My intuition might be right or it might be wrong, but a Wall Street Journal article on shakeups at Uber and Lyft provoked a sense of deja vu in me. I can’t help but suspect we’re seeing the beginning of the end for these companies.
I know what experience my pessimism draws on: It was the time when the dot-com boom was so far out of hand that even I got sucked in. Linuxcare had a lot of people working for it who were really not that different from me, albeit coming from more, if not much more so, financially secure positions. I was a San Francisco taxi driver at the time (November 1999), suffering a lot of financial uncertainty as The City added ever more medallions trying to improve taxi service while my most prominent memories of being a cab driver are of the times I was waiting for or searching for fares. A lot of other workers came from non-tech industries. It was a time when if you were breathing, you could have a decent-paying job.
But as this went on and offices were being rearranged into new and larger spaces, I remember sitting next to my then-boss, watching what seemed like ludicrous extravagance, and asking him, “This doesn’t make sense, does it?”
He said no, confirming my fears. And he was reasonably competent to know: He’d studied business in college and followed that path through his career. He mysteriously disappeared from the company shortly after that conversation; in retrospect, I think he’d been at Linuxcare for less than a month.
We did another office reshuffle after that, this time moving into a cavernous basement at 650 Townsend Street (we’d been on an upper level before that) but it wasn’t long after that that more trouble signs began to appear.
Linuxcare had always been distribution-neutral but suddenly we were contemplating a merger with TurboLinux, a low-quality distribution that had apparently gained traction in Asia. And we were laying people off—not the relatively inexpensive people like myself, but the high-priced expert-level talent.
I jumped ship, only to find I’d landed at a company that was also funded by venture capital and that, in addition, had a totally, remarkably, and unrealistically ambitious business plan. That was my last real job, and it ended in 2001.
Linuxcare is only a memory. The company I landed at, Axis Personal Trainers and Spa, remains a fraction of its former size.
I’ve been hearing about the structural unprofitability of Uber for a while, but the same paradigm really applies to Lyft as well. Both companies rely on the successful development of self-driving technology in their long-term business plans. This has been beset by problems.
It’s not been a situation that made sense for drivers who are treated as contractors rather than employees, often earning less than minimum wage and ineligible for the labor protections due real employees, either. And it doesn’t make sense for cities, who’ve borne the brunt of increased traffic. It doesn’t make any sense for anybody, really, except the passengers who’ve been getting subsidized fares. And it’s hard to see how it even can make sense.
Which recalls the lesson I took from my dot-com experience: If it doesn’t make sense, it doesn’t make sense, and it cannot last.
I rather strongly suspect that more than a few people at these companies should heed the advice my mother attributed to her father: “Take the first buy-out offer.” Subsequent offers will only get worse, my mother explains, and the company continues going down the toilet.
I won’t be among those in a position to even receive such an offer from Uber or Lyft but I know she’s right.
