Uber’s Dystopian Bet

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Individual investors will get to buy stock in Uber for the first time next week. What’s the bet they’ll be making?

It’s pretty dark, if you ask me.

A future world in which Uber thrives — it hasn’t yet figured out how to actually make money in our world — would be characterized by three broad accomplishments:

First, it has put its competition out of business. For the quick trips that account for almost 95% of all fares, riding in an Uber is no cheaper than taking a taxi, and can often cost more because of its surge pricing policy. Its app is a more convenient way to hail a ride than hoisting a finger in the air [disclosure: I use it just like you do], but the service it sells isn’t necessarily safer or more reliable. 

So the only way it crushes its competition is by outlasting them, which means operating at a loss for the foreseeable future. 

If a foreign company followed this strategy, it would be considered DUMPING and nobody would tolerate it. But since Uber’s mediocre, costly product comes wrapped in flowery language about technology and disruption, it gets a pass.

Second, then it has to replace its human drivers with robots. Even on a good day, Uber will struggle to make a profit as long as it has to pay and incentive drivers; by replacing them on its balance sheet with automatons, it can shift that expense to a CapEx investment (perhaps getting a third-party to underwrite the cost and just lease the service for its service). 

Robots also don’t need to eat or sleep, and will never demand a raise.

Of course, achieving this goal assumes that individuals, unions, cities, and a host of other entities and associations will allow Uber to put many more thousands of people out of work. It means they’ll have to change things like the way traffic and access to urban centers is managed, and how infrastructure upkeep is financed. Laws will have to be changed to accommodate it.

There are likely a host of other impacts that we can’t even imagine, and most certainly don’t feature in Uber’s prospectus. The Law of Unintended Consequences won’t cost it a dime. Ever. It’s a price externality that we’ll be forced to cover.

Third, it has to succeed in beating all of the other companies that are equally (or better) positioned to deliver the same service.

Uber’s just a data collector operating on tech that isn’t unique under a brand that isn’t terribly likable. But it has data on rides, from which it can extrapolate all sorts of insights not just about where and when people want to go places, but who they are, with whom they associate and, of course, what they want to buy .

Sound familiar? It’s the same business plan at Amazon, Google, and Facebook, among many other lesser-known names. Even the robot driving thing is anything but exclusive to Uber; the same tech brands along with every car company are planning to put robot cars on the streets sometime in the near future.

Ultimately, the bet underlying Uber’s IPO is that this future is inevitable, and the only question is which brand will dominate it.

It’s interesting that Uber’s original investors made a different bet; its founders, along with various banks and VCs, hope that the rest of us would believe that the future it’s pursuing is inevitable, and assume that our only hope is to try to profit from it.

In doing so, we individual investors will make those original owners fabulously wealthy. They’ll walk away from Uber and any consequences of its activities, and find another dark promise to hoist upon the world.

The rest of us will have to wait until its competitors are destroyed and its drivers are robots.

Only then will our investments pay off. 

What a dystopian bet. 

One thought on “Uber’s Dystopian Bet

  1. Derivative contracts covering the bonds would be something over which Kalanick could not exercise his authority. And they thus offer another potential way to counter-bet on Uber. You could short the debt—right?

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