We’re All Killing Uber Just By Using It

(Source: https://www.vice.com/en_au/article/zmjew8/were-all-killing-uber-just-by-using-it)

Uber lost another $5.2 billion this quarter and continues to lose money. For now, we’re just getting subsidized rides from Silicon Valley investors.

Uber just reported that in the past three months, it lost $5.2 billion (BILLION!!). As the business press spills black ink explaining away Uber’s red ink, this is a good opportunity to remember why the ride-hail company’s business model is not only unsustainable but a fundamental threat to the public.


Uber (nor any other ride-hail company) has never earned a profit: Before its IPO, Uber kept a tight lid on its profits and losses. From what some analysts have revealed, the numbers were abysmal. Uber had a net loss of $2.6 billion in 2015, $3.8 billion in 2016, $4.5 billion in 2017, and $3.9 billion in 2018. So far, Uber has lost over $6.3 billion in 2019. Commentators (and Uber) have been quick to argue the lion’s share of this quarter’s loss ($3.9 billion) comes from one-time costs related to going public, but this is not the first time an accounting trick has been invoked.

In Q1 2018, Uber claimed its first profit ($2.5 billion) after selling failed operations in Southeast Asia and Russia for approximately $3 billion. In its S-1 prospectus released before the IPO, Uber claimed there was a $5 billion profit improvement that turned a nearly $4 billion operating loss in 2017 into a $987 million profit in 2018. The $5 billion is largely on paper: it comes from non-tradeable equity and debt it gained after selling its operations to competitors in China, Russia, and SE Asia, but also Uber’s valuation of how much those competitors (and the equity/debt they gave Uber) was worth. In other words, Uber has deliberately used accounting tricks to seem more profitable to investors and the public.

Uber isn’t more efficient, it just has more investors: As an economic model, Uber is actually more inefficient than any standard taxicab company. The costs for taxicab companies can be split into four parts: vehicle, corporate, fuel, and labor costs. Uber shifts vehicle costs onto drivers, but costs end up being higher for drivers because they can’t manage assets as well as a centrally managed multinationals like Uber. In theory, shifting costs onto drivers saves Uber money in the short-term but in actuality costs more as drivers end up fighting for higher compensation or benefits. Uber has higher corporate costs than standard taxicab companies since it is a global corporation with an army of lobbyists, public relations professionals, app development and IT staff, executive staff, and real estate costs. Taxicab companies can negotiate for bulk discounts on fuel, but Uber abandons this and shifts the cost totally onto the driver. Uber’s driver costs are lower than the traditional model, but only because it pays starvation wages and doesn’t offer traditional benefits like healthcare or a 401k.

Typically, this business model would be paid for with passenger fares. But Uber’s passenger fares are artificially low because it uses investor money to subsidize trips, attract customers, and undercut competitors. This means that Uber is losing money on many of its rides. Taxicab companies can’t operate like this because they don’t have the billions in investor capital that Uber does. Simply put, Uber is losing money in part because its fares are too low; it’s long-game is to undercut competitors long enough for them to go out of business so it can jack up prices, or to develop driverless car technology before it completely runs out of money, pushing its expenses on drivers down toward zero.

Uber’s success relies on its ability to tell stories. Frankly, we use Uber because it’s often more affordable, available, or reliable than taxicabs or our crumbling public transit systems.

Uber has claimed that its “technology” gave it a competitive edge and was responsible for all the things customers enjoyed. But its technology did not stop its failures overseas, nor has it allowed Uber to operate efficiently, let alone generate a profit.

Uber has claimed that its success came from the freedom drivers had to “be their own boss.” Not only do Uber’s algorithms manage drivers more tightly than human bosses would, but Uber relies on the majority of the work being done by a minority of full-time workers.

Uber has been called an early example of the “sharing economy.” The sharing economy, however, has long been established as a dud: it’s a rentier economy where low wages, precarious employment, high debt, and extreme wealth inequality forces us to rent everything. The difference between riding in a taxi and “ridesharing” is that the former has regulations and the latter has investor subsidies.

Uber’s investors want a monopoly at any cost. Herein lies the ultimate point. Uber’s investors have thrown so much money at Uber because they are making a simple bet: Uber will become a monopoly. The only thing standing in its way is that it has no idea how to make any money.

Disclosure: I previously worked with the Independent Drivers Guild, a labor organization for ride-hail app drivers in New York City, as an organizer during their 2018 campaign for an industry-wide living wage.

This article originally appeared on VICE US.