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[Dec 12, 2017] Can Uber Ever Deliver Part Eleven Annual Uber Losses Now Approaching $5 Billion

Notable quotes:
"... Total 2015 gross passenger payments were 200% higher than 2014, but Uber corporate revenue improved 300% because Uber cut the driver share of passenger revenue from 83% to 77%. This was an effective $500 million wealth transfer from drivers to Uber's investors. ..."
"... Uber's P&L gains were wiped out by higher non-EBIDTAR expense. Thus the 300% Uber revenue growth did not result in any improvement in Uber profit margins. ..."
"... In 2016, Uber unilaterally imposed much larger cuts in driver compensation, costing drivers an additional $3 billion. [6] Prior to Uber's market entry, the take home pay of big-city cab drivers in the US was in the $12-17/hour range, and these earnings were possible only if drivers worked 65-75 hours a week. ..."
"... An independent study of the net earnings of Uber drivers (after accounting for the costs of the vehicles they had to provide) in Denver, Houston and Detroit in late 2015 (prior to Uber's big 2016 cuts) found that driver earnings had fallen to the $10-13/hour range. [7] Multiple recent news reports have documented how Uber drivers are increasing unable to support themselves from their reduced share of passenger payments. [8] ..."
"... Since mass driver defections would cause passenger volume growth to collapse completely, Uber was forced to reverse these cuts in 2017 and increased the driver share from 68% to 80%. This meant that Uber's corporate revenue, which had grown over 300% in 2015 and over 200% in 2016 will probably only grow by about 15% in 2017. ..."
"... Socialize the losses, privatize the gains, VC-ize the subsidies. ..."
"... The cold hard truth is that Uber is backed into a corner with severely limited abilities to tweak the numbers on either the supply or the demand side: cut driver compensation and they trigger driver churn (as has already been demonstrated), increase fare prices for riders and riders defect to cheaper alternatives. ..."
"... "Growth and Efficiency" are the sine qua non of Neoliberalism. Kalanick's "hype brilliance" was to con the market with "revenue growth" and signs ..."
Dec 12, 2017 | www.nakedcapitalism.com

Uber lost $2.5 billion in 2015, probably lost $4 billion in 2016, and is on track to lose $5 billion in 2017.

The top line on the table below shows is total passenger payments, which must be split between Uber corporate and its drivers. Driver gross earnings are substantially higher than actual take home pay, as gross earning must cover all the expenses drivers bear, including fuel, vehicle ownership, insurance and maintenance.

Most of the "profit" data released by Uber over time and discussed in the press is not true GAAP (generally accepted accounting principles) profit comparable to the net income numbers public companies publish but is EBIDTAR contribution. Companies have significant leeway as to how they calculate EBIDTAR (although it would exclude interest, taxes, depreciation, amortization) and the percentage of total costs excluded from EBIDTAR can vary significantly from quarter to quarter, given the impact of one-time expenses such as legal settlements and stock compensation. We only have true GAAP net profit results for 2014, 2015 and the 2nd/3rd quarters of 2017, but have EBIDTAR contribution numbers for all other periods. [5]

Uber had GAAP net income of negative $2.6 billion in 2015, and a negative profit margin of 132%. This is consistent with the negative $2.0 billion loss and (143%) margin for the year ending September 2015 presented in part one of the NC Uber series over a year ago.

No GAAP profit results for 2016 have been disclosed, but actual losses likely exceed $4 billion given the EBIDTAR contribution of negative $3.2 billion. Uber's GAAP losses for the 2nd and 3rd quarters of 2017 were over $2.5 billion, suggesting annual losses of roughly $5 billion.

While many Silicon Valley funded startups suffered large initial losses, none of them lost anything remotely close to $2.6 billion in their sixth year of operation and then doubled their losses to $5 billion in year eight. Reversing losses of this magnitude would require the greatest corporate financial turnaround in history.

No evidence of significant efficiency/scale gains; 2015 and 2016 margin improvements entirely explained by unilateral cuts in driver compensation, but losses soared when Uber had to reverse these cuts in 2017.

Total 2015 gross passenger payments were 200% higher than 2014, but Uber corporate revenue improved 300% because Uber cut the driver share of passenger revenue from 83% to 77%. This was an effective $500 million wealth transfer from drivers to Uber's investors. These driver compensation cuts improved Uber's EBIDTAR margin, but Uber's P&L gains were wiped out by higher non-EBIDTAR expense. Thus the 300% Uber revenue growth did not result in any improvement in Uber profit margins.

In 2016, Uber unilaterally imposed much larger cuts in driver compensation, costing drivers an additional $3 billion. [6] Prior to Uber's market entry, the take home pay of big-city cab drivers in the US was in the $12-17/hour range, and these earnings were possible only if drivers worked 65-75 hours a week.

An independent study of the net earnings of Uber drivers (after accounting for the costs of the vehicles they had to provide) in Denver, Houston and Detroit in late 2015 (prior to Uber's big 2016 cuts) found that driver earnings had fallen to the $10-13/hour range. [7] Multiple recent news reports have documented how Uber drivers are increasing unable to support themselves from their reduced share of passenger payments. [8]

A business model where profit improvement is hugely dependent on wage cuts is unsustainable, especially when take home wages fall to (or below) minimum wage levels. Uber's primary focus has always been the rate of growth in gross passenger revenue, as this has been a major justification for its $68 billion valuation. This growth rate came under enormous pressure in 2017 given Uber efforts to raise fares, major increases in driver turnover as wages fell, [9] and the avalanche of adverse publicity it was facing.

Since mass driver defections would cause passenger volume growth to collapse completely, Uber was forced to reverse these cuts in 2017 and increased the driver share from 68% to 80%. This meant that Uber's corporate revenue, which had grown over 300% in 2015 and over 200% in 2016 will probably only grow by about 15% in 2017.

MKS , December 12, 2017 at 6:19 am

"Uber's business model can never produce sustainable profits"

Two words not in my vocabulary are "Never" and "Always", that is a pretty absolute statement in an non-absolute environment. The same environment that has produced the "Silicon Valley Growth Model", with 15x earnings companies like NVIDA, FB and Tesla (Average earnings/stock price ratio in dot com bubble was 10x) will people pay ridiculous amounts of money for a company with no underlying fundamentals you damn right they will! Please stop with the I know all no body knows anything, especially the psychology and irrationality of markets which are made up of irrational people/investors/traders.

JohnnySacks , December 12, 2017 at 7:34 am

My thoughts exactly. Seems the only possible recovery for the investors is a perfectly engineered legendary pump and dump IPO scheme. Risky, but there's a lot of fools out there and many who would also like to get on board early in the ride in fear of missing out on all the money to be hoovered up from the greater fools. Count me out.

SoCal Rhino , December 12, 2017 at 8:30 am

The author clearly distinguishes between GAAP profitability and valuations, which is after all rather the point of the series. And he makes a more nuanced point than the half sentence you have quoted without context or with an indication that you omitted a portion. Did you miss the part about how Uber would have a strong incentive to share the evidence of a network effect or other financial story that pointed the way to eventual profit? Otherwise (my words) it is the classic sell at a loss, make it up with volume path to liquidation.

tegnost , December 12, 2017 at 9:52 am

apples and oranges comparison, nvidia has lots and lots of patented tech that produces revenue, facebook has a kajillion admittedly irrational users, but those users drive massive ad sales (as just one example of how that company capitalizes itself) and tesla makes an actual car, using technology that inspires it's buyers (the put your money where your mouth is crowd and it can't be denied that tesla, whatever it's faults are, battery tech is not one of them and that intellectual property is worth a lot, and tesla's investors are in on that real business, profitable or otherwise)

Uber is an iphone app. They lose money and have no path to profitability (unless it's the theory you espouse that people are unintelligent so even unintelligent ideas work to fleece them). This article touches on one of the great things about the time we now inhabit, uber drivers could bail en masse, there are two sides to the low attachment employees who you can get rid of easily. The drivers can delete the uber app as soon as another iphone app comes along that gets them a better return

allan , December 12, 2017 at 6:52 am

Yet another source (unintended) of subsidies for Uber, Lyft, etc., which might or might not have been mentioned earlier in the series:

Airports Are Losing Money as Ride-Hailing Services Grow [NYT]

For many air travelers, getting to and from the airport has long been part of the whole miserable experience. Do they drive and park in some distant lot? Take mass transit or a taxi? Deal with a rental car?

Ride-hailing services like Uber and Lyft are quickly changing those calculations. That has meant a bit less angst for travelers.

But that's not the case for airports. Travelers' changing habits, in fact, have begun to shake the airports' financial underpinnings. The money they currently collect from ride-hailing services do not compensate for the lower revenues from the other sources.

At the same time, some airports have had to add staff to oversee the operations of the ride-hailing companies, the report said. And with more ride-hailing vehicles on the roads outside terminals,
there's more congestion.

Socialize the losses, privatize the gains, VC-ize the subsidies.

Thuto , December 12, 2017 at 6:55 am

The cold hard truth is that Uber is backed into a corner with severely limited abilities to tweak the numbers on either the supply or the demand side: cut driver compensation and they trigger driver churn (as has already been demonstrated), increase fare prices for riders and riders defect to cheaper alternatives. The only question is how long can they keep the show going before the lights go out, slick marketing and propaganda can only take you so far, and one assumes the dumb money has a finite supply of patience and will at some point begin asking the tough questions.

