I have many friends that I respect who are working at Uber, Lyft, etc. They should leave. Their business is doomed long term. Here’s my 3 part argument:
1) Self driving tech
2) Uber specific
3) Car manufacturer specifics
Read the headlines if you’re short on time. My conclusions are at the bottom.
1. Self Driving Technology
Self driving cars are coming fast. It’s largely a solved problem. Google and Tesla are leading the charge. [Skip this if you live in the Bay Area]
This isn’t science fiction. This isn’t 20 years out. This is today. Yes, legislation & liability needs to be worked out. Musk gives the examples of elevator operators. 100 years ago it was the rule, now they don’t exist. Same will hold for most driving circumstances.
First: My office is located between Google’s Campus and their GoogleX’s facility. So I see Google’s self-driving “clown cars” almost every day. I think nothing of them as I drive alongside them, as they wiz by me during my walking meetings. It’s the new normal.
Second: A friend has a 35 mile commute from downtown San Francisco to Palo Alto. It takes him about 43 minutes. His Tesla is on auto-pilot all but 4 minutes of the trip.
2. How Uber Doomed Itself
Uber is pretty cheap, but the majority of the cost is related to the human driver, not the car or the platform
Uber has no access to car data
Car data is the key to building up simulation and algorithms to make self driving technology a reality. Uber essentially bought a robotics team from Carnegie Mellon to try to kick start their effort. Rumors are that it’s proceeding, but not quickly enough.
By the way, robotics teams have traditionally been steeped in rules-based AI’s. Essentially enormous if-then decision logic tree. Even if they are using the most advanced self-learning algorithms, huge amounts of data are required to train, perfect, and ship such a system. Uber has access to essentially NONE of it.
Uber is a gifted “field organizer,” not a great tech company
Need to mobilize a new market launch? Need to sign up 10K drivers quickly and background check them? Need to do a PR push, or get “street teams” to canvas an area with signup pamphlets? Uber is great at that.
The tech behind matching cars and passengers in relatively close proximity to each other? Not so hot.
Even if Uber can get the tech right, car manufacturing is hard and way outside its core competency
Uber is excellent at burning cash to acquire customers and engaging in pricing wars with their regional competitors. Car manufacturing is a whole different ball of wax, particularly at scale. Even if they were the best coders, these car-sharing companies have no competency in design, production, or assembly of physical systems.
Uber has limited brand equity and loyalty
Uber randomly changed their logo several months ago. Every one of their users had to wake up the next morning and essentially find a new app on their phone. Consumers did this because they needed the service. If there’s a better alternative (faster &significantly cheaper), very few people would stick around. Again, it’s easy to install a new app. Almost as easy as finding Uber’s app after that rebrand.
I’d argue that Uber’s brand has a lot of cracks — anyone who uses Lyft or follows tech news will surely agree — so I don’t think it’s a stretch that people can and will move on when there’s a significantly better alternative.
3. The Car Manufacturers Rise Again
Car manufacturers are already in the car ownership business. In fact it’s probably their best/most profitable business
Just like GE, it turns out financing people’s purchase of your products is a really great business, sometimes even better than actually making what you make. So GM, Ford, Toyota, etc all have enormous credit organizations where they loan their customers money to buy their products. Said differently, they already own their own cars. And they are very used to it.
Car manufacturers know they are behind — and are gunning to catch up on self driving functionality
Google is showing willingness to share its tech. Tesla is willing to open source some of its technology. Their suppliers and newer tech companies are very focused on filling this void as well. And yes, they do have raw car data access.
Car manufacturers could significantly bring down the total cost of their cars
There’s a good reason cars start falling apart after their warranty period — They have been carefully engineered to specifically have this happen, a term called “planned obsolescence”. Manufacturers want to sell more cars, and if cars last longer, they sell way fewer new cars. If car manufacturers start owning and operating the cars they build, getting paid for usage, they’ll do what’s in their best interest — build cars that are optimized to operate for much longer time horizons at the lowest cost.
- Car manufacturers will begin flirting with building, owning, and deploying their own cars…via their own apps.
- Cars will appear when ordered through the app. They will drive off and disappear when you step out of the car. When running low on fuel, cars will coordinate trips to tucked away re-charging depots to be smartly refilled with electricity.
- Then car manufacturers will go all in, cutting out the Uber/Lyft’s of the world.
- It will cost 20–30% of today’s cost of Ubers.
- Then car manufacturers will drastically start reducing the cost of operating these vehicles.
- Car manufacturers will start optimizing fleet size accordingly.
- This will all start in some forward-looking city, and then spread like wild fire across the globe.
Uber, Lyft, and Didi will need to massively recreated themselves or wither away as quickly as they have grown.
I welcome critiques, contrary opinions, and alternate conclusions. @noahbarr