Pixel Envy

Written by Nick Heer.

Understanding Uber’s Bleak Operating Economics

Hubert Horan (bio), in a guest piece for Naked Capitalism:

There have been hundreds of articles claiming that Uber has produced wonderful benefits, but none of these benefits increase consumer welfare because they depended on billions in subsidies. Uber is currently a staggeringly unprofitable company. Aside from the imposition of unilateral cuts in driver compensation, there is no evidence of any progress towards breakeven, and no one can provide a credible explanation of how Uber could achieve the billions in P&L improvements needed to achieve sustainable profits and investor returns.

Uber’s growth to date is entirely explained by its willingness to engage in predatory competition funded by Silicon Valley billionaires pursuing industry dominance. But this financial evidence, while highly suggestive, cannot completely answer the question of how an Uber-dominated industry would impact overall economic welfare.

Uber is about to relaunch in Calgary after councillors capitulated to an adjusted fee structure; no other parts of the law were changed, despite Uber’s claim that the rules are “unworkable”. Unfortunately, this means that we’re about to see an influx of cars subsidized by venture capitalists in California, operating at a rate entirely unsustainable for traditional taxi companies.

Two questions:

  1. What happens to taxi drivers and truck drivers who are displaced by Uber’s predatory intrusion into their markets?

  2. What happens to drivers who work for Uber when they will, eventually, be made redundant by the company’s growing interest in self-driving vehicles?

See Also: Washio’s Legacy.