Gee, it's almost as if a municipality that valued the good provided by a shared-ride or car-for-hire service to their community would have an interest in creating an artificial monopoly for the sake of allowing such a service to operate in a profitable manner...

Price comparison against current taxi services operating in the US is akin to a price comparison of a complex medical procedure across US medical providers - there's a lack of transparency around pricing, and a bunch of gotchas, such as the driver not taking the optimal route or frowning at you for a mere 10% tip.

So until taxicab operators in major cities get a nifty app with guaranteed pricing most of people would just limit the price comparison to Uber vs Lyft.

In Singapore grab has added taxi's to it's fixed price or you can book a taxi with normal meter fare. At peak periods taxi with meter is about 25-35% cheaper and without peak 5-10% cheaper. The government has also allowed taxi companies to offer fixed fares from their apps the way things are going I don't think uber will be able to compete very long if it actually tries to be profitable.

> Put another way, even if Uber drives every competing taxi/limo operator out of business, as soon as the company raises prices to cover costs -- vehicle, insurance, maintenance, fuel, credit card processing, license fees, and (at least for now) labor -- new entrants (and revived old entrants) would quickly come into the market, preventing Uber from keeping prices up.

Not true -- Uber has a permanent moat, which is their steadfast, solitary willingness to be a no-tipping oasis, which others equally refuse to replicate.

Oh, wait: https://news.ycombinator.com/item?id=14596529

Just don't tip. It's a bug if they can rate your tip.

Meanwhile I like not being a dick to drivers. What's the big deal?

You just explained one of the big deals.

More generally, the way tipping works, there is no clear, consistent, compatible expectation, so I'm forced into a position of either a) overpaying, b) committing a silent faux pas, or c) having negative feedback misinterpreted as stinginess or ignorance.

Would you not consider that a big deal? Are you really surprised about the existence of people who don't like the tipping system, or who don't consider "just stiff them" a valid workaround?

The alternative is not supporting a company who doesn't provide a living wage for their workers after they go into debt. They talk about making drivers entrepreneurs? That's just code for "we convinced some suckers to invest in a falling wage". Who do you know who invested in a black car and paid it off driving uber? There are similar stories with medallions, but that's a separate issue with separate solutions.

Lyft may have similar issues, but in cities without real taxi companies (e.g. Sf) there's no real alternative to being a part of this terrible "entrepeneurship". Tipping will put uber back on my phone.

Even if they didn't do that, there's nothing stopping a competitor from having the same policy.

Nothing except the fact that there seems to be an extreme taboo that makes everyone steadfastly refuse to do it with the same fervor.

If it were really the only thing giving Uber a monopoly on the market I guarantee somebody else would lose their scruples.

Tipping isn't about scruples. Businesses with scruples would pay their employees a fair wage and price accordingly. And then immediately go out of business as everyone flocks to the competitor that's magically 20% cheaper (before the essentially mandatory 20% tip).

Tipping is entirely about being able to advertise a lower price than the actual customer cost. Unfortunately that is extremely effective, so if one company in a market accepts tips all the others basically have to.

It's not like Uber was paying a generous wage in the first place.

HN's discussion last year on this blog's more thorough analysis of the economics:

https://news.ycombinator.com/item?id=13079023

Well, yeah, exactly, that's what the guys on Naked Capitalism have been saying for a while. Even if they establish their monopoly there is no barrier to entry for new competitors.

The same could be said for Google.

The moat for Google is the complexity and expensive nature of doing accurate search at scale

That moat only holds out aspiring competitors who compete using the same game Google plays. The person who can come up with a way to show you a grommet when you're thinking cloth clamp will break Google. How many times have you searched for an algorithm, knowing it exists, but not knowing its name? Search is still very broken, and after 20 years of Google is very ripe for disruption.

On the other hand, you can compete with Uber by having a guy in a yellow cab hanging around at the airport.

