Uber and Lyft are going to fail -- and they should.
Updated: Nov 8, 2021
First things first - - I am a full-time rideshare driver and have been for over four years. I have given nearly 10,000 rides in total. The tone of this piece is undoubtedly going to come across as sour grapes, but that's not the intention. My aim is to provide insights to the Rideshare passenger and general public they might not normally get -- and maybe, just maybe, reach someone at Lyft or Uber and give them something to think about.
The term disruption has become one of the most bantered about and overused terms in business the last decade or so, specifically referring to startups mostly. Every startup is going to disrupt everything. It's nauseating. Uber is as likely responsible for this as any one company. Though it is a ubiquitous part of our culture 12 years later, the concept of using your smartphone to procure transportation really was a revolutionary and disruptive idea. Whatever your opinion is on the taxi cab industry, it's likely to not have the box very satisfied checked on a survey form. I have taken less than 5 cab rides in my entire life - and for good reason. All of these rides were regrettable for one reason or another. Uber would not have been able to kick over the garbage can that is the taxicab industry in a matter of months if it was a well-run, well thought of industry full of positive customer experiences. Using a taxi often meant getting in to a dirty vehicle with weird smells and a driver who might rip you off by taking the wrong route. That's of course if you could even get a cab after using a physical telephone to call a surly dispatcher who may or may not actually dispatch you a car. Fuck that noise. Enter Uber and Lyft stage left. The process was an order of magnitude more accessible, reliable, transparent and affordable. At least that's the way it was presented. The fact that the industry took on the name of Rideshare is still quite comical to me, as if drivers are just picking up people on the way to places that we were already going. All the Lolz. I suppose it is right on brand for Uber and Lyft though now that I think about it, as deception has been a hallmark of their businesses to all three of their major stakeholders since their beginnings - - the customer, the driver, and last but not the least -- their investors.
I am continually amazed by the fact that most of my passengers still have no idea about the financial status of either Uber or Lyft. Most assume that both companies are wildly profitable since rideshare has become a fixture in modern urban/suburban life. Nothing could be further from the truth. Uber is now 12 years removed from their founding, and they are still spectacularly unprofitable. How can this be? Everybody uses Uber! They have nearly 100 million monthly users! Well, it's pretty simple really:
Uber and Lyft have never charged appropriate amounts for a single ride in their entire existence.
You might think that awfully convenient for me to say since I’m a full-time driver. Stick with me here. I promise you that just because I’m in the driver's seat doesn’t mean I can’t impartially analyze my workplace. Uber and Lyft failing would mean that I would be out of a job, so I certainly don't have a horse in the race of their impending crash.
Uber has been the darling the venture capital world since the moment they started looking for other people’s money to lose. They were widely touted as the fastest growing company ever, and quickly became the world’s most highly valued private company by 2015. Their growth was unprecedented as they expanded the world over. All sounds great right?!? Not so fast.
What Uber did was create a technology platform that allowed them to “transform and disrupt” a shit industry that has been protected by various municipalities for the better part of a 100 years. Taxis would say that they are “regulated”, I would say their shitty industry has been protected. Uber was able to use technology to fill an enormous need nearly instantly. Yet even more so than making an easily accessible, slick app which matched supply (drivers) with demand (riders), I would argue that another factor was far more integral to their success.
This is why I have been incredulous to any supposed “success” that has been attributed to Uber during their existence. It’s not that they haven’t charged what the service is worth, it’s that they haven’t charged enough to even make the service viable. Whether you realize it or not as a passenger, every ride you’ve ever taken has been heavily subsidized by an investor somewhere. As is common with many tech companies, the focus has been entirely on growth and not about operating with any sort of common sense business fundamentals. It doesn’t take a degree from Wharton to understand a business needs to take in more money than they spend. Not Uber! Uber might be the G.O.A.T. at losing other people’s money. They have spent and lost money in spectacular fashion, losing 5.2 Billion in a single quarter. Holy shit Batman. “But we’re growing!” Always growth. Growth, Growth, Growth.
In a former life when I worked in the world of finance, a wise senior advisor told me something about the term growth that I will never forget:
“Growth sounds great in a board meeting. Growth looks great in an annual report. You can do a lot of things with growth, but you know what you can’t do with it? Buy anything. You can’t take growth to the bank. You can’t buy a yacht with it. You can’t put your kids through college with it. If you show me a company that is always touting and talking about their growth, I’ll show you a company that probably hasn’t made their first dollar yet.”
