[timewarrior]

Uber is valuable only because it has solved a two party network problem at a city level. You need drivers and you need riders. If you don't have any drivers riders won't come and vice versa.

Two party networks are much more difficult to solve than one party network problems. Because with two party networks you have a chicken and egg problem.

Anyone who has solved self driving, has near unlimited scale on the driver side. Their cars can autonomously be present to respond to peak demand - e.g having thousands of cars at Burning Man.

In the autonomous car world, Uber has no place if it doesn't have that tech. There is almost no reason for the company which has self driving tech to license it to Uber, when they are easily run it themselves. The only value Uber has right now is because it has crossed the critical mass on the two party network. And some people thought they could solve self driving cars.

OTOH, a global two party network (e.g Airbnb) is exponentially tougher than a city level two party network. Which is why Airbnb has almost no competition (except some local players in China), while Uber has competition everywhere. In fact, Uber has already lost and conceded a few major markets (China, Russia).

Can Uber - even sustain what they already have. I have my doubts and theories, but that's for another day.

[konschubert]

I think the crucial point here is really that uber's two-party networks are city-wide. Yet because Uber is operating globally, it's falsely being valued as an international two party network.

[timewarrior]

Bingo!

There is no future where Uber is profitable and there isn't someone with deep pockets who wants to undercut them starting with their most profitable markets.

Most riders don't have much customer loyalty, they just want the cheapest price. Drivers don't mind driving for multiple services.

When a deep pocketed competitor launches with zero market share, they can compete with lower prices. If Uber responds too early, Uber would need to cut down prices on their full market share. If Uber waits too long, the competitor gets more traction.

In the end it is a zero sum game for Uber, unless they could have used their money and focus to create Autonomous Driving Tech. Not sure if that is going to happen now! Their new CEO's mandate is to do the IPO and get investors their return ASAP.

My prediction:

In the next 2 years, Amazon will enter as an Uber competitor starting with Seattle and then slowly expand to Uber's most profitable markets.

Any bets :)

[sanxiyn]

I would like to bet 4:1 against that. What is your preferred betting platform? Mail me.

[sverhagen]

Amazon Restaurants, UberEATS, haven't you essentially lost that bet already?

[nemo3141]

Amazon Flex has been around and growing. It's Uber but the drivers have packages instead of people. It will not be difficult for them launch Uber like services.

[usrusr]

The rider network is somewhat global. In any larger city, Uber could probably sustain a minimum viable driver network just from international visitors. This does have value.

But this value is also impossible to defend against the combination of more local networks aggregated by some global directory specialist who follows a low cost/low commission/high volume strategy.

[Bogdanovich]

"Building out autonomous technology and having global network is a huge advantage. Because the issue with autonomy and any software, is that you've got these edge cases [...]. If you have a network live and you developing autonomy, it's not gonna go from 0 to 1, it's gonna be hybrid networks, you can answer certain calls with autonomy (the weather is good, the roads are main line, there is no traffic, no accidents, that can be served with autonomous vehicle), versus another ride that will have to be served by person."

https://youtu.be/Mo2-4sXYZxU?t=29m37s

[timewarrior]

So Uber's new CEO is talking about the transition time and Uber's value during that time. Makes sense!

The original comment was wondering why should Uber invest in building Autonomous Driving at all.

And I am suggesting that once we have true autonomous driving (all conditions), and if Uber doesn't have it - Uber has not reason to exist at all.

[malandrew]

Autonomous cars also has a regional learning curve that benefits from having many human drivers on the road in many cities. For a purely autonomous company to enter a new market, they need to map it and there is a learning curve to building out maps sufficient to provide all the possible routes in a city. An autonomous network that can only do some routes and is useless for other routes, is going to have an expensive time scaling as they will have to put human drivers behind the wheel until they know they can operate safely in that new market.

A company with many existing human drivers can easily enlist those drivers with autonomous-car quality mapping kits. The drivers are all already driving all possible routes, so mapping a new market is much easier and cheaper. Furthermore, a mixture of autonomous cars for routes that autonomous cars can operate safely and human-driven cars for routes that are still being learned guarantees that the service is useful for any route a rideshare customer might want to take.

Lastly, you won't be able to operate a self-driving network without great ops. You need people to maintain the vehicles and provide customer service. Building out a great ops org is yet another massive learning curve for a purely autonomous company.

