The Fall of The Uber Menschen

Unless you've been living under a rock these last few years, you know that Uber is angling to Go Public and make a handful of folks really rich. At least, on paper. This missive has been germinating for some time, and began to gel a few days ago when I read that An Analyst finally said that the emperor has no clothes:

"The problem that Uber or any other incumbent faces is that the barriers to entry are very small," said Bob Hancké, an associate professor of political economy at the London School of Economics.

Finally, a quant with an ounce of sense.

It's clear that Uber, et al, represent a case of tech overwhelming good sense. There really is no intrinsic benefit to innterTube taxi service. Really. It should not surprise that the whole idea loses money. Taxi service is a local enterprise, everywhere.

And, of course, one must ask how Uber, et al, propose to make money? Well, let's go back to (at least) David Ricardo, who proposed a labor theory of value. LTV is most often conflated with Marx, but it wasn't his idea, and he didn't base his writings on it. There is an ultimate LTV, which does a thought experiment: how is physical capital created? The answer, of course, is that the process starts with some raw material, extracted by labor, which act is the value add. Each subsequent step is exactly the same: value add comes only from labor. Not a widely held idea, naturally.

But, in practical terms, how does Uber actually make money? If it ever does. Consider the cost structure of a generic business. All but labor, sans unions, are costs which are not easy unilateral by the business. Materials are gotten by contract. Land is gotten by contract. And so on. In other words, the only flexible cost is labor. So, of necessity, that's where the profit is: pay less than the value add.

In the case of Uber, there's also the gambit of escaping externality-enforcing regulation. You know, like the local taxi commission, which exists for reasons, if only to avoid clogging streets with empty taxis. Now, some may consider those reasons onerous, but on the other hand, it is never optimal to allow capitalists to impose externalities. Just ask the folks living in the vicinity of factory pig farms Down South.

So, also not too surprising is today's news that the Uber menschen have lowered the IPO share price. I bet they do again, and may be yet again. It's a nonsense business.

The only dumber 'service' of this transportation type is Turo. For all the same reasons.