Boom. Perhaps no company in the history of American business has personified the "grow at all costs" mantra more than Uber. Sure, the dot bomb era of the late 90’s had all kinds of companies with screwy valuations that weren’t based on anything tangible, but nothing like Uber. It’s one thing to have been Amazon in 1997 who was still years away from profitability, but there was a reason for that. They could have been profitable long before they were, and furthermore posted far more profits along the way, but Amazon has made it a practice to continually reinvest profits in to their business. Uber is constantly reinvesting in themselves too -- it’s just not their money (conveniently) that they do it with. The next dollar they make will be their first. Here are just a few local businesses that are more profitable than Uber:
Neighborhood lemonade stand ran by 8 year old girl.
14 year old boy who mows lawns for $20 in the summer.
Girl Scout Cookie Stands
Anyone on Etsy.
You get the point. Queue extreme eye roll when investment analysts tout Uber’s “Growth” and state Uber's valuation at $92 Billion. Bullshit. You're worth nothing. You still haven't made a single honest dollar on 1 ride. If you give me a shit ton of cash and tell me I don’t have to make a profit on any individual unit of sale offered by my business, I will dominate any industry of your choosing. Imagine being able to offer housecleaning for $20? A G-Wagon for $49,999. Gasoline for $.99 a gallon. Get your house painted for $1000? A complete brake job for your car for $250? Sure! Oh yeah, and not only would you get these services and products for these artificially low prices, you’d also be able to get them nearly instantaneously like when you order a ride. Ludicrous right? Indeed! But that’s been Uber’s entire business model. No shit your growth was extra terrestrial Uber. You were allowed to violate the most basic of business principles from the get go without ever being held accountable for it. You indoctrinated millions of people the world over in to a price slot for a product that needs to cost at least twice what it does. Customers are now outraged by what rides cost and how long they have to wait to get them, and are actually starting to venture back over to cabs. Join me on a brief thought exercise.
What other service in the entire world can you pull out your phone and expect the person on the other end completing the service to be there within seconds or minutes and not pay an exorbitant fee for that convenience? I’ll wait.
There isn’t one. I grant you that driving a car takes nowhere near the skill of becoming an electrician, a carpenter, or even a skilled landscaper. But it’s still a service, and apparently one that is pretty valuable based upon the millions of rides that Uber drivers give each day. There are more reasons other than the lack of smartphones as to why services like Doordash, Uber, Instacart and so on weren’t available in 1985. Cars and restaurants and grocery stores weren’t invented yesterday. In 1985, if you wanted someone to do your grocery shopping for you, you needed to hire someone and pay them a wage they found acceptable enough to perform the service. Same with a cab. Pizza delivery was (and is) expensive, and they have their own employees brining you the food from a central location! The point is these services needed to stand on their own 2 feet. It wasn't technology that prevented normal people from being able to procure these services. It was price. “Normal” people didn’t have their groceries delivered. A friend or family member took you to the airport. You did your own grocery shopping. When you went out drinking with your friends in the city, the cost of actually getting home was a major consideration. This is not a “back in my day/you god damn spoiled millennials” argument. If you can pay for something, then by all means pay for it. What I am saying is that having these types of tailored services were the territory of the more affluent for good reason, they could actually afford them. In this sense, I would like to personally thank every investor in Uber and Lyft for essentially "donating" to help prevent drunk driving. You would have never done it directly, but that is essentially the public good that has come from your donation to Uber and Lyft, which is not insignificant.
Requesting that another human being perform a direct service for you immediately is expensive, no matter how unskilled you think the task might be. Uber has violated this basic principle, and now it’s customers have come to expect a service that is artificially cheap and available 24/7/365. The customer doesn't give a shit that the service isn't economically viable, only that it's available. Part of that indifference is a willful ignorance by both U&L and their customers to the working conditions and wages of drivers based on something that's going to make some of you very uncomfortable -- race.
