Where is the pro-business chat?

[Smurf1976]

As an example of the different thinking between an investor and a non investor, in LA recently, Uber drivers went on strike.

Using Uber as a specific example:

There was an established business model known as taxis which operated in some form in just about every city in the world. Such services also existed in many larger towns also.

The taxi business model involves owning a car which is used for the sole or primary purpose of providing the service and paying someone to drive it.

Taxis and taxi drivers are usually required to have some form of license, training and insurance over and above that required by a private motorist. Regulations impose set fares for travel by taxi which are non-negotiable. Regulations may also stipulate the type of vehicle used as a taxi, often limited to a specific make and model or even a custom built vehicle not sold for other purposes.

The above are all requirements imposed by some level of government and collectively constitute a substantial cost over and above the cost of simply owning and running a car as such.

Now Uber has come along with a different business model which throws most of that straight out the window. The driver uses their existing private vehicle which can be practically anything subject to a few restrictions, they require no special training or license, there are no special safety measures in the vehicles and government regulations are simply ignored.

In doing so Uber have given themselves an advantage over every established taxi operator simply by choosing to ignore regulations on the basis of technical loopholes or in some cases outright defiance of the law. In doing so they have caused economic loss to investors in traditional taxis and their employee drivers.

Now, if Uber aren't making any money out of this then that sounds awfully like they've engaged in predatory pricing, or "unfair competition" as a taxi driver would likely call it, in an effort to displace established competitors who mostly have relatively limited financial backing and ability to withstand losses when compared to Uber. Presumably Uber's intent is to raise prices at a future time once there's no competition.

I thus have no sympathy for them.

Fair competition sure, that's fine, but if you play dirty then you need to expect to be on the receiving end of the same sort of thing. Or as a taxi driver might say - what goes around, comes around.

 

[Craton]

Only stands to reason that investors and non-investors would have a different view. As a non-investor I'd shop at either BizA or BizB but as an investor of BizA, I'd shop there first and foremost.

Uber: I've always thought this model was fraught with danger and it amazed me that govts around the world have allowed Uber to operate without first, having the proper safeguards in place. Not to mention my anger at seeing state revenue dollars used to compensate those in the existing taxi industry when Uber was allowed to operate.

By deploying their own assets, Uber drivers would be seen as investors no?
Anyways, I'd wager that there'll be a few Uber drivers that did strike and are Uber investors.

Like the Uber drivers, most of us would want a fair days pay for a fair day's work. An investor sees it no differently, just the wording is different. ROI/ROC/P&L et all...

 

[Zaxon]

Taxis and taxi drivers are usually required to have some form of license, training and insurance over and above that required by a private motorist.

Now Uber has come along with a different business model which throws most of that straight out the window.

I definitely thought it was very unfair on the taxi industry. In addition to the taxi driver training, the taxis required a special plate which some people invested in (as a standalone item) because they appreciated in value over time. That market has been decimated.

Having said that, I think the taxi industry was a closed shop and far too cosy. You need the ability for new technology to enter and shake up the market, and for creative business models from new competitors to provide something original to the customer.

For instance, online-only stores have shaken up bricks-and-mortar stores, and we all love hearing Gerry Harvey complain about that

 

[Zaxon]

Only stands to reason that investors and non-investors would have a different view. As a non-investor I'd shop at either BizA or BizB but as an investor of BizA, I'd shop there first and foremost.

It does. I checked my stock holdings, which I hold a fair cross section off, to see how my shopping habits align. I don't think any of my personal expenditure is coming back to me! The closest I can come up with is a clothing store for plus sized women. Sadly, being neither plus sized nor a woman, I don't qualify to shop in there.

By deploying their own assets, Uber drivers would be seen as investors no?

No. They are contractors using their own equipment.

Anyways, I'd wager that there'll be a few Uber drivers that did strike and are Uber investors.

Now that would be an interesting twist.

 

[Zaxon]

The way I see it and from a point of view of living and working in both locales, is that those living/working in the bush have a different attitude than the coastal cousins

I think businesses whether public or private are far more valued in the bush and seen largely as a positive more so than in metro areas.

Now that I found interesting. It makes sense that people out in the country are desperate for businesses to move into their area, and would have a different POV.

On a personal note, I'm still waiting for Walmart to come to Australia. Biggest retailer in the world? Not so big if it can't even come across the pond.

 

[Craton]

No. They are contractors using their own equipment.

Yeah, and that's the way Uber sees them.

In Australia Uber drivers = contractors

So isn't one investing in one's self and deploying ones own assets to derive revenue for profit, isn't that a form of investing?
Investing in the prospect of becoming contracted for paid work?

From my understanding, it's an interesting point because Uber drivers see themselves as employees not contractors.

 

[Craton]

Now that I found interesting. It makes sense that people out in the country are desperate for businesses to move into their area, and would have a different POV.

Desperate is an understatement and don't even mention the water!

On a personal note, I'm still waiting for Walmart to come to Australia. Biggest retailer in the world? Not so big if it can't even come across the pond.

What, isn't Amazon enough already?
I know, Amazon doesn't sell groceries but there's a whole different tangent right there, global Americanisation. Urgh!

 

[Zaxon]

So isn't one investing in one's self and deploying ones own assets to derive revenue for profit, isn't that a form of investing?

Yes, in the English sense of the word. Though Uber drivers probably don't think of themselves as part of the broader "investment community", such as those who own shares and property.

From my understanding, it's an interesting point because Uber drivers see themselves as employees not contractors.

I think they have a valid case. Even if you do a temp office job, you're still entitled to minimum wage protection.

