No, Uber’s (still) not profitable

🌈 Abstract

The article discusses Uber, describing it as a "bezzle" - a confidence trick where the perpetrator knows they have the money but the victim does not yet realize they have lost it. The article examines Uber's history of predatory pricing, unsustainable business models, and deceptive financial reporting. It also highlights the role of transportation analyst Hubert Horan in debunking Uber's claims of profitability.

🙋 Q&A

[01] Uber as a "Bezzle"

1. What is the definition of a "bezzle" and how does it apply to Uber?

• A "bezzle" is defined as "the magic interval when a confidence trickster knows he has the money he has appropriated but the victim does not yet understand that he has lost it" (JK Gabraith).
• The article argues that Uber is a true "bezzle innovator", coming up with various fairy tales and sci-fi gimmicks to explain how they would convert their money-losing business into a profitable one, while in reality, Uber has been losing money on every ride.

2. How has Uber used predatory pricing and misclassification of workers to maintain its "bezzle"?

• Uber used predatory pricing to offer incredibly cheap taxi rides and always have cars available, even though they were losing $0.41 on every dollar they brought in.
• Uber misclassified its employees as contractors to avoid paying them properly and bearing the costs of maintaining the vehicles.

3. What are some of the unrealistic plans Uber has pursued to try to become profitable?

• Uber spent $2.5 billion on self-driving cars, producing a vehicle whose mean distance between fatal crashes was half a mile.
• Uber also pursued plans for flying cars and replacing all train, bus, and tram rides in the world, which the article describes as implausible.

[02] Uber's Financial Reporting and Profitability Claims

1. How has Uber used creative accounting to claim profitability?

• Uber has used various balance-sheet tricks and invented its own non-standard metric called "EBITDA profitability" to claim it is profitable, even though it is still losing billions of dollars.
• The article cites transportation analyst Hubert Horan's analysis showing how Uber's "profits" come from selling off failed companies it had acquired to other dying rideshare companies, and how Uber's "margin improvements" are actually due to cutting driver pay and making rides more expensive for customers.

2. How do Uber's financials compare to its competitor Lyft?

• Lyft, Uber's competitor, is slightly better off than Uber overall, as it spent less money on expensive props for its long con and abandoned them sooner than Uber.
• Lyft also fired 24% of its staff at the end of 2022, which should have improved its margins by cutting costs.

3. What are the implications of Uber's financial practices for its long-term profitability?

• The article argues that even if Lyft goes under, Uber cannot attain real profitability by scooping up its passengers and drivers, as it is still losing money on every ride.
• Uber's diseconomies of scale mean that adding more rides increases its losses, not its profits.