Monday, March 19, 2018

Will Uber Survive?

According to a Forbes Magazine article dated December 14th, 2017, two amazing facts screamed out at me, underlining what I have been both thinking and saying: despite all their investment money, something in the range of 70 billion dollars, Uber may not survive.  Forbes tells us that in its seven year history, it has yet to show all those investors one penny of profit.  And in 2017, to the point that the article was written, Uber had already lost 3.2 billion dollars.  And further updating the misery, on February 14th 2018, CNBC said Uber's 2017 losses increased by 61 percent, resulting in a total loss 2017 loss of 4.5 billion.  The question obviously is, how is this sustainable, and like a comatose patient, when will the plug be pulled?

While there have been some investor grumbling, like Benchmark Capital's August 2017 fraud lawsuit against Uber and its founder, Travis Kalanick, there still appears to be some optimism left evidenced by the December 2017 move by Softbank (a Japanese multinational conglomerate) to take a 14% stake in Uber, thus making Kalanick an instant billionaire.  Again my question is, what will it ultimately take for the majority of Uber investors to suddenly realize that what they invested their money in is just a more transparent Ponzi scheme, where the illusion of profit exists solely to own their financial miscalculations because, while Uber is bringing in money, will it ever be enough to be  profitable?

Hopefully I don't have to remind anyone about the recent Bernie Madoff and his  defrauding of everyone within his investor circle?  While Madoff clearly was a compete liar, is Uber any more truthful by insisting that billions of small operator fares annually will not only pay back all inventor capital but also provide a tidy profit?  Is this "Alice in Wonderland" all over again?  Maybe.

Glancing online at various reports, it seems that Uber, at least recently, 2017 greater losses not withstanding, has been losing 2 billion dollars annually.  Adding it all up, including 2017, and we see a potential total loss of 16.5 billion dollars.  Subtract 16.5 from 70 billion and you get a total of 53.5 and lot of investor money down the financial drain.  While income does offset some of the loss, it remains a sorry situation for those interested in faster and more guaranteed gains.

Another puzzling factor is Uber's overhead and just what is bleeding them financially?  Looking it up, I find costs for lobbying, lawyers, driver acquisition and on-boarding, which I assume means app costs.  How this all adds up to 2 billion in losses yearly I don't understand which bring me back to my Ponzi scheme.  Maybe its true that you just can't make a profit constantly undercutting your competitors, and getting back to hypotheticals, the ability to make this a sustainable economic model is purely a pipe dream and nothing else.

One article I saw said that Uber felt its true and ultimate profitability will come from self-driving cars.  If that is true then Uber might want to rethink that notion because yesterday in Tempe, Arizona one of their autonomous vehicle struck and killed a pedestrian.  And this occurred even though it had a driver on board.

After reading 3 different articles about the accident,  a fourth one I discovered in the NY Times related that the State of Arizona had told all those makers of autonomous cars that they will remain totally free from state regulations, an assurance leading to a flood of autonomous road trials.  That fact alone should give anyone crossing a street in Phoenix or Tucson or Tempe pause because the state is now allowing completely driverless cars to be used in the developmental process thus transforming the average Arizona citizen into an experimental laboratory rat.

This is good governance?  Perhaps not but it shows the kind of deference Uber is provided.  Maybe soon everyone one will stop kissing innocent little Uber on the forehead and instead issue a good smack to the buttock.  Remember that age old adage, "spare the rod and spoil the child?"  It certainly looks like it might apply to the petulant Uber, puckering its lips and sticking out a nasty tongue.

And if this is what its like in Uber's childhood, how is it going to act during its adolescent years?  Run for the "financial" hills, everybody!

Postscript March 21st, 2018 Wednesday

Reading the March 20th LA Times article online (written by Russ Mitchell)  concerning the Tempe, AZ death of Elaine Herzberg caused by Uber's robot-car, I found the late 2016 quote by Arizona  Governor Doug Ducey to be telling:

"Arizona welcomes Uber self-driving cars with open arms and wide open roads. While California puts the brakes on innovation and change with more bureaucracy and more regulation, Arizona is paving the way for new technology and new businesses."

"Monday, the governor's office expressed condolences for Herzberg's family and said "public safety is our top priority"

For the record, the reason why the State of CA stopped Uber from testing was due to, one, Uber never having applied for the proper permits and  two, that one of their driverless cars was involved in a rollover accident.

I for one would not invest into Uber.  Might be a bad idea.

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