How do you figure? How can somebody replicate Google's services without a tremendous investment in both hardware and software?

I think that's the point, though. To compete (as a new entrant) with Uber+Lyft, wouldn't you need to build infrastructure, win mindshare with drivers + passengers, and all the other things that Lyft and Uber have been spending years doing?

The argument of the 10-part series they put out on Uber is that main expense is the actual transportation, and you can't achieve meaningful economies of scale, which is the reason that livery services never expanded beyond regional monopolies previously. Relatively speaking the software is a commodity (and traditional taxi services remain competitors to Uber anyway -- likely more attractive in many cases if you take away the subsidized price difference).

Yes, that was more or less my point.

And also Uber (more than Lyft) it's by far the major player, it's entrenched in people's imagination as the representative of the very service it provides, and it just works.

"Call an Uber" is as idiomatic today as "Google something".

I don't believe this non-equitable business model holds true when automated vehicles become an option. That is, I don't think Uber itself has a viable business model because they've sunk too much cash too quickly to be around long enough for it to be a great model.

However whomever has a fleet of automated vehicles could easily divert resources into an uber-like ride sharing app.

Cities that limit the number of taxi drivers allowed to work are demonstrating that there's a viable market-clearing price lower than current taxi rates.

the article is frustratingly light on actual reasoning about why uber can't become profitable. the tl;dr is basically "it looks bad so they're going to fail". it does look very bad but that in itself (even with the various details mentioned) doesn't shine a light on the path that uber will take to failure. it only shows that any path they could take is treacherous.

it's an opinion piece with a bunch of facts thrown around but no reasoning to thread it together. i wouldn't bother putting any weight on it's conclusions (or wasting your time reading it, if you haven't).

FYI, the OP links to a 10-part series of posts about Uber's economics by someone with decades of experience in the transportation industry. Here's a link to part one: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver...

From that series:

Uber’s real problem is that it is a staggeringly unprofitable company with fundamentally uncompetitive economics. It lost $2 billion in 2015, $3 billion in 2016, and another billion in China. It is a higher cost, less efficient producer of taxi service than traditional operators; all of its growth is explained by these multi-billion dollar subsidies as it has flooded markets with additional capacity offering unprofitably low fares.

It has none of the scale or network economies that allowed other startups to quickly grow into profitability. In its fifth year of operation Facebook had achieved 25% profit margins; in Uber’s fifth year its profit margins were negative 149%. Absolute Uber losses have continued to worsen with recent growth. Margins improved somewhat in 2016, but only because Uber unilaterally reduced driver compensation by $1 billion, leading to news reports of drivers sleeping in the cars in order to make ends meet. Uber never had any hope of profitability in a competitive market, even at its present scale.

That's Uber's big problem.

The response to that has always been that if they can stay afloat until autonomous vehicles arrive, they can cut costs to the point where they're profitable. Beyond that, with the driver costs out of the picture, the cost of an autonomous ride would actually be below the per-mile cost of driving your own vehicle to the point where Uber would ride a wave of decreased individual ownership and reliance on car-hailing services.

The WayMo lawsuit, in which Google appears to have a pretty airtight case, has destroyed that hope. It's the Carpathia radioing that they're 4 hours away. There's no help coming and the Titanic is going down.

Now all these shifts are likely still going to happen. A seemingly cogent analysis I came across recently [1] breaks down the costs and strongly argues for a future where individual vehicle ownership is the departure from the norm rather than the default that it is today. But it just won't be Uber that cashes in on it. Or, more accurately, it won't be the current Uber. If Uber goes down in flames, their carcass will be plucked and someone, perhaps Google in the lawsuit settlement, will come away with Uber's brand and logistics platform that can be paired with self-driving technology to achieve Uber's vision.

[1] https://shift.newco.co/this-is-how-big-oil-will-die-38b843bd...

