As the money-making scheme floats on the New York stock exchange, Tom Hodgkinson questions its morals
If you’ve ever taken an Uber, now might be the moment to reflect on what you have done. The ride-hailing app – so successful that it has become a verb – is about to float on the New York stock exchange and will make its already enormously wealthy founders even wealthier. Former CEO Travis Kalanick, the man behind one of the most ruthless and aggressive companies in the world, owns 8.6% of the shares and will make billions. Long term drivers are being offered a bonus of up to $10,000. That sounds generous till you realise that’s for the ones who have done 20,000 rides or more and equates to a tip of just fifty cents per ride.
When I tell people why I don’t like Uber, they say: “but it’s a really good service.” Yes, I know that. It is half the price of real taxis and is more efficient because you can summon one almost by magic. It’s irresistible.
But those magically low fares have been subsidised over the years by Uber’s investors – the company still loses billions of dollars a year. Each fare really costs more than you are charged. They have spent the billions of investment they’ve received on creating a monopoly or technopoly. And the drivers are paid terribly: the Guardian reports that they often earn less than minimum wage in the UK. Not only that but New York City has seen a spate of suicides among yellow cab drivers who have watched their livelihood destroyed. So Uber has a lot of blood on its hands, but like Walter White in Breaking Bad, the directors and shareholders of Uber (the CEO – pictured above – was paid $45.3 million last year) have sacrificed all morals for making an enormous pile of cash.
They are in the Empire business: destroy the competition by savagely undercutting them and create a monopoly where 20% off all the world’s cab fares – which should stay in the country of origin – are siphoned into a bank account in San Francisco. Quite brilliant! It is a money-making scheme of genius, capitalism on crystal meth. And it is underpinned by a harsh “fuck you” libertarian philosophy: do you remember when Travis was caught on camera by an Uber driver? The driver complained to Travis about his low wages and Travis, flanked by two young women, replied: “Some people can’t take responsibility for their own shit.” Truly the spirit of Ayn Rand permeates Silicon Valley.
For my own part I stage a feeble resistance by using local cab firms, Addison Lee and bicycles. But so far my protest has gone unnoticed by Uber or by the world’s financial markets. I know that some of you think Uber is a wonderful free market invention that helps individual drivers become their own bosses. Is Uber evil? Will you be buying shares? Let us know.
On May 10 Uber floated and its share price sank 8% immediately. Its value was $82 million – a lot of money, but the share price was lower than private investors paid in 2016. It was, said the FT, “one of the worst debuts for a big US listing.” These comments were mailed to us after the above piece was sent as a newsletter. We like to publish a selection and reserve the right to edit them for clarity. Feel free to drop us a line with your views.
If you think Uber’s evil, using Addison Lee’s no answer. It’s got much the same disease of mismanagement in pursuit of global profit as Uber, and since Washington-based venture capitalists The Carlyle Group bought it in 2013 and, after losing money almost every year since, are now trying to sell it.
But Uber’s never given any sign that its aspirations to create a monopoly are remotely realistic. It’s pulled out of direct operations in Russia, SE Asia and China (where it retains a minority shareholding in the loss-making business that trounced it) and it’s struggling in India.
Though Uber’s banned, has severe limits on its activities, is under judicial investigation or faces driver rebellions around the world, the real question is whether it’s any more than a loss-making taxi app. Of which there are dozens: in London alone, taxi drivers had fifteen to choose from in January, and more spring up all the time
Worldwide, Uber’s run up operating losses of $13 billion since 2014, and $3 billion in 2018. In the first three months of this year, monthly losses grew 33%, while revenue grew just 6%. As a proportion of sales, US rival, Lyft, is losing even more. UK performance typifies their worldwide problem: since Uber arrived here in 2012, the number of cabs and minicabs in England and Wales has grown 27% – but there’s been no growth in cab use.
