Tesla got lifetime cashflow positive after burning $6B in accumulated losses, and has now paid all of those back prompting investors to ask for stock buybacks.
Uber is just a terrible waste of capital to have an app company with an accumulated deficit almost five times as much as Tesla which makes cars.
Uber was essentially a financial instrument for VC investors to pump and then dump on the public markets. It's main function was to produce creditability rather than be an actual business.
And the worst part is that business world has watched Uber (and WeWork, et. al.), and have tried to emulate the model with every new company created since.
When money is free, this is what people will do, because it makes them money. It's interesting to see things crash and burn though now feds raised rates.
Don't forget to raise rates far above the modes of transportation they were meant to replace. It's not unusual for Uber to cost triple what a cab would here in NYC for a trip home after working at night.
Uber provides far less value than it used to since they stopped burning through VC funds as much to keep their prices artificially low. One advantage was you got a single price without needing to tip. Now tipping is similar to a cab. Another was that you can use an app to get one. Now you can use the Curb app to hire a cab. Another was that you could always pay with a card saved on your phone. Now you can use the Curb app to do this whether you hail with Curb or hail on the street. You type in the pairing code in the Curb app and you're set.
Curb is a bit more expensive than a street hail but generally less than Uber due to a lack of surge pricing. When it's raining, Uber is about 2x the price of a cab. When it's busy after an event at Madison Square Garden, Uber is about 3x the price of a cab. On a recent Friday evening, Uber was showing $105 for a 25 minute ride with a relatively long wait. I hailed a cab and it was $28 for the same ride. Both prices exclude tip.
Note, of course, that this is my own personal experience in NYC over the last year and will not apply to all cities or even all locations in NYC.
I think this is an overly cynical take. I think the majority of Uber's investors (along with a surprisingly high fraction of the tech community) genuinely believed that self-driving cars were just a few years away, and so Uber's stated business model was viable: in the few years it takes to develop self-driving cars, sell rides at a massive loss to get customers accustomed to cheap taxi transportation and destroy existing taxi markets, and then switch customers who are now addicted to Ubering everywhere over to self-driving cars, thereby yielding absurd profit margins.
And to be fair, had self-driving cars indeed become commonplace by now (as many people ~10 years ago believed would have happened), Uber would rightly be one of the world’s most valuable companies.
I'm genuinely curious how those who claimed full self-driving would be a thing by today broke out between:
1.) Techno-optimists including those who saw the extremely rapid progress in ML across various domains after very little progress for decades. If we've made so much progress in 5 years, surely we can achieve almost anything in ten more even if we're not quite sure how!
2.) People whose self-interest was wrapped up in it happening so they just didn't want to probe too deeply.
3.) Those who knew it was probably flim flam, but hey whatever parts the rubes from their money
4.) Those who just figured that so many people who apparently believed in it can't possibly be wrong. (And there were a bunch of, especially, younger people who really wanted this world where they didn't need to own a car.)
I think it was mostly (1) and (4), with (1) feeding (4). There was a lot of "this time it's different" about the current AI bubble, though I think it's fading a bit, now.
The non-cynic in me tends to agree. There has been remarkable progress. I was just in someone's Tesla "FSD" beta a couple of weeks ago and it was pretty impressive. It's also a long way from being able to be turned loose on arbitrary roads in arbitrary weather without a human in the loop. But it can be easy to dismiss all the work it can take to solve the "last 10%" of many problems. And, of course, there's a general mindset in tech to be positive about overcoming obstacles as opposed to being "it will never work" about some technology.
I do think today there's a better appreciation of just how challenging it is for AI to deal with an unconstrained physical world.
I don't think self driving cars were part of the original Uber plan. It was bolted on after it became pretty obvious the business isn't sustainable. Uber was a behemoth before they did any self driving RnD.
You give an extremely charitable explanation. Given what we know about Kalanick character I doubt if your explanation is reasonable.
Uber's public launch was in 2011. It only offered limos, at rates competitive to traditional limo services. This would have been a sustainable (albeit much smaller) business.
Uber didn't start offering unsustainably cheap rides until mid 2013, when UberX was launched. Its self-driving research program was announced not long after in early 2015, so it's quite plausible that a long-term pivot to self-driving was indeed part of the UberX business strategy from the beginning.
