The Disturbing Value of Uber

by William Skink

Until Uber is able to replace humans drivers with robots, problems between the company and the drivers will continue. To Uber, drivers are nothing more than portals to profit, and apparently Uber isn’t satisfied with its margin, so the company is “testing” a higher fee, 30%. From the link:

Uber Technologies Inc. is experimenting with taking 30% of the revenue from fares booked through its car-hailing app, the highest commission it has charged drivers.

The higher so-called take-rate quietly went into effect in April in two cities, San Francisco and San Diego, and only applied to drivers who signed up for its UberX service since then, a company spokeswoman confirmed.

Uber’s rise is stratospheric, and the numbers are mind boggling. Forbes digs into Uber’s 50 BILLION dollar valuation to try and understand what velocity of growth must be achieved for Uber to deliver:

If you assume a normalized long-term free cash flow margin of about 35% (yes, this is quite high, but Uber’s business model is very efficient), Uber’s $50 billion valuation means that they will need to generate about $35.7 billion dollars of gross revenue and about $7.1 billion dollars of net revenue to justify the recent valuation. Perhaps more interestingly, the company will have to have an annual growth rate of about 286% each year over the next five years to hit these numbers. To put those numbers into perspective for a moment, it means that Uber is currently valued at 125x trailing annual net revenue.

Uber’s massive market value surpasses 80%+ of all S&P 500 companies, many of which have been around for 20, 30, 50 or more years (Uber was started in 2009). At first glance, the $50 billion valuation seems absurd. However, if the company manages to continue its current growth trajectory (seemingly doubling revenue every 12 months or less), it is not as crazy as one might presume. Still, this sky-high valuation isn’t without risk.

Uber inching up its take-rate in select markets makes more sense now. Just imagine the take when those inconvenient human drivers, with those those sometimes inconvenient proclivities, can be removed from the equation. I think it’s safe to say these numbers will incentivize further take-no-prisoner tactics against anyone who stands in their way, be it journalist, regulator or aggrieved customer.

At Pando, Paul Carr reports on how a Clinton crony, David Plouffe, has been replaced by a Cameron crony, Rachel Whetstone. Carr does a deep dive on Whetstone, something his media peers have made little to no effort reporting on. And they should, considering Uber is tapping a Margaret Thatcher 2.0 type:

Everyone in UK politics who I asked about Whetstone was agreed on one thing: She’s the person you bring in if you need to convince everyone that your company isn’t quite as nasty as it appears, and if your current spin doctors aren’t delivering the results you want. First that was Google, and now comes the biggest challenge of her career: Uber.

I have low hopes when it comes to the American business press covering Uber, but even I was surprised at how few journalists bothered to share even the most basic details of Whetstone’s background with their readers. That stuff sits barely below the surface and speaks volumes about the famously ultra-libertarian Travis Kalbnick’s decision to replace Plouffe with her at Uber: An Obama liberal booted upstairs to make way for a multi-generation Cameron conservative/libertarian.

Less shocking is the American’s media’s unwillingness to delve any deeper into the other bizarre web of connections that link Uber with Whetstone and her British political pals. People who go up against those folks rarely come away unsmeared, and we all know what Uber is capable of on that front. In any case, it takes a whiteboard and a lot of patience to even begin to get the threads straight — and there’s little evidence that anyone in Washington, Wall Street or Silicon Valley really cares what lurks under Uber’s hood, so long as it keeps proving fancy limos and killer profits.

Closer to home, Pete Talbot wonders how progressives can get ahead of these times that be a-changin’. Unfortunately I think the way he frames this issue shows that the conversation is already passing him by:

On one side you have entrepreneurs, smart phones, and the trendy, on the other: unions, regulations and institutions.

What’s a progressive to do?

I will hazard an answer. Progressives should start by understanding the scope of what they’re dealing with. Uber has quickly grown beyond the trendiness of disruptive technology into a regulation-smashing juggernaut without concern for labor or consumer safety. Local support by Montana Democrats is short-sighted. The trendy are a fleeting lot, and opportunists who take advantage will just be on to the next self-serving opportunity, leaving the consequences of their short-sightedness for others to deal with.

