WeWork is absolutely not a bad idea. Talk to regus, they’re running a profitable business doing the exact same thing (pre-covid).
Also, Rides had already reached profitability at Uber (pre-covid).
They are both totally viable businesses, post-covid.
The mistake SoftBank made wasn’t investing in them, it was investing at a valuation that grossly overestimated the size of the opportunity, and how quickly they would see their return.
Uber & Wework aren’t going to be Apple/Google market cap any time soon, if ever. And that was true pre-covid.
I am not trying to bash Uber, but statements like:
>>Also, Rides had already reached profitability at Uber (pre-covid).
Need to be taken with a grain of salt. There are so many ways to game accounting in general, and even more ways to game the accounting of business unit. So when they say Rides is profitable, it may be true, or close enough to be true to be so. But you should doubt. If a company has $14b in revenue and $8b in losses (2019) and a profitable unit like Rides. That means some other part of the company is lost $8b+. I am sure they spend a lot on delivery, and self driving cars, but do they spend that much.
The reply to this will be "that involved a one time write down.." or some such. But when a company has never turned a profit, its hard to tell when the one time costs will stop.
That said, I believe there is a viable business in Uber. It has just been overvalued.
Others may be profitable, but I'm skeptical that Uber is.
If you talk to many drivers, you'll find a common theme that "bonuses" make up a substantial fraction of their overall income (bonuses are things like "Drive XX rides in a week and get $YYY").
To my understanding, most/all of these bonuses are placed under the accounting budget (under the premise that these bonuses are intended to bring new drivers onto the platform), not the rideshare budget.
So rideshare cost of operations doesn't properly reflect the true cost of operating the rideshare business, which means that unit economics are worse than they appear in Uber's reporting (possibly even negative).
There's a huge gap between "the economics of ridesharing are not obviously unprofitable" and "the economics of ridesharing justifies the valuation implied by the investments in uber lyft etc".
I agree it is a viable business, but they still may not be charging enough for it to be profitable. If they need to charge more, growth may slow or reverse.
> There are numerous profitable companies in Europe and Asia doing the same thing as Uber.
How can Uber be doing the same thing if Uber is losing money doing the thing and the other companies make money doing it?
Even if one or more sections of Uber are profitable, it's likely that those sections rely on functions performed by unprofitable sections of the company. Disentangling those elements isn't simple. It's possible that Uber as-it-exists-now can never transition to profitability but a company-like-Uber-in-some-ways could be profitable in the future.
>but a company-like-Uber-in-some-ways could be profitable in the future
In a sufficiently dense area, there is clearly a market for app-summoned taxis (for various values of who owns/maintains/pays for said cab). Prices may be higher than today's rideshare and volume lower. But there's a market for it. Just probably in fewer areas/at fewer times/with more expensive rates than today.
> In a sufficiently dense area, there is clearly a market for app-summoned taxis (for various values of who owns/maintains/pays for said cab)
Oh well. For sure, but it's a pretty vague statement, isn't it? We're not talking about some modest value that can keep some small company running; we're talking about $75 billion value. I'm sure that not one, but many small companies can thrive providing local services to taxi drivers collecting and dispatching hails. But that's a far cry from that to a single global company valued at almost a hundred billion dollars.
I'm sure some people would disagree with you. What you value isn't the same as what others necessarily value. That doesn't make it a terrible idea in itself.
The experience of a WeWork and Regus are very different. They can both co-exist because some people like a more community type environment, and some people just want a modular space that is affordable.
WeWork tried a bunch of things that you might not find at a typical coworking space but I personally would pay 2x for a WeWork space over the same Regus space because I will get more value out of the WeWork space which is meeting people. I have spent plenty of time in my career in WeWork and Regus spaces, and WeWork has been much more fruitful in terms of the network effect.
Tesla shares are expensive compared to other car manufacturers because investors are placing a bet on the future of the automobile being electric and Tesla having the first mover advantage and becoming almost synonymous with Electric Car. Same way we now tell each other "just Google it".
If it was just for having a yoga instructor as CEO and all you can drink Kombucha at it's charging stations then it is eye roll worthy.
Maybe not a bad idea but its ludicrous that WeWork was ever considered and valued like a Tech company, it's a real estate company with hipster interior designers nothing more.
> The mistake SoftBank made wasn’t investing in them...
The mistake Softbank made was investing in direct competitors without enough control to make those competitors play nicely.
Instead you get companies both buying marketshare using softbank's money that are forced to do so because the other has softbank's money. That's just lighting money on fire. The majority of the investment should have gone to R&D and developing durable assets that bring value in perpetuity. Buying marketshare through promotions is the opposite of that.
"The mistake SoftBank made wasn’t investing in them, it was investing at a valuation that grossly overestimated the size of the opportunity, and how quickly they would see their return."
That doesn't say much. When you're off by 20X for a close-to-IPO company that's a huge mistake and the diff in funds would've been better spent on spray and pray R&D. Many companies are good investments at 20X lower valuations than what they recently raised at.
Uber and WeWork is a capital driven business, not technology driven. The barrier of entry is very low. Anytime if there is a competitor come to the market, they have to compete with price. I'd like to see they transform into a data platform. Rather than providing the service through their apps, why don't they provide APIs for small cab companies.
As long as this companies keep investing in marketing over customer satisfaction and real value generation for shareholders the scenario is going to be the same regardless of covid etc. As you pointed out Refused is a good example: focus on business fundamentals, that's it.
Also, Rides had already reached profitability at Uber (pre-covid).
They are both totally viable businesses, post-covid.
The mistake SoftBank made wasn’t investing in them, it was investing at a valuation that grossly overestimated the size of the opportunity, and how quickly they would see their return.
Uber & Wework aren’t going to be Apple/Google market cap any time soon, if ever. And that was true pre-covid.