Can prices ever be "too low?" The short answer is yes, but not very often.
Generally, low prices benefit consumers. Consumers are harmed only if below-cost pricing allows a dominant competitor to knock its rivals out of the market and
then raise prices to above-market levels for a substantial time. A firm's
independent decision to reduce prices to a level below its own costs does not
necessarily injure competition, and, in fact, may simply reflect particularly
vigorous competition. Instances of a large firm using low prices to drive
smaller competitors out of the market in hopes of raising prices after they
leave are rare. This strategy can only be successful if the short-run losses
from pricing below cost will be made up for by much higher prices over a longer
period of time after competitors leave the market. Although the FTC examines
claims of predatory pricing carefully, courts, including the Supreme Court, have
been skeptical of such claims.
Pricing below your own costs is also not a violation of the law unless it is part of a strategy to eliminate competitors, and when that strategy has a dangerous probability of creating a monopoly for the discounting firm so that it can raise prices far into the future and recoup its losses. In markets with a large number of sellers, such as gasoline retailing, it is unlikely that one company could price below cost long enough to drive out a significant number of rivals and attain a dominant position
That's not the case here. I don't see Uber creating a monopoly in any way. If they raise prices to unreasonable levels (i.e., more than people used to pay for regular cabs), people will go to Lyft, Juno, or the next ride-hailing startup. If there's no competitor remaining, new ones will show up. Or regular cabs will be back.
IMO, the endgame for Uber is not to raise prices; it is to reduce costs. They're betting the farm on driverless cars.
Not too different than Amazon with retail. Amazon doesn't need to charge more than the local retailers they've put out of business; they just need to have a lower cost structure.
Regarding your point about probability of creating a monopoly:
"Brishen Rogers, an associate professor at Temple University’s Beasley School of Law who has studied Uber’s effects on the taxi market, said traditional cab companies are clearly threatened by newer competitors, and he expects many more will go out of business as a result.
[Many] lenders, including Citibank, expressed concerns about the effects that “nontraditional ride-sharing companies” would have on the city’s traditional medallion-based business model. "
http://www.wsj.com/articles/san-franciscos-biggest-taxi-oper...
Developing a basic app for taxis (calling a cab, paying, ETA) will probably not cost more than a few millions. Getting people to drive for you (in addition to other companies) is also very easy at the moment. That makes barriers to entry extremely low in the market. It's not an Amazon with huge warehouses and not a Google with a highly sophisticated search algorithm. Uber just competes by price, they have no real technical advantage here.
The framing I see sometimes of Big Mean Uber vs 'poor little guy cab driver' seems wholly out of touch with my experience. At least in Boston the taxi system is/was rife with corruption and cronyism. Neither riders or drivers get a good deal, just medallion owners and the regulators they captured[0]. The money isn't staying in the 'local economy', to 'small business owners', it is, by and large, going to rent-seeking medallion owners, many of whom live out of state to monopoly holders who use that power to prevent competition through regulation. I'd happily pay the same to take an Uber driven by someone who wasn't being exploited and who was accountable for the quality of the ride than a crappy medallion cab with a driver who is on the phone, the whole time being forced to watch ads on their "entertainment screen" with no off button.
Uber isn't a monopoly (yet), but they are breaking a monopoly, and that's a good thing.
What special advantage does Uber have there, though? Many companies are working on driverless cars. When that reduces costs, it'll reduce costs for Uber's competitors too.
Thorny legal issues in a nutshell ;)
The end game is a company with self driving cars, having SIGNIFICANTLY less overhead than they currently do with human drivers. And, probably a ton of technology patents to boot?
Yea, they're definitely a brazen company, but do you really expect anything less from a unicorn company? Very few make it this big without cutting some corners, having some connection, etc.
Right now Uber is really just proving that if you burn billions and billions you can create a "market" for your "product." It has yet to show that it's a real company with long term prospects. There's a difference between losing money because you haven't hit scale (when Facebook was losing money in the early years) and losing money because you're at scale and just undercutting everyone to show you can make "revenue" or by investing in "innovation" that everyone and their brother is doing and doing it better than Uber.