Louis Fyne , December 12, 2017 at 8:35 am

The irony is that Uber would have been a perfectly fine, very profitable mid-sized company if Uber stuck with its initial model -- sticking to dense cities with limited parking, limiting driver supply, and charging a premium price for door-to-door delivery, whether by livery or a regular sedan. And then perhaps branching into robo-cars.

But somehow Uber/board/Travis got suckered into the siren call of self-driving cars, triple-digit user growth, and being in the top 100 US cities and on every continent.

Thuto , December 12, 2017 at 11:30 am

I've shared a similar sentiment in one of the previous posts about Uber. But operating profitably in decent sized niche doesn't fit well with ambitions of global domination. For Uber to be "right-sized", an admission of folly would have to be made, its managers and investors would have to transcend the sunk cost fallacy in their strategic decision making, and said investors would have to accept massive hits on their invested capital. The cold, hard reality of being blindsided and kicked to the curb in the smartphone business forced RIM/Blackberry to right-size, and they may yet have a profitable future as an enterprise facing software and services company. Uber would benefit from that form of sober mindedness, but I wouldn't hold my breath.

David Carl Grimes , December 12, 2017 at 6:57 am

The question is: Why did Softbank invest in Uber?

Michael Fiorillo , December 12, 2017 at 9:33 am

I know nothing about Softbank or its management, but I do know that the Japanese were the dumb money rubes in the late '80's, overpaying for trophy real estate they lost billions on.

Until informed otherwise, that's my default assumption

JimTan , December 12, 2017 at 10:50 am

Softbank possibly looking to buy more Uber shares at a 30% discount is very odd. Uber had a Series G funding round in June 2016 where a $3.5 billion investment from Saudi Arabia's Public Investment Fund resulted in its current $68 billion valuation. Now apparently Softbank wants to lead a new $6 billion funding round to buy the shares of Uber employees and early investors at a 30% discount from this last "valuation". It's odd because Saudi Arabia's Public Investment Fund has pledged $45 billion to SoftBank's Vision Fund , an amount which was supposed to come from the proceeds of its pending Aramco IPO. If the Uber bid is linked to SoftBank's Vision Fund, or KSA money, then its not clear why this investor might be looking to literally 'double down' from $3.5 billion o $6 billion on a declining investment.

Yves Smith Post author , December 12, 2017 at 11:38 am

SoftBank has not yet invested. Its tender is still open. If it does not get enough shares at a price it likes, it won't invest.

As to why, I have no idea.

Robert McGregor , December 12, 2017 at 7:04 am

"Growth and Efficiency" are the sine qua non of Neoliberalism. Kalanick's "hype brilliance" was to con the market with "revenue growth" and signs of efficiency, and hopes of greater efficiency, and make most people just overlook the essential fact that Uber is the most unprofitable company of all time!

divadab , December 12, 2017 at 7:19 am

What comprises "Uber Expenses"? 2014 – $1.06 billion; 2015 $3.33 billion; 2016 $9.65 billion; forecast 2017 $11.418 billion!!!!!! To me this is the big question – what are they spending $10 billion per year on?

ALso – why did driver share go from 68% in 2016 to 80% in 2017? If you use 68% as in 2016, 2017 Uber revenue is $11.808 billion, which means a bit better than break-even EBITDA, assuming Uber expenses are as stated $11.428 billion.

Perhaps not so bleak as the article presents, although I would not invest in this thing.

Phil in Kansas City , December 12, 2017 at 7:55 am

I have the same question: What comprises over 11 billion dollars in expenses in 2017? Could it be they are paying out dividends to the early investors? Which would mean they are cannibalizing their own company for the sake of the VC! How long can this go on before they'll need a new infusion of cash?

lyman alpha blob , December 12, 2017 at 2:37 pm

The Saudis have thrown a few billion Uber's way and they aren't necessarily known as the smart money.

Maybe the pole dancers have started chipping in too as they are for bitcoin .

Vedant Desai , December 12, 2017 at 10:37 am

Oh article does answer your 2nd question. Read this paragraph:-

Since mass driver defections would cause passenger volume growth to collapse completely , Uber was forced to reverse these cuts in 2017 and increased the driver share from 68% to 80%. This meant that Uber's corporate revenue, which had grown over 300% in 2015 and over 200% in 2016 will probably only grow by about 15% in 2017.

As for the 1st, read this line in the article:-

There are undoubtedly a number of things Uber could do to reduce losses at the margin, but it is difficult to imagine it could suddenly find the $4-5 billion in profit improvement needed merely to reach breakeven.

Louis Fyne , December 12, 2017 at 8:44 am

in addition to all the points listed in the article/comments, the absolute biggest flaw with Uber is that Uber HQ conditioned its customers on (a) cheap fares and (b) that a car is available within minutes (1-5 if in a big city).

Those two are not mutually compatible in the long-term.

Alfred , December 12, 2017 at 9:49 am

Thus (a) "We cost less" and (b) "We're more convenient" -- aren't those also the advantages that Walmart claims and feeds as a steady diet to its ever hungry consumers? Often if not always, disruption may repose upon delusion.

Martin Finnucane , December 12, 2017 at 11:06 am

Uber's business model could never produce sustainable profits unless it was able to exploit significant anti-competitive market power.

Upon that dependent clause hangs the future of capitalism, and – dare I say it? – its inevitable demise.

Altandmain , December 12, 2017 at 11:09 am

When this Uber madness blows up, I wonder if people will finally begin to discuss the brutal reality of Silicon Valley's so called "disruption".

It is heavily built in around the idea of economic exploitation. Uber drivers are often, especially when the true costs to operate an Uber including the vehicle depreciation are factored in, making not very much per hour driven, especially if they don't get the surge money.

Instacart is another example. They are paying the deliver operators very little.

Jim A. , December 12, 2017 at 12:21 pm

At a fundamental level, I think that the Silicon Valley "disruption" model only works for markets (like software) where the marginal cost for production is de minimus and the products can be protected by IP laws. Volume and market power really work in those cases. But out here in meat-space, where actual material and labor are big inputs to each item sold, you can never just sit back on your laurels and rake in the money. Somebody else will always be able to come and and make an equivalent product. If they can do it more cheaply, you are in trouble.

Altandmain , December 12, 2017 at 5:40 pm

There aren't that many areas in goods and services where the marginal costs are very low.

Software is actually quite unique in that regard, costing merely the bandwidth and permanent storage space to store.

Let's see:

1. From the article, they cannot go public and have limited ways to raise more money. An IPO with its more stringent disclosure requirements would expose them.

2. They tried lowering driver compensation and found that model unsustainable.

3. There are no benefits to expanding in terms of economies of scale.

From where I am standing, it looks like a lot of industries gave similar barriers. Silicon Valley is not going to be able to disrupt those.

Tesla, another Silicon Valley company seems to be struggling to mass produce its Model 3 and deliver an electric car that breaks even, is reliable, while disrupting the industry in the ways that Elon Musk attempted to hype up.

So that basically leaves services and manufacturing out for Silicon Valley disruption.

Joe Bentzel , December 12, 2017 at 2:19 pm

UBER has become a "too big to fail" startup because of all the different tentacles of capital from various Tier 1 VCs and investment bankers.

VCs have admitted openly that UBER is a subsidized business, meaning it's product is sold below market value, and the losses reflect that subsidization. The whole "2 sided platform" argument is just marketecture to hustle more investors. It's a form of service "dumping" that puts legacy businesses into bankruptcy. Back during the dotcom bubble one popular investment banker (Paul Deninger) characterized this model as "Terrorist Competition", i.e. coffers full of invested cash to commoditize the market and drive out competition.

UBER is an absolute disaster that has forked the startup model in Silicon Valley in order to drive total dependence on venture capital by founders. And its current diversification into "autonomous vehicles", food delivery, et al are simply more evidence that the company will never be profitable due to its whacky "blitzscaling" approach of layering on new "businesses" prior to achieving "fit" in its current one.

It's economic model has also metastasized into a form of startup cancer that is killing Silicon Valley as a "technology" innovator. Now it's all cargo cult marketing BS tied to "strategic capital".

UBER is the victory of venture capital and user subsidized startups over creativity by real entrepreneurs.

It's shadow is long and that's why this company should be ..wait for it UNBUNDLED (the new silicon valley word attached to that other BS religion called "disruption"). Call it a great unbundling and you can break up this monster corp any way you want.

Naked Capitalism is a great website.

Phil in KC , December 12, 2017 at 3:20 pm

1. I Agree with your last point.

2. The elevator pitch for Uber: subsidize rides to attract customers, put the competition out of business, and then enjoy an unregulated monopoly, all while exploiting economically ignorant drivers–ahem–"partners."

3. But more than one can play that game, and

4. Cab and livery companies are finding ways to survive!

Phil in KC , December 12, 2017 at 3:10 pm

If subsidizing rides is counted as an expense, (not being an accountant, I would guess it so), then whether the subsidy goes to the driver or the passenger, that would account for the ballooning expenses, to answer my own question. Otherwise, the overhead for operating what Uber describes as a tech company should be minimal: A billion should fund a decent headquarters with staff, plus field offices in, say, 100 U.S. cities. However, their global pretensions are probably burning cash like crazy. On top of that, I wonder what the exec compensation is like?