- Eliot Brown and Sarah Nassauer, “Uber Cuts Third of Marketing Staff; Lyft Chief Operating Officer Exits,” Wall Street Journal, July 29, 2019, https://www.wsj.com/articles/uber-cuts-third-of-marketing-staff-lyft-chief-operating-officer-exits-11564430556↩
- See David Benfell, “What Uber and Lyft get right,” Not Housebroken, February 12, 2019, https://disunitedstates.org/2019/02/12/what-uber-and-lyft-get-right/↩
- My experience at Linuxcare—it lasted less than two years—remains the only experience I’ve had where I felt I was actually making a living.↩
- When I joined Axis Personal Trainers and Spa, the company planned to expand to five hundred stores, one hundred of these to be complete by the end of the year. It had three unbelievably luxurious, truly gorgeous stores at the time. I wondered how that many could even be built within that time frame. As venture capital folded its checkbooks, a founder returned to run the company. Among the first things she did was that she outsourced the information technology (IT) department where I worked. The company is now down to one store in Menlo Park.↩
- David Benfell, “About my job hunt,” Not Housebroken, n.d., https://disunitedstates.org/about-my-job-hunt/↩
- Eliot Brown, “Uber Wants to Be the Uber of Everything—But Can It Make a Profit?” Wall Street Journal, May 4, 2019, https://www.wsj.com/articles/uber-wants-to-be-the-uber-of-everything-11556909866; Ryan Felton, “Uber Is Doomed,” Jalopnik, February 24, 2017, https://jalopnik.com/uber-is-doomed-1792634203; Yves Smith, “Uber Is Headed for a Crash,” New York, December 4, 2018, http://nymag.com/intelligencer/2018/12/will-uber-survive-the-next-decade.html; Julia Carrie Wong, “Disgruntled drivers and ‘cultural challenges’: Uber admits to its biggest risk factors,” Guardian, April 12, 2019, https://www.theguardian.com/technology/2019/apr/11/uber-ipo-risk-factors↩
- The two companies are conflated in the vernacular. Uber receives more media attention likely due to its size and market reach. And since I have removed the Uber decals from my car (I stopped driving for them when the company got weird about paying—a huge red flag for me), I continue to hear my Lyft passengers say on their phones that they are in an ‘Uber.’↩
- Greg Bensinger, “Uber Resumes Self-Driving-Vehicle Program After Arizona Accident,” Wall Street Journal, March 27, 2017, https://www.wsj.com/articles/uber-resumes-self-driving-vehicle-program-after-arizona-accident-1490641844; Greg Bensinger and Jack Nicas, “Alphabet’s Waymo, Lyft to Collaborate on Self-Driving Cars,” Wall Street Journal, May 15, 2017, https://www.wsj.com/articles/alphabets-waymo-lyft-to-collaborate-on-self-driving-cars-1494813169; Michael J. Coren, “Uber’s need for self-driving cars before running out of money may endanger the entire industry,” Quartz, March 21, 2018, https://qz.com/1233951/ubers-need-to-deploy-self-driving-cars-before-it-runs-out-of-money-may-endanger-the-entire-industry/; Megan Rose Dickey, “Uber will not reapply for self-driving car permit in California,”TechCrunch, March 27, 2018, https://techcrunch.com/2018/03/27/uber-will-not-reapply-for-self-driving-car-permit-in-california/amp/; Patrick George, “Uber Has No Damn Business Testing Self-Driving Cars,” Jalopnik, March 22, 2018, https://jalopnik.com/uber-has-no-damn-business-testing-self-driving-cars-1823982487; Adrienne LaFrance, “Can Uber Survive Without Self-Driving Cars?” CityLab, March 27, 2017, https://www.citylab.com/tech/2017/03/can-uber-survive-without-self-driving-cars/520911/; Alejandro Lazo and Greg Bensinger, “Arizona Governor Suspends Uber’s Self-Driving Cars From Roads,” Wall Street Journal, March 26, 2018, https://www.wsj.com/articles/arizona-governor-suspends-ubers-self-driving-cars-from-roads-1522113198; Christopher Mims, “Self-Driving Cars Have a Problem: Safer Human-Driven Ones,” Wall Street Journal, June 15, 2019, https://www.wsj.com/articles/self-driving-cars-have-a-problem-safer-human-driven-ones-11560571203↩