Soaring overcapacity has dragged prices down. Nonetheless, Uber raised $8.2 billion on May 10 for about 10% of its shares, putting a paper value on its whole business of around $82 billion. How can such a massive loss-maker be “worth” anything? Uber has no real assets: so there are two alternative explanations.
– Uber’s prospectus. Which hints at colossal profits – someday – by moving from human drivers to autonomously driven taxis. Oh, and by “disrupting” the “$5.7 trillion market for all passenger vehicle miles and all public transportation miles in all countries globally” , the “$2.8 trillion consumers spend at restaurants” and the “$3.8 trillion market for freight trucking”.
Autonomous taxis? Does anyone seriously believe there’ll be a thriving market for self-driving taxis in our lifetimes? No doubt some vehicles will be driving themselves in environments where they can’t hit a human – but plying for hire on the streets of London, New York or Tokyo?
And all this “disruption” sounds as believable as the company floated at the time of the South Sea Bubble, raising £2,000 (in 1719 money) “For carrying-on an undertaking of great advantage but no-one to know what it is.”
– Or alternatively. Speculating in tech shares isn’t about recognising commercial excellence. It’s about obsessive techno-fanatics dreaming up a fantasy of global control, then selling shares to professional investors. Who conspire with the firm to spin a myth (like ”The future of travel is online-ordered cabs”), price the service way below cost, then sell more shares to the general public for even more than the early investors paid. Like being a comic: success depends on timing more than almost anything else.
On May 10, Uber and its chums got their timing spectacularly wrong. Last October, Uber’s brokers said they’d sell the shares for around $66 each: by the end of their first day’s trading, those shares were going for $41.60. At least $50 more than they were worth – but a lot less than a clutch of early investors like the Saudi Public Investment Fund and Softbank had paid a couple of years earlier.
By some standards, Uber’s May 10 share collapse is the biggest in history. More significant, I’d say, is the scale of losses made by hard-core professional speculators: people who can afford the loss, but who may well reappraise their assumption that buying into hokey businesses will always guarantee a profit if the business spins its pitch properly.
An assumption that underpins the astronomic “valuations” of shares in all the tech firms, from Alphabet to Zalando. Those prices won’t all collapse to the conventional ten times earnings in the next few days: but once that universal belief starts to crumble, dull normalcy becomes inevitable.
– Mike Flanagan, https://www.clothesource.net/about-us/
Back in 1967/68, I drove a Yellow Cab in Philadelphia. At that time I was at the bottom of the totem pole, earning 50 cents on every dollar of fare. It was a marginal existence and I didn’t own my car so I had to use their company cars which had backbreakingly useless suspension as they’d been on the road for more than 200,000 miles. I made it pay by working in North Philly, which most cab drivers tried to avoid going as everyone was black. The company even posted spies on the Schuylkill Expressway to spot any drivers who were fleeing back to downtown with their light off in order to avoid North Philly. They were fined or sacked. Because of the shortage of cabs I would make a lot of money just picking up and setting down on quite short journeys, getting the startup fare of $2.50 and then 10 cents for every 1/5 mile. The reason that NYC cab drivers are committing suicide is because a medallion (the license to drive a cab in NYC) cost $1 million in 2013 and now they trade at $160,000. So a cabbie bought an asset for far more than it was worth 6 years later. Many borrowed money to get one and join the yellow cab monopoly in NYC. Uber did away with that. But $160,000 for a medallion is evidence that it is still profitable to drive a Yellow Cab or the price would have dropped to zero. I use Uber and black cabs. My main interest is in getting from A to B. An Uber comes to your door in remote locations in minutes. Standing in the rain hoping for a black cab on Chamberlayne Road, Kensal Rise, is a miserable business.
– Craig Sams
I agree with the sentiments. But it is actually more complicated. Uber and its main investors WANT to make losses, for reasons that I explain in my book The Corruption of Capitalism. An objective has been to grab market share, undercut and thus drive out competitors, and then raise the prices.