Driverless cars on the other had and still decades away, whether the tech is ready or not. Society is not yet at a place that will allow the use of full driverless vehicles on public roads. It doesnt matter how much statistically better a driverless car is than a human, every single accident will be magnified. Driverless cars could be our first foray into truly autonomous robotics within the general public, it is not something that will occur lightly.
Google is a league ahead of the competition with their Autonomous OS, and they're getting close to implementing robotaxis commercially in limited capacities. However, Chris Urmson, ex CTO of the self driving project doesn't think they'll be able to go everywhere a human can for ~30 years.
Uber's autonomous program is looking pretty sketchy at the moment, but now that they have Anthony Levandowski to play Darth Vader to Kalanick's Emperor Palpatine, the project is in capable hands.
Uber's robotaxis need only augment their human network of drivers through the mid-term, and as the capabilities of their Autonomous OS improves they take over more responsibility. Still, this is capital intensive and it'll be still be many years before autonomous vehicles have any measurable effect on Uber's bottom line, and even then, Uber will still be facing competition from other companies with robotaxi networks in development, including but not limited to GM/Lyft/Cruise, The Tesla Network, Waymo, Zoox, and any Automaker willing to license from the Mobileye/Delphi/Intel partnership.
Uber is currently playing hardball with the California DMV, in some sort of attempt at asserting their dominance over the law. I'm not sure if they've got some kind of legit strategy here or not, because I'm skeptical they'll have as much luck leveraging popular public support against regulators in the Autonomous Vehicle space with as they've had in the taxi industry.
It's also an inevitability that Uber's labour will organize for better bargaining power. Legislators seem to side with drivers as 'employees' rather than 'contractors' in the few regional cases that have made it through the courts.
Nonetheless, these incomplete financial reports that have been leaking out make it easy to spin a negative narrative about Uber's future prospects. That narrative may be on the mark, but we can't know for sure.
This is never going to happen. This is a pipe dream. Self-driving cars are so far away from being a reality that you might as well assume you'll never live to see them, and Uber will certainly expire long before they arrive on the scene.
If the entire value proposition is "taxi using self-driving cars", then surely they would be much better off dropping the money burning ride-hailing operation with cars they don't own to spend more on R&D...
Market share. Or more precisely, establishing market dominance by undercutting the competition.
There is simply no scenario where having a network of poorly paid drivers, their heterogeneous fleet of unmaintained cars and a load of debt is an advantage in a rollout of self-driving cars, the first useful version of which will surely be limited to one particular manufacturer, model and sensor suite.
And Uber couldn't double down on their existing strategy of heavily subsidised rides to undercut self-driving cars? I mean, this is assuming that self-driving taxis are cheaper off the bat, which kind of ignores the fairly large capital expenditure of buying a fleet.
> A first-to-market competitor will have 747s full of money landing on their doorstep begging them to take it.
I don't think it's that simple. That's not taking into account how difficult it would be for Competitor X to build enough of a network to rival Uber, and how easy it would be for Uber to replicate/steal/buy the tech and steamroll Competitor X. Having superior tech and being first to market are not enough alone to trump market share.
As it seems that is their only chance at profitability, then they should be plowing a lot more of their capital into driverless R&D.
This softens the depreciation in the medallion market. The cab drivers who paid a lot of money for their medallions would be furious if they're worthless overnight. This way it takes 10-15 years for them to fully depreciate.
Then Uber showed up and decided they didn't need a proper license or anything and shit got crazy.
A more gradual phasing out helps to ease the pressure on this system and move to a more market-driven approach.
"News of assaults by ride-hailing drivers has been a frequent occurrence. Reports of rape, battery and harassment have grabbed headlines in California, Georgia, Illinois, Texas, Washington, Florida and many other states. While some of these drivers have clean criminal histories, others had prior convictions that Uber and Lyft's background checks didn't find."
https://www.cnet.com/news/california-law-tightens-background...
