Loomio
June 22nd, 2017 23:21

Buy Uber

Chris Cook
Chris Cook Public Seen by 456

http://www.nakedcapitalism.com/2017/06/wheels-come-off-uber.html

Hubert Horan has analysed Uber in gruesome detail over a 10 part series on the Naked Capitalism site while Izabella Kaminska at FT Alphaville has also been picking off the Uber wings.

Clearly the C suite at Uber have come to the same conclusion, while some wag came up with this immortal line.....

“With no CEO, CFO, COO, and CIO, Uber is coming very close to becoming a self-driving company.”

If ever there were a candidate for a platform co-operative buyout, Uber is it, with a brief window of opportunity before it crashes and burns.

JD

Josh Davis June 23rd, 2017 06:33

There are a number of problems with that idea, imho. 1) Uber's business model is based on blatantly violating local and state laws. 2) As detailed in Horan's series, Uber does not have a legitimate value proposition. They've been hemorrhaging over $2 Billion per year. Riders are only paying 60% of the cost of their rides and Uber's investors are (foolishly) subsidizing the rest. 3) Besides violating public transportation laws, Uber's business model also relies on driver's essentially lying to their insurance agents. Transporting passengers for pay requires additional insurance that most drivers never get. 4) I could go on, but it's late. Just read Hubert's series...that company is a stinking pile of unicorn droppings.

As Horan detailed at great length, and as Yves has pointed out repeatedly, personal vehicle transportation has a well-understood cost structure. Uber has not invented anything that changes any of the major components of that. All their model does is push fleet maintenance costs onto drivers, evade local regulations, and operate as a ponzi scheme that transfers money from the pockets of gullible investors into those of Travis Kalanick...with cheap cab rides being but a temporary side effect of that operation. To quote Yves Smith:

"Even if Uber were able to drive literally every competing cab operator in the world out of business due to its ability to continue its predatory pricing, once Uber raised prices to a level where it achieved profits, new entrants (or revived old entrants) would come in. Uber will thus never be able to charge the premium prices (in excess of the level for a traditional taxi operator to be profitable) for the very long period necessary for Uber to merely be able to recoup the billions of dollars it had burned, mainly in subsidizing the cost of rides, let alone to achieve an adequate return on capital. And that’s before you get to the fact that systematically much higher prices would mean fewer fares and thus lower revenues and profit potential at the new pricing level."

So Uber is not, by any means, a company that I would encourage any cooperator to get involved in, ever (unless you're into losing money while breaking the law).

For those interested in all the gory details:
http://www.nakedcapitalism.com/?s=Uber

Matthew Cropp

Matthew Cropp June 23rd, 2017 13:26

I think @joshdavis's points are very valid - given the amount of sunk capital into the platform already, I can't imagine VCs will be very keen on walking away from the pile of burned cash and acquiesce to a pivot to a generative biz model.

That said, I agree with @chriscook1 that this moment might offer a strategic opportunity similar to BuyTwitter, so long as we ensure the tactics advance two implicit goals that were advanced by the Twitter campaign: spreading awareness of the (Platform) co-op model, and laying groundwork for a platform co-op alternative to springboard off of the energy of the campaign at its likely "failed" conclusion (as the Social.Coop Mastodon instance, which is now home to a few hundred co-op nerds, did off of Buy Twitter).

For this latter goal, I could see existing cab worker co-ops (Union Cab in Madison, Green Cab in Denver, etc.) as key stakeholders to engage, as such a campaign could be a catalyst for them to better network and develop a shared app that could be promoted as the Social.coop type "doing it now" prefigurative alternative at the conclusion of the campaign.

I have a contact at Union Cab who I've discussed this idea in general terms with before, and Jason Weiner is tight with Green Cab, so if there is energy for this, I'd be down for taking on convening a call between relevant existing cab co-ops...

Danny Spitzberg

Danny Spitzberg June 23rd, 2017 14:02

I see a #BuyUber as 95% spectacle, 5% strategy and action.