  1. “Regulation-smashing juggernauts”, here we come.

  2. Market forces are destructive, which is why most people in business spend their entire lives devising ways to hide from them. But some times old models have to go. It is hard to know what the future holds for Uber, but it has a Bitcoin feel about it.

    I just wish this process were a little more orderly, as lives are being destroyed and menacing characters are preying on the unsuspecting public, even apart from Plouffe and Whetstone.

    Swede, may you someday actually experience the market forces you worship in all their magic. You’re immune now and don’t even know why. When Rand did, she accepted Medicare and Social Security.

    • Well at least she contributed to both.

      • So do all of us Swede, except people who live on investment income. And anyway, she used her husband’s accounts. She also openly cheated on him. What a catch she was! What an intellectual giant!

        • “The Centers for Medicare and Medicaid Services has improperly paid millions of dollars to Medicare Advantage organizations on behalf of illegal immigrants.

          In a new report released Friday, the Department of Health and Human Services’ Office of Inspector General (OIG) revealed that for calendar years 2010 through 2012, CMS provided $26.2 million in improper payments to Medicare Advantage organizations for 1,600 “unlawfully present beneficiaries” — or nearly $16,375 per illegal immigrant.

          According to the OIG, CMS did not have policies in place to notify the Medicare Advantage organizations about the legality of potential beneficiaries. Without such data, illegal immigrants were able to enroll with Medicare Advantage organizations.”-Caroline May.

          • JC

            Chump change compared to Lockheed ($640 toilet seat) Martin’s government ripoff of a half-trillion for the F-35.

          • It is true that Medicare is heavily ripped off by the private sector. But it is a choice they make, to apply stricter standards which cost lots of money or to allow a certain amount of greed and graft to go through.

            Anyway the leakage in the Medicare system doesn’t begin to stack up against the waste fraud and abuse of the private system, not to mention the bureaucracy.

  3. Turner

    It won’t happen in my lifetime, but the obvious solution to many of our problems is to heavily regulate parasitic capitalism. Unless we do, they will continue ruining the planet.

    • JC

      “heavily regulate”? Nah, capitalism needs replacing.

      The ultimate form of creative destruction will replace capitalism with an economic system that is person-centered, instead of capital-centered.

  4. petetalbot

    Mr. Skink says of me:
    “Closer to home, Pete Talbot wonders how progressives can get ahead of these times that be a-changin’. Unfortunately I think the way he frames this issue shows that the conversation is already passing him by … ”
    Not sure how you came to that conclusion. I would say just the opposite; I’m starting a conversation by asking questions. I do that from time-to-time, especially when there might be gray areas in a debate.
    I don’t have all the answers and don’t know everything about all subjects. It must be great to have that gift, though.

  5. lizard19

    Pete, you aren’t starting a conversation, you are joining one that was started before this legislation was passed. it might have been more impactful for you to be asking your questions before one of your fellow Missoula Democrats did Uber’s bidding to pry open Montana markets.

    now that Uber is here all we can do is wait and see what happens. asking what progressives can do is pointless. progressives don’t have any significant political influence, they have ceded any influence to the uber-corrupt Clinton machine for 2016. your post lauding that snake, Jim Messina, is just one more sad example of how far gone the Democrats have become.

    • petetalbot

      Perhaps you missed my headline, lizard: Uber v. Taxis: a METAPHOR, or one of my comments: “I was trying to paint a larger picture … ”

      My question was basically how do progressives respond to an economy in transition, i.e. labor unions, regulations, small businesses, etc. I didn’t realize there were “starting” times for conversations. I’ll try to be more prescient in the future.

      I have criticized my “fellow Missoula Democrats” at times but not enough as I should, by your standards. And guess what? Not all Democrats have “ceded … to the uber-corrupt Clinton machine for 2016.” The way those who post and comment here loathe and lump all Democrats together borders on zealotry. There are no gray areas at this site anymore.

