nonsensically high valuation of uber
Uber will be the single largest value collapse in technology history. Here are the reasons why:
The service is a commodity. Users do not care about which driver or car picks them up as long as the driver is not crazy and the car is not filthy. (It is hard to preserve even such basic qualities at large scale. Generally speaking, you can not perform above average when you become almost as big as the market itself. This in turn increases your insurance cost per transaction.)
The technology is a commodity. It is no longer hard to build the basic application from scratch. (Even municipalities have started doing it themselves.)
Neither drivers or users are loyal to the company. Uber is fundamentally a utility app with very low switching costs. A lot of drivers and users utilize the rival apps as well. (Driver are looking for more rides and users are looking for cheaper prices.) In fact, there are even aggregator apps that help drivers juggle more easily between the different networks.
It is not a winner-takes-all market as it was imagined. Any network that is dense enough so that the average waiting time for the user is below 5 minutes is good enough. Killing competitors through predatory pricing does not change the basic market structure. If the market allows an oligopolistic structure, it will sooner or later (i.e. once Uber runs out of all the stupid money in the world to finance every ride) converge on one.
Unit economics is not improving. (In fact, as mentioned above, insurance cost per transaction is getting worse.) Rides do not scale since most of the costs are variable. (Cars are owned by the drivers and efficiency gains from their greater utilization quickly maxes out, especially since they are used for personal purposes as well. So there is not much for Uber to suck away.) The underlying (evil) hope is that once Uber becomes a monopoly, it will be able to relax and dictate prices. This is a false hope however since governments do not tolerate in-your-face physical monopolies, especially if they create negative externalities like luring people away from public transportation and increasing congestion. (They seem to be more lenient with abstract digital ones.)
With the arrival of autonomous cars, the whole industry will change. Any gains from building a driver network will be gone, making it easier to launch Uber-like services with sheer capital. (Make no mistake, there will be a LOT of new capital coming in. Germans will hit especially hard, old money will form alliances etc.) Autonomy itself will become quickly commoditized and centralized around a few intermediary technology companies who will be training all the models and centralizing all the data. Also, at some point, (as they do in the hospitality industry) users will start placing greater value on the consistency of quality. Hence, instead of riding in random cars, they will prefer to become members of the fleets owned by car manufacturers themselves. God knows what else will happen… Autonomy will be big disruptive wave with a lot of currently-unforeseeable consequences.
Nevertheless do not short-sell Uber when it goes IPO this year. It is backed by an aggressive giant called SoftBank which is ruled by an old man who is backed by an infinite amount of blood money. As Keynes said, markets can remain irrational longer than you can remain solvent, and it will for surely be the case for Uber.
