Five Reasons Uber Will Fail
So I have written about Lyft and Uber before but so many people have been asking me more and taking my twitter post-bytes that I have come to terms with writing my thoughts in a longer piece. I am not an economist, I am not a business expert but I do think there is a real problem with this forced monopolistic view of car future from a company that only knows how to spend money.
1 Does Not Make Money, The Race to Zero Ends in Zero
Zero only works with other people’s money. They keep running around to overly rich people sharing their Kool-aid to billionaires too drunk on their own venture capital interests of “unicorn” portfolios to smell the roses that the little boy Emperor Travis Kalanick does not have any cloths, only a big poop(no real money). One of their first and biggest investors Google Ventures can’t wait to ditch them. Their convoluted goal is near 100% market capitalization so they can sell their Uber-tobia to the general public for an IPO, the problem is that they are not suited to be a public company. Transparency, quarterly earnings, regulation and reality are a total enema to their business model.
If Coke tried that with Pepsi drinks would be 5c and be as small as a capsule, you can’t keep providing better service for less money and operate at a loss forever and still offer something people want.
Starbucks did not win the hearts and wallets of people by trying to undercut and price-war gas station coffee, they provided more perceived VALUE and were able to ask more money in return. Uber burns through more money then it can find instead of being a real company like Starbucks, Goggle, Apple who provide more value then others in their respective spaces.
Most importantly, there is no real reason or president for Uber to want to dominate the world, it’s an app, its a TNC (Transportation Network Company), look how many there are or will be once cars drive themselves, and actually by the people who build them. They are a visionary app leader that will die a real slow death because they do not make MONEY. Who cares how much of the pie you have if you do not own a car company? Who cares if cities do not let your Robocars park all over your city? Nokia had 80+% of the cell phone market at one point and they even owned the hardware, the next guy with better ideas and lots of money ate their lunch. having market share is no guarantee of keeping it, so why don’t they just focus on making some money already? once a better app come along people will leave, people will not stay just because they have everyone’s credit cards and know your trip history.
2. Monopolies get crushed
Monopolies get heavy regulation and broken up so why it does not encourage small players makes no business logic. massive multinationals are constantly trying to stay under the regulation by “spinning off” as separate entities while Uber is running and robbing it’s way to massiveness unnecessarily.
Goggle dominates search and fully replaced companies like Netscape, Excite and Yahoo Search (now powered by Microsoft’s Bing). Google goes around the world making the exact opposite excuse to regulatory boards in EU and individual counties that it is not a monopoly. Microsoft had a similar hurdle in the 90’s trying to say they did not control the “whole” market when Macintosh was tanking and Linux was in infancy.
For Uber to be actively striving to be a defacto monopoly worldwide for short-term private transit is not market-smart. They are just painting a massive target on their back that eventually will go from brand recognition to brand toxic.
Providing a better product dictates market adoption, not forced strangulation of competitors. in 1911 John D. Rockefeller’s Standard Oil company had steal, oil refineries and rails and Congress proved that he violated the Sherman Antitrust Act and got broken up into 36 companies including the Conoco, Amoco and ExxonMobil gas companies.
If a national airline or taxi company price-strangling competitors would be called before congress in a hurry and finned, regulated, or broken up entirely, so why not Uber and why is Uber desperately pushing to be a monopoly so badly?
Other examples of actual public traded companies that are thriving (making tons of MONEY) despite other competition in their space:
Starbucks — Sip, Seattle Finest
iPhone — Samsung, LG, Sony, HTC
Coke — Pepsi
Walgreen’s — CVS, Rite Aid
Amazon — Alibaba, Jet
Apple Music — Pandora, Spotify, Tidal
Netflix — Amazon, Ruko, Hulu
Completion is healthy for a market and even better for users. Once they own the whole market they will just screw the user like they did with the driver app.
3. Does Not Make Cars — Self-driving cars will drive Uber off a cliff.
Uber’s strength is its driver network, yes, the very thing it hates and so dreams to eliminate so badly. Mr. Travis famously boasted if Tesla had “50,000 self driving cars they would take them all”, and then what? They do not have a clue about service, car care, storage or trip cycles. Putting $100K cars around town or near rich communities on call will not go as planned. They should start with 5 Camery’s and see what I am talking about. Rental car company Hertz made a deal with Walgreen’s to park cars in their lots that went no where, who is responsible for insurance of a 30k car at night in an open lot? Storms, bird poop, vandals, sound like the car you want to get into?
Once their utopia of self-driving cars comes (my thoughts more on that in a minute) to be they will just be a short-term self-driving car rental, nothing sexy, nothing original or proprietary. They will have even more competitors. If they thought taxi unions were trouble they will not know what hits them going up against rent-a-car and even car manufacturers themselves like Ford and GM that are re-positioning as transit companies, who own ACTUAL cars, road mapping software (not just trip data) and a dealer network for servicing and maintenance.