 

[sptrawler]

The biggest gripe I have with new CEO's and management in general, they always have a burning desire to change things, whether it needs it or not.
They just can't stop themselves, usually it ends up a stuff up, if it ain't broke why try to fix it?

 

[Zaxon]

What, isn't Amazon enough already?

Largely Amazon Australia has been a disappointment. If I'm wanting a product, 9/10 they don't stock it, and if they do, it's far more expensive than eBay. I'm hoping that will change in the future.

 

[Value Hunter]

The problem with the Uber business model as I see it is that network effects while they do exist, for this type of business are rather limited and not so great as something like Facebook or Google.

Also Uber is selling a commodity service and has no pricing power. Thus the benefit of a lower cost of doing business over time must (and is being) be passed onto customers in the form of low prices and will not benefit shareholders. On top of this you have the threat of in the future the large automakers running their own transport services (and thus crushing Uber) once autonomous vehicles become an everyday reality.

 

[Value Hunter]

sptrawler its because when they (senior executives) get paid big bucks they have to look like they are doing something to justify the big pay packet. If you are getting paid millions and don't change things around people will think "we are paying this guy millions and he isn't even doing anything".

 

[Zaxon]

Also Uber is selling a commodity service and has no pricing power. Thus the benefit of a lower cost of doing business over time must (and is being) be passed onto customers in the form of low prices and will not benefit shareholders.

Possibly Uber's plan is to bleed its competitors out of the market, then ramp up pricing. Long term rewards for very patient shareholders.

On top of this you have the threat of in the future the large automakers running their own transport services (and thus crushing Uber) once autonomous vehicles become an everyday reality.

Automated vehicles could shake up the way we think about transport. Perhaps in 30 years, people won't own personal vehicles anymore, and we'll all be catching Uber, Waymo, or Cruise.

But I don't feel that self driving cars are going to be a significant reality in the near future outside of limited test areas and well defined shuttle runs. If Uber needs to wait until it can go 100% driverless before it makes a profit...yes, well.

 

[Smurf1976]

Possibly Uber's plan is to bleed its competitors out of the market, then ramp up pricing. Long term rewards for very patient shareholders.

If they do get rid of the competition that would be the proverbial red flag waved at the bull so far as the prospect of government intervention is concerned.

 

[SirRumpole]

They just can't stop themselves, usually it ends up a stuff up, if it ain't broke why try to fix it?

They have to mark their territory like an animal and justify their position otherwise it's an admission that someone else did a good job.

 

[Value Collector]

I definitely thought it was very unfair on the taxi industry. In addition to the taxi driver training, the taxis required a special plate which some people invested in (as a standalone item) because they appreciated in value over time. That market has been decimated.

Having said that, I think the taxi industry was a closed shop and far too cosy. You need the ability for new technology to enter and shake up the market, and for creative business models from new competitors to provide something original to the customer.

For instance, online-only stores have shaken up bricks-and-mortar stores, and we all love hearing Gerry Harvey complain about that

Taxi’s and the government benefited for decades by locking out competition, there were limited taxi plates available, and the government made a lot of money selling them, while those that owned them had limited competition and were protected by government regulations and could over charge (remember the 10% fee on credit cards)

Then Uber came along, and increased competition, and the government let them stick around.

In NSW the government made compensation payments to taxis, basically repaying some of the fees charged for the plates, because they no longer protected their monopoly and prices.

Uber pays $1 per ride into the compensation plan.

 

[Smurf1976]

Then Uber came along, and increased competition, and the government let them stick around.

The issue in this case is that they are losing money to undercut established operators.

If it were goods then the term "dumping" would be appropriate and the action would be illegal.

I've nothing against Uber per se, they're just the example being used here, but some of their practices seem very questionable to me if they are indeed losing money whilst driving the competition out of business by means of undercutting them.

 

[Zaxon]

To add some perspective to this, I decided to compare the cost of the taxi fare vs Uber on the same sample trip near where I live.

Taxi: $30
UberX: $19-25
Discount: 27%

Let's compare this to the first grocery item that came into my head - the humble meat pie from Woolworths, pack of 4.

Four N Twenty: $5
Woolworths: $3.50
Discount: 30%

Is Woolworths dumping pies on Australia to drive FNT out of business? Few people would argue that. Are FNT overcharging for their pies, and WW is simply charging a "reasonable" price? That's how I'd see it personally.

So is Uber is using predatory pricing, or are Taxis simply overcharging? I honestly don't know. What I do know is that in the pie world, there's enough room for multiple brands priced massively differently. So if taxis want to survive, they need to be the Four N Twenty pie: convince the public that they're a premium service worth paying 27% extra for.

 

[Value Collector]

The issue in this case is that they are losing money to undercut established operators.

If it were goods then the term "dumping" would be appropriate and the action would be illegal.

I've nothing against Uber per se, they're just the example being used here, but some of their practices seem very questionable to me if they are indeed losing money whilst driving the competition out of business by means of undercutting them.

A lot of businesses lose money in the early years, especially the Silicon Valley types.

It doesn’t mean they are dumping, just fighting though huge expansion costs, and marketing.

 

[Smurf1976]

Let's compare this to the first grocery item that came into my head - the humble meat pie from Woolworths, pack of 4.

If Woolworths make and sell their pies in accordance with all relevant laws then no real issue.

If however Woolworths decide they'll ignore the law and, since they're really big, will force government to change it in their favour, whilst not giving the same advantage to FNT, then that's a huge problem.

In the Uber case - either they should be required to incur all the same costs as rivals (taxis) or alternatively rivals should no longer be required to incur those costs. One or the other - same rules for all.