Is the CEO of Uber reading my blog? He almost seems to be quoting me!
Uber has come under a lot of criticism lately, mostly for its corporate culture. In the early days, it was lauded for its Wild West style of doing business, intimidating critics and ignoring charges of sexism and racism.
But lately, they've been changing their tune, acting almost like sensitive liberals going on an apology tour. In the latest brouhaha this morning, the CEO of Uber apologizes for dressing down one of his drivers. What he said sounds like something quoted for my blog:
"Some people don't like to take responsibility... They blame everything in their life on somebody else. Good luck!"
This sounds an awful lot like something I would have said regarding externalizing your personal problems. People want to blame their own personal problems on other people. But nobody put a gun to this guy's head and told him to be an Uber driver.
I have thought about using Uber as a customer, but the hassle of setting up an account seems like a bit much, and I rarely spend much time in cities where they have the service. Plus, all the negative things I have heard about Uber make me pause.
I thought about being an Uber driver - for about ten seconds - and then realized that like delivering pizzas, all you are doing is selling your car to Uber, a little bit at a time. Drivers for Uber don't realize that the money they are making as "drivers" also includes the depreciation and operating expenses of their cars. In reality, they might not be making much at all, which is good for Uber but bad for the drivers. And from what I read, they have a lot of driver turnover as a result.
While what the Uber CEO said was kind of harsh, it was also true. If you drive for Uber and don't like the pay structure, then find a job somewhere else. If it weren't for the existence of Uber, that driver wouldn't have a job in the first place. Or would he?
The fundamental problem with Uber as I've stated before is it is merely an unregulated taxi service. Taxi services have been heavily regulated over the years for very good reasons. In the early days of the automobile, taxis were largely unregulated and as a result we ended up with a system largely like Uber is today.
Drivers did not have to have commercial licenses, nor did they have to charge standard fares. People complained about being ripped off and charged outrageous rates. Drivers, trying to compete with each other often cut rates to the point where nobody was making money and safety of passengers was at risk.
Today, the taxi system in Mexico works the same way. In Mexico, taking a taxi can sometimes take your life. Many taxi drivers are in fact criminals in Mexico City, and they rob, rape, or kill you rather than take you to your destination.
To eliminate cutthroat competition as well as traffic jams from unlicensed gypsy cabs, many cities including New York went to a medallion system or other form of regulation to license taxi cabs and drivers. This put a limit on the number of cabs available in the city, and over time the price of medallions skyrocketed to over a million dollars.
Taxi drivers, however, charged standardized fares, and were paid standardized amounts. And many immigrants found that driving taxi was a good first job when entering the country. Uber has no such regulations, other than its own internal rules, which are very lax.
Uber has also recently cut driver pay which angered many drivers. And they also appear to be taking seriously, for the first time, complaints by customers, employees, and the media.
And the reason for this is simple. It's not that they really care about us at all, but that they want to do an IPO and sell stock in the company so that the founders can cash-out and buy new Ferraris.
In order to run a successful IPO, they need to show that the company is profitable or will be profitable soon. So cutting driver pay helps their bottom line look better. In the beginning of the company, like most dot-com nightmares, they lost money at a rapid clip. By overpaying drivers and undercharging customers, they attracted a lot of business in a short period of time. Drivers were estatic as to how much money they were making and customers were thrilled to be taken to their destination for far less than traditional taxi cabs.
In a way this mirrors the results of pets.com. Pets.com sold pet food for below cost and was hemorrhaging money every quarter. They spend enormous sums of money on Super Bowl ads and other gimmicks in order to attract attention, assuming that down the road somewhere they would make a profit. That never happened. Once the money well ran dry, the company folded rather quickly.
I'm not saying the same thing could happen to Uber, but it's not impossible either. There is little barrier-to-entry in this business, other than to have some it guy write an app over the weekend and set up some servers to run the whole damn thing. And indeed there are other competitors such as Lyft already in the market.
So this begs the question, why is Uber any sort of particular value as an IPO stock?
And the answer come of course, is that it isn't. They are selling something that anybody else could sell - a commodity item. There are no barriers to entry in this business, and other competitors could enter the marketplace on a moment's notice and take away a huge chunk of their business overnight. They could end up being the AOL of ride sharing apps.
And that is why Uber is suddenly finding religion - being all sensitive and whatnot, trying to project a new, professional image, much as the President did last night with his not-State-of-the-Union address. The Uber people already have shown their stripes, and their Cheshire Cat act this time around is for one reason and one reason only, to make money by selling out in an IPO.
The comments of the CEO of Uber remind me of that of the former CEO of Groupon. He really didn't care about the business or anything for that matter, so long as he could cash out in the end, which he did.
Investing in these dot-com nightmares is for idiots.
UPDATE: Uber is backtracking from its earlier positions in a very similar manner to that of another famous high-flying company that has gotten a lot of negative press, namely Chick-fil-A.
The founder, Mr. Cathy now admits he never should gave gotten involved in the gay marriage debate and is distancing his personal and religious beliefs from that of the company.
Of course, the entire point is that he wants to do an IPO and cash out not only for himself but for his family, and you can't do that if there's negative press, pending lawsuits, or lack of profits. Mr. Cathy only have to worry about negative press. Uber has to worry about all three.