After reading HH's initial series, I made a crude, back-of-the-envelope calculation that Uber would run out of money sometime in the third fiscal quarter of 2018, but that was based on assuming losses were stabilizing in the range of 3 billion a year. Not so, according to the article. I think crunch time is rapidly approaching. If so, then SoftBank's tender offer may look quite appetizing to VC firms and to any Uber employee able to cash in their options. I think there is a way to make a re-envisioned Uber profitable, and with a more independent board, they may be able to restructure the company to show a pathway to profitability before the IPO. But time is running out.

A not insignificant question is the recruitment and retention of the front line "partners." It would seem to me that at some point, Uber will run out of economically ignorant drivers with good manners and nice cars. I would be very interested to know how many drivers give up Uber and other ride-sharing gigs once the 1099's start flying at the beginning of the year. One of the harsh realities of owning a business or being an contractor is the humble fact that you get paid LAST!

Jan Stickle , December 12, 2017 at 5:00 pm

We became instant Uber riders while spending holidays with relatives in San Diego. While their model is indeed unique from a rider perspective, it was the driver pool that fascinates me. These are not professional livery drivers, but rather freebooters of all stripes driving for various reasons. The remuneration they receive cannot possibly generate much income after expenses, never mind the problems associated with IRS filing as independent contractors.

One guy was just cruising listening to music; cooler to get paid for it than just sitting home! A young lady was babbling and gesticulating non stop about nothing coherent and appeared to be on some sort of stimulant. A foreign gentleman, very professional, drove for extra money when not at his regular job. He was the only one who had actually bought a new Prius for this gig, hoping to pay it off in two years.

This is indeed a brave new world. There was a period in Nicaragua just after the Contra war ended when citizens emerged from their homes and hit the streets in large numbers, desperately looking for income. Every car was a taxi and there was a bipedal mini Walmart at every city intersection as individuals sold everything and anything in a sort of euphoric optimism towards the future. Reality just hadn't caught up with them yet .

[Dec 09, 2017] MIT Professor Angrist Publishes Obviously Misleading Analysis of Uber Driver Economics....With Uber Chief Economist as Co-Autho

Notable quotes:
"... Uber and Lyft are fraudulent schemes based on selling false hope to desperate drivers on one hand, while promising investors the 'opportunity' of getting in on the ground-floor of a new, and 'disruptive technology', sure to become a profitable monopoly, and so make a fortune when it they take it public. ..."
"... new and disruptive technology ..."
"... It's not a good job, it's not a good investment, it's not a 'new and disruptive technology', it's a scam, and anyone trying to sell any portion of it is a fraud. ..."
"... I think it's worse than a scam. It's a scam on the drivers and users, but I suspect that the investors know just what is up: destroy the taxi market, supplant it with Uber/Lyft, and enjoy your monopoly rents forever. Libertarianism indeed! That's the ground floor they're getting in on: entrepreneurial feudalism. ..."
"... Most of the litigation regarding Uber drivers is predicated on proving an employment relationship, contrary to Uber's assertion that the drivers are independent contractors. ..."
"... These drivers are overworked, underpaid, deceived, exploited employees of uber all but in name, the independent contractor nonsense is bulls***. Tell me how this is a win for the driver?? ..."
"... The assumption goes further than that. If you are depreciating an asset (wearing out your car), that's a cost. Replacing tires more often, paying for a commercial car rider (which Uber riders are supposed to do but Uber does not enforce) are all costs that need to be included even if the driver owns his car outright. ..."
"... That depreciation and upwardly trending running costs are ommited in the analysis seems to me to be gross incompetence or willful deception by the authors. ..."
"... That is my buddy in Seattle's experience with Lyft. He got laid off from his tech job and started driving after a lengthy unsuccessful job search but has no illusions about the "gig economy", doing it mostly just to get out of the house. The other day he told be he'd driven over 4 hours for slightly over $50. That's below the Seattle minimum wage and that's before accounting for his expenses. ..."
"... People may like the cheap fares, but that's only because they are heavily subsidized by flushing VC down the toilet and drivers working basically at a loss once expenses are considered. ..."
"... I'm not a frequent Uber user, but when I do I ask the driver what it's like. All say that it's much harder to make money now than it used to be. One driver actually attributed that to the ouster of Kalanick, on the belief that Kalanick had been ousted because he was pro-driver. (I didn't argue). That same driver told me he was getting $8 of my $22 Friday night fare. ..."
"... So, I think The Point with Uber it that it is mostly a political research project. What those VC investors actually pay for is to test to what extent they can get away with undercutting wages, how agressive and blatant one can cut corners on legal compliance, what the consequences for doing this are in different regions. What are the stakeholders? How should these be managed/manipulated? ..."
"... When a ride is requested the customer knows where they are going and about how much it will cost. Uber and Lyft have the same information. But the driver only gets a customer rating and an estimated time to pick up, and 10-15 seconds to decide if they will accept the ride. They are not allowed to call the customer and ask for the destination. If they cancel the ride, they are punished. When the driver shows up, the customer has up to five minutes to get in the vehicle before the driver can cancel on that person, and five minutes is a horrible waste of time to someone who is compensated pennies per minute for waiting. The driver has no idea how much the customer is actually paying (which is often a violation of state laws requiring full disclosure of fares). Drivers have no information, a very unfair economic reality. ..."
"... The companies are praying that elimination of drivers via automated vehicles will solve their financial problems, however I suspect that these companies are going to learn a hard lesson about the true cost of maintaining a fleet of hi tech vehicles. ..."
"... Out in San Francisco proper the number of ridehailing vehicles with expired registrations has increased dramatically. Savvy taxi drivers and ridehailing drivers are earning less across the board. Drivers are coming from San Diego to drive in the SF Bay Area. Plateless toll evasion on the toll bridges has skyrocketed since ridehailing came on the scene. ..."
Dec 09, 2017 | www.nakedcapitalism.com

MK , December 8, 2017 at 6:20 am

In Buffalo last weekend for a family event. Tried Uber and Lyft around 7 pm Saturday from our hotel in Cheektowaga to get to Town of Tonawanda. Not one single car available on either service. Call to taxi dispatch, taxi at our hotel in less than 10 minutes.

Uber and Lyft absolutely failed in that scenario and left a poor impression for what would have been our first rideshare trip.

Watt4Bob , December 8, 2017 at 7:36 am

I drove a taxi for many years, and I now work in IT for a group of auto dealers.

Last week, one of the general sales managers at work explained to me that people are ' selling ' cars to us in order to get out from under the expense of payments. Many of these people are 'up-side-down' in their loans, meaning they owe more than the car is worth. These folks are having to pay us to take the car off their hands, for example one customer paid us $8,000 to ' buy ' his car.

Now understand that this is only part of the potential cost of attempting to make part of a living by driving for Uber or Lyft.

You've wasted a year, making much less money than promised, you put 40K miles on your car instead of the average 20K, and you end up with a car that isn't worth nearly what you owe on it.

So now you've wised up to the fact that this is not a real 'opportunity', you've damaged your financial situation and you're worse off than you were before.

That nice car that was going to help you make a living is now a weight holding you down, it's hard for you to even look at it, and you can't afford to pay someone to 'buy' it from you.

Uber and Lyft are fraudulent schemes based on selling false hope to desperate drivers on one hand, while promising investors the 'opportunity' of getting in on the ground-floor of a new, and 'disruptive technology', sure to become a profitable monopoly, and so make a fortune when it they take it public.

It's not a good job, it's not a good investment, it's not a ' new and disruptive technology ', it's a scam, and anyone trying to sell any portion of it is a fraud.

Thuto , December 8, 2017 at 8:12 am

Watt4Bob, my sentiments exactly, see my comment below.

Wukchumni , December 8, 2017 at 8:19 am

I've only taken Uber a few times, and when a Cuban-American fellow in Miami picked us up in his $40k new SUV and told us how Uber was going to be his way out of the rat race, I thought along the same lines as you, this is never going to work.

Martin Finnucane , December 8, 2017 at 10:29 am

It's not a good job, it's not a good investment, it's not a 'new and disruptive technology', it's a scam, and anyone trying to sell any portion of it is a fraud.

I think it's worse than a scam. It's a scam on the drivers and users, but I suspect that the investors know just what is up: destroy the taxi market, supplant it with Uber/Lyft, and enjoy your monopoly rents forever. Libertarianism indeed! That's the ground floor they're getting in on: entrepreneurial feudalism.

Also, maybe that the way investment tends to work.

Watt4Bob , December 8, 2017 at 11:40 am

It's a scam on the drivers and users, but I suspect that the investors know just what is up: destroy the taxi market, supplant it with Uber/Lyft, and enjoy your monopoly rents forever.

Anybody who has been following this discussion here at NC knows that is the play, as it has been sold to investors, however, there is very little evidence that it will work to investors benefit outside of a profitable IPO.

IMHO, that IPO has always been the end game.

As has been pointed out previously, it will be very hard, maybe impossible to drive enough of the taxi industry out of business to create that monopoly, and thus make the IPO look enticing.

My bet would be that Uber and Lyft miss that mark by a wide margin, and go down in history as a foolish misadventure on the part of investors.

As the number of disappointed investors, and ex-drivers mounts up, it will be harder and harder to recruit new 'sub-contractors' and I wouldn't rule out a class-action suit by drivers, investors, or both.

