Even evil plans require a certain level of competence

This article on Uber by Reeves Wiedeman is less than the sum of its parts, but some of those parts are very good. I particularly liked this observation about the role of competition in the company's valuation and business plans, though Wiedeman does leave one important point unmade. [Emphasis added]

To explain its massive losses, Uber and its investors have often cited Amazon, which didn’t turn a year-end profit for ten years as it built out an infrastructure that made the selling of more and more books — and eventually, of everything — cheaper and more efficient the larger it got. But Amazon’s biggest-ever loss was $1.4 billion, half of Uber’s 2016 deficit, and Jeff Bezos responded by cutting 15 percent of his workforce. Plus, Uber’s economics barely resemble Amazon’s. The taxi business doesn’t scale in the same way, and while Uber’s technology is sophisticated, the barriers to entry are relatively low, and Uber has had to fend off various competitors. So far as [transportation-industry analyst Hubert] Horan could tell, there was only one possible path for Uber to meet that $68 billion valuation: eliminate competition.

Uber’s potential aspirations toward monopoly are a sensitive matter — in discussing how Uber Pool became more efficient the more people used it, [Uber’s former head of mapping Brian] McClendon referred to Uber’s ideal state as a “monopoly,” before correcting himself to call it “not a monopoly, but a heavily used service” — and while every company dreams of owning its entire market, the question of whether Uber can do so has become murky. One Uber investor told me he no longer sees ride-hailing as winner-take-all but didn’t want to speak for the company; when I put the question to Rachel Holt, Uber’s head of North American operations, she ducked it by praising the value of competition and saying she didn’t have a crystal ball.

Being an old Arkansas boy, I was born and raised in the Walmart briar patch and I know a thing or two about anti-competitive practices. The giant retailer mastered the art of driving small, locally owned stores out of business by selling products at a loss, then jacking the prices back up when they had a clear field.

There are two essential components to this strategy: sufficiently deep pockets to stay in the game long enough and sufficiently high barriers to reentry so that, when the profit margin starts going back up, a new crop of competitors does not quickly appear. In the case of Walmart, restarting a collapsed local retail economy is next to impossible, but as noted in the article, the barriers to starting a ridesharing service are relatively low, particularly one targeting a single metro area.

So to recap,

1. Uber's plans depend on establishing an objectionable and quite possibly illegal set of international monopolies

2. Even if they do manage to pull this off, they probably won't be able to jacked prices up sufficiently to cover their losses.