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Reading the back-and-forth, the takeaway for me was just how much pure guesswork - on both sides - went into the estimates. It's not just the professor's arguments that are easy to poke holes in, it's every single valuation you can think of for Uber. Here are three scenarios, for example, where Uber value trends toward zero: Google brings self-driving cars to market. Instead of owning a car, a fleet of autonomous vehicles drive around and pick up any passenger who requests it. No drivers are necessary, the app is built into the Android OS, and all the logistics are handled by Google Maps. Workable telepresence solutions are developed, relying on combinations of e-mail, web applications, GitHub, videoconference, and some yet-to-be-invented virtual presence system (holodecks? Oculus Rift?). Instead of requiring that you be in a physical office, all knowledge workers can telecommute from wherever they live, and their "office" exists only in virtual reality. Seeking cheaper real estate, larger houses, and yards, workers leave cities in droves. Socializing happens in virtual worlds, and all those trips that Ubers are currently necessary for never happen. The taxi union lobbies hard and gets Uber and similar ride-sharing services declared illegal in all major cities. And that's discounting the truly black-swan events like "World War 3 breaks out, and we're all wiped out by nuclear winter." It really drives home how the market value of a company is set by the last person to buy a share of that company, no matter how crazy or irrational his beliefs are. I could momentarily drop the market cap of Google to $6.75M by selling a share at $0.01, but presumably the market would correct itself in a millisecond. In thinly-traded private stocks, this market correction mechanism is not always available, and so valuations can be way off the mark until all the assumptions built into those valuations have become public and been judged as likely or not likely by the market. |