (keeping supply and demand matched is the constant challenge of nascent two-sided marketplaces).

That being said, the fact that they're having to turn to Saudi money (nobody's preferred source) isn't encouraging.

[0] http://fortune.com/2016/02/18/uber-profitable-us/

I wouldn't trust a thing that company says about their cashflows until they are in SEC filings.

Capitalism giveth, and capitalism taketh away.

[1] https://news.fastcompany.com/elizabeth-holmess-net-worth-is-...

> Forbes said it has reexamined and revised Theranos' $9 billion valuation in light of recent investigations and allegations against the company.

> Citing conversations with venture capitalists and analysts, Forbes estimates that the company is actually worth a great deal less: $800 million. That takes into account its intellectual property and financing, according to Forbes' Matthew Herper.

> Holmes' 50% stake in the company would effectively be worth nothing at that valuation, Forbes concludes, because her investors would be paid back first (they hold preferred stock, not common stock like Holmes).

The taxi company I drove for has contracts with many government agencies to transport poor & unfortunate people around. People have to get to their doctor (Arizona Medicaid) appointments, to the hospital, home from the hospital, foster kids transported to meetings with their parents, etc.

These fares pay better than Uber's non-surge fares.

/methinks "ride share" companies are run by founders suffering from delusions of grandeur. When they run out of venture capital, the realities of transporting people from place to place will reassert themselves.

That would be like Uber buying every road and every manufacturer.

I also don't think Uber's biggest competition is cars or taxis, I imagine it is public transport. The markets with the best scale (esp outside of US) have good public transit. People aren't going to go from paying a £10 uber to a £30 black taxi in London, they'll go back to getting the tube or the bus home after a night out.

Also worth noting: Los Angeles is not like London or Paris or NYC where you can very often walk to a nearby mass transit station. In many parts of Los Angeles, Uber can serve as a useful complement to the public transport system. For example, one can quickly take Uber to a rail station which then travels the rest of your route underground -- thus avoiding traffic jams.

If Uber did not exist in LA, one would be more likely to just get in one's car for the entire journey: buses take too long to get you to the underground station, and taxis are too expensive.

It's also important to keep in mind that, in Los Angeles, Uber cars arrive really promptly by comparison to public transport buses. If your time in, say, the office, is really valuable, then the Uber service offers more value than a bus, because buses require a lot more time to transport you than an Uber car does.

I know this sounds like an ad for Uber, but I have no connection to the company, except as an occasional customer.

Like a taxi?

Uber will never come close to moving the sheer numbers that public transit does. You can't do it, not enough road to fit all those cars. Especially in downtown cores.

So Uber competes with public transit as much as taxis compete with public transit.

> Uber will never come close to moving the sheer numbers that public transit does. You can't do it, not enough road to fit all those cars. Especially in downtown cores.

I never suggested anything of the sort. Especially not at commute hours.

> So Uber competes with public transit as much as taxis compete with public transit.

I think we agree. I just noted that if Uber prices rose, some Uber users would prefer to use public transit rather than pay higher Uber prices or Taxi prices.

Eventually governments will get wise to the fact that this is not magic. Just a new way to dial up a ride.

Governments didn't allow individuals to install a radio into their private car & drive around making rides. Why should they allow the same just because you have a smartphone?

So I don't think Uber needs to buy roads. All they need to do is have a broad enough base and deep enough pockets that they can drive everybody else out of business. Or, possibly better, keep a few sickly competitors forever on the margins. That way they can pretend they're really competing.

There may be some equilibrium somewhere, but I don't believe it will be in the users best interest having to wait for cars.

Just my thoughts. I'm probably wrong.

Now of course, maybe also need to be concerned about autonomous cars using this p2p app, in which case just need to pay a slave robot with the minimal energy it requires to drive.

I sure as hell am not getting into a car with an unlicensed driver

A more cynical version: they're trying to pump up their valuation, IPO, and dump their stock before anyone notices.

It depends what you mean by "actual costs," but I would suspect that Uber's will still be lower than cabs' under any reasonable definition.

What people pay for an Uber still varies a lot by city.

At home in Ohio, Uber is more expensive than taxis in several cases, for example, to/from the airport, and short trips from the city center to the bars (2-3 miles). Taxis are also generally cheaper here for longer trips (maybe 30+ miles).

Similarly taxis can still be cheaper (and are still ubiquitous) in NYC.

While price increases do happen, they generally have nothing to do with driver incentives. Incentives for drivers are (usually) meant to build supply, not cut the cost of rides.

There's no reality here. No magic self driving electric taxis, no robot delivering your takeout.

18-24 months this thing will be like Groupon (remember they were magically saving writers by hiring thousands of them to copywrite Yoga Studio coupons) -- the insiders cash out, and the dumb money takes a bath.

That said, I thank the Saudis for subsidizing my next black car ride. God knows I've shipped $100k for gas to them over the last two decades.

I'm currently doing about 40 miles/day commute for work, and know people who are driving a lot farther than I am... while I was married, I'd drive about 140 miles to/from home on the weekends, staying in the city during the week, put many miles on my car and truck back then.

And it's at a huge, because most of this isn't happening at the federal level (yet)—it's all state and city—which means they don't have the luxury of concentrating on the familiar, well-tread (and very insular) game of DC politics. Instead Uber has to have boots on the ground in a ton of places, and they have to have people knowledgable on the nuances of regional politics and culture. Things like the dynamics of a state's house vs senate, country executives, the port authority, taxi unions, legal systems, initiative systems, local elections, Chambers of Commerce. The list really does go on and on. It's a huge and complex footprint to manage.

http://www.nytimes.com/2015/09/13/magazine/uber-would-like-t...