Disclaimer: I work at a background check company
Within this thread, your parent has at least provided some support for their position. If you're aware of evidence to support yours (e.g., information regarding taxi-driver attacks or counter to the info in the cnet article), that would be a worthwhile contribution. Dismissing out of hand the commenter as naïve isn't civil.
http://www.whosdrivingyou.org/rideshare-incidents
Why are you so invested in ignoring what's right in front of you?
I know because I received over 30 pieces of direct mail in the two weeks leading up to the vote from whatever clown-show operation they hired. Twelve of the direct mail pieces were the same mailer.
Given the waste of paper and their previous history (especially the behavior of the executives), I don't care if Uber ever "comes back."
When they replace all taxis, do they really think they can just permanently ignore all driving laws?
Since when do hackers bleat about obeying laws and regulations? What happened to having a "we can do better" mindset? Has everybody wigged out and flipped their "I want a nanny state to protect me 24/7" bit?
And as far as that goes... I guess no "certified" taxi driver has ever turned out to be a criminal or done anything to harm a passenger? Me personally, I prefer to exercise some personal discretion and simply decide whether or not I will ride with a particular Uber driver, or cabbie, or Lyft driver, or whatever, based on my own judgment in the moment, as opposed to abdicating responsibility to either the State or a corporation.
Please stop perpetuating this myth- started by Eric Raymond and happily encouraged by SV "thought leaders"- that hackers must, by definition, be laissez-faire capitalists who love Ayn Rand and treat breaking laws as a noble goal in and of itself. I do none of those things, because I recognize that many times regulations are vital for ensuring human health and happiness, and think that free-for-all capitalism leads mostly to misery for all but a few in the plutocracy. "We can do beter" implies not settling for a world like that.
Other people don't have to agree with my politics, but if they want to say I'm "not a hacker" because of that, they can take their very-politically-motivated prescriptivism and... well, I got told by dang the other day and I'm trying to cut down on the angry HN posts because of it, but you get the idea.
I agree. The regulations created for the war on drugs has lifted millions of African Americans out of poverty and into group-oriented communities that promise shelter, free food, and at least one hour of happiness per day.
Nice strawman. Luckily I didn't say anything about esr, laissez-faire, capitalism, or Ayn Rand in the post you replied to. Hell, I didn't even say that breaking the law is a "noble goal in and of itself".
All I'm saying is that it's disturbing to me how so many HN'ers have just completely sold out to the idea that the State is their proper master, and should regulate / control pretty much everything and anything. It seems to me that in the past, there was a more individualist / freedom oriented mindset around sites like this - whether it was from "American style libertarians" or socialist anarchists or whatever. Personally I find the change to be a bit depressing.
Sure you can. Laws aren't magical and there's nothing about the State that gives it any actual innate authority.
What gives the state its authority is that me and three hundred million other people continue to give the state its authority. Break a severe enough law and we'll take away your freedom of movement for a while.
Behold, society!
Since when does hackerdom constitute blindly following dogma, whether it be libertarian or not?
Furthermore, even supposed would-be laissez-faire capitalists know this- I doubt that startups pass up the chance to use government policies to their own advantage, or pursue rent-seeking behaviors that help their startups. The perfect libertarian society you envision exists next to the perfect communist society, as utopias that contravene human nature.
In theory. I think we're pretty far removed from that in reality.
Remarkable.
"ultimately, though, the state is still made up of the people it rules."
Well, that's one reason why it can be so dangerous. It's made of humans! :)
Bleat? People would give Uber a pass if they actually created new and innovative technology.
Right now they're much more of a financial services (attracting VC funds) and DC lobbying firm than a technologically innovative company. They have a few (albeit NP complete) interesting technological problems. The rest is mostly legal and finance.
Why wouldn't people complain about companies who try to muscle in with money and lobbying featuring products that are not noticeably superior at all?