Anon , December 8, 2017 at 1:32 pm

As the number of disappointed investors, and ex-drivers mounts up, it will be harder and harder to recruit new 'sub-contractors' and I wouldn't rule out a class-action suit by drivers, investors, or both.

Probably not from the drivers -- Uber drivers for the last several years (~2013 or so, I think?) have been subject to an arbitration clause with a class action waiver. There is an opt-out provision (most likely in place only to support the ridiculous argument that the class action waiver doesn't violate Section 7 of the NLRA because of the right, under Section 7, to refrain from participating in concerted activity) but no doubt the vast majority of drivers have not opted out and are probably unaware of it. The numerous class actions against Uber have either involved drivers who stopped working for Uber prior to their implementation of arbitration or have tried to attack the enforceability of the arbitration clause. Unfortunately, those arguments haven't been, and the pending ones are unlikely to be, very successful. The argument involving Section 7 of the NLRA is currently pending before SCOTUS, but based on oral arguments, this looks likely to result in another 5-4 partisan split in favor of employers.

Watt4Bob , December 8, 2017 at 3:13 pm

The argument involving Section 7 of the NLRA is currently pending before SCOTUS, but based on oral arguments, this looks likely to result in another 5-4 partisan split in favor of employers.

Ah, yes, which brings up another matter;

Q. When is an employer not an employer

A. any time it matters to the 'employed'.

Anon , December 8, 2017 at 3:50 pm

Most of the litigation regarding Uber drivers is predicated on proving an employment relationship, contrary to Uber's assertion that the drivers are independent contractors.

You are correct that asserting any rights under the NLRA will require proving a common-law employment relationship, which is unfortunately a more restrictive standard than the FLSA's broad "suffer or permit to work" standard (and used by many state laws).

This is actually being investigated by the NLRB, who has consolidated numerous charges filed by Uber drivers into a single investigation in the San Francisco region .

Unsurprisingly, Uber's response has been to hire Littler and Gibson Dunn to stonewall the investigation by playing games like ignoring NLRB administrative subpoenas, requiring the NLRB to petition a district court for an order enforcing the subpoenas. The order the NLRB sought was eventually granted by the court , but this game managed to delay the proceedings for several months. And with the NLRB now under complete Republican control, both on the GC and Board side, it's hard to have hopes for a positive outcome for the drivers.

Knifecatcher , December 8, 2017 at 11:42 am

And there are even worse possible scenarios than making less money than expected. A friend of mine used a small inheritance ($5k or so) as a down payment to buy a new-ish car, with the idea of driving for Lyft. The hope was that he would at least make enough money to pay the note on his off-hours and have a more modern / reliable / fuel efficient car to get to his other 2-3 jobs. My friend is very much part of the precariat, so this felt like a win from his perspective.

This went on for a couple of months or so and things went more or less according to his meager expectations, so he was happy. Until he got rear ended in his nice new car. The car was totaled, the guy who hit him uninsured. His cut rate insurance company paid off the car at 2k or so less than he owed on it. Of course he had no gap coverage to cover that, and his down payment is long gone. I let him borrow an old pickup until he was able to get the insurance sorted out and arrange another beater so he didn't lose his other job(s).

Damn the "sharing economy" to hell.

Louis Fyne , December 8, 2017 at 1:14 pm

Absolutely this!

In addition to the obvious costs (fuel) and abstract costs (depreciation), drivers have a non-zero chance of death, injury, or plain old fender benders. And I'd bet most drivers don't take that into account.

Zero workers comp, zero disability, and Uber's collision insurance has a high deductible that guarantees risk is shifted onto its drivers, but for the long-tail crashes.

Not to mention drivers have only a vague idea what demand is like at any given time, while Uber HQ has 100% perfect information on the level of demand and its algos can make a reasonable guess as to the near-term expected demand.

Norbert Haering , December 8, 2017 at 7:50 am

The biased Research that you take apart here, is part of a wider and worrying phenomenon. Uber Money is dominating economic Research on ride-hauling platforms. Uber is contracting with many top-economists with their close links to prestigous publication channels. Even reputable journals publish the resulting PR as if it was science. Critical Researchers have no chance to compete, because they will not get the exclusive Uber-data, which Uber-loving researchers like Angrist and Levitt can work with.

There is an article in German Business newspaper "Handelsblatt" on this, http://www.handelsblatt.com/my/unternehmen/handel-konsumgueter/von-uber-finanzierte-studien-public-relations-oder-wissenschaft/20364132.html?ticket=ST-1630133-4TdJOLrZkvGWS3rsDDPg-ap

which is translated and slightly extended here:

http://norberthaering.de/en/home/32-english/news/920-uber-research

Rosario , December 8, 2017 at 12:40 pm

Yep, it already works in politics: https://www.npr.org/sections/money/2012/01/06/144737864/forget-stocks-or-bonds-invest-in-a-lobbyist

From Uber's perspective, why not game academia as well to help build the social values they desire. Further proof that, despite the libertarian truisms, markets are absolutely a product of politics and society rather than a natural phenomenon.

Thuto , December 8, 2017 at 8:09 am

The embedded assumption for this analysis is that the average uber driver owns their car outright (i.e. no vehicle finance/ lease repayments) and is available to work during peak demand hours. This idealised "be your own boss, set your own hours and make lots of money" myth has been shown up to be marketing fluff to attract gullible drivers who aren't savvy enough to see through the obfuscated numbers uber presents at its driver recruitment seminars. I'd wager that depreciation and dead miles, because they bite ever so silently by piling on hour by hour, mile by mile without seemingly affecting earnings dropping down into drivers "bottom lines", aren't ever mentioned at such seminars. IOW, drivers naively believe that their net earnings are 75%, when they're anything but.

In my neck of the woods the situation is even more dire because uber has partnered with South African banks and car dealerships to offer leases to unsuspecting drivers seduced by the marketing cool aid and exaggerated earnings potential, with lease terms transferring the bulk (read all) of the transaction risk to the driver. This has the effect of immediately exploding the "work part time/set your own hours" myth because said drivers are now tethered to uber (and have their free time rapaciously confiscated) in order to make their monthly repayments to the banks. With obligations to the banks on a monthly basis top of mind, asset down time becomes the bane of most of these drivers tenures with uber, with dead mile upon dead mile driven in the hope of positioning oneself close enough to areas of peak demand (leading to oversupply in such areas), artificially boosting supply for uber while wearing out both asset and driver.

These drivers are overworked, underpaid, deceived, exploited employees of uber all but in name, the independent contractor nonsense is bulls***. Tell me how this is a win for the driver??

Yves Smith Post author , December 8, 2017 at 8:28 am

The assumption goes further than that. If you are depreciating an asset (wearing out your car), that's a cost. Replacing tires more often, paying for a commercial car rider (which Uber riders are supposed to do but Uber does not enforce) are all costs that need to be included even if the driver owns his car outright.

Thuto , December 8, 2017 at 8:50 am

I totally agree, and I should have made it explicitly clear that even if you own your car outright the economics are junk owing to "hidden costs". I was addressing specifically the tacit assumption this analysis hinges on to arrive at its conclusion that uber should be a no brainer in the decision calculus of a driver looking to drive part time. That depreciation and upwardly trending running costs are ommited in the analysis seems to me to be gross incompetence or willful deception by the authors.

lyman alpha blob , December 8, 2017 at 8:23 am

So though Uber says you can drive whenever you want, drivers often only work from, say, 7 a.m. to 11 a.m. or from 3 p.m. to 8 p.m., because fares are too low at other times.

That is my buddy in Seattle's experience with Lyft. He got laid off from his tech job and started driving after a lengthy unsuccessful job search but has no illusions about the "gig economy", doing it mostly just to get out of the house. The other day he told be he'd driven over 4 hours for slightly over $50. That's below the Seattle minimum wage and that's before accounting for his expenses.

He rarely even tries to drive during non-peak hours as there's no money in it. Some fares earn him around $3 which is less than what it takes to ride the damn bus. I would never have dreamed of getting in a cab in Seattle and paying less than $5 to get anywhere in Seattle, and that was 25 years ago.

People may like the cheap fares, but that's only because they are heavily subsidized by flushing VC down the toilet and drivers working basically at a loss once expenses are considered.

gk , December 8, 2017 at 8:48 am

I'm not a frequent Uber user, but when I do I ask the driver what it's like. All say that it's much harder to make money now than it used to be. One driver actually attributed that to the ouster of Kalanick, on the belief that Kalanick had been ousted because he was pro-driver. (I didn't argue). That same driver told me he was getting $8 of my $22 Friday night fare.

I agree with the takedown of this piece, and the points previously made here about the economics of ride-sharing and the implausibility of Uber ever deriving Amazon-like network effects. I do think their app was a huge improvement over pre-Uber taxi dispatching (here in DC, call a phone number, hope someone answers, then hope a taxi shows up). Also, I think that it's at least possible that a demand-based per-ride fare structure would (assuming good faith) better match supply and demand than traditional taxi time and distance-based fares. Operating the system that enables the demand-based fares wouldn't be a ticket to world domination, but it might improve utility for drivers and riders.

fajensen , December 8, 2017 at 10:49 am

I do think their app was a huge improvement over pre-Uber taxi dispatching

The bar for "tech-disruption" is set pretty low with Uber. The local taxi companies (Taxi Skåne) all have one, even in backwards Germany, where they might not take any card payments but there is an app for getting a taxi wherever you are.

