Today’s Must Read
From Cory Doctorow, the well known author, tech journalist, commentator, and superhero, we get a devastating take-down of how Uber is basically a fraudulent enterprise whose goal was to generate buzz while losing money so that the original investors could make money going public.
If you thinks that this sounds like the orgy of fraud and puffery that was the dotcom (dotbomb) mania of the early 2000s, you would be right:
Uber is (still) a bezzle (“the magic interval when a confidence trickster knows he has the money he has appropriated but the victim does not yet understand that he has lost it”). And every bezzle — every bezzle — ends.
Uber entered the market with an absurd proposition, which they papered over with an idiotic narrative…which the world ate up with a spoon.
The absurd proposition: Uber could use apps to reinvent taxis, and turn a low-margin business into a high-margin business by sprinkling it with high-tech pixie dust.
The idiotic narrative: Uber could establish itself in the market by pouring billions down the drain, losing 41 cents on every dollar it brought in, subsidizing unprofitable rides at unsustainable rates…but someday, it would make it up in volume.
Here’s how that proposition worked: Uber loses a lot of money on every ride. But someday, it will corner the market on transit (not just taxi journeys, but all transit), and it will be able to raise prices and cut wages and recover all those loses and turn a profit.
He notes that Uber’s model, that of the unlicensed Gypsy cab driver, is won with very few barriers to entry, and the idea that, “Uber could use apps to reinvent taxis, and turn a low-margin business into a high-margin business by sprinkling it with high-tech pixie dust,” is an absurdity.
And it’s not just their ride services, it’s everything that they touch:
There’s one way in which food delivery is good for Uber’s business: it allows the company to continue to trumpet its “growth,” and keep hope alive for the suckers who bought out the company’s early investors. The company touts its food delivery runs as “trips,” and thus shows the number of trips as rising.
Uber and Lyft’s 2021 would have been a lot worse, but for the fact that they raised prices by 66%, even as driver compensation fell. Despite these skyrocketing prices, the companies still aren’t turning profits. In fact, in Lyft’s case, it’s possible that they actually lost customers, even as they reported a 14% rise in “average revenue per rider.” That’s because Lyft also reports that the journey lengths have increased, so it’s entirely possible that the 14% gain comes from riders who have no choice but to take Lyft for longer and longer distances, while those with choice are turning away from the service.
As is his wont, Doctorow explains that this is all symptomatic of an economy that is increasingly focused on fraud, the “Bezzle”, as opposed to actually producing something of value.
You find it everywhere, and it’s frightening to think about what happens when something like ends, because it is baked into our society, but to quote Herbert Stein, “If something cannot go on forever, it will stop.”
The bezzle has gone from omnipresent to foundational in the United States. It’s inevitable collapse will necessarily be extremely painful.