The Uber advantage

The Guardian reports:

Uber has admitted that there is a “problem” with the way autonomous vehicles cross bike lanes, raising serious questions about the safety of cyclists days after the company announced it would openly defy California regulators over self-driving vehicles.

Maybe it’s the bicycle riders who are the “problem” here. You’d think they’d have sense enough to get out of the way of the future, particularly in San Francisco.

Uber will lose some $3 billion this year, after losing $2.2 billion last year. Even by the exuberant standards of the internet industry, the company is a remarkably effective cash-burning machine.* By comparison, the largest annual loss posted by, no slouch when it comes to losing money, totaled $1.4 billion, back in 2000.

We’re often told that companies like Uber and Amazon are masters of business innovation and industry disruption. But an argument could be made that what they’re really masters of is getting investors, whether in public or private markets, to cover massive losses over long periods of time. The generosity of the capital markets is what allows Uber and its ilk to subsidize purchases by customers, again on a massive scale and over many years. It’s worth asking whether these subsidies are the real engine behind much of the tech industry’s vaunted wave of disruption. After all, the small businesses being disrupted — local taxi companies and book shops, for instance — don’t have sugar daddies underwriting their existence. They actually have to make money, day after day, to pay their employees and their bankers. They have to charge real prices, not make-believe ones.

Some will argue that the capital markets are acting rationally, investing for future returns. But if those future returns are predicated on the killing off of competitors through years of investor-subsidized predatory pricing and other economically dubious behavior, how rational are the capital market’s actions, really? At some point, it starts to smell like a market failure rather than a market success.

Uber will reportedly meet with officials from California’s attorney general and motor vehicles departments later today to discuss its rollout of self-driving taxis in apparent violation of state law. The company likes to present itself as a juggernaut, an inevitability, but really it’s more of a paper tiger. It may have succeeded in exempting itself from the rule of economics, but it shouldn’t be allowed to exempt itself from the rule of law.


*It’s hardly a surprise that president-elect Donald Trump would pick Uber CEO Travis Kalanick as one of his strategic advisers. The league of gentlemen who require ten figures to report their annual losses is quite small.