A Year Ago on Equitable Growth: Twenty Worthy Reads from the Past Week or so: July 19, 2018

Few people today want to say "Uber is a bad investment". But its track record of no signs of convergence to profitability gives nobody any reason to believe that it is a good investment. And its prospectus and other documents gives nobody any reason to believe that it is a good investment either. Surely if it were to be a good investment, there would be something you could point to suggesting that it is? I find myself puzzled it has gotten this far—not that ridesharing does not promise to be a sustainable productive activity, but that is a very different question from whether ridesharing will be a wildly profitable activity for the first mover. I think Uber is probably a societal plus: a little creative destruction in taxis and a little destruction of monopoly medallion value is a good thing, plus there is a transfer from rich investors to middle-class riders and working-class drivers. But a good investment going forward? What is the road to pumping value equivalent to a flow of 3.5 billion a year starting now out of the system through control of the hailing-and-billing website?:

Ben Thompson: Uber’s Rocky IPO, What Went Wrong, The Perils of Private: "I think the private funding model that Uber pioneered, which puts off going public for years, is terrible for nearly all of the relevant stakeholders.... The private investment market is bad for private investors... dramatically less oversight and accountability.... Most importantly, I think that these private investment rounds are bad for the companies themselves. Being able to attract investors on a vision is a wonderful thing when a company is small, and something that makes Silicon Valley great. Being able to do so when a company is large is a recipe for a lack of discipline and a dismissal of economic realities.... The only way to use the proceeds of such a large round is to take on massive operating losses. Historically, as a company neared an IPO level of revenues (say $50-$100mm), investors would expect convergence toward profitability. As these late-stage private companies digest these large fund raises, they are pushing profitability further and further into the future, as well as the proof that their business model actually works. Let me be clear: I am not saying that Uber is a bad investment. I am reiterating the fact that I don’t know, and that I believe that extremely large late-stage rounds not only denied me that knowledge, but very well may have denied that knowledge to Uber itself...


#noted

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