*Anyone*, literally, doing steady business can afford to have a decent "Rendevous-app" made. Give a bunch of Norwegian teenagers err App Development Company three, six months and about 15-50 kEUR and it is Done.

I can probably even get one to track my retriever on the app-store – but I don't need it since she is a proper retriever, she finds stuff and comes back with it.

So, I think The Point with Uber it that it is mostly a political research project. What those VC investors actually pay for is to test to what extent they can get away with undercutting wages, how agressive and blatant one can cut corners on legal compliance, what the consequences for doing this are in different regions. What are the stakeholders? How should these be managed/manipulated?

The information gathered until Uber craters will be used to better tailor more serious parasitic business ventures. It is an investment in the Next-Thing.

Kukuzel , December 8, 2017 at 4:41 pm

Great point! They are looking to test the limits of the system for sure in all the wrong ways.

UserFriendly , December 9, 2017 at 1:14 am

Just because they could develop an app doesn't mean they would. Next to none of them did till Uber became a threat. Not that I'm a fan of Uber.

Louis Fyne , December 8, 2017 at 9:55 am

People complain about bitcoin energy use? Let's talk about uber deadhead miles/idling. If you're in a city where uber cars must wear trade dress Just stand at a downtown corner and watch all the empty cars drive by.

Certainly not convinced ridehail is a net plus. Uber HQ would have that data and if it is not a talking point, the data must not be good

fajensen , December 8, 2017 at 10:28 am

What a shame Uber is not a listed company. That is a short-indicator if there ever was one. At least Iceland could afford a real Harward Professor write a paper declaring the robust health of their economy right before it tanked.

Wukchumni , December 8, 2017 at 10:32 am

Mishkin Accomplished!

Wukchumni , December 8, 2017 at 12:16 pm

p.s.

Not a Harvard dude, another MIT professor, ha!

Jim H. , December 8, 2017 at 12:16 pm

The money mustache guy in Longmont, CO recently posted his experience as an "underground" uber guy. Seems to confirm what I've heard around here (Berkeley/SF) about it not being the pot of gold at the end of the rainbow. Certainly has added to the snarled traffic as people use them to avoid walking short distances and as drivers carry on like amateurs. They drive like part timers and stop in the middle of streets, rather than pulling to the side of streets.
http://www.mrmoneymustache.com/2017/11/22/mr-money-mustache-uber-driver/

Basil Pesto , December 8, 2017 at 1:18 pm

Recently in Australia I've noticed when my friends have been catching Ubers that they have been subject to surge pricing for little-to-no reason. I couldn't help but wonder if this is a concerted effort by Uber to get their customers more accustomed to paying surge rates, for when Uber can no longer afford to subsidise the rides.

Noni Mausa , December 8, 2017 at 3:01 pm

It has always seemed to me that the Uber business model could only exist in a transient economic situation -- that is, a time where the economy had done poorly enough to leave many people unemployed, but before then had done well enough that many of those hard up people owned a private car. A business model that depends on transient conditions will yield, of course, transient business.

Joel , December 8, 2017 at 3:27 pm

A small correction:

the Boston market, which has a particularly high level of licensed cabs per capita, nearly twice as high as New York City.

They're talking about the City of Boston, which is only a tiny % of the Combined Statistical Area and has far more people than population during the workday. A better comparison than City of Boston-NYC would be City of Boston-Manhattan. I'm surprised that the City of Boston doesn't have a much higher number of taxis per resident.

Comparing different municipalities in the US rarely makes sense since the size of a municipality is so arbitrary. Combined Statistical Areas is a better focus since they're standardized by social scientists working for the government.

Mista T , December 8, 2017 at 3:40 pm

Knowledge is power, and drivers are given NONE.

When a ride is requested the customer knows where they are going and about how much it will cost. Uber and Lyft have the same information. But the driver only gets a customer rating and an estimated time to pick up, and 10-15 seconds to decide if they will accept the ride. They are not allowed to call the customer and ask for the destination. If they cancel the ride, they are punished. When the driver shows up, the customer has up to five minutes to get in the vehicle before the driver can cancel on that person, and five minutes is a horrible waste of time to someone who is compensated pennies per minute for waiting. The driver has no idea how much the customer is actually paying (which is often a violation of state laws requiring full disclosure of fares). Drivers have no information, a very unfair economic reality.

The service is a terrific idea, but the economics of it are not realistic. Currently the discounts are all being subsidized by a combination of VC money and drivers' lack of knowledge.

The companies are praying that elimination of drivers via automated vehicles will solve their financial problems, however I suspect that these companies are going to learn a hard lesson about the true cost of maintaining a fleet of hi tech vehicles.

artiste-de-decrottage , December 8, 2017 at 5:43 pm

Well, but this takes the cake.

"Rent a car, drive for Uber or Lyft"

"$1000 per week before rental fees"

http://hyrecar.com/

Joel , December 8, 2017 at 6:15 pm

The question that has always confused me: since Uber offers a nicer "experience" than taxis, why didn't they charge a premium for that from the beginning? Why dedicate yourself to such an extreme burn rate?

Race2Bottom Isreal , December 9, 2017 at 12:02 pm

Out in San Francisco proper the number of ridehailing vehicles with expired registrations has increased dramatically. Savvy taxi drivers and ridehailing drivers are earning less across the board. Drivers are coming from San Diego to drive in the SF Bay Area. Plateless toll evasion on the toll bridges has skyrocketed since ridehailing came on the scene.

The situation is not sustainable. There are way too many vehicles out there. Generally there are less rides too now. Services like Chariot or Ford Bike share have reduced ridership for taxi/ridehailing. Apps like Tinder/Grinder reduce the need for barhopping. Services like Munchery or Uber Eats eliminate a round trip for going out to eat.

Oddly enough Uber Eats competes against itself, UberX, as every delivery takes away two rides from the livery side of the equation. People that get a ride out to eat need a ride home.

[Jun 28, 2017] Uber Is Doomed, Argues Transportation Reporter

Jun 28, 2017 | tech.slashdot.org
(jalopnik.com) 334

Posted by EditorDavid on Sunday February 26, 2017 @08:37PM

When an Uber self-driving car ran a red light last year, they blamed and suspended the car's driver, even though it was the car's software that malfunctioned, according to two former employees, ultimately causing Uber cars to run six different red lights . But technical issues may be only the beginning.

An anonymous reader writes:

Jalopnik points out that in 2016 Uber "burned through more than $2 billion, amid findings that rider fares only cover roughly 40% of a ride , with the remainder subsidized by venture capitalists" (covering even less than the fares of government-subsidized mass transit systems). So despite Google's lawsuit and other recent bad publicity , "even when those factors are removed, it's becoming more evident that Uber will collapse on its own ."

Their long analysis argues that the problems are already becoming apparent. "Uber, which didn't respond to questions from Jalopnik about its viability, recently paid $20 million to settle claims that it grossly misled how much drivers could earn on Craigslist ads.

The company's explosive growth also fundamentally required it to begin offering subprime auto loans to prospective drivers without a vehicle."

Last month transportation industry analyst Hubert Horan calculated that Uber Global's losses have been " substantially greater than any venture capital-funded startup in history ."

[Jun 28, 2017] When Their Shifts End, Uber Drivers Set Up Camp in Parking Lots Across the US

Jun 28, 2017 | tech.slashdot.org

A feature report on Bloomberg today illustrates the lives of several Uber drivers, who find shelter in car parking at nights when it's too pricey and tiring to go home . An excerpt from the story:

In Chicago, Walter Laquian Howard sleeps most nights at the "Uber Terminal." "I left my job thinking this would work, and it's getting harder and harder," Howard said. "They have to understand that some of us have decided to make this a full-time career."

Howard has been parking and sleeping at the 7-Eleven four to five nights a week since March 2015, when he began leasing a car from Uber and needed to work more hours to make his minimum payments. Now that it's gotten cold, he wakes up every three hours to turn on the heater.

He's rarely alone. Most nights, two to three other ride-hailing drivers sleep in cars parked next to his. It's safe, he said, and the employees let the drivers use the restroom. Howard has gotten to know the convenience store's staff -- Daddy-O and Uncle Mike -- over the past two years while driving for this global ride-hailing gargantuan, valued at $69 billion.

"These guys have become my extended family," said Howard, 53. "It's my second home. We have this joke that I'm the resident. I keep asking them: 'Hey, did my mail come in yet?'"

[Jun 28, 2017] Disrupt the Disrupters: Uber's Comeuppance is the Moment for the U.S. to Finally Start Regulating the So-called Sharing Economy by Dean Baker

Notable quotes:
"... Uber took this to the extreme, fighting all forms of regulation everywhere, whereas Airbnb and most of the other sharing economies have generally tried to reach accommodations with regulators. (Interesting exception: In New York City, though Uber flooded the market and undercut yellow cabs on pricing, they technically abided by the stringent rules of the Taxi & Limousine Commission. Airbnb, meantime, got its foothold enabling activity that was against the city's hotel laws.) ..."
"... But Uber forced the issue by plunging ahead with its service and completely ignoring the rules governing the taxi industry. It quickly gained a following of loyal customers, which made politicians in most cities reluctant to challenge the company.... ..."
Jun 28, 2017 | cepr.net

anne: June 27, 2017 at 03:40 PM

June 25, 2017

Travis Kalanick's forced resignation as the CEO of Uber is a great symbolic end to the adolescence of the "sharing" economy. Uber and other companies that claimed space in this invented arena may now have to acknowledge that they are not actually new and different from everything that went before them. And the rules that apply to their competitors also apply to them.

