Tuesday, December 8, 2020

So what is the business strategy now?

This is Joseph.

Uber is selling off its autonomous vehicle division. This does, however, bring up one important question -- namely, what is Uber's unique value proposition? 

It is quite clear that Taxi businesses are able to develop and deploy applications to make it easier to order a taxi. So it cannot possibly be the IT piece of the equation, which is broadly imitated, even in cities that ban Uber and Lyft. 

But the number of other differences are tiny. Maybe they are shifting the capital costs to owner/operators, but this is also a taxi business plan as well. Certainly, I have known people who owned their own car and rented access to dispatch and a taxi license as a part of the taxi business.

So it looks a lot like the two things left are:

1) Network effects

2) Regulatory arbitrage

The first is not to be minimized, for visitors and people from out of town. But it isn't likely to be a major draw for people who already live in the location. Price also seems to be a part of this, but there has to be a way that Uber gets cheaper rates than a traditional business. That seems to be based on evading traditional employee protections, a new strategy that is being led by the state of California who has enacted massive legal protections for these companies. 

My question, perhaps too late, is whether this is a good idea. The idea of making money by eroding employment protections isn't new and it is unclear how it accelerates things like innovation. If anything, like slaves in ancient Rome, artificially cheap labor can actually slow innovation. Yeyt, with this move, I cannot interpret the jump in Uber's stock price as anything but a cheap labor ploy. 

Why, California, why? 

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