Will the Uber/Lyft IPOs Finally Change the Public Narrative About Ridesharing?(nakedcapitalism.com) |
Will the Uber/Lyft IPOs Finally Change the Public Narrative About Ridesharing?(nakedcapitalism.com) |
This is just so blatantly false that it's hard to take the rest of the article seriously. Let's take just a cursory glance at Uber and Lyft's efficiency advantages:
* Uber and Lyft have massive efficiently advantages over traditional taxi cabs and ride services. Taxis drive around the city burning fuel while they look for someone to wave them down. This results in considerable wasted time and gas between rides. Uber any Lyft drivers connect to the internet to get hailed by drivers, thus getting rides at a much higher rate and without burning gas driving around waiting to get hailed.
* Uber and Lyft handle payment, thus avoiding the issue of cabs with credit card machines that don't work - and more often than not, mysteriously start working again when the passenger explains that cabs (at least in my city) are required to have operating credit card machines and if the machine is inoperable the ride is free.
* The fact that ride share companies don't hail drivers on the street means that they are not required to be a part of the artificially constrained supply of taxi medallions. This allows for much lower barriers to entry for drivers, and eliminates the need to spend six figures on medallion.
* GPS tracking of riders and drivers is a safety benefit.
Saying that Uber and Lyft did not develop efficiency advantages is just willfully ignorant. There's valid complaints to be raised about these companies, but saying that they have not developed any efficiently advantage is just plain wrong.
>> * The fact that ride share companies don't hail drivers on the street means that they are not required to be a part of the artificially constrained supply of taxi medallions. This allows for much lower barriers to entry for drivers, and eliminates the need to spend six figures on medallion.
That is not efficiency, that is regulatory circumvention. I think almost everyone agrees it is a circumvention that is good for consumers. But once you drive down the cost of medallions through competition you have no advantage.
You sound so passionate about the advantages of Uber and Lyft I hope you are holding a lot of Uber and Lyft stock.
No it is not. A medallion is required to accept rides from people that hail you from the street. Rides, say, scheduled over the phone are not required to have medallions. Services that you call and schedule a car to take you to the airport, for example, do not require medallions. These have been around for decades before Uber or Lyft. Uber any Lyft just found an effective and fast way of scheduling rides over the phone.
> You sound so passionate about the advantages of Uber and Lyft I hope you are holding a lot of Uber and Lyft stock.
Unfortunately none. I'm just point out the blatant falsehood of saying that Uber and Lyft did not develop any market efficiently.
The next line from your quote was.
>These subsidies distorted normal price signals which in turn subverted the ability of consumers to allocate resources to the most efficient competitors.
I think that makes clear that while Uber did introduce some efficiencies, they still were not competing on an even playing field given their massive funding
I don't think so. The article wrote that Uber, "skipped the difficult process of finding legitimate efficiency advantages" It sure seems to me that the author is claiming that Uber did not find efficiency advantages, or at least not any "legitimate" ones. This isn't the only place where the author essentially claims that Uber and Lyft provide no value:
> The narratives Uber has successfully manufactured are the key to how $80 billion was created out of thin air and key to the subversion of the market discipline that would normally limit these resource misallocations and welfare losses.
Apparently Uber's $80Bn valuation was "created out of thin air" and not, you know, building and engineering an internet based ride-sharing application.
> Uber is the breakthrough case where the propaganda-type narratives that dominate partisan political coverage successfully developed a multi-billion dollar private company from scratch.
This is just a small excerpt of a whole section that essentially tries to claim that Uber and Lyft's sole reason for their valuations were the narrative and hype they built up around their brands.
Personally, I think this author thinks that Uber and Lyft are going to be the next Theranos - the way he tries to attribute the former two's valuations with a narrative and propaganda rather than their product seems very similar to how Theranos was covered after its collapse. But unlike Theranous, Uber and Lyft actually have a product. One that may not turn out as well as its later investors as hoped, perhaps. But it's not going to crashing down to the bottom like a company that actually fakes having a product..
In fact, whoever came up with this nonsense is so distant from reality that he even failed to acknowledge that the main criticism that incumbent taxi services direct at rideshare services is that rideshare companies have a lower operational cost due to lack of expenses such as purchasing medallions.
The efficiencies you state did not cause them to have lower prices though, the lower prices came the effect of the funding that turned into subsidies.
On top of that, it's not just lower prices it's also better service. I'm sure there's some people that have their Uber horror stories, but I've had several cab drivers that said some really creepy stuff (stuff that a >6' man like me just kinda cringes at, but I can definitely see it being very uncomfortable for women). It's night and day, Uber/Lyft drives have always had clean cars, didn't pull any route shenanigans, and often had amenities like water and wifi. My only bad experience was when a driver messed up the destination and ended up getting on the Bay Bridge. He apologized profusely, ended the trip immediately on the app (so I barely got charged anything), and drove me to my destination.
While I think it's true that these companies are offering rides at unsustainable rates at the moment, I don't see customers ditching Uber and Lyft for cabs even if prices rise by 20-30%.
Do rideshare companies have lower operational costs? Taxi's have presumably been profitable seeing as they dont have funding backing and have been around for years. while the two biggest rideshare companies dont make a profit
A taxi medallion is required to accept rides from people that hail you from the street. That's it. Companies that schedule rides via phone do not require medallions, and never have. These have existed for decades, I remember my family using them to get to the airport when I was a kid in the 90s. Uber and Lyft just found a way to schedule rides via phone much, much quicker.
> Do rideshare companies have lower operational costs? Taxi's have presumably been profitable seeing as they dont have funding backing and have been around for years. while the two biggest rideshare companies dont make a profit
Taxi companies have been profitable, yes, but a large portion of their profitability comes from the artificially constrained supply of taxis. The medallion system constrains supply, thus inflating the cost of the service. Taxi companies' profitability was due to government interference, which let taxis grow complacent and offer non-competitive services. And now that they have competition from ride sharing, taxis are struggling. Taxis apparently aren't profitable when they actually have to compete.