This is an an issue in my opinion Uber has gotten a complete pass on. It's entire business model is based on exploitation of immigrants and POC. It’s no secret that a majority of full-time Uber drivers are not guys named Gerald Johnson from Springfield, Illinois. If you take 10 random Uber rides in any major US market, you are going to run in to a lot more Muhammads, Abdis and Yousefs than Johns and Tonys. Every time I go in to a local hub for either Uber or Lyft, it's one of the few places in my life where I am the minority as a white male. That's not racist, that's reality. Exploiting the labor of immigrants and POC has been a founding principle of big business in America since Jamestown. People who are thousands of miles from home who don’t have the same language skills as you are far easier to exploit. While I’m not trying to enter Colin Kappernick territory of saying that modern day NFL players are akin to slaves, I do believe that many Uber drivers are akin to what I would call modern day farm labor, which is to say an unorganized group of largely ethnic minority workers who are not given any of the protections that even other unskilled, low wage workers are. Nobody gives a shit about Uber drivers because the majority of business travelers, vacationers and drunken bar hopping millennials who frequent the service don't actually know any. Sure, they might know someone who "did Uber for awhile" on the weekends, between jobs, etc but they don't actually know any grinders. The drivers that actually make the service go. Uber and Lyft know they can essentially get away with whatever they want because the overwhelming majority of their drivers have nothing in the way of leverage to make them change their business practices. Internal customer service for Uber and Lyft makes quitting your cable service seem like a day at a luxury spa. It's so bad that I have literally been driven (no pun intended) to toddler moments by their extreme difficulty to contact, total lack of empathy, and outright incompetence. Take Lyft for example. The only way for a driver to contact support is through a "chat bot" in the app. They don't even have the decency to present you with an endless phone tree of transfers like other behemoth corporations. The "support" that you get is a boiler room of CSA's in a country far, far, away that are trained to simply copy and paste policies from their website. They have ZERO knowledge of any individual market, nor do they have the authority to actually fix anything. It's pathetic, and infuriating. I have given up on contacting them. If one of my rides get's fucked up due to app malfunctioning and I don't get properly compensated for it (which happens waaaaaaaaaaaay more often than you would think), I just go on to the next ride because I don't have 45 minutes to sit and try to get it fixed with the mindless chatbot I will be assigned to. Rest assured, you can be damn sure the customer payment went through though. In their minds, Uber and Lyft don't have to provide any sort of support to their drivers because they think there is an endless supply of us. The pandemic has shown us that this just isn't the case. Even Uber drivers have limits to the amount of bullshit they are willing to put up with. While Uber and Lyft have gone to great efforts this year touting all of the bonuses and incentives they have offered to drivers to get back in the car, it's still not working. Why? Because seasoned drivers know these bonuses are fleeting and temporary, and the second that U&L think they don't have to offer them, they won't. This has been the way the U&L have operated since the beginning though, constantly injecting cash in to bonuses and incentives instead of just offering fair pay for fair work. As anyone who has ever been a part of labor bargaining knows, once you give the other side something major it's nearly impossible to take it back. In this sense I completely understand why U&L have fought drivers becoming employees so fervently. They know if this actually happens, they're finished.
If the value proposition that you offer to your customers crumbles if you actually have to hire employees, your business model is SHIT and deserves to fail.
It is not within the scope of this article to detail the hundreds of millions of dollars and incredible effort U&L have spent to keep it’s drivers from becoming actual employees, but it makes it that much easier to abuse and exploit workers if your name isn’t on their shirt. They even send out internal emails telling drivers to advocate against themselves, using propaganda and scare tactics implying that if fares are raised or drivers are made employees, we'll all suffer. Convenient. It's always been my belief that U&L have been short sighted in it’s militant opposition to making drivers employees. I can’t imagine how difficult it is to run a business when all your workers have to do to not work for you any more is sign out of an app. Live by the sword, die by the sword. Much in the same way passengers have next to zero loyalty when it comes to which app they choose to use to get a ride, this same attitude exists with drivers. Boop, now I drive for Lyft. Boop, now I drive for Uber. Back and forth, only following the next carrot in front of you. Rideshare is a shit business because neither it’s customers nor it’s workers give a damn who provides them with the service/paycheck, only caring what maximizes either savings or earnings. Brand loyalty is next to zero, with both companies having been locked in fatalistic competition for years now. There are no U&L "stans" willing to cape up for them in the way that customers of Apple or Tesla would. Say something about Elon Musk to Tesla people or suggest to an iPhone user that they use something else and you'll have whacked a beehive of true believers you want no part of. Neither Uber or Lyft can offer anything that would differentiate themselves from each other, and worse yet most of their customers could give a shit about which one of them they use.
They don't have a product. They have a platform.
One of the great ironies of Uber's platform is that normal economies of scale don't really apply to their business model. A facebook (sorry, Meta) network goes viral with next to zero customer acquisition costs, Amazon gains efficiencies as they build more distribution centers, Tesla streamlines production with more factories. None of this applies to Uber. If they are successful in a market such as Seattle, it's no easier for them to replicate that success in a market such as say, Memphis. They have had to fight these same customer and driver acquisition battles in every market they enter. Operating this way has cost them billions upon billions of dollars, as they are in a never ending death spiral of litigation with local municipalities considering the legality and regulation of their service. It also doesn't take a genius to figure out if you are constantly injecting cash in to customer acquisition (riders) in the way of discounts, and bonuses/incentives to attract and keep drivers, you are going to come down with a very bad case of what I like to call Double Ledger Diarrhea. It's economic stigmata in which cash is bled profusely from the eyes and anus. I'm sorry Uber, I'm afraid it's terminal.
