Since founding in 2009, Uber has upended the taxi industry, bringing new competition and providing immense value to passengers and drivers alike. However, their path has not been very straightforward at all. In fact, the company faces many issues on the legal front, on their corporate image, and from their own internal politics. So problematic has been their journey that founder Travis Kalanick himself was recently ousted, following many other high profile executives who had gone before him.
Reflecting all this perhaps, is the stark fact that Uber has not recorded a single profitable year since 2009, with losses of $2b in 2015 and $2.8b in 2016 being blemishes on the company’s history. So how is Uber still running? What actually goes on in the business? Can they eventually become profitable?
We uncover the economics behind Uber’s business model in this episode, and through it you will learn about:
- The 4 key cost components of a taxi business
- How Uber’s model is different from the traditional model
- The inherent productivity limitations in the taxi industry
- How Uber’s strategy plays into their massive losses
- Whether there is any hope for the future of the business
Much thanks goes to the transportation analyst Hobert Huran and his article on NakedCapitalism. Even though I don’t agree with all of it, it is a fascinating analysis and I encourage you to read it as well.
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