In what has to be seen as a desperate bid to become profitable—“[t]he company has promised to be profitable on an adjusted basis before interest, taxes, depreciation and amortization by the end of next year”—Uber has sold its self-driving car unit.[1] I don’t know any accountants myself, but of course that promise, with those exclusions, has to have them rolling their eyes hard, if not howling on the floors in laughter, because all of those are real costs and there is no rational basis for excluding them. Skepticism that the company will ever be profitable is longstanding.[2]
“The problem with Uber is, they cannot make money,” said Aswath Damodaran, an NYU corporate finance professor who has been skeptical of Uber’s valuation for years. “Nobody is making money [in ride-hailing]—so it can’t just be a company-specific problem. It is a business model that is not working.”[3]
Uber has been laying people off, including engineers.[4]
The secret sauce always had to be self-driving car technology, but that doesn’t make any sense either.[5] And now that they’ve sold that development effort off, admitting, effectively, that it won’t come to fruition anytime soon,[6] there’s no longer any reason at all to believe the company will ever really be profitable. There’s going to have to be a reckoning here, and I expect it to take down Lyft as well.
And that will mean I’m out of the only job I can get.[7] And a lot of drivers—none of us making very much money, usually less than minimum wage,[8]—will be hurt.
But Uber’s outrageously well-paid executives? The ones who sold investors on this mess? You know, they’ll be just fine.
- [1]Heather Somerville, “Uber Sells Self-Driving-Car Unit to Autonomous-Driving Startup,” Wall Street Journal, December 7, 2020, https://www.wsj.com/articles/uber-lyft-face-a-no-sharing-economy-11603710180↩
- [2]Rich Alton, “Basic economics means Uber and Lyft can’t rely on driverless cars to become profitable,” MarketWatch, August 12, 2019, https://www.marketwatch.com/story/basic-economics-means-uber-and-lyft-cant-rely-on-driverless-cars-to-become-profitable-2019-08-12; 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; Richard Durant, “Uber’s Profitability Problem Is Structural,” Seeking Alpha, August 21, 2019, https://seekingalpha.com/article/4287055-ubers-profitability-problem-structural; Edward Helmore, “Will Uber ever make money? Day of reckoning looms for ride-sharing firm,” Guardian, August 4, 2019, https://www.theguardian.com/technology/2019/aug/04/uber-ride-share-lyft-ipo-earnings; Megan McArdle, “Uber can’t keep bleeding money, can it? It apparently thinks it can,” Washington Post, November 5, 2019, https://www.washingtonpost.com/opinions/uber-cant-keep-bleeding-money-can-it-it-apparently-thinks-it-can/2019/11/05/4aa4fec0-000b-11ea-8501-2a7123a38c58_story.html; Tom McKay, “Surprising No One, Uber Continues to Hemorrhage Cash,” Gizmodo, November 4, 2019, https://gizmodo.com/surprising-no-one-uber-continues-to-hemorrhage-cash-1839625062; Stephen Wilmot, “Uber’s Long Road to Profits,” Wall Street Journal, August 22, 2019, https://www.wsj.com/articles/ubers-long-road-to-profits-11566471068↩
- [3]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↩
- [4]Megan Rose Dickey, “Uber lays off 435 people across engineering and product teams,” TechCrunch, September 10, 2019, https://techcrunch.com/2019/09/10/uber-lays-off-435-people-across-engineering-and-product-teams/; Timothy B. Lee, “Uber, losing billions, freezes engineering hires,” Ars Technica, August 9, 2019, https://arstechnica.com/cars/2019/08/uber-freezes-engineering-hires-amid-mounting-losses/; Heather Somerville, “Uber Shedding About 350 Jobs to Shore Up Business,” Wall Street Journal, October 14, 2019, https://www.wsj.com/articles/uber-shedding-about-350-jobs-to-shore-up-business-11571092680; Heather Somerville and Mark Maurer, “Uber Cuts More Than 400 Technical Jobs,” Wall Street Journal, September 10, 2019, https://www.wsj.com/articles/uber-cuts-more-than-400-technical-jobs-11568144111↩
- [5]Rich Alton, “Basic economics means Uber and Lyft can’t rely on driverless cars to become profitable,” MarketWatch, August 12, 2019, https://www.marketwatch.com/story/basic-economics-means-uber-and-lyft-cant-rely-on-driverless-cars-to-become-profitable-2019-08-12↩
- [6]Ryan Felton, “Uber Is Doomed,” Jalopnik, February 24, 2017, https://jalopnik.com/uber-is-doomed-1792634203; 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↩
- [7]David Benfell, “About my job hunt,” Not Housebroken, n.d., https://disunitedstates.org/about-my-job-hunt/↩
- [8]Farhad Manjoo, “The Uber I.P.O. Is a Moral Stain on Silicon Valley,” New York Times, May 1, 2019, https://www.nytimes.com/2019/05/01/opinion/uber-ipo.html; Christopher Mims, “In a Tight Labor Market, Gig Workers Get Harder to Please,” Wall Street Journal, May 4, 2019, https://www.wsj.com/articles/in-a-tight-labor-market-gig-workers-get-harder-to-please-11556942404; 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/; Kari Paul, “Uber drivers plan shutdown over ‘poverty wages’ as company goes public,” Guardian, April 25, 2019, https://www.theguardian.com/technology/2019/apr/24/uber-drivers-strike-ipo; 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↩
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