– Dr Guy Standing
It’s worse than you think. Read:
1/ Thread about Uber, hacking, ghost cars, spying apps, Obama’ers in the corporate wild, cyber-security, UNzealous prosecutors, cover-ups and this guy… pic.twitter.com/OGAZ7BGxHp
— Adam Townsend (@adamscrabble) April 18, 2019
And check out Adams’ site for similar refs to Google & Amazon.Adam is a very successful tech investor, left libertarian leaning Cali Hindu who does the occasional twitter thread on corporate evil. He knows his stuff and delves deep. And as for Uber’s prospects and the reasons why it does what it does, the ever essential zerohedge.
I’m absolutely with you regarding Uber. I made a conscious decision not to use them and support my local taxi company when I’m at home in Yorkshire and when in London, I use cabs, buses, tube or I walk. I have taken an Uber just once which was ordered by a friend. As it was to go to her birthday party I really felt I couldn’t object! Needless to say I wouldn’t invest in them.
– Rachel Taylor
And not forgetting that the bedrock of their business is cars — which spoil everything and need getting rid of.
– Rob Wringham
I am so thrilled you have posted this. I am a virulent disliker of Uber and deleted their App from my phone over a year ago. The straw that broke the camel’s back was a £31 Uber fare from Albert Bridge to E and O. I saw red – it was a gloriously cathartic moment and I have enjoyed every second since then. I know it makes me sound a bit tragic (and frankly my stand, rather like yours, is swimming against the tide) but I am the person who never gets a ride deleted, never gets charged surge fares and takes dignified, comfortable black cabs to support London cabbies.
– Laura Mackay
I hate Uber. I make a point of taking black cabs when I can. I’m lucky I live central so hopping in a black cab is easy and not too pricey. I have always loved black cabs and come on, the drivers do the Knowledge for God’s sake.My experience of chatting to black cab drivers is not generally the stuff of stereotype. I’ve had some brilliant chats and good laughs and great kindness when I was having medical treatment and had to take cabs to and from hospital. One conversation I will never forget: “born in England, you’ve won the lottery of life. Wake up, you’re breathing, your family’s all right, you’ve got nothing to complain about”. The zen of black cabs. Unfortunately I’m not surprised that Uber got the licence to operate in London, it seems to be the way it goes now days. What really pisses me off, with all this talk of the environment and the emissions, is that Uber are a major contributor to the increase in traffic over the recent years. It has put loads more cars on the road in London, along with the delivery vans for all the crap ordered off the internet.
Down with Uber!!
– Caroline Bridgwater
History is full of examples of scientists, doctors and inventors handing their work over to the public domain in the name of the common good (even if Silicon Valley loves to take the credit, computers, which were invented by researchers in public universities, are a good example). If Uber’s founders were really interested in improving transport while helping self-employed drivers earn a living, they simply could have worked with local taxi authorities to create an app and then made it a free, open source tool (leaving the regulation part up to city governments). They’d probably have walked away with a tidy sum of money, and done humanity something of a favor. Instead they chose a very different business model and have syphoned enormous sums of money away from the struggling public sector. You’re right to boycott them.
– Jordan De Maio
You’re right. Uber is pure evil. The geeks are taking over the world. The evil ones, at least. But we don’t have to let them, these socially-awkward, smiling assasins. Maybe it is libertarianism or neo-liberalism gone mad, or simply the stereotypical brash side of US culture ringing true. I’ve never booked an Uber ride. Had the app on my phone but deleted it. Aside from the atrocities that you mention, another horror offence Uber commits is not paying any tax outside the States. But that’s long been a ‘crime’ of many a US computer or ‘tech’ company. It’s bus, train, my car, shanks’ pony or the local Wellington Combined Taxis for me. Never evil Uber – or for that matter – its recent ugly food delivery service, Uber Eats.
– Jonathan Roe