[rileymat2]

Wouldn’t Running your own cars would mean incredible capital costs and marketing costs to get people to switch from uber?

Additionally you need people maintaining them.

[timewarrior]

My understanding is that in a reasonably stable state, an autonomous car would run on battery, charge itself and cost 40k. If a car has a life time of 5 years and electricity costs 4k/yr + 2k maintenance (lower for electric cars), we are looking at operational cost of 14k/yr per vehicle.

Right now an Uber driver who is probably online 60 hours a week, needs to support a car priced around 25k (amortized over 5 years), gas (which is more expensive than electricity), maintenance and 50k-70k/yr driver income. Assuming lower end we are looking at 5k car + 10k fuel + 5k maintenance + 50k driver income. So cost to support a driving car is 70k/yr for lower hours of operation.

So we are looking at a 5x cost and lesser hours of operation with human driving vs autonomous driving.

These are off the napkin numbers so please don't take them literally. It is meant to highlight that driver income is the biggest factor.

Whoever has self driving tech, they can start undercutting Uber with the most profitable markets (NYC, SF, Boston, LA etc) and expand from there.

I feel that we are at least 5-8 years away from main stream self driving. But I could be wrong.

[nindalf]

Great comment.

Let me take a stab at it as well, because I think it could be simpler.

Let's assume the driver drives the exact same model as the autonomous one, except he saves $10k upfront on the sensors. So his costs are 12k/year. A decent alternate job would pay $10/hour, and a person could probably work 9 hours a day * 6 days a week * 50 weeks, which comes to $27k. So for the taxi driving gig to be worthwhile, the driver needs to make somewhere in the region of $35-40k ($27k + $12k).

As mentioned earlier, the costs of the self-driving car is $14k/year. So that's a difference of 2.5x-3x. Still significant enough that the a taxi company that offers rides at 30-40% of the cost of its competitors will just win.

[spikels]

I have gone through a few different versions of these calculations and got similar results. Even if the driverless tech costs more it is still around half the costs of a human driven car.

On factor I have not seen fully addressed is the ability of driverless cars to run near 24/7. Given than demand is variable and human drivers could share cars like taxis what is the worth in practice?

[nindalf]

I think having access to rides at all hours is helpful. You might not take many rides at 2am, but when you do, its something pretty important. Having a safe option that's available at any time of day or night will make self-driving equal to or better than actually owning a car and far superior to conventional taxi rides.

[mattdeboard]

Couple of great comments in the thread. Thanks.

[mandeepj]

> Wouldn’t Running your own cars would mean incredible capital costs and marketing costs to get people to switch from uber? > Additionally you need people maintaining them.

This is why I think Tesla is a bigger threat to Uber in long term. If you are not sure then refer to Tesla's plan 2 but Uber also have a counter plan - UberAir

https://www.tesla.com/blog/master-plan-part-deux

[timewarrior]

I somehow feel that Autonomous drones would be easier to build than Autonomous cars.

Benefits of Autonomous drones:

1. Do not need to deal other non autonomous devices while in flight. Cars needs to deal with human, other cars driven by humans.

2. Do not need to follow existing road traffic rules.

3. Lot of paths available. Cars are limited to existing roads. Drones can have a lot of flight paths.

I understand that there are other challenges - more energy required, less safe in case of an accident, flight regulations.

But still. It seems like if the technology is there, it would be an easier transition with Drones vs Cars.

[nickserv]

> Do not need to deal other non autonomous devices while in flight.

In a decent-sized city, there will be low-flying helicopters for police, fire and medical emergencies. Admittedly, this is much less common than for autonomous cars, but any slight problem could easily become catastrophic (no such thing as a fender bender in mid-air).

> Do not need to follow existing road traffic rules.

But do need to follow existing air traffic rules. New regulation would also certainly be drafted (one would hope anyway).

> Lot of paths available.

Maybe, again depends on regulation. Commercial airplanes do have certain "lanes" they are supposed to stay in, and are not allowed over certain areas.

[mathgeek]

> Do not need to deal other non autonomous devices while in flight. Cars needs to deal with human, other cars driven by humans.

Birds and power lines both come to mind as obvious things to deal with while flying in urban areas.

[malandrew]

> Do not need to deal other non autonomous devices while in flight.

They may also have to deal with hobbyist drones.