Uber under Kalanick was in many ways the poster child for the sharing economy. The company insisted that all the rules that governments had put in place to regulate the taxi industry - to protect workers and to prevent discrimination - didn't make sense for the new model, because they were Uber.

The company's effective motto, that it is better to ask for forgiveness than permission, seemed to cry out for a swift slap to the face. Taxis are hardly new, but the Uber gang claimed that the whole set of regulations developed around the industry didn't apply to them because they were an app-based "ride hailing" platform, not a taxi company.

This was, and is, garbage; as are most of the claims for the "newness" and "uniqueness" of the sharing economy companies. There is very little that is genuinely unique about this set of companies, but they insistently claim that they are reinventing everything but the wheel.

Take, for example, Airbnb, the other towering pillar of the sharing economy. What exactly is new and unique about renting out rooms in a house, or even about renting whole apartments? This one probably dates back to pre-historic times. Airbnb has people marketing this service over the Internet, in a single, easily organized directory. That is certainly newer, but the Internet has been around for two decades and so has been the practice of using it as a way to market rooms for rent.

The only thing that was really new about Uber, Airbnb and the other sharing economy companies was the claim that they should be exempt from longstanding rules and regulations.

Uber took this to the extreme, fighting all forms of regulation everywhere, whereas Airbnb and most of the other sharing economies have generally tried to reach accommodations with regulators. (Interesting exception: In New York City, though Uber flooded the market and undercut yellow cabs on pricing, they technically abided by the stringent rules of the Taxi & Limousine Commission. Airbnb, meantime, got its foothold enabling activity that was against the city's hotel laws.)

Just to be clear, there were and are real problems with the regulatory structure in many sectors, especially the taxi industry. Uber performed a valuable service by directly challenging a framework that largely served to protect the incumbent industry. The structure limited supply and in this way had the predictable result of giving bad service and high prices.

This regulatory environment needs to be modernized - thoughtfully, not by a profit-making competitor, but by government.

But Uber forced the issue by plunging ahead with its service and completely ignoring the rules governing the taxi industry. It quickly gained a following of loyal customers, which made politicians in most cities reluctant to challenge the company....

[Jun 25, 2017] Obama is being cited as a wild card candidate for Uber CEO

Notable quotes:
"... Hmmmmm, I think he'd be perfect, especially as he has 8 years of experience being an empty suit covering for an evil organization, but I also think he's smart enough to avoid jumping on a sinking ship. ..."
"... an illegal endgame - Uber only wins if it becomes a monopoly ..."
"... Self-driving cars in the future means that developing the AI, sensors, and vehicles themselves will require a lot of investment and knowledge. It will not surprise me if the big mergers a few years from now are companies like Google and Apple merging/acquiring/partnering with old-school vehicles to bring their AI, mapping, and electronics design experience to bear on vehicles. The car companies are already buying the electronic interfaces for their radios/phones from Apple etc.now. Extending that partnership to the entire vehicle is likely coming. ..."
"... deployable wings and a new source of energy and propulsion ..."
"... The notion of practical self driving cars might as well include technology that can exploit the third dimension. They will need a volume rather than an area to function. Think BladeRunner ..."
"... I think you've done something very good here. The timespan of the world that you are considering in your example necessarily spans the lifespan of Uber AND a future taking place after Uber is dead. ..."
"... Another interesting place to find this out was in a hearing convened by senators Reed and Bunning on "alternative investments". They were mostly concerned with systemically dangerous institutions, which meant they were focusing on leverage. There was a VC guy at the table who constantly said "we don't do that. We're on the side of the angels. We put in literal cash. I think you want to be talking to THEM." (gestures to the private equity and hedge fund representatives.) ..."
"... The Airbnb business model transfers the property rights of neighbors of the Airbnb location to the owners/renters of the Airbnb listing. This is unfair and illegal. In the parlance of Municipality Zoning it is "Spot Zoning" which is completely illegal. ..."
"... After Travis Kalanick's Resignation, Will Uber Really Change? ..."
Jun 25, 2017 | www.nakedcapitalism.com
David Carl Grimes , , June 24, 2017 at 8:05 am

Obama is being cited as a wild card candidate for Uber CEO:

http://www.businessinsider.com/uber-ceo-candidates-8-possible-successors-to-travis-kalanick-2017-6/#thomas-staggs-1

Huey Long , , June 24, 2017 at 8:44 am

Hmmmmm, I think he'd be perfect, especially as he has 8 years of experience being an empty suit covering for an evil organization, but I also think he's smart enough to avoid jumping on a sinking ship.

different clue , , June 24, 2017 at 9:01 pm

They could change the company's name to . . . Uberama.

Vastydeep , June 24, 2017 at 8:52 am

I think that even here on NC we might be falling short in reviewing Uber.
The "Ah HA!" of Uber isn't that it's a "tech company" (it isn't), or the "shar(ecropp)ing economy" (nothing new there either). The Ah HA of Uber is that it was formed and operates strictly to establish what factors are needed to make an expressly-illegal business de-facto legal.

It's a recipe, and here are the ingredients:

– an illegal endgame - Uber only wins if it becomes a monopoly
– a war chest ($13B raised!) big enough to
– win wars of attrition against any "little people" that bring suit
– subsidize pricing to drive cab companies out of markets
– pay "protection" money to prosecutors that could cause issues
– buy legislators to make today's crimes tomorrow's "Best Practices"
– Media support - board-member Ariana Huffington
– VC support - board-member Bill Gurley makes this a "High Tech" investment
– Political support - David Plouffe was Barack Obama's 2008 campaign manager
– a hated enemy - nobody likes cabs, cab company economics are lousy, NOBODY defends cabs!
– a psychopathic CEO who will attract "bad boy" press, rather than the "criminal" press he should draw. Nobody will miss a psychopath when you throw him under the bus when the experiment is over.

With all the scandals, Uber now has too much smell for its backers to continue with it. So shut it down and throw Travis under the bus. Use the lessons of Uber to advance all the little "Uber-of-xxx" businesses still littering VC portfolios. In that sense, the "Uber experiment" is just beginning. As Balzac wrote (incidentally the epigraph to The Godfather):

"Behind every great fortune there is a crime."

DH , June 24, 2017 at 11:19 am

Ultimately, the big risk with Uber is that it is really just a software company, which means new software can be developed to replace it.

Self-driving cars in the future means that developing the AI, sensors, and vehicles themselves will require a lot of investment and knowledge. It will not surprise me if the big mergers a few years from now are companies like Google and Apple merging/acquiring/partnering with old-school vehicles to bring their AI, mapping, and electronics design experience to bear on vehicles. The car companies are already buying the electronic interfaces for their radios/phones from Apple etc.now. Extending that partnership to the entire vehicle is likely coming.

If the future for vehicles in cities is corporate-owned self-driving electric vehicle fleets, then that is going to require huge capital investments which will only be available to companies with many of the major components under the belt. That is a completely different business model than a phone app.

Uber/AirBNB also have the fundamental ethical and behavioral baggage of ignoring long-standing laws in cities, similar to the banking industry developing MERS to do end-runs around county clerks and their fees/paperwork/delays. I think there is a lot to be said by periodically challenging the status quo but in general, that will be most successful if other laws and societal norms other than the targeted one are scrupulously followed. This was a cornerstone of the civil rights movement where everybody tried to behave impeccably while breaking racist laws so they would not simply look like hoodlums and looters, which is where the banking and Uber's reputations have ended up.

Optimader , June 24, 2017 at 1:57 pm

"Self-driving cars in the future means that developing deployable wings and a new source of energy and propulsion will require

The notion of practical self driving cars might as well include technology that can exploit the third dimension. They will need a volume rather than an area to function.
Think BladeRunner

footnote4 , June 24, 2017 at 11:49 am

With sales tax avoidance as the original exploitation opportunity, your list largely applies to Amazon as well.

Just following the 'market' logic where it leads, add the fawning press, etc., and damn the consequences – from Walmart to Amazon to Uber

Toolate , June 24, 2017 at 12:37 pm

Thank you for this clear explanation

Kevin Carhart , June 24, 2017 at 11:13 pm

I think you've done something very good here. The timespan of the world that you are considering in your example necessarily spans the lifespan of Uber AND a future taking place after Uber is dead.

Which means that there are people a level up who use and deploy these pilot-project entities possibly not just for a traditional IPO story, but also for your idea of a recon or research project. If what you're describing could be demonstrated, maybe this could change society's views on VC. The fact that they use equity and not debt usually seems to be the basis for an argument that they are "on the side of the angels" (as in this very interesting post by Yves, http://www.nakedcapitalism.com/2017/02/private-equity-slugfest-managing-partner-sequoia-slams-blackstone-chief-steve-schwarzman-new-york-times-op-ed.html ).

Another interesting place to find this out was in a hearing convened by senators Reed and Bunning on "alternative investments". They were mostly concerned with systemically dangerous institutions, which meant they were focusing on leverage. There was a VC guy at the table who constantly said "we don't do that. We're on the side of the angels. We put in literal cash. I think you want to be talking to THEM." (gestures to the private equity and hedge fund representatives.)

If it was more clear that the portfolio entities can be rolled out for the type of larger project or experiment you are describing here, it would be another way of criticizing VC which can't be shut down based on whether or not they use leverage.

