Saturday, February 25, 2017

Jalopnik: "Uber Is Doomed"

Readers who have followed the Uber story over the last few years, especially if you read Izabella Kaminska at FT Alphaville, know that despite posting on the lurid details from time to time (us more than she) our (and her) focus has been on the business/finance/econ aspects of Uber, although the political economy and other social science stuff can't help appearing, because what Kalanick built was in his own image.

From a 2014 post, "Here's the Real Problem With Uber: You Can't Trust Them":
The first thing I thought of when I started digging into Uber:
"From all our legends, mythology, and history (and who is to know where mythology leaves off and history begins – or which is which), the first radical known to man who rebelled against the establishment and did it so effectively that he at least won his own kingdom – Lucifer."
-Page ix of Rules for Radicals.
That's Alinsky seemingly quoting himself and the way I read it he's saying the Devil challenged authority and won his own kingdom.
That emulating the methods of Satan using any means fair or foul, including lying, cheating and stealing is the way to get riches and power.

And that was the moment when I stopped thinking of Uber as frat boys making stupid boob jokes and started thinking of them as nasty little political operatives.

If you're into this kind of stuff, Rule 12 appears to be the approach Uber management favors:
RULE 12: Pick the target, freeze it, personalize it, and polarize it." Cut off the support network and isolate the target from sympathy. Go after people and not institutions; people hurt faster than institutions. (This is cruel, but very effective. Direct, personalized criticism and ridicule works.)
I should note we are fans of Alinsky's tactical brilliance, oftentimes struggling to resist employing rule #5:
#5 Ridicule is man’s most potent weapon. It’s hard to counterattack ridicule, and it infuriates the opposition, which then reacts to your advantage....
So yeah, although the focus has been on the quantifiable, the soft science stuff is there as well and may be the thing that takes Uber down. At least that's the charitable interpretation, that Kalanick, blinded by hubris didn't see the flaws in the business plan.

The less favorable interpretation is that he knew all along and kept pushing in the hope that magic would happen.
That would be a fraud.

Anyhoo, here's one of the best automotive websites on the net talking Uber.

From Jalopnik:
If there is one quote that sums up the ethos of Uber, it might be this cut from the company’s firebrand CEO Travis Kalanick: “Stand by your principles and be comfortable with confrontation. So few people are, so when the people with the red tape come, it becomes a negotiation.” But after a month marked by one disaster after another, it’s hard to see how Uber’s defiant, confrontational attitude hasn’t blown up in its face. And those disasters mask one key, critical issue: Uber is doomed because it can’t actually make money.

After a discombobulated 2016, in which Uber burned through more than $2 billion, amid findings that rider fares only cover roughly 40 percent of a ride, with the remainder subsidized by venture capitalists, it’s hard to imagine Kalanick could take the company public at its stunning current valuation of nearly $70 billion.

And now, in the past few weeks alone, Uber has been accused of having a workplace that fosters a culture of misogyny, accused of stealing from Google the blueprint of a successful self-driving system, and has lost 200,000 customers over ties to President Donald Trump and how it responded to a taxi driver boycott.

Yet even when those factors are removed, it’s becoming more evident that Uber will collapse on its own. Barring a drastic shift in the company’s business—an implausible rollout of self-driving car fleets across the U.S., an increase of fares by three-fold, or a complete monopolization of the taxi and ride-hailing markets—Uber’s lifeline is shrinking. Its business model could collapse if one court case, and there are many, goes against it. Or perhaps more pressing, if it simply runs out of cash.
That Kalanick quote about confrontation may be as innocuous as a random sound bite, but it’s representative of the ride-hailing giant’s methodology since its founding in 2009: a perpetual resistance to regulatory oversight; a belief that, ultimately, an unfettered market is the key to prosperity. 

At first glance it seems like Kalanick’s libertarian ideals have paid off. Most recently valued at a reported $69 billion, Uber has captured a majority of the ground transportation market and flipped the taxi industry—a sector Kalanick once famously and snidely referred to as the Big Taxi Cartel—on its head. His philosophy mirrors the mindset of one of his favorite authors, the laissez-faire Ayn Rand. In 2012, Kalanick proffered that Uber’s battle against government regulations has an “uncanny resemblance” to the Randian philosophy. A billionaire fighting The System—and prevailing. It’s a good story for those who find truth in Atlas Shrugged.

Uber’s long had skeptics, and it’s not innovative to paint Kalanick, 40, as the boogeyman of Silicon Valley, where unseemly savants exist in vast supply.
The precarious moment in the company’s eight-year history falls on Kalanick’s lap. It’s his baby after all—a startup founded on seemingly nothing more than a vague idea, without much regard for the workforce to make it possible, or even a clear idea of what business model it actually wants to pursue. Uber has jumped from one idea to the next: UberX, UberEats, autonomous cars, and now flying cars, of all things.

The impact of Uber’s death would probably be as much of a rebuke of Kalanick’s vision of running on a scatterbrained dream, not so much a solid business model and philosophy, that you could muster.
It would also be devastating for some. The livelihood of 11,000 employees across the world rests on Kalanick’s decision to submit to that philosophy—which, at its core, is a ruthless way of doing business. At the very least, drivers in the pre-Uber market could earn a decent living. Conversely, for example, Uber drivers taking advantage of new “vehicle solution” pilot program in Boston — renting cars by the hour through Zipcar — will earn less than Massachusetts’ minimum wage. How innovative. 

The Contractor Problem
One of the biggest issues that has left Uber’s business model hanging in the balance is its resistance to classifying its drivers—there are reportedly 600,000 in the U.S.—as employees, not contractors. If Uber is a house of cards, this is a key part of the foundation that, once removed, would demolish the structure.

Indeed, the company has said reclassifying drivers could “force Uber to restructure its entire business model.” The result of its opposition to readjust has been entirely expected. Without the perks and protections that an employee may enjoyhealth care, benefits, gasoline and work reimbursements, vehicle maintenance, all of which could reportedly total as much as $730 million—complaints from drivers have piled up, ranging from low pay to new services like UberEats (a loathed food delivery service that’s reportedly set to lose over $100 million annually) and UberPOOL, its carpool option which increases the company’s take per-ride, lowers the take-home pay for drives, and is understood to be quite a drag for drivers and passengers alike. Drivers themselves said as much in a recent, disastrous question-and-answer session with Uber’s president....MUCH MORE
If interested, we have an awful lot of posts on Uber; here's the Google search of the site: uber