[thetrb]

> I recently read an article about the unit economics of Uber. It doesn't work out. Uber, in it's current form is based on leveraging free VC money to subsidize and incentivize somewhat artificial demand.

I don't buy that argument. By that logic no taxi service could ever work out. It might not work out at the current price levels, but once they squashed all competitors they're free to raise their prices (similar to what Amazon does).

[TeMPOraL]

And that's supposedly a good thing?

Maybe regular taxis aren't that bad after all...

[dx034]

It's not that hard to set up a business like Uber if you only start with one city. You don't need a global business. Taxi businesses also always worked per city. As soon as it'd be lucrative, there will be some competition in the city where it's worth most.

Sure, you can't just copy uber's app. But building a simple app with basic functionality isn't that expensive. And people will mainly decide by price.

Their only chance to ever make back the losses is the self driving business. If it works out they could be very profitable. If it doesn't, I don't believe that they'll ever make back the investments.

Amazon is actually a good example. They also haven't really made back the investments. They're still not very profitable. Maybe they never will be, who knows. As long as enough investors believe in them they can comfortably afford this style.

[automatwon]

people will mainly decide by price.

They have, they are, and they will.

[automatwon]

Can you explain how you arrived at the deduction that NO taxi service could exist?

I agree :

(1) SOME taxi service has to exist. By "work out", we mean profitable, if not non-negative

(2) the unit economics of Uber at the current prices are not profitable / sustainable

(3) The deca-unicorn valuation is based on Uber's revenue as a monopoly.

To ask Sam Altman's question: "If you win, will you stay the winner?"

In the case of Amazon, I can imagine a world where a retailer simultaneously satisfying (1) (profitability) and (3) (monopoly) can continue to exist. Amazon have logistical advantages and the largest catalog of products. It will be hard for a startup to de-thrown hypothetical monopoly Amazon. Hypothetical monopoly Amazon will reap monopoly profits, but demand for retail goods is not suddenly going to disappear.

Hypothetical Uber monopoly will reap monopoly profits per transaction. But will demand for taxi services remain as high as in the current environment of subsidized taxi prices? I'm sometimes able to land a 3-4 mile Uber pool ride in San Francisco for just $3. I have a feeling Uber is not making money here, and these prices are not sustainable, unless of course, someone invents Unicorn fuel * ahem *. This is comparable to public transit prices. If Uber monopoly starts charging unsubsidized and profitable rates, I will reduce my usage by an order of magnitude, if not two. Particularly in situations where public transit is a substitute good. 3 years ago, before moving to San Francisco, I lived just fine without ever using a Taxi. I used public transit to the airport, or got a lift from a friend. Being in San Francisco where subsidized Uber is so cheap, why WOULDN'T I use it? Taxi service is a price sensitive good, and I can live without taxi services 99% of the time.

What characteristics of Uber will allow it to remain a monopoly? Technology? Intellectual Property? Network effects? Lower costs than competitors? Autonomous vehicles? Or something else?

- Network Effects - if I'm using a taxi service, I don't really care if my friends or family use it. Network effects will definitely make me try it out, but ultimately it will be based on price.

- Intellectual Property / Technology - I don't mind making a phone call, rather than using a fancy app, if making a phone call to a cab company saves me money versus a monopoly

- Lower Costs - Will Uber's economy of scale allow them to get gasoline at a significantly lower cost than competitors? Or buy cars and maintenance at discount? Or what other cost advantage will monopoly Uber have?

- Intellectual Property / Technology - Maybe Uber's dispatching system is better than the competitor. What's to stop Google from calling along and integrating a comparable dispatching system?

- Autonomous Vehicles - Are Uber's autonomous vehicles at Level 4 autonomy?

What's to stop a local low-tech taxi cab company from coming along and offering profitable, sustainable, and most importantly (relatively) attractive non-monopoly prices?