Can you imagine how unprofitable Uber and Lyft would be if they actually had to make drivers employees? Paying for things like health insurance, 401ks, unemployment insurance, HSA’s, deferred comp, sick leave, paid time off, etc etc etc. That’d be a wrap folks! There isn’t a clear path to profitability with contracted workers, imagine if U&L actually had to fairly compensate their drivers. Still plenty of money in the coffers for Uber's shithead ex-CEO and Grand Marshall of the Toxic Bro Culture Travis Kalanick to be worth $2.8 billion though. Only in America could someone run the most unprofitable company in the history of the world, oversee and enable a workplace culture that turned a blind eye to the safety and well being of its female employees, and still leave with enough fake money equity to cash out for $2.8b. It would be amusing if it wasn’t so disgusting.
Which brings me to U&L's greatest slight of hand, their accounting practices. When companies don't have any actual profits that can be quantified by GAAP's, they turn to a wall street invention called EBITDA. This stands for Earnings Before Interest, Taxes, Depreciation and Amortization. That's a mouthful, but let me summarize it for you in a way that real people can understand.
"If you don't count all of this shit over here that costs us tons and tons of money, we are actually profitable!"
Supposedly it's an accurate way of measuring real cash flow in a business. Uh huh. You can shovel that shit in to someone else's mouth and tell them it's pudding. It's not. If Warren Buffet thinks that EBITDA is bullshit, that's good enough for me. I've asked Mike Posner, artist of the super catchy 2015 song "I took a pill in Ibiza" to help me playfully adapt the first 2 verses to help better explain EBITDA as it applies to Uber.
Lemme tell you bout' EBITDA
It show investors that we coo'
But if any one looks, we just a buncha crooks
But Fuck it, its what all of us do
We livin' fraud u lent laaaaaaay
We use EBITDA just to prove
That we real big ballas cuz we gross lots a dollars but our balance sheet is covered in poo
You dont wanna know why we see,
No chance of prof a ability
You dont ever wanna see what the fuck,
Is really going on……
You dont wanna bleed cash like this,
Losing b's every QUARTER like this
Just keep look at EVITDA.
Look at our E--VIT--DA
All…..we do, is shovel poo, shovel poo,
All…..we do, is shovel poo, straight on you
Even just this week, Uber reported it's first ever "operating profit." Again, all the LOLZ. They still lost $2.4 Billion, largely associated with their stake in Chinese rideshare platform Didi taking it in the shorts. How did they get this stake in Didi? Oh yeah, they got it when they sold their Chinese business to rival Didi after turn tailing it out of China in the wake of losing more billions and trying to pretty up their balance sheet prior to their IPO. Are you seeing the pattern here? If you happen to have a few billion dollars you no longer desire to be in possession of, give them to Uber! They will be sure to donate it to a good cause for you. Just don't expect it back.
The bottom line is that Uber is the drum major of a gig economy parade that just doesn’t make any sense if normal economic principles and basic worker rights are applied to it. It doesn’t need to be any more complicated than this:
If customers were actually presented with the true cost of the service they were consuming, also factoring in what standard working conditions for actual employees would cost, they likely would choose to consume a whole hell of a lot less of it. Think about it -- how may less Ubers would you take if it cost 2-3 times as much as it does now? I'm guessing a substantial amount, because the services which U&L provide are largely a convenience and not a necessity.
It might not seem so, but the world would keep right on spinning if Uber and Lyft were to just vaporize. Somehow everyone got where they were going prior to 2009, and we would figure it out again. They have added nothing to the economy unless you consider thousands and thousands of part time, benefit-less jobs a good thing. Someday the investors of Uber are going to want to stop hearing about EBITDA and other phony-baloney corporate accounting practices saying they are profitable, and actually see a real fucking profit in the way that anyone with half a brain for business could quantify.
Spoiler Alert: It ain't comin'.
I'm Ryan Marks, a full-time rideshare driver, entrepreneur, and Editor of Ryan on Everything. I write about anything that interests me, which is a lot. My folksy, sarcastic, irreverent, off the cuff writing style is a reflection of who I am and how I think. I treasure your feedback, however contrarian to my opinion it may be. Help me build a community of free thinkers and bullshit sniffers.