- Cyrus Farivar, “What’s Uber and Lyft drivers’ median hourly wage? $10 or lower, report finds,” Ars Technica, March 6, 2018, https://arstechnica.com/tech-policy/2018/03/whats-uber-and-lyft-drivers-median-hourly-wage-under-4-report-finds/; Sam Levin, “Uber and Lyft drivers’ median hourly wage is just $3.37, report finds,” Guardian, March 1, 2018, https://www.theguardian.com/technology/2018/mar/01/uber-lyft-driver-wages-median-report; Natasha Lomas, “MIT study shows how much driving for Uber or Lyft sucks,” TechCrunch, March 2, 2018, https://techcrunch.com/2018/03/02/mit-study-shows-how-much-driving-for-uber-or-lyft-sucks/; Robert Maxim and Mark Muro, “Uber’s IPO fallout underscores the need for a new labor model,” Brookings, May 23, 2019, https://www.brookings.edu/blog/the-avenue/2019/05/23/ubers-ipo-fallout-underscores-the-need-for-a-new-labor-model/; Alexa Noel, “Revised MIT Study Says Uber, Lyft Drivers Make About $8 or $10 per Hour,” Points Guy, March 8, 2018, https://thepointsguy.com/2018/03/revised-mit-study-says-uber-lyft-drivers-make-about-8-or-10-per-hour/; Julia Carrie Wong, “Disgruntled drivers and ‘cultural challenges’: Uber admits to its biggest risk factors,” Guardian, April 12, 2019, https://www.theguardian.com/technology/2019/apr/11/uber-ipo-risk-factors↩
- Take all of these citations with a grain of salt but only a grain of salt. While I have methodological issues with all, or nearly all, of it, I think the overall picture is probably accurate: Emily Badger, “Is Uber Helping or Hurting Mass Transit?” New York Times, October 16, 2017, https://www.nytimes.com/2017/10/16/upshot/is-uber-helping-or-hurting-mass-transit.html; Katie Dowd, “Why is San Francisco traffic so bad? Uber and Lyft are to blame, says city,” SFGate, December 13, 2016, http://www.sfgate.com/bayarea/article/San-Francisco-traffic-Uber-Lyft-SFMTA-blame-10791265.php; Joe Fitzgerald Rodriguez, “SFPD: Uber, Lyft account for two-thirds of congestion-related traffic violations downtown,” San Francisco Examiner, September 25, 2017, http://www.sfexaminer.com/sfpd-uber-lyft-account-two-thirds-congestion-related-traffic-violations-downtown/; Nikil Saval, “Uber and the Ongoing Erasure of Public Life,” New Yorker, February 19, 2019, https://www.newyorker.com/culture/dept-of-design/uber-and-the-ongoing-erasure-of-public-life; Faiz Siddiqui, “A new study says services like UberPool are making traffic worse,” Washington Post, July 25, 2018, https://www.washingtonpost.com/news/dr-gridlock/wp/2018/07/25/a-new-study-says-services-like-uberpool-are-making-traffic-worse/; Heather Somerville, “San Francisco investigating whether Uber, Lyft are public nuisances,” Reuters, June 5, 2017, http://www.reuters.com/article/us-san-francisco-rideservices-idUSKBN18W2F3 See also David Benfell, “San Francisco’s war on Uber and Lyft drivers,” Not Housebroken, September 27, 2017, https://disunitedstates.org/2017/09/27/san-franciscos-war-on-uber-and-lyft-drivers/↩
- Ryan Felton, “Uber Is Doomed,” Jalopnik, February 24, 2017, https://jalopnik.com/uber-is-doomed-1792634203; Faiz Siddiqui and Greg Bensinger, “Uber’s first day of trading ended deep in the red over gig-economy fears, Washington Post, May 10, 2019, https://www.washingtonpost.com/technology/2019/05/10/uber-ipo/; Georgia Wells, “Uber Cites Tight Competition After Posting $1 Billion Loss,” Wall Street Journal, May 30, 2019, https://www.wsj.com/articles/ubers-first-quarter-loss-tops-1-billion-11559246846↩
- My qualifications can be seen here: David Benfell, “The mother of the social sciences,” Not Housebroken, n.d., https://disunitedstates.org/the-mother-of-the-social-sciences/↩
- Despite my qualifications, I have been unable to find a real job since the dot-com crash in 2001: David Benfell, “About my job hunt,” Not Housebroken, n.d., https://disunitedstates.org/about-my-job-hunt/↩