Hacker News is fairly progressive/authoritarian. The kind of attitude you describe can still be found on slashdot.
This is one of those places where people will happily sit around and argue that breaking laws is moral and necessary, no matter what the law.
This is one of those places where people will happily sit around and argue that breaking laws is moral and necessary, no matter what the law.
It looks like there are about two of us in that camp, in this discussion, versus pretty much everybody else. It's pretty clear the pendulum has swung and this site is largely oriented towards big government interventionism.
And of course, in their regular operation, many companies routinely pollute the environment: http://www.prwatch.org/news/2011/05/10722/koch-industries-to...
Funny how libertarians never seem to consider dumping millions of lbs of poison into the environment an "initiation of force", but god forbid government raise taxes by one cent.
It's also worth noting - both of your examples involved the state actually doing the dirty work.
Funny how libertarians never seem to consider dumping millions of lbs of poison into the environment an "initiation of force"
Citation needed - AFAIK there is no such consensus.
https://tech.slashdot.org/story/16/12/15/1559226/uber-we-don...
It has become more so over the past few years for sure. It was a lot more balanced in the past, as I recall.
4. Dump all your drivers once your self-piloting cars come fully online
The driver plus bring your own vehicle model is a mostly operational cost model where the cost slides based on region, which makes it perfect for rolling out on a global scale.
The self driving taxi service model has a significant capital cost associated with it and that cost won't slide much based on region. It would take far too long to see meaningful returns on self driving taxis in India for example.
What laws do you think they'd need to permanently ignore? And no, I doubt that's their belief.
Why wait? https://www.wired.com/2016/12/ubers-self-driving-car-ran-red...
Outside peak hours (and on the intl airport which isn't São Paulo proper) I still find Uber more convenient/cheaper, but otherwise they have a tough competition with taxi services.
(1.7b / 0.8b + 1.7b) = 68% of their costs. 3.25 * 0.68 = 2.21$, but Uber charges more than that and would like some profit. aka Uber has higher costs than cab companies making them a long term dead end.
Sure, they are probably subsidizing other markets more, but even then that are gong to run out of money long before the self driving car thing takes off.
Many people here would dodge Uber if they expect surge pricing (And something along these lines was said today on one of the popular for young people radios stations, here).
Also, there are plenty of taxi just waiting around everywhere downtown.
Many (older?) people, would never get Uber to go to the airport, which is a very good profit opportunity.
So, I don't see Uber having a 100% monopoly in any future, as various people have various needs and opinions and it's not a race to the bottom on price in this segment.
They will both coexist, but for people taking the cab in the first place, $0.75 is not even on the list of thoughts in downtown Toronto. You get out of a Johny Cash event, $200 a person ticket, it's snowy, and you'll wait few minutes for uber when the Taxis are parked up front?
As you move outwards from the core, more people drive Uber, and one was even my ex coworker, so he told lots of stories.
So, to conclude, you can't assume race to the bottom on price alone. Or IPhones, rolexes, Alienware PCs, etc would have been long gone.
Notice that they've stopped displaying the surge price multiple on their hail screen. Previously I would have hesitated at 1.4x surge, but now "fares are slightly higher due to increased demand" just makes me shrug my shoulders.
http://globalnews.ca/news/2430713/alberta-man-furious-over-1...
Ended up all over the news.
Not sure if Uber caps surge in Canada now.
You misunderstand me. That's the verbiage they display now. "fares are slightly higher due to increased demand", rather than the actual surge multiplier. If the surge multiplier is higher than that, it'll say something to the effect "fares are a lot higher due to high demand". It doesn't tell you the exact multiplier anymore, which makes me at least a bit more price insensitive.
"It's faster than the fucking taxis... of which there are five."
This practice is illegal in many countries. Legalities and ethics aside (it's easier to discuss this in 'value neutral' terms), the strategy only works if you've got a bigger bankroll than your competitors (i.e. they go bankrupt before you do). By the sounds of it, Uber have a pretty big bankroll thanks to VC funding?
[Value Free Zone]
Also, they're going about it in a fairly clever way. It's almost like a market version of the 'blitzkrieg' strategy. By progressively moving through one localised market to the next, it's essentially Uber's bankroll vs. whatever the largest local market incumbent can muster. In addition, they're ignoring regulations because it further lowers their costs.
And here's the blitzkrieg part: when they encounter a market (e.g. Austin) with particularly strong regulators or incumbents with larger than usual bankrolls, they bypass it (for the moment), just as the Nazi's did if they encountered heavily fortified positions on the Maginot line. They'll just bypass and move on to softer targets.
I imagine once those are monopolised, and they've replenished their bankroll by charging monopoly prices where they can, they'll come back for the more 'fortified markets'. Except this time they'll:
- Have a bigger bank roll
- Have a constant stream of cash rolling in from their monopolised markets
- Possibly have a more favourable regulatory environment due to 'lobbying' (i.e. political 'donations')
Given the position they will be in by the time they swing back to the 'holdouts', they may not even see the need to flaunt local regulations to crush their competition.
[/Value Free Zone]
Personally, and assuming I'm right, it's pretty despicable behaviour. It's not innovative; it's illegal. And it's not 'disruptive' either; it's destructive and exploitative. I wouldn't deny these guys are smart, but so were most 'robber-barons' throughout US history. If 'hacker culture' is synonymous with 'destroy all who might oppose us, then turn around and screw consumers', then yeah, they're hackers (and I most certainly am not).
But if SV gives a fig about its reputation, and believes that hackers can 'break the rules' while maintaining some shred of personal integrity, then I wouldn't be so keen to hitch my wagon to the likes of Uber.
Note: I have no stake in this one way or the other. Frankly, I'm not a big fan of the traditional taxi industry in my country; they're essentially a government protected oligopoly and a bunch of rent-seekers to boot. Just calling it like I see it.
Could you share some specific information to substantiate this?
I frequently hear this statement on Hacker News, and (as far as I can recall), every time I've asked for a source or evidence for the claim, I have not gotten a satisfactory answer.
Black car services where you arrange pickup with a specific driver ahead of time have always been regulated differently than taxis. Uber has cars that operate as taxis, and they're properly licensed.
I'm not looking for flawless proof, suitable for a court of law, just some kind of cogent allegation of what happened and what law was broken would suffice. These kind of vague claims about Uber breaking the law do nobody any good; they are middlebrow mud slinging.
Here is an example of what a cogent allegation might look like: "Zenefits broke the law by allowing salespeople to act as insurance brokers in seven states despite lacking the licenses to do so." [1]
Has Uber broken the law? Who knows? There have certainly been accusations that Uber tried to sabotage competitors by placing fake rides, for example. I am not trying to make any kind of moral claim about Uber, so please do not misunderstand. I am simply to hear the evidence from people who make comments like "Uber evades local regulation".
From my casual research into the matter, no, black car services or any kind of private, pre-arranged transportation for hire are not considered taxis in most municipalities. Uber actually offers taxis in certain places through UberTAXI [2]. The key difference seems to be whether the trip is arranged ahead of time through an existing business relationship, versus whether it might be solicited or formed directly on the street at the beginning of the ride. This seems to be how law works in most places in the USA, anyway. If you know of examples of municipal law where it works differently, I'd be glad to hear the details.
[1] https://www.buzzfeed.com/williamalden/zenefits-under-scrutin...
1. Collect a huge pile of money at sky-high valuations from those who really should know better.
2. Ignore any sensible unit economics and undercut local taxi/transport services until those small businesses go bankrupt since they don't have Uber's money pile.
3. Evade local regulations that everyone else follows in the name of 'innovation' even though the reality is they are just taking a free pass on conducting background checks, and skipping safety guidelines.
What's the endgame here? When they replace all taxis, do they really think they can just permanently ignore all driving laws?