Here We Go Again: Tech Bubble 2.0... But "This Time It's Different"



Posted by Ed 3 mths ago
The doses of Delusionol(tm) required to believe "this time it's different" are becoming dangerous.
Here we go again, another tech bubble is expanding like a supernova and the financial media is declaring (as it does during every bubble) "this time it's different." File Tech Bubble 2.0 under memories are getting shorter or this time is never different:

The "Uber of dog-walkers" is worth a cool $1 billion pre-IPO. Or maybe it's the AirBNB of dog-walkers, but who cares? Just as any company with no hope of profits skyrocketed once it put blockchain or crypto in its name during the cryptocurrency mania of late 2017, now calling a dead-on-arrival start-up "the Uber of...." is enough to justify a billion-dollar valuation.

A scooter-rental company in a very crowded field of never-will-be-profitable scooter start-ups is worth a cool $1 billion--but heading to a $10 billion valuation because... well, it's the Uber of scooters.
Meanwhile, Uber and Lyft will never be profitable because their market is already commoditized.

Companies only generate billions of dollars of profit when they scale up within a moated sector to become a quasi-monopoly with pricing power and the ability to buy up or crush any competitors. Without a defensible quasi-monopoly, margins are low and pricing power is zero.

The truth is neither Uber nor Lyft will ever be profitable: their fixed cost structure is high, their pricing power is essentially zero and there is no way to establish a quasi-monopoly in a sector with a wide range of commoditized competing transportation options.

The cost of operating a very complex vehicle will never be near-zero, and neither will the liability. Many other transport options will always be available to customers, starting with walking, public transport, biking, arranging a ride with a friend and the "black market" ride-sharing opt


Ed 3 mths ago

Ed 3 mths ago
Let's check in on the Lyft IPO:

Ed 3 mths ago
Day Ja Voo?

Ed 2 mths ago
Uber's Big Problem: It's a Zombie Corporation That Can't Make Any Money

Analysts are questioning Uber's viability. Many are concerned it will never make a profit. There's too much competition.

Grandiose Plans

Uber wants to become the Amazon of everything transportation related. But a key question remains: Can Uber Ever Make a Profit?

Amazon started making profits eight years in. Uber is bleeding money badly.

Uber Has to Continually Raise Money

There are no barriers to entry other than raising money. The competition is intense and competitors have learned from Uber's mistakes.

Note the four food delivery competitors in the right panel in the lead chart. There are competitors in the scooter business as well.

Uber has a deal with McDonald's. Uber used to get a 20% commission on deliveries. McDonald's renegotiated the deal. Uber now gets a 15% commission.

Is that enough to make a profit? Year-to-date number provide a resounding no.

Uber Does Many Related Things, All Poorly

If Uber made money in one place it could afford to have cash drains elsewhere.

Compare Google to Uber. Google makes massive amounts of money off search engine advertising. It uses that free cash flow to fund many other endeavors, notable driverless car technology.

In contrast, Uber loses money at everything it does. It is also far behind Google (Waymo) in driverless technology.

Uber's Survival

As long as Uber has the confidence of investors, it can survive by raising money. But if that confidence wanes before Uber makes enough to pay interest on accumulated debt, Uber is toast.

Right now, Uber is a zombie corporation, totally dependent on investors' willingness to keep funding Uber's cash needs.

Mike "Mish" Shedlock

Ed 2 mths ago
Uber sued for 'hundreds of millions' in Australian class action

More than 6,000 participants have already joined the suit.

Uber is no stranger to lawsuits on any continent, but a new class action filing from four Australian states looks set to become one of the largest in the country's history.

Law firm Maurice Blackburn filed the suit at the Victoria Supreme Court on behalf of drivers, operators and licence owners from Victoria, New South Wales, Queensland and Western Australia. It says more than 6,000 participants have already joined on a no-win, no-fee basis, and potential damages could number "in the hundreds of millions of dollars," per Reuters.

The company states that the claimants aim to "hold Uber accountable for destroying their livelihoods," with case files accusing Uber of operating illegally and assisting its drivers to do the same.

According to Maurice Blackburn, Uber intentionally targeted Australian markets with less-stringent transport regulation, ignored local requirements to have a taxi or hire licence, and paid drivers' fines when they were caught breaking the rules.

This, alleges the suit, allowed Uber to quickly establish a strong presence in the relevant four markets that damaged licenced drivers' livelihoods.

Furthermore, the suit raises the controversial issue of 'Greyball,' a software update to the Uber app that showed fake 'ghost' vehicles to users believed to be transport officials, giving the illusion the app was working while not allowing them to book any rides. The software operated as Uber's version of a shadowban, essentially.

Elizabeth O'Shea, Senior Associate at Maurice Blackburn, comments:

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