Even if they could survive until they can switch to autonomous cars, that would remove the barrier to entry for competitors because they wouldn't have to convince drivers to use them. There's more on this comment from last year:

https://news.ycombinator.com/item?id=13079767

The Waymo lawsuit shouldn't affect Uber much. Google's LIDAR is rotating machinery for experimental vehicles, not production use. The production products will be flash LIDAR at a low price point. From Continental, definitely, and Quanergy, maybe. (Quanergy, maybe not. They've been talking big since 2015, but haven't shipped.)

*ten-part

It's still going: http://www.nakedcapitalism.com/2017/06/can-uber-ever-deliver...

Thanks. I fixed it.

I will read this, but from an intuitive perspective Uber should have dramatically better economics vs taxis in places where the minimum buy-in is a $1m medallion purchase.

that article is better, but that doesn't change the fact that the originally linked article is a puff piece.

even in your article, it's not obvious that the economics of uber is doomed. it doesn't talk about the economics of the taxi industry, but simply makes a big assumption that it's an efficient market (just considering medallions should make you skeptical of that claim), so uber must get it's economics in line with the taxi industry. that's not obvious. (maybe it's explained in the 10 parts, but 10 parts?!?! seems like an editor might be warranted).

to be clear, i'm not defending uber, just that the arguments presented aren't so convincing once you dig into them a bit (and appeals to authority make me even more skeptical. it's like saying "trust me"... it sets the alarm bells off).

It might be puff piece, but at least it does not focus on "toxic culture forced CEO to resign". The latter story might feel good and thus be more popular, but is less likely reason for investors revolution then "they are losing money, have no plan and are overall ineffective".

It is true that former CEO personality was important for uber and different dude or lady could not achieve the same, but achievement here is losing tons of money on business that does not seem to be profitable ever. That is odd definition of winning.

The reasoning in the article seemed strong to me: Street level transport is a commodity and the market is mature. There is a maximum amount of value to extract from this business and the current companies almost do that. Uber spent way more money than the industry is likely to generate to try and steal their business.

Combine that seemingly solid market reasoning with them being opposed often and them fucking up almost as often and it seems surprising they are still functioning now. Their are missing leadership, their investors are unlikely to assemble a stellar team, there are existing internal and external problems. This seems overwhelming for all but the most profitable companies, and that is just what was in this short article. Even if it is wrong the reasoning seems solid. News facts or or astounding leadership at Uber are required to pull out of such a deep hole.

Their master stroke was supposed to be a self driving taxi, but they are no closer than anyone else and their bill is due. They appear to have an existential need to have that desperation move work for them for at least a few years before anyone else gets in on it. If they succeed then likely Google and Telsa will succeed within a few months of them. There appears to be no situations where they can recoup losses at a reasonable rate.

I could be totally wrong, but it looks suspicious as hell. If I had money to invest at a scale that mattered to Uber, I sure wouldn't go with them.

your summary of the reasoning is much better than the article itself, which simply asserts that uber is doomed while randomly citing recent developments in the news about uber.

given what i know (which is admittedly not much), i probably wouldn't invest in uber at this point either, but i remain skeptical that the taxi industry is a mature and efficient market, such that uber has no path to profitability (setting aside all their other asinine self-inflicted wounds).

I could be convinced to be more neutral by as little as a reasonable argument that they have a plan. I have not yet seen this plan. I have seen both pro and anti uber zealots though.

The reasoning seems pretty straightforward. Uber is only cheaper than taxis because investors are subsidizing the operating costs. They won't be able to do that forever and become a viable business, and there isn't a very high barrier to entry for competitors even if they somehow manage to snuff out all other traditional cab operators and Lyft etc, because once they raise the prices new competitors can swoop in.

Naked Capitalism did a series of posts on Uber back in November/December of 2016 that did have a lot more facts and reasoning behind them. They probably figured their readers are already familiar with those posts and didn't want to be redundant. You should read those before blithely assuming they don't know what they're talking about.

[TL;DR] you should read before assuming