      And my post “lauding” Jim Messina was nothing of the kind. I made note as to how he sees effective campaigns should be run in this day and age but I also called for electoral reform. I found Messina’s remarks informative. Obviously, you didn’t.

  6. lizard19

    Travis Kavulla made a notable comment on Pete’s post, which I’ll repost here with a little clean up of the formatting:

    This same type of debate was playing out about 20 years ago, between the monopoly landline system owned by Ma Bell and its start-up competitors. The argument in favor of the former was that it paid high wages, that it was regulated by state utility commissions, that it performed a social-welfare function (using its lucrative urban monopoly to offer subsidies to rural or low-income consumers).

    Nonetheless, government stood aside (in some ways) and the following 20 years have seen the flourishing of competitive long-distance services, mobile telephony, VoIP over dedicated systems, over-the-top phone services like Skype, etc. There is still nostalgia for Ma Bell in some places, but I think the consensus is that the public has benefited enormously by freeing up the telecommunications industry.

    There are differences between telecom and the passenger motor-carrier industry, but the fundamentals are the same. We have a technology, as Pete says, that is disrupting the way things have always been done — and the way things have always been done is being held up (rather baselessly) as an innately safer, better-paying, regulated, you-name-it way of doing things.

    I’m glad SB 396 passed because it makes clear that 1) the PSC (which regulates these carriers) should not subject motor carrier businesses to a test of whether or not the market “needs” them and whether or not their would-be competitors cannot or will not meet that “need,” before a new company (be it a Transportation Network Carrier or another taxi company) starts operating; 2) the PSC will be the safety regulator of TNCs like Uber.

    Before Uber or a company like it starts in Montana, it still must apply for a license to the PSC, and at that time existing companies may file fitness-related protests. Additionally, the PSC has just started a rulemaking in preparing to enact SB 396. A formal public comment period will soon open, so please stay tuned!

    Travis Kavulla
    Montana Public Service Commissioner

  7. JC

    Democrats that advocate or allow the creative disruption of traditional democrat industries — those past strongholds of unionism for instance — will find that the workers they left behind during the radical economic transformations and trade treaties will eventually band together and creatively disrupt the democrat party…

  8. Our travels have taken us to places with and without regulated taxi service. Those without … It’s a jungle, the vehicles are crappy, we have to negotiate prices not knowing distances or rates. Cabbies hover around like a pack of dogs waiting for meat. They don’t give change. Locals tell us to watch our backs. Women traveling alone are a target.

    Those with regulation – drivers are relaxed, cars well taken care of, and rates published. Prices – hard to know. Least important factor however. So what if a cabbie, like a waitress, makes a good living? Who suffers? But it drives owners buggy that regular people make money investors feel entitled to.

    Both get the job done. One is chaotic and dangerous, the other safe and relaxed. The “free market” wears people down, makes them aggressive and over-assertive. That’s why people avoid it by whatever means possible. The more wealth and power one accumulates, the more one can avoid the free market. Corporations on one hand, unions on the other, crime syndicates, corrupt politics – all done to avoid the market, a destructive force in life.

    Travis talks about the phone company breakup, which coincided with technology advances in other areas. It was chaos. “Slamming” became routine practice, shysters lurking trying to get your long distance business by any means possible. The companies re-consolidated for the most part, monopolies back, to and they are protected once again from the free market. The American cell phone business is a giant rip off now. That’s they way they like it. They are protected from market forces.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

  • Pages

  • Recent Comments

    Miles on A New Shelter for Vets or an E…
    success rate for In… on Thirty years ago ARCO killed A…
    Warrior for the Lord on The Dark Side of Colorado
    Linda Kelley-Miller on The Dark Side of Colorado
    Dan on A New Shelter for Vets or an E…
    Former Prosecutor Se… on Former Chief Deputy County Att…
    JediPeaceFrog on Montana AG Tim Fox and US Rep.…
  • Recent Posts

  • Blog Stats

    • 1,691,415 hits
  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 2,734 other followers

  • May 2015
    S M T W T F S
  • Categories

%d bloggers like this: