- No, Uber's (still) not profitable: A relentless, world-leading innovator in ever-sweatier balance sheet tricks, accounting gimmicks and hopium.
- Hey look at this: Delights to delectate.
- This day in history: 2013, 2018
- Colophon: Recent publications, upcoming/recent appearances, current writing projects, current reading
No, Uber's (still) not profitable (permalink)
- "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)
Uber was, is, and always will be a bezzle. There are just intrinsic limitations to the profits available to operating a taxi fleet, even if you can misclassify your employees as contractors and steal their wages, even as you force them to bear the cost of buying and maintaining your taxis.
The magic of early Uber – when taxi rides were incredibly cheap, and there were always cars available, and drivers made generous livings behind the wheel – wasn't magic at all. It was just predatory pricing.
Uber lost $0.41 on every dollar they brought in, lighting $33b of its investors' cash on fire. Most of that money came from the Saudi royals, funneled through Softbank, who brought you such bezzles as WeWork – a boring real-estate company masquerading as a high-growth tech company, just as Uber was a boring taxi company masquerading as a tech company.
Predatory pricing used to be illegal, but Chicago School economists convinced judges to stop enforcing the law on the grounds that predatory pricing was impossible because no rational actor would choose to lose money. They (willfully) ignored the obvious possibility that a VC fund could invest in a money-losing business and use predatory pricing to convince retail investors that a pile of shit of sufficient size must have a pony under it somewhere.
This venture predation let investors – like Prince Bone Saw – cash out to suckers, leaving behind a money-losing business that had to invent ever-sweatier accounting tricks and implausible narratives to keep the suckers on the line while they blew town. A bezzle, in other words:
Uber is a true bezzle innovator, coming up with all kinds of fairy tales and sci-fi gimmicks to explain how they would convert their money-loser into a profitable business. They spent $2.5b on self-driving cars, producing a vehicle whose mean distance between fatal crashes was half a mile. Then they paid another company $400 million to take this self-licking ice-cream cone off their hands:
Amazingly, self-driving cars were among the more plausible of Uber's plans. They pissed away hundreds of millions on California's Proposition 22 to institutionalize worker misclassification, only to have the rule struck down because they couldn't be bothered to draft it properly. Then they did it again in Massachusetts:
Remember when Uber was going to plug the holes in its balance sheet with flying cars? Flying cars! Maybe they were just trying to soften us up for their IPO, where they advised investors that the only way they'd ever be profitable is if they could replace every train, bus and tram ride in the world:
Honestly, the only way that seems remotely plausible is when it's put next to flying cars for comparison. I guess we can be grateful that they never promised us jetpacks, or, you know, teleportation. Just imagine the market opportunity they could have ascribed to astral projection!
Narrative capitalism has its limits. Once Uber went public, it had to produce financial disclosures that showed the line going up, lest the bezzle come to an end. These balance-sheet tricks were as varied as they were transparent, but the financial press kept falling for them, serving as dutiful stenographers for a string of triumphant press-releases announcing Uber's long-delayed entry into the league of companies that don't lose more money every single day.
One person Uber has never fooled is Hubert Horan, a transportation analyst with decades of experience who's had Uber's number since the very start, and who has done yeoman service puncturing every one of these financial "disclosures," methodically sifting through the pile of shit to prove that there is no pony hiding in it.
In 2021, Horan showed how Uber had burned through nearly all of its cash reserves, signaling an end to its subsidy for drivers and rides, which would also inevitably end the bezzle:
In mid, 2022, Horan showed how the "profit" Uber trumpeted came from selling off failed companies it had acquired to other dying rideshare companies, which paid in their own grossly inflated stock:
At the end of 2022, Horan showed how Uber invented a made-up, nonstandard metric, called "EBITDA profitability," which allowed them to lose billions and still declare themselves to be profitable, a lie that would have been obvious if they'd reported their earnings using Generally Accepted Accounting Principles (GAAP):
Like clockwork, Uber has just announced – once again – that it is profitable, and once again, the press has credulously repeated the claim. So once again, Horan has published one of his magisterial debunkings on Naked Capitalism:
Uber's $394m gains this quarter come from paper gains to untradable shares in its loss-making rivals – Didi, Grab, Aurora – who swapped stock with Uber in exchange for Uber's own loss-making overseas divisions. Yes, it's that stupid: Uber holds shares in dying companies that no one wants to buy. It declared those shares to have gained value, and on that basis, reported a profit.
Truly, any big number multiplied by an imaginary number can be turned into an even bigger number.
Now, Uber also reported "margin improvements" – that is, it says that it loses less on every journey. It didn't explain how it made those improvements. But we know how the company did it: they made rides more expensive and cut the pay to their drivers. A 2.9m ride in Manhattan is now $50 – if you get a bargain! The base price is more like $70:
The number of Uber drivers on the road has a direct relationship to the pay Uber offers those drivers. But that pay has been steeply declining, and with it, the availability of Ubers. A couple weeks ago, I found myself at the Burbank train station unable to get an Uber at all, with the app timing out repeatedly and announcing "no drivers available."
Normally, you can get a yellow taxi at the station, but years of Uber's predatory pricing has caused a drawdown of the local taxi-fleet, so there were no taxis available at the cab-rank or by dispatch. It took me an hour to get a cab home. Uber's bezzle destroyed local taxis and local transit – and replaced them with worse taxis that cost more.
Uber won't say why its margins are improving, but it can't be coming from scale. Before the pandemic, Uber had far more rides, and worse margins. Uber has diseconomies of scale: when you lose money on every ride, adding more rides increases your losses, not your profits.
Meanwhile, Lyft – Uber's also-ran competitor – saw its margins worsen over the same period. Lyft has always been worse at lying about its finances than Uber, but it is in essentially the exact same business (right down to the drivers and cars – many drivers have both apps on their phones). So Lyft's financials offer a good peek at Uber's true earnings picture.
Lyft is actually slightly better off than Uber overall. It spent less money on expensive props for its long con – flying cars, robotaxis, scooters, overseas clones – and abandoned them before Uber did. Lyft also fired 24% of its staff at the end of 2022, which should have improved its margins by cutting its costs.
Uber pays its drivers less. Like Lyft, Uber practices algorithmic wage discrimination, Veena Dubal's term describing the illegal practice of offering workers different payouts for the same work. Uber's algorithm seeks out "pickers" who are choosy about which rides they take, and converts them to "ants" (who take every ride offered) by paying them more for the same job, until they drop all their other gigs, whereupon the algorithm cuts their pay back to the rates paid to ants:
All told, wage theft and wage cuts by Uber transferred $1b/quarter from labor to Uber's shareholders. Historically, Uber linked fares to driver pay – think of surge pricing, where Uber charged riders more for peak times and passed some of that premium onto drivers. But now Uber trumpets a custom pricing algorithm that is the inverse of its driver payment system, calculating riders' willingness to pay and repricing every ride based on how desperate they think you are.
This pricing is a per se antitrust violation of Section 2 of the Sherman Act, America's original antitrust law. That's important because Sherman 2 is one of the few antitrust laws that we never stopped enforcing, unlike the laws banning predatory pricing:
Uber claims an 11% margin improvement. 6-7% of that comes from algorithmic price discrimination and service cutbacks, letting it take 29% of every dollar the driver earns (up from 22%). Uber CEO Dara Khosrowshahi himself says that this is as high as the take can get – over 30%, and drivers will delete the app.
Uber's food delivery service – a baling wire-and-spit Frankenstein's monster of several food apps it bought and glued together – is a loser even by the standards of the sector, which is unprofitable as a whole and experiencing an unbroken slide of declining demand.
Put it all together and you get a picture of the kind of taxi company Uber really is: one that charges more than traditional cabs, pays drivers less, and has fewer cars on the road at times of peak demand, especially in the neighborhoods that traditional taxis had always underserved. In other words, Uber has broken every one of its promises.
We replaced the "evil taxi cartel" with an "evil taxi monopolist." And it's still losing money.
Even if Lyft goes under – as seems inevitable – Uber can't attain real profitability by scooping up its passengers and drivers. When you're losing money on every ride, you just can't make it up in volume.
Hey look at this (permalink)
- Labor Notes 2023 Tech Organizing Conference https://labornotes.org/techcon2023
Star Wars: Galactic Starcruiser https://adrianhon.substack.com/p/star-wars-galactic-starcruiser (h/t Super Punch)
'Unpatchable' vulnerability in Tesla's AMD chips allows free access to the cars' paywalled features https://www.pcgamer.com/unpatchable-vulnerability-in-teslas-amd-chips-allows-free-access-to-the-cars-paywalled-features/
This day in history (permalink)
#10yrsago Lavabit competitor Silent Circle shuts down its secure email service, destroys servers https://silentcircle.wordpress.com/2013/08/09/to-our-customers/
#10yrsago Bikram “Yoga” Choudhury accused of rape, sexual harassment, racism, homophobia, and unsafe practices related to the color green https://jezebel.com/bikram-yoga-founder-hates-sluts-and-fatties-loves-talk-1068127138
#10yrsago More on the NSA’s weird, deceptive, indefensible definition of “targeted surveillance” https://www.eff.org/deeplinks/2013/07/what-it-means-be-target-or-why-we-once-again-stopped-believing-government-and-once
#10yrsago Assault on Equestria: My Little Pony themed D&D game with a young kid! http://www.chippewavalleygeek.com/2013/07/assault-on-equestria.html
#10yrsago Court finds for man who rewrote the credit-card fine-print to give himself unlimited, interest-free credit https://consumerist.com/2013/08/09/man-tries-to-beat-bank-at-its-own-game-with-fine-print-that-gives-him-unlimited-credit/
#10yrsago NSA leak: US can spy on Americans, despite direct statements of President, Congress, top spooks https://www.theguardian.com/world/2013/aug/09/nsa-loophole-warrantless-searches-email-calls
#5yrsago My closing keynote from the second Decentralized Web Summit https://archive.org/details/decentralizedwebsummitmedia-2018-courtyard-2?start=475
#5yrsago Bad infrastructure means pacemakers can be compromised before they leave the factory https://www.wired.com/story/pacemaker-hack-malware-black-hat/
#5yrsago Florida’s prisons change tech providers, wipe out $11.2m worth of music purchased by prisoners https://www.eff.org/deeplinks/2018/08/captive-audience-how-floridas-prisons-and-drm-made-113m-worth-prisoners-music
#5yrsago Kill sticky headers: a bookmarklet to get rid of the web’s static blobs https://alisdair.mcdiarmid.org/kill-sticky-headers/
#5yrsago Defective Comcast security exposes 26.5m customers’ partial Social Security Numbers and addresses https://www.buzzfeednews.com/article/nicolenguyen/a-comcast-security-flaw-exposed-millions-of-customers
#5yrsago State of Georgia goes to court to defend voting machines that recorded 243% voter turnouts https://www.mcclatchydc.com/latest-news/article216056560.html
#5yrsago Everybody hates their cable company, unless the company is Google, or the city, or a tiny mom-and-pop https://www.consumerreports.org/electronics-computers/telecom-services/best-and-worst-home-internet-providers-a2853390170/
#5yrsago What should go in an IoT safety-rating sticker? https://memex.craphound.com/2018/08/09/what-should-go-in-an-iot-safety-rating-sticker/
- A Little Brother short story about DIY insulin PLANNING
Picks and Shovels, a Martin Hench noir thriller about the heroic era of the PC. FORTHCOMING TOR BOOKS JAN 2025
The Bezzle, a Martin Hench noir thriller novel about the prison-tech industry. FORTHCOMING TOR BOOKS FEB 2024
Vigilant, Little Brother short story about remote invigilation. FORTHCOMING ON TOR.COM
Moral Hazard, a short story for MIT Tech Review's 12 Tomorrows. FIRST DRAFT COMPLETE, ACCEPTED FOR PUBLICATION
Spill, a Little Brother short story about pipeline protests. FORTHCOMING ON TOR.COM
Latest podcast: The Internet Con: How to Seize the Means of Computation (audiobook outtake) https://craphound.com/news/2023/08/01/the-internet-con-how-to-seize-the-means-of-computation-audiobook-outtake/
- Medium Day (online), Aug 12
San Diego Union Tribune Festival of Books, Aug 19
Defcon (Las Vegas), Aug 10-13
Burning Man Center Camp, 1430h, Aug 29
EFF Awards (San Francisco), Sept 14
An Evening with VE Schwab (Des Moines), Oct 2
26th ACM Conference On Computer-Supported Cooperative Work and Social Computing keynote (Minneapolis), Oct 16
- Haunted Mansion Ghost Post Panel Live From Midsummer Scream
how big tech makes the internet worse (What's Gonna Happen)
Let The Platforms Burn: Bringing Back the Good Fire of the Old Internet (IETF117)
- "Red Team Blues": "A grabby, compulsive thriller that will leave you knowing more about how the world works than you did before." Tor Books http://redteamblues.com. Signed copies at Dark Delicacies (US): and Forbidden Planet (UK): https://forbiddenplanet.com/385004-red-team-blues-signed-edition-hardcover/.
"Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid, with Rebecca Giblin", on how to unrig the markets for creative labor, Beacon Press/Scribe 2022 https://chokepointcapitalism.com
"Attack Surface": The third Little Brother novel, a standalone technothriller for adults. The Washington Post called it "a political cyberthriller, vigorous, bold and savvy about the limits of revolution and resistance." Order signed, personalized copies from Dark Delicacies https://www.darkdel.com/store/p1840/Available_Now%3A_Attack_Surface.html
"How to Destroy Surveillance Capitalism": an anti-monopoly pamphlet analyzing the true harms of surveillance capitalism and proposing a solution. https://onezero.medium.com/how-to-destroy-surveillance-capitalism-8135e6744d59 (print edition: https://bookshop.org/books/how-to-destroy-surveillance-capitalism/9781736205907) (signed copies: https://www.darkdel.com/store/p2024/Available_Now%3A__How_to_Destroy_Surveillance_Capitalism.html)
"Little Brother/Homeland": A reissue omnibus edition with a new introduction by Edward Snowden: https://us.macmillan.com/books/9781250774583; personalized/signed copies here: https://www.darkdel.com/store/p1750/July%3A__Little_Brother_%26_Homeland.html
"Poesy the Monster Slayer" a picture book about monsters, bedtime, gender, and kicking ass. Order here: https://us.macmillan.com/books/9781626723627. Get a personalized, signed copy here: https://www.darkdel.com/store/p2682/Corey_Doctorow%3A_Poesy_the_Monster_Slayer_HB.html#/.
- The Internet Con: A nonfiction book about interoperability and Big Tech, Verso, September 2023
The Lost Cause: a post-Green New Deal eco-topian novel about truth and reconciliation with white nationalist militias, Tor Books, November 2023
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