What made Uber so popular and convenient was it’s two apps (yes, according to Uber we drivers are “customers” too). Once they rid themselves of driver app they will just have one app like any other tech startup that rents or parks cars around town like ZipCar or Car2Go that rent by the day or hour. Charging per ride is hardly special.
SDC’s (Self-Driving Cars) next battle will not be customer acquisition but parking, vehicle maintenance and speed-to-user aka roads/traffic. This will take lots of interaction with local city and state traffic regulatory boards, something Uber’s bullying tactics has achieved but made few lasting friends not greased by lobbying or lawyer persuasion. Who has dealer networks, parking lots, service centers, insurance, financial arms a national presence and tons of lobbyists other than global car manufacturers? They also happen to provide fleet vehicles to cities, municipal, state and federal governments so there is a lot more natural synergy for natural transportation progression then a greedy tech company that really only owns an address book of possible ride clients and maybe a fleet of SDC’s that they want parked on every corner of a city near you, OR ELSE!
Either Uber will partner with or get acquired by a global car maker or conglomerate similar to Nokia’s HERE app. It’s software and not a “game changer” end-all product.
4. A Security Tinderbox
In this day and age the big guy who is a bully gets smacked around. Uber has put itself in a unique position as in trying to take over the world they set up their own financial entity (since they claim just to be a technology company and not a service provider). Raiser is their “bank” and have fought heavily with regulators and countries to do what most other online vendors are not allowed to do and that is keep ALL credit card numbers and not just the last four digest. They need this convenience to bill quickly and without passengers having to swipe cards or type out their account numbers. This is ILLEGAL for most businesses to do, stores and other online vendors are only allowed to have the last four digits for history. They are big and they are sneaky and have been able to do this. Companies like Authorize.net, PayPal, Square, Stripe etc act as levels of security between the payee and the retailer.
What happens if they get in the cross-hairs of cyber terrorists or vigilantes? If they were a public company and had to show their books I am sure after driver pay their next big expense is (or should be) is security. Every crook (Chinese, Russian hackers) are probably trying to crack them, part spite and part for the challenge.
Remember when Microsoft was making software choices people did not like and everyone was bashing them and then computer viruses became mainstay? I think we will wake up one day and Uber will be breached like Home Depot, Target, Ashley Madison and all our info will be up for sale on the back market, I hope not but it is inevitable because they have shortcut the system for their quick gain, pissing off driver with low pay will encourage some vigilante to want to “robinhood”. Investors do not like uncertainty.
Security breaches and public concern will get them regulated and implementing measures just like the other 95% of businesses.
Besides the financial security risks there are driver safety risks of third party software mated to a vehicle that can get hacked, so what that they hired the two guys that hacked into a moving Jeep, there will be more car hackers then Uber will ever be able to hire.
4. Market-movers flame out
All through history those visionaries changed the word, Uber might be in the running, Tesla Motors too but just like them I fear Tesla’s push for more people using battery cars might have exhilarated their demise too. Luxury car makers can do it better and sell more examples then Tesla ever will and cheaper, faster, farther. GM’s Bolt might start that wave. Car manufacturers and transportation partnerships will render Uber as redundant as a 56k modem in the self-driving age that they are pushing us to. Would you rather get into and pay a monthly subscription to GM, Ford, Toyota to have a SDC on call when you need one or an app company who just bought one and threw in their 3rd party software to make a buck off you? Who do you think would be there for you in the event of an accident? Who would have more to lose and have better coverage and better insurance? Wright airplanes (Wright brothers company) are not in use today and do not dominate air travel,Tomas Edison’s company General Electric(GE) is but does not monopolize the electric power grids of the world in an Uber-visioned fashion.
5. SDC’s baby steps need parents
We use the internet all the time but 20 years ago it was a hassle, modems, glitches, poor service. A real nightmare. What we will experience in the next 5–20 years will be a lot of trial and error and we are not talking about some cables running across the living room floor and an annoying beeping sound, we are talking millions of miles of roads, aging infrastructure and state of the art tech duct-taped are a real recipe for some big speed bumps and whiplash. An app company is not the right entity to usher in SDC’s, they would just be the middle man running software and get more lawsuits then they already have. Google is smart and has been watching the show in class get all the attention but they are probably the only software company mature enough to make a run and even they want to work with Ford and other manufactures, Uber is clueless and will not have a date to the prom, just too toxic and a liability.
Uber has proven that it can be so brash, so bold, so fanciful yet still get people to love it, it is a great service for the time being, but it thumbing its nose at banking, governments, and just getting faith-based valuations whie wearing out people’s cars for their own gain will come to epitomize this area of “unicorns” and early days of SDC’s. Time will tell but my bet is Uber will not be a part long term unless it corrects these things and get acquired by a global automobile maker.