Why companies like Lyft, Uber, Postmates, etc. will never be profitable

https://hackernoon.com/why-companies-like-lyft-uber-postmates-instacart-etc-will-never-be-profitable-ecdfde647175#.mwvarq8pm

by webnanners • 9 years ago

15 2 9 years ago

hackernoon.com

rs86• 9 years ago

When the author says that kamek does not get more rides... Well that doesn't mean the pie is still the same size, there are more people eating it.

From a theoretical point of view, Uber allows underutilized assets (a car in the garage) to be used, frictional unemployment to be temporarily allocated and reduces barriers to entry (bypassing taxi permits). All of above, from a naive (but not necessarily wrong) perspective, contribute to increase the market surplus. It also has a side effect of shifting wealth from taxi permit holders to newcoming drivers.

Whatever implications that has, it is not just a broker, it is a powerful market mechanism for increasing asset utilization and employment, and as such a mechanism it creates value that can in principle be captured as profit.

edblarney• 9 years ago

I don't agree.

Uber is playing against a highly regulated market, with controls on supply, and also massive institutional incumbency which means inefficient pricing (the cab owners take huge out of the wages of the drivers), as well as just general inefficiencies.

Also overlooked: quality of service. Everyone who I know takes Uber does it largely for the convenience of a) the app call, b) the payment and c) friendly drivers, clean cars.

The 'added volume' of cars + 'better service' is absolutely growing the pie.

As far as Instacart - well - so long as there is a good chunk of people who want the service and are willing to pay a surplus, then there is value add.

I do not buy the premise of the article that there are some kind of systematic reasons for lack of profitability.

The reasons for unprofitability have everything to do with lots of liquid capital, massive risk appetite by owners and investors, and same for the competition, creating very aggressive market-share combat scenarios: see Uber China, and Uber vs. Lyft in the USA.

Why companies like Lyft, Uber, Postmates, etc. will never be profitable

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