Tuesday, November 28, 2017

Belated Tuesday Tweets


















3 comments:

  1. Mark:

    You write, "Under its existing model, Uber's competitive advantage is mainly based on cheap nonunion labor providing its own vehicles."

    I always understood the above as Uber's short-term business model, with their long-term business model as getting so large (in $, customer base, and publicity) to become too big to fail. The idea is that Uber becomes viewed as indispensable and then they can live off government subsidies. That's the plan, no?

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    Replies
    1. Andrew,

      Yes, that's the only possible endgame that justifies the valuation of the company. You simply have to have monopolistic pricing, government subsidies and regulatory capture to make those numbers work. For the moment though, rideshare companies run on regulatory arbitrage (not having to follow the same rules as taxi companies), cheap labor (often below minimum wage when you take into account operator expenses), and investors' willingness to lose money on each transaction.

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    2. The ability to lose a ton of money is kind of key. It is one thing to be Amazon and have little profit but constant growth. But growth paid for entirely by debt is an enormous advantage, if you can find a way to either evade the debt bill or obtain monopoly rents to pay it down.

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