[pfarnsworth]

Whoever solved self-driving cars could buy 10,000 cars per city. Let's say each car costs $100,000. That's $1B if paid upfront which is never the case, but let's assume.

Now, each of those 10,000 cars could work 24x7. Assuming each ride is $10, and you can do 50 rides in a day (2 trips per hour on average over the entire day), that's $500 per day less electricity and maintenance. That's $5M/day with no employee costs except for maintenance workers. You could scale up by simply buying more cars, and whichever cars aren't needed could roost at homebase, without people picketing or sending nasty tweets saying they don't have enough work.

I doubt you have to pay for marketing costs at this point, word of mouth would be strong enough, and you just develop an app.

[marinman]

While I'm bullish that self-driving will happen in our lifetimes, I think there are a lot of challenges that many are underestimating. This includes the actual technology—this is one of the most important and challenging technological breakthroughs of all time. It's going to take time and be very, very expensive to produce at scale (ie all-electric self-driving cars at $100K a piece).

Even putting that aside, I have questions about the business side of things. Demand for transportation has been pretty consistent with big lumps during the morning and evening commutes.

One of the beauties of Uber's existing business model is that it can theoretically spin up and down drivers as needed with Surge pricing. With a fleet of cars, it's not guaranteed that supply will perfectly match demand most of the time.

The counter to that, which I sort of buy, is that it will kind of be like broadband Internet. We don't even know what demand and opportunities self-driving cars will create. My hesitancy with fully embracing this is that broadband was an acceleration of something new whereas self-driving is a leap to an existing quantity of transportation. It will still change lots of things but it will take longer for things like where you choose to live to change.

Finally, my main hesitancy is the human aspect. For self-driving to make the impact that many want/believe, there's going to have to be a hard line in the regulatory sand where human-controlled cars are outlawed or limited. I don't see that happening in the United States for a long, long time.

[malandrew]

Great points. The other thing I might add, which your points support, is that the longer the roll-out of self-driving cars takes, the less likely it is to be disruptive to TNCs.

[timewarrior]

I agree. The user behavior has already been developed. And Uber doesn't have any special user loyalty. There is no reason for users to not try another app.

If the tech is indeed safer vs human, it would also have an added benefit of not having safety risks similar to Uber where some Uber drivers have assaulted their riders.

[hndamien]

In the case of Tesla it is the customers that pay for the cars.

[usrusr]

Marketing would be negligible because Uber has already created that market: "that other app where there is no driver begging for tips like on Uber" would not need much help selling itself (assuming uber would be phasing out drivers incrementally, while a robotic competitor would start 100% driverless).

As for capital costs: I would expect competitors to have a much easier time raising capital for their fleet than Uber, where all new investors have to to share their stake with several billions (!) of pre-selfdriving investment. Not every competitor will be drowned in investment, (there is an infinite number of ways to share off investors) but one or two will be enough to cause serious trouble for uber.

[StudentStuff]

The credit line needed for such a venture would be quite large, I doubt Uber could get such a credit line any time soon.

[xyzzy_plugh]

Surely you're not serious. Uber is seemingly unstoppable at raising funds.

[TylerE]

Franchise!

Let some guy buy a couple of cars, clean them at the end of shift, etc.

[StudentStuff]

> e.g having thousands of cars at Burning Man.

Sounds like a great way to piss off the organizers of Burning Man and get a bunch of damaged vehicles. The desert itself is very damaging to car paint, nevermind how Uber operating there would be the antithesis of the purpose of Burning Man.

[timewarrior]

That was just an example. Don't take it literally :)

[adventured]

China and Russia are poor examples.

Google lost both of them as well, not because they were out-competed by superior products. Amazon also 'lost' China, it also had nothing to do with being out-competed.

What matters for Uber are the hundred other important markets globally. China was never on the table as a possibility, it's a small miracle they got out of it what they got (a big chunk of Didi).

[gcb0]

meh. it just means their "drivers" will be car brokers and not much will change for uber. Other than they might experience the other side of the stick on their price shenanigans used to kill competitors.

[jellicle]

But in fact UBer has cleared the way for any other taxi company. Uber's drivers can all (within one single day) download the app of any new company, and switch to driving for them without a hiccup. Uber's riders can all (within one single day) download the app of of any new company, and switch to hailing them without a hiccup.

There's no barrier to entry at all.

[typon]

Also Careem are strong competitors in South Asia and the Gulf