If you spend $1B on actual physical vehicles or whatever (let's say... 500 $2M vehicles), then if you have 200 employees with an average pay of say $500k per year, then you could pay them all for a decade with another $1B, meaning that you'd have spent less than 1/6th of the funding they've taken to date, or still have $1.5B left of the Saudi Royal Family's hard earned money.

More briefly: no, obviously they are not spending their money on an autonomous driving program.

Why is the expertise they have built up in car-hailing directly applicable to other logistics problems, and what advantage will they have going in that creates a barrier to entry for newcomers?

I think there is one answer to this for Uber, and its the same strategy Amazon stumbled into: have your "main" business be breakeven, but provide the scale needed for a pure profit business. In Amazon's case, the main business is retail and the profit center is AWS.

In Uber's case, this would look like individual ride-taking customers providing the demand to keep a critical mass of drivers on the road. This business is breakeven at best, likely slightly money-losing (sorry folks, but an increases in ride costs will quickly stamp out demand to pre-Uber days).

Then, with this "infrastructure" of drivers on the road, they can leverage it into nearly pure profit areas like last-mile delivery.

There's a huge catch, though. Amazon just has to buy new machines every 3-5 years. Uber's driver turnover is much much higher, and is absolutely killing them. All the claims of profitability are deceptive, because they assume current demand with current set of drivers; those statements do not factor in driver recruitment costs next month, or tomorrow.

Unfortunately this appears on the surface to be a structural problem. Current pay with driver-owned vehicles is probably not a long-term or full-time possibility for most candidate drivers.

Edit: to save a step, the predictable response to my objection is always, "but... self-driving cars!"

That doesn't mean that they will, of course. I have a feeling that these platform-locked services like Uber and Lyft will not be able to compete with the scalability of an open auction network.

This is the non-profit I want to invest in.

> The cloud division’s sales rose 64% to $2.57 billion. While that is less than one-tenth of Amazon’s overall revenue, AWS generated about 67% of the company’s operating income in the quarter.

That's the only interesting thing about Uber. Sure they have delusions of grandeur and they certainly have no qualms about putting out glossy marketing material extolling how they will change humanity, but today they are a taxi company.

I've heard this argument before, but how can this be taken seriously? Take DHL, or UPS - they do orders of magnitude more (in transactions) than Uber does, and I know it's not exactly the same, but I'd even argue that any parcel service is a lot more complicated than Uber. Hell, even the tiny postal service of my country ships the same amount of packages each day as Uber has rides.

The tech side of Uber is (dare I say it!) trivial (well the 'ride sharing' part, not the AV research side). It's the regulatory and plain business model angles that must be costing them.

Amazon is investigating Uber-like delivery options [1]. If they decide that there's anything there (and I'm not totally convinced that there is), they'll build the service themselves and not pay Uber for the privilege. And if the service works well for themselves, you can bet they'll open it up to other people to use for a price, as they have for all of their internal infrastructure projects.

[1] Source for this claim: I worked at Flywheel, an Uber competitor. Amazon had a program to have our drivers deliver packages, and got fairly close to acquiring us, before deciding they would rather not. This was a few years ago at this point, information is not current, and I have no idea about the present state of Flywheel, as I do not work there any more.

Two words: network effect. More drivers means more users. More users attracts more drivers. This is precisely why we have eBay and Craigslist despite them both offering, by modern standards, objectively terrible user experiences. Suffice it to say I am extremely bullish on Uber, Airbnb, etc. sticking around for a whole.

In Europe small scale transportation is as competitive as cellphone market. Hmm now I am beginning to see the problem, in US you might not understand what a competitive cellphone carrier market looks like in the first place? :) Here you can transfer numbers freely between carriers, there are usually 3-5 providers to pick from and they all compete fiercely on price, level and quality of service. Changing companies is not a mayor ordeal, merely an ~hour of work to optimize your phone bill.

In Singapore, Uber owns and operates a car rental subsidiary that has singlehandedly driven up the total cost of owning a car. [1] I suspect that this has been the case in some other cities that Uber operates in as well.

[1] http://www.straitstimes.com/singapore/transport/uber-bids-co...

Of course, if they are more economically efficient per-car because they drive these cars more, the separate congestion charging might have to go up. Still a net win for the economy of Singapore---since they will be using the national share of capital sunken into the cost of cars more efficiently.

(I am talking about the cost the economy of Singapore has to pay as a whole to import a car. That's net of taxes and CoE which are just transfers within Singapore.)

I hope the government can stay non-populist, and not give in to shortsighted special interests.

The other reason I see is China. I've heard estimates that and seen probably at least one story here on HN about Uber spending 1 Billions a year to try to compete in China and it's largely not working.

So the question is how sustainable is this valuation? It's too big for anyone to step in and acquire at this point at least in terms of its current model - cars with drivers, since the long term future is likely driverless cars.

On top of engineering spend they are basically at war with every single place they move into and refuse to go public. They can't continue to be just ride sharing when self-driving cars come out, so they need to capture that market (or some market) another way

You mean with every single jurisdiction they move into? (Customers and drivers seem reasonably happy. At least they are not at war.)

Additionally if they are doing R and D beyond this (autonomous cars, universal delivery service, whatever) then they need lots of cash.

They are disrupting one of the most heavily regulated markets where government is protecting special interest groups. I would not even have bet any money that Uber could have taken off the ground. But they have done well.

Secondarily, Amazon was public for years - which means they were required to become profitable. Uber doesn't yet have that pressure in place- and a new round of cash delays that requirement even further.