Can Uber Ever Deliver Part Four Understanding That Unregulated Monopoly Was Always Ubers Central Objective. Yves here. To underscore the point that Hubert Horan is making, you cant achieve a monopoly if you are a high cost producer who has no prospect of achieving economies of scale or scope in a field with few barriers to entry. As weve discussed, Ubers app is not difficult to replicate, Uber drivers now often work with multiple ride sharing services, and Uber is particularly vulnerable to local driver consortia where the ownership is mutualized or charges to drivers are set at a level only to defray the cost of operating the enterprise. By Hubert Horan, who has 4. Horan has no financial links with any urban car service industry competitors, investors or regulators, or any firms that work on behalf of industry participants. Uber Is Staggeringly Unprofitable, Is the Industrys High Cost Producer, Cannot Grow Into Profitability, and Has no Meaningful Competitive Advantages Uber is currently the most highly valued private company in the world. Since its start in 2. To identify useful statistics, you must have a solid grasp of cause and effect. If you dont understand the sources of customer satisfaction, for example, you can. The P4 PPPP organizational model. Purpose, People, Planet, Probity or Purity or Principles. The P4 diagram right and summarised below advocates four principles or. Copyright 2007 Metrus Group, Inc. Under review with HR Planning. The contents of this article are proprietary and should not be quoted without attr ibution to. What is a Balanced Scorecard Theres a lot that goes into explaining this topic, but lets begin with the Balanced Scorecard definition The Balanced Scorecard. Screen-shot-2011-04-04-at-3.11.49-AM-484x300.png' alt='Four Major Drivers Of Customer Profitability' title='Four Major Drivers Of Customer Profitability' />Uber has been on a steady path towards domination of an urban car service industry that had been competitively fragmented and structurally stable for over a century. This series of articles has focused on the question of whether an Uber dominated industry would actually improve the efficiency of the urban car service industry and improve overall economic welfare. Capital markets have invested 1. Uber, producing a venture capital valuation of 6. Have those investorsprimarily Silicon Valley billionairesbeen making society better off by reallocating resources from less productive to more productive uses These articles applied standard financialcompetitive analytic approaches used to evaluate the potential impact of major market restructuring caused by new entry or other exogenous forces, andor major increases in industry concentration on industry efficiency and consumers. The first article presented the evidence that Uber is a fundamentally unprofitable enterprise, with negative 1. Uber did not achieve any meaningful margin improvement between 2. Uber imposed cutbacks to driver compensation. Ubers ability to capture customers and drivers from incumbent operators is entirely due to predatory competition funded my massive investor subsidiesUber passengers were only paying 4. Amazon-profit-crushes-estimate.jpg' alt='Four Major Drivers Of Customer Profitability' title='Four Major Drivers Of Customer Profitability' />The second article provided a breakdown of the taxi industrys cost structure, and demonstrated that Uber was the industrys high cost producer, with a significant cost disadvantage in every cost category except fuel and fees where no operator could achieve any advantage. Flying Wheel Police Patch. It also explained that Uber could not grow into profitability because there were no significant scale economies related to any of these cost categories. The third article debunked a range of claims about potential sources of Uber competitive advantage that might explain its ability to drive incumbents out of business none were based on actual evidence of industry economics, and none of the claimed sources had ever had ever produced major competitive impacts in any other industry. The findings from the three posts are entirely consistent with one another, and consistent with the conclusion that Uber could never generate sustainable profits in a competitive market. Ubers lack of cost competitiveness explains its massive losses, its lack of scale and network economies explains the lack of margin improvement, the financial and cost evidence is consistent with the finding that Uber lacks meaningful competitive advantages, and the lack of efficiency and competitive advantage is consistent with the finding that Ubers growth is primarily explained by the predatory use of investor subsidies. The critical caveat here is in a competitive market. This article documents that Ubers business model is focused on the pursuit of monopoly power. The elimination of competition is always problematic from an economic welfare standpoint, but there are certainly cases in other industries where dominance could be considered welfare enhancing or at least welfare neutral. But these cases require overwhelming objective evidence that the dominance was created by legitimate economic factors huge, unmatchable efficiency advantages, powerful scalenetwork economies that clearly offset the risks from reduced competition, and evidence that industry economics would create strong incentives for the newly dominant firm to continue to share efficiency gains with consumers. None of these conditions apply to Uber where growth was not driven by superior efficiency or scalenetwork economies there are few benefits that could be shared with consumers, and no incentives to share any that might exist. Ubers Investors Always Understood That Financial Returns Required the Ability To Exploit Quasi Monopolistic Industry Dominance, and Provided the Level of Financing Deemed Necessary. Ubers investors and managers have always been totally focused on earning strong returns on its 1. Four Major Drivers Of Customer Profitability' title='Four Major Drivers Of Customer Profitability' />Subscribe and SAVE, give a gift subscription or get help with an existing subscription by clicking the links below each cover image. TwentyFour7 is a multidisciplinary design firm specializing in brand strategy, retail design, and graphic design. We are based in Portland, Oregon, but our clients. Two simple questions that could be applied to any company what did Uber see as the source of investor returns, and were its actions spending, management and competitive priorities strongly focused on pursuing those sources of financial returns The first three articles in this series focused on traditional productefficiency based sources of financial returns that are broadly consistent with improving overall economic welfare. If investors can profit by introducing major producttechnological process breakthroughs that vastly improve industry efficiency, or if their returns come from providing slightly better service at slightly lower costs in a competitive market, then both consumers and capital accumulators will be better off in most cases. There is absolutely no evidence that Ubers investors put 1. Amazon type efficiency advantages over incumbent urban car service operators. There is no evidence that Ubers managers or spending priorities were ever focused on creating welfare enhancing efficiency improvements or consumer benefits. Unlike past startups, Uber made no effort to provide outsiders with evidence that its business model generated powerful efficiency advantages, or that it could actually produce urban car services at lower cost than incumbents. From its earliest days, Ubers investors and managers have always recognized that investor returns would require global industry dominance, and the elimination or effective nullification of longstanding laws and regulations designed to protect competition, and to protect consumers from the risks of anti competitive market power1. Zbrush Windows. This presumes that urban car services can be turned into a winner take all game, where the winner can earn sustainable rents once quasi monopoly industry dominance has been achieved. Dominance would also allow Uber to leverage its platform in order to expand into other markets that it could not otherwise profitably enter. As will be discussed below, the belief that monopoly power can be a major source of financial returns is widely held among the venture capitalists that funded Uber, and its spending priorities and marketplace behavior have been totally consistent with a company pursuing global industry dominance. But most critically, the staggering 1. Ubers investors did not put 1. Silicon Valley billionaires willing to subsidize years of multi billion dollar losses.