Uber’s only path to levels of profitability commensurate with its VC valuation in 2013 that wouldn’t have involved self-driving cars would instead have required that the demand elasticity for taxi rides be so low that after getting people Ubering everywhere, Uber could successfully raise prices above the level of the taxi services it displaced without demand falling off a cliff.
Although Kalanick probably believed Uber was just that good, I doubt his investors did.
Is this really true? How do you learn to classify when others are bull shitting you vs. when they're sincere? Specifically, how do you tell when a founder or investor is in it for a pump-and-dump vs actually trying to build a lasting business? Uber has built incredible tech, negotiated deals globally, become a vocabulary word (i.e. let's an get an uber.) Uber's engineering blog shows real complex ongoing projects.
Or to put in reddit terms: how do you know when you've joined a pump-n-dump business?
There's probably a big grey area between "This is a really hard problem but we've got smart people and I think we have a decent shot" and "This is a really hard problem and odds are we'll crash and burn but we'll have given it a shot and made lots of (personal) money in the mean time."
I largely agree with the take that Uber is an inefficient company, but I don't think Uber is as simple as "an app company". Uber's main challenge is people. They're basically one of the largest employers on Earth (est. ~4 million drivers). They operate across all regions. All of that adds complexity.
> They're basically one of the largest employers on Earth (est. ~4 million drivers).
I thought Uber's line was that the drivers were independent contractors. By their own logic Uber only employs the engineers and support staff that actually work at Uber not the 4 million drivers.
Edit:
> They operate across all regions. All of that adds complexity.
I thought the idea was that by operating in multiple regions Uber could leverage economies of scale and deliver ride-hailing services cheaper than traditional taxi companies. Is this hypothesis completely incorrect then?
Anytime you bring up the fact that Uber has far too many engineers someone inevitably brings up the a defense along the lines of "you don't understand how complex it is" or "they operate in so many different markets, so of course they need that many".
So your theory is probably correct, economies of scale don't exist. This is the same reason why a delivery company in Texas isn't also doing bike courier deliveries in Hanoi. On the surface it is very similar but they really have nothing to do with one another.
Pretty much yes. A local taxi services usually pays for their drivers and a few dispatchers. In my city they'd even introduced basic mobile apps around the same time Uber popped up. There's not really many places for money to go to waste.
Uber removes the dispatcher and then introduces software engineers, translators, product managers, SREs, executives, scrum masters, marketing, sales, etc.
From a customer perspective Uber is often worse as well. Pre-booking simply doesn't work. A traditional taxi company will make sure they have someone available at the right time for the booking. Uber just hopes someone will be available 30 minutes beforehand. Uber also doesn't seem to make it obvious to the driver that it's a pre-booking as they often show up 15 minutes early and angry that I'm not ready for them.
Someone I know was just complaining about what a crap shoot Uber pre-booking is for airport dropoffs. The taxi services out where I live aren't great either in general so I just eat the cost of a private car.
I'm not sure I've ever really understood the scale argument. Sure it's not developing the app. And OK--it's a single app and brand in many (though not all) different cities and countries. But how many people are flitting from place to place sufficiently for that to be a significant market? Heck I've been one of those people and I've rarely used Uber/Lyft.
> Tesla got lifetime cashflow positive after burning $6B in accumulated losses, and has now paid all of those back prompting investors to ask for stock buybacks.
Sorry to be dumb, but can you explain this sentence a bit further? What do you mean by "burning $6B in accumulated losses"?
Not really. Last quarter for example, they had $14.6 billion in automotive revenues of which $344 million was regulatory credits or a little more than 2%. They had $4.1 billion in automotive gross profits so regulatory credits made up about 8% of their profits.
Elon talks about it in the 2022 investor update [1] below.
It means that they burned $6B in total before becoming profitable and eventually paying it all back. So they are now lifetime profitable on a cash basis.
Its only a bad investment if it has zero value at the end of those 10 years, or stops producing cash flow then. OTOH, if its producing enough cash flow to have a market value of many times more than the 6B initial investment, it might look like a bargain.
TSLA market cap is currently greater than 600B and it produced 6B in positive cashflow in 2021 alone.
Uber is just a terrible waste of capital to have an app company with an accumulated deficit almost five times as much as Tesla which makes cars.