Sue , June 25, 2017 at 12:07 am

Ah, the mysterious markets! Invisible to my eyes they have caused me a painful bunion and a emotionally devastating depression! I did not do anything to them and they did everything to me!

McWatt , June 24, 2017 at 10:17 am

Regards Airbnb:

The Airbnb business model transfers the property rights of neighbors of the Airbnb location to the owners/renters of the Airbnb listing. This is unfair and illegal. In the parlance of Municipality Zoning it is "Spot Zoning" which is completely illegal.

The purpose of our Zoning Laws is so all are protected; commercial, industrial, residential and multi-family. Airbnb destroys those protections and the company's income is a direct result of illegal activities. What part of unfair and illegal don't people understand?

Carla , June 24, 2017 at 10:57 am

I understand the concerns about Airbnb and share some of them. However, I question the rosy view that zoning codes protect all interests equitably. Zoning laws are written by the powerful to their advantage - always. They protect property owners whose wealth and influence frequently was purchased by taking advantage of others, if not thanks to outright illegal activities.

What part of unfair and illegal don't people understand? Some of us see the demonizing of little people just trying to survive in this neoliberal world, while bankers and their protectors crash the world economy, crushing the lives of millions, and face no consequences at all, but emerge even richer and more powerful than before. That's the part of unfair and illegal I don't understand.

So yeah. I can see more than one side to this story.

Carla , June 24, 2017 at 12:51 pm

The following, linked over at The Automatic Earth, has my point buried within it - I have put the critical point in upper case for emphasis. It wasn't the Greek pensioner or the American sub-prime borrower who tanked the world economy in 2008. And it isn't Uber drivers or AirBnb hosts who will be responsible for the next Big One. The power elite have got that covered. The richer brethren of the same people who, at the local level, write the zoning laws.

"Illinois is in a death spiral, but it's not alone. Illinois is merely the canary in the coal mine.

We're only hearing about Illinois right now because the percentage of their pensions that have been funded is the lowest in the nation. However, there are plenty of states that aren't too far behind Illinois And it's not just public pensions. The pension funds for every company in the the S&P 500 are underfunded by $375 billion. BEFORE THE LAST FINANCIAL CRISIS, THEY WERE FULLY FUNDED. And globally, the problem is far worse. 20 countries in the OECD, whose members include every western and developed nation, have a combined $78 trillion in unfunded liabilities, from both private and public pensions."

http://www.shtfplan.com/headline-news/canary-in-the-coal-mine-unfunded-liabilities-have-turned-illinois-into-a-banana-republic-on-the-brink-of-bankruptcy_06222017

JimTan , June 24, 2017 at 11:21 am

"In the days after Travis Kalanick stunned Uber Technologies Inc.'s more than 15,000 employees by resigning as chief executive, the company's senior leaders made impassioned pleas reassuring them it is worth sticking around"

Apparently these 15,000 employees are all that currently matter to Uber management, which shows their priorities as Company spokesman Matt Kallman said Uber has more than 600,000 drivers in the United States .

reslez , June 24, 2017 at 11:59 am

Given the way Uber structured employee stock options it seems like the vested employees are basically"handcuffed" to the company. What a surprise if only the very senior management walks out of this debacle with significant riches.

https://www.google.com/amp/s/techcrunch.com/2016/04/29/handcuffed-to-uber/amp/

Bobby Gladd , June 24, 2017 at 12:40 pm

I dimly recall reports of onerous employee tax liability stuff from the old 2000 DotCom crash days, relating to vested stock options. Something having to do with being taxed at the once-"peak" values of subsequently worthless stock. Anyone?

Vastydeep , June 24, 2017 at 2:50 pm

Yes - this is where we cover the joy of the "same day" transaction. I believe the story is basically this: When your options vest, you can exercise your options - your options become stock by your paying the strike price, and shares of stock (at the current price) are yours. This creates a taxable event. If you do a "same day" transaction then your options-conversion is paid-for out of the proceeds of the sale of the shares, which are sold immediately. You are subject to the full income tax rate if you do it this way, but nobody ever went broke paying for gains Or, you can continue to hold your shares and try to "wait out" the better Capital Gains Rate. The problems come when your $70 shares crash to $2 - now you still owe tax based on the gains up to $70, but you have pennies stock fund to cover it. Poor You!

Bobby Gladd , June 24, 2017 at 4:13 pm

Yes, thank you, that's what I'd vaguely recalled (absent the terminology). Lotta people got creamed this way during the 2000 bust.

Amit Chokshi , June 24, 2017 at 12:02 pm

I had commented on the FT site re if uber can make money. Based on the what press sources released for uber q416 and q117 u could guess that uber needs about 20b in annual rev to break even or make a bit of money. Uber's opex looks like 3.8b per qtr and based on sequential growth from q1 to q4 is growing at like 6pct vs uber top line growth of 17pct. Seems like there is some scaling so if it gets to 18-19b they prob break even.

Problem is they have 2 quarters of cash left before needing more funds at a v lofty valuation.

Phil In Kansas City , June 24, 2017 at 2:15 pm

Two quarters? My understanding from this posting and previous Horan posts is that Uber had about 6-7 B left of startup capital at the beginning of Q1 '17. At the rate they are losing money, they should last until the end of Q4 '18, assuming losses in the range of 3.5B per year. At that point, I doubt that they will still have that open line of credit, nor will they have the lofty valuation they now enjoy.

This is a company that can never go public, as they can't show how they can make a profit without destroying all competing cab and livery services. Who, or what entity, in their right mind, would pour more billions into this fiasco after watching 13 B go poof in subsidies to Uber passengers?

Yves Smith Post author , June 24, 2017 at 6:32 pm

Uber also has over $2 billion in credit lines but no (normal) company draws on them in full when it is going down. Bear Stearns didn't, for instance.

Uber might be able to raise money at a much lower valuation and the early stage investors would still be fine, but that would really demoralize the employees, and some of the later investors might not be ones the early VCs want to burn (like the dumb Saudis). So I don't know how this works.

Also Amit's # are meaningless since the "opex" isn't a fixed cost and consists to a significant degree of driver subsidies. If those aren't kept at the same level, revenue will fall, potentially by a lot.

Bobby Gladd ,
Reply
Amit Chokshi , June 24, 2017 at 12:02 pm

I had commented on the FT site re if uber can make money. Based on the what press sources released for uber q416 and q117 u could guess that uber needs about 20b in annual rev to break even or make a bit of money. Uber's opex looks like 3.8b per qtr and based on sequential growth from q1 to q4 is growing at like 6pct vs uber top line growth of 17pct. Seems like there is some scaling so if it gets to 18-19b they prob break even.

Problem is they have 2 quarters of cash left before needing more funds at a v lofty valuation.

Phil In Kansas City , June 24, 2017 at 2:15 pm

Two quarters? My understanding from this posting and previous Horan posts is that Uber had about 6-7 B left of startup capital at the beginning of Q1 '17. At the rate they are losing money, they should last until the end of Q4 '18, assuming losses in the range of 3.5B per year. At that point, I doubt that they will still have that open line of credit, nor will they have the lofty valuation they now enjoy.

This is a company that can never go public, as they can't show how they can make a profit without destroying all competing cab and livery services. Who, or what entity, in their right mind, would pour more billions into this fiasco after watching 13 B go poof in subsidies to Uber passengers?

Yves Smith Post author , June 24, 2017 at 6:32 pm

Uber also has over $2 billion in credit lines but no (normal) company draws on them in full when it is going down. Bear Stearns didn't, for instance.

Uber might be able to raise money at a much lower valuation and the early stage investors would still be fine, but that would really demoralize the employees, and some of the later investors might not be ones the early VCs want to burn (like the dumb Saudis). So I don't know how this works.

Also Amit's # are meaningless since the "opex" isn't a fixed cost and consists to a significant degree of driver subsidies. If those aren't kept at the same level, revenue will fall, potentially by a lot.

Bobby Gladd , June 24, 2017 at 9:52 pm

Your entire amazing Uber series has utterly persuaded me . Were they publicly traded, I'd be shorting them big-time. Some CNBC OpEd guy whined today about how the (allusively metaphorically "deep state") media anti-Travis/Uber Feeding Frenzy reflects The Death Of U.S. Innovation As We Know It. Which, of course, is what got said about the poignant (relative rounding error) Elizabeth Holmes/Theranos.

Bobby Gladd , June 24, 2017 at 12:34 pm

New Yorker:

After Travis Kalanick's Resignation, Will Uber Really Change?

Mickey Hickey , June 24, 2017 at 1:00 pm

It is not so much that the MSM got it wrong as that they did not give an opinion one way or the other on Uber's prospects. MSM are dependent on large corporations for advertising income and it is not in their interest to make comments that reflect negatively on present or prospective customers. It has always been thus, those who have the gold make the rules written or unwritten. Uber is likely to survive but it is not likely to turn into a money spinner like Amazon, Apple, Google or Facebook. I see those four facing more competition from the likes of Alibaba, Aliexpress, Ten Cent, WhatsApp, Xiaomi, BBKElectronics, Dalian Wanda. China is racing up the value chain and has passed the point at which it can be stopped by competitors from smaller economies. China is everywhere these days, the house next door to me was bought by Chinese a year ago and sits there unoccupied but well maintained. The STEM programs in Canadian Universities have large Chinese student contingents. A grandson of mine recently entered a primary school in Canada with a competitive entry exam, 2600 applicants for 23 places. The students are 3/4 Asian with a majority of those being Chinese. This was an Irish school associated with a cathedral which opened up to French Canadians and Italians so it is unlikely that the Chinese are getting on anything but pure merit.

