First off, socially infused platforms like Medium are brilliant in serendipitous moments like this – when experts like you, Oliver, enhance a conversation among generalists like myself. I’d love to read your work if you can direct me to a good starting point.
Back to Uber: I don’t think I disagree with your textbook analysis, but again I just don’t think it considers the broader, dynamic context…
Your null hypothesis to my thesis is: “de novos” could attempt to modularize Uber. To which I say: they can, they should, and they will. Modularization is the textbook strategy for completing with a monopoly power. Focus on a niche segment of the monopoly’s business; provide a superior experience; come to own that niche.
That will happen. In fact, it’s possible that Uber never figures-out the low-end of the market (especially if they lose the autonomous vehicle game of thrones), in which case other, local providers can reorient themselves to own that segment.
Don’t forget, I did acknowledge new entrants:
“the window is closing on the conditions that enabled [Uber’s] rise: both the market inefficiencies (e.g. free money/abundant capital or disruption of taxi medallion system) and the scale opportunity (e.g. low barriers-to-entry have allowed competition to catch-up & chip-away marketshare).”
However, I balanced that with the assertion that Uber has reached scale, which has material benefits:
“Really? There are no scale advantages here; no opportunities for Uber to negotiate bulk discounts? No chance that an automaker would cave-in on the Prisoner’s Dilemma and offer wholesale, buyer, or lessor discounts to Uber drivers? No chance that Uber would commercially hedge fuel costs, then offer drivers gas cards?”
This is not big box retail. This is the high-end taxi market. No taxi company has 16M MAUs and this kind of geographic footprint. Are there no benefits of such scale? Reliability, liquidity, ubiquity, loyalty, etc, etc.
We haven’t even broached the topic of Lyft, which is subject to substantially similar forces. Lyft is a distant second to Uber and consequently under pressure. If Lyft disappears, that really changes the equation for Uber. Then again, if Lyft gets acquired by the right strategic buyer (e.g. Avis Budget Group/ZipCar), things get interesting.
I don’t want to creep toward defending Uber, because I don’t have conviction that they’ll be a $1T company one day. But, I do think everyone is making mistakes by relying too heavily on comps to other tech darlings or other startups, and these are some of the specific alternative hypotheses we should be evaluating.
Thanks again Oliver!