Unlike the beginning of #BuyTwitter, where their stock price was down to $16 from $66 at IPO and reports emerged that they were looking for an acquisition...I see no indication that Uber dealing with similarly serious weaknesses or threats.

Overall, Matt's perspective on our prospects for a campaign eclipses my own.

I will add that there is a TONNE of general organizing against Uber (nouberoakland.org ( http://nouberoakland.org ) is front of mind, as is the hardline Independent Workers Alliance and somewhat compromised Independent Driver Guild) that ought to inform any initiative we consider.

Also, i agree that the coalition organizing on behalf of co-op cabs seems like the absolute best group to start with.

Chris Cook

Chris Cook June 23rd, 2017 14:35

I've long been aware of the complete unsustainability of Uber, which is why I posted in the first place. It was never a question of if but when the shit hit the fan.

Naked Capitalism's Horan and FT's Izabella Kaminska documented the issues brilliantly, and the fact that the Uber C-Suite has done a runner (which is pretty much unprecedented) is what makes Uber such a great opportunity for a complete change in business model.

The point is (and my first jobs were in insolvency and company fraud investigation) that shareholders with even half a brain will no longer be looking for profit, but will rather being looking to minimise loss.

Uber's value (such as it is) lies in its driver and customer bases - let's call them the Uber Platform user group - and ICT/commercial Platform.

The value of a Platform Coop bid to shareholders is that the co-operative advantage (absence of returns to rent-seekers) means that all things being equal, a Platform Coop can provide a better exit for shareholders than any other buyer (and if you think Twitter was problematic Uber is uber-problematic).

My proposal for a migration to a mobility-as-a-service platform cooperative is in due course to partner with vehicle manufacturers and fuel suppliers (my forte) to provide fuelled vehicles to drivers in exchange for a share of the gross fare income. Then allocate a proportion of gross fare income to the redemption of $1.00 denominated Uber promises/credit instruments (the original form of 'stock' which predates common stock/equity and loan stock/debt) which we would exchange for Uber shares.

As Danny suggests, this outcome could be achieved by prototyping via a proposal to Uber for a proof of concept driver buyout in (say) Oakland, and if that works, to network the model rapidly.

JD

Josh Davis June 24th, 2017 17:07

Agree. Just what I was thinking. Jim from DAWN is also working with at least one taxi co-op, and I think maybe even a couple of them. I'd be happy to put people in touch if folks are serious about pursuing something.

Chris Cook

Chris Cook June 24th, 2017 17:40

Josh

I fully understand your point and sympathise with it. I agree that local apps with local taxi co-ops in the way you suggest is entirely possible.

Uber the (toxic) business will crash to zero for sure, and good riddance. Uber built their engine for consuming finance capital and drivers at phenomenal speed by deploying the worst kind of predatory capitalism. The existing app, a database of tens of thousands of (not exactly loyal - as you point out) drivers, customers, engineers and immense operational experience of running a networked business on a global scale constitute an asset right now with a very limited life span.

I see Uber (as I see Twitter) as an opportunity to demonstrate the superiority of the Cooperative model over predatory capitalism through what would essentially be a driver/staff/customer earn-out/assimilation.

The fact that investors get a better exit from Uber as a going concern through ethically sharing risk and reward than from a complete bust/liquidation is not only a small price to pay, it is also an object lesson for Uber investors (and for investors as a class) that Ethical is Optimal.

As someone said, we must solve our problems on the same speed and scale they have been created. I think that turning one of the most extreme examples of our toxic form of capitalism to a platform co-op could have a catalytic effect.

Since Kalanick still owns 60% of Uber and therefore has the most to lose (and gain) and appears after the tragic death of his mother to be re-assessing his approach to life, who knows what might be possible?

I envisage the Platform Co-operative as a 'Drivers' Club' platform co-operative with the potential to assimilate Uber as the platform service provider.

Best regards

Chris