[Jun 12, 2016] Calculate Your Own Car Lease Payment

Edmunds.com

Most car shoppers have no idea what a good lease payment is for a car they're considering. They need a benchmark to guide them through the shopping process: something to shoot for as they get lease quotes from different dealerships. You can calculate such a lease payment with the formula described later in this article. However, there are easier ways to estimate what your lease payment could be.

Your first stop should be to check our Incentives & Rebates page. Here, manufacturers sometimes offer "lease specials" with very attractive monthly payments.

Another valuable resource is the Edmunds.com Lease Calculator. You will need to have some information handy to get an accurate quote, but the calculator will do the math for you. It also pulls in current purchase price information about current models and local tax rates.

Finally, you can use the Internet to simultaneously get multiple real-world lease quotes. With three to five quotes in hand, you can quickly test the market. Later, you can finalize the rest of the deal with a phone call or e-mail.

If, after you exhaust these resources, you are still determined to calculate your own car lease payment, read on.

Lease Payment Estimating
Calculating a lease payment to the penny is unrealistic: Local taxes vary widely and the dealer may charge additional fees. But you can arrive at a ballpark figure by using the following formula. As an example we will use a $23,000 car and a three-year lease. That's a term Edmunds.com highly recommends because, for one thing, you will always be under the manufacturer's bumper-to-bumper warranty.

You can calculate a "bottom-line lease" that represents the very best deal you can expect to get. Such a lease is based on the car's invoice price. When you shop and get quotes from dealers, if you get payments close to this (in a 36-month lease), you will have done well. As you're working on estimating your payment, please reach out to the Edmunds.com Live Help team for free assistance any time you need it. They'll be happy to help.

To calculate a bottom-line lease payment, you will need to gather several figures:

1. MSRP of the vehicle. Also called the sticker price. You can find the MSRP price for each car shown on Edmunds.com.

2. The money factor. This is the interest rate on which the lease is based. It's sometimes called a lease factor or even a lease fee. To get the money factor, call the dealer or get the information from your credit union. A common interest rate is 3 percent and as a money factor, this would be 0.00125. (Here's a handy tip: To convert interest rates to money factors, divide the interest rate by 2,400. To convert money factors to interest rates, multiply by 2,400.)

3. Lease term. We recommend leasing for 36 months or less.

4. Residual value of the car. Look up your car's residual value. Or call the bank or dealer and ask for the vehicle's residual value. As a rough guide, most cars have a residual value of between 45 and 60 percent for a 36-month lease.

Calculating a Sample Car Lease Payment
In the following example, let's assume you negotiated the car's sticker price of $23,000 down to $20,000. We'll also assume that the interest rate is 3 percent and the residual value is 57 percent. So what would the monthly payments be on a three-year lease?The first step is to find out what the car will be worth three years from now. In other words, how much of the car's value are you going to use during the lease term? In this example, multiply the sticker price of $23,000 by the residual value of 57 percent.

$23,000 X 0.57 = $13,110

The car will be worth $13,110 at the end of the 36-month lease. Since the car was worth $20,000 (after you negotiated it down from a sticker price of $23,000) and it will be worth $13,110, you will be using $6,890 of the car's value.

$20,000-$13,110 = $6,890

Then, divide $6,890 by 36 (the number of months in the lease). That yields a base monthly payment of $191.39. But, before you get excited about how low this payment is, remember that this figure doesn't include interest or tax. Finding how much interest you'll be charged is the second half of the calculation.

Add the negotiated price of the car to the residual value and multiply this by the money factor.

($20,000 + $13,110) X 0.00125 = $41.38

Finally, these two figures are added together to give you the approximate bottom-line monthly lease payment.

$191.39 + $41.38 = $232.77

Remember, this figure still does not include taxes or fees. It also doesn't take into consideration any down payment, trade-in credit or upfront money such as rebates or incentives. The entire formula looks like this:

1. Sticker Price of the car + options $23,000
2. Times the residual value percentage X 0.57%
3. Equals the residual value = $13,110
4. Invoice price of car minus incentives (net capitalized cost) $20,000
5. Minus the residual (from line 3) - $13,110
6. Equals the depreciation over 36 months = $6,890
7. Depreciation (line 6) divided by term in months χ 36
8. Equals the monthly depreciation payment = $191
9. Net capitalized cost (From line 4) $20,000
10. Plus the residual (From line 3) + $13,110
11. Equals = $33,110
12. Times the money factor X 0.00125 (3 percent)
13. Equals money factor (interest) payment portion = $41
14. Monthly depreciation payment (from line 8) $191
15. Plus money factor payment portion (from line 12) + $41
16. Equals bottom-line monthly lease payment = $232

Don't forget that you haven't paid sales tax yet. To account for tax, multiply the monthly lease payment by the state sales tax. For this example, in California the sales tax is approximately 9.25 percent. (For a more precise preview of your payments, you can also factor in any local sales taxes at this stage.)

$232.78 X 0.0925 = $20.95. This increases your monthly payment to $253.73

In the above example, you could reduce your monthly payment with a bigger down payment or by trading in your old car. Most advertised lease payments assume at least $1,000 in "drive-off fees." However, you decide on the amount you want to pay for drive-off fees yourself. The more money you put into drive-off fees, the lower the monthly payment. Subtract any money you put down from line 4, which is the invoice price of the car.

While this calculation looks a bit complicated, it is easy to set up a spreadsheet to do the calculation for you. Then, all you need to do is plug in the new figures for each car you are considering and your spreadsheet will generate an estimated lease payment. It's time well spent, since this will guide you through the process and help you get a good deal on a leased car.

[Oct 03, 2015] How to buy a used car - step by step guide part 2 - how much you can afford, insurance, what mileage is OK

Buying 1-2 year old used cars

Sometimes you may come across a one- or two-year-old used car. On one hand, it might be a good deal, since a new car depreciates the most in the first year and there is still some warranty coverage left. On the other hand, the main question is how this car ended up on a dealer's lot, because usually people tend to keep their cars for at least three-four years.

Most of lease or finance contracts are also have three to five years terms. One common source for one-two year old cars is the car rental companies, as they typically lease their cars for one or two years, after which the ex-rental cars find their way to the dealer lots. Another possibility is that the car was either bought back or traded in because there was some problem with it that the previous owner couldn't live with.

It also could be an insurance write-off after an accident. Either way, if you want to buy a one or two year old car, try to find out where it came from and have it thoroughly inspected. Running the car history report can help. By the way, if you are looking for a one-year old car, you might be able to buy directly from a car rental company; read below.

[Sep 27, 2015] The moral universe of the corporate killers

Sep 27, 2015 | www.samefacts.com
Stuart_Levine

Mark--The passage "As Paul Krugman points out" links not to PK, but to a Brad Plummer Vox article. I assume that you wanted to link to PK's column in this AM's NYT.

BTW, you may want to point to this Jeb! Tweet: http://bit.ly/1gVFixr I think that he may have set a record for the total number of horribly bad policy positions that one can advocate in 140 characters or less.

liberalhistorian

Couple of side bar comments:

...and apparently the buzz in the automotive world is that "everyone" was doing it...

Anybody who thinks Mr. Cook and Apple can't disrupt the automobile industry clearly isn't paying attention to the automobile industry. It seems designed more by cads than CAD. Smart elegant design? The auto industry is retrogressive: low hanging fruit. The whole damn kit: from CEOs to Dealers to Mechanics you can't trust. It's a moral atrocity.

Apple can and will seize the wheel and make a ton of money doing so...

As Paul Krugman points out, the scandal makes a nice counterpoint with Jeb Bush's latest "anti-regulation" rant.

Another nice counterpoint: https://www.newscientist.com/article/dn27867-cod-...

Of course there are many others. And of course there are also many cases of over-regulation. But you don't win an argument for smart regulation unless you have plenty of examples to draw from. I suspect Mrs. Clinton will be well-armed that way come the big time debates with Jeb!

Brett

Fisher's reaction is so typical for many economic libertarians that I've met. They can't really dismiss environmental problems altogether, so instead they diminish and minimize - "Oh, it's just some marginal emissions/a small amount of forest land/a little pollution into the river! What's the harm? And do you really want to hurt an important company that employs thousands over it over a little bit of dirty air?"

Jarndyce

Mark is too easy on both VW and GM in this paragraph:

"That's not as bad as an ordinary murder, where the killer picks out a specific victim, because being personally singled out to be killed is somehow worse than being a random victim. But in both the GM case and the VW case, people wound up dead (or injured, or sick) through the choice of someone else. In the GM case, the company's culpability was mostly passive: it made a design or manufacturing mistake and then didn't disclose it or act promptly or adequately to fix it. What VW did was much worse: the 'defeat software' wasn't a defect, but a deliberate decision to break the law with the predictable consequence of killing hundreds of people, at least twice as many as died of GM's malfeasance. I don't think you need to live in Marin County to find that objectionable."

The pertinent question is whether VW or GM knew that people would die as a result of their actions. If they did, then they are as culpable as an ordinary murderer, despite not having picked out a specific victim or having acted "