Uber and Crystal Balls

No Uber, lah.

Back in June, Salon published a listicle detailing “5 Major Threats to Further Hasten Uber’s Decline.” Listing the sexual harassment lawsuits, the mishandling of a driver rape case, improper driver classification, the Waymo issue, and Greyball, it was better clickbait than it was journalism, doing little more than offering a summary of recent headlines. Thanks for the update, Salon.

While each of these represents a serious crisis, and while the company is being tested in its ability to deal with one, much less all of them, arguably each of these are, separately and collectively, crises that the company can survive.

Rather more ominous is the insight offered by RadioFreeMobile on the accelerating erosion of Uber’s global markets. “First Uber lost China, then Russia, and now it looks as if South East Asia may go the same way.”

He then goes on to detail the strategic investments made by Softbank and Didi into Grab, the dominant ride-hailing platform in Malaysia, Singapore, Indonesia, Thailand, Vietnam and Philippines, with a 97% share in those markets. A dominant market leader fortified with loads of cash means that Uber is essentially locked out of markets with over 560 million people, in addition to the 1.5 billion Chinese and 300 million Russians who will not be using an Uber service soon.

The big question now is where India and Brazil will go.

Uber is on its back foot in international markets. You can argue, as does RadioFreeMobile, that the distractions listed by Salon are not helping, and you’d be right. But those issues are not the cause of Uber’s missteps outside the US: the strategic flaws that have undermined Uber’s global expansion predate Salon’s list and are rooted in the nature of the company.

As I said recently on Twitter, when historians ultimately close the book on Uber, they will agree that the fall began with Uber’s failure in China. Not that Uber’s China missteps will be seen as the cause of the company’s demise, mind you, but as the first clear indication that its strategic miscalculations and flawed leadership left the rest of the world beyond Uber’s reach.

Shannon

I think looking for a “cause” beyond the inherent flaws in the ridesharing idea is missing the forest for the trees.

No one will “win” in ridesharing because it’s broken in three fundamental ways:

1. Insurance. The actuarial modelling will catch up, and private citizens will be priced out of the market

2. Rider safety. Although flawed, the taxi model that (in most places) assures a rider that their driver can drive to a certain standard, and is known by law enforcement, offers assurance that ridesharing simply cannot.

3. Economics. Without some sort of fiat-based monopoly, ridesharing is a guaranteed race to the bottom. Pure classical economics damns it as surely as anything else.

David Wolf

All great points. I’ll go one step further: I think the shared economy is nonsense, a house of cards that will eventually collapse when established players get their acts together. Uber is doomed, but so are Airbnb and Ofo.

As to the reasons for Uber’s demise, let’s expand this based on your thoughts.

Uber is hitting a short-term wall because of its bad publicity, and will eventually underperform its valuation because:

a) it has failed to become a monopoly, locking it in to a race to the bottom and endless battles for both drivers and riders;

b) it is awful on driver competence/rider safety, and has no way out of that quandary unless it professionalized its driver base, thus killing ridesharing;

c) insurance will be too expensive, and

d) its failure in international markets deprives it of the ability to cross-subsidize developed markets an effort to overcome the insurance and rider safety issues there first.

Uber could have saved itself by playing things a bit differently, starting out as a disruptor with ridesharing, and once they had crushed or permanently weakened taxis and the livery business, used their global footprint to cross-subsidize their market-by-market transition to become the dominant global taxi and livery company. They would not have been able to pull that off in every market, but even if they’d been able to manage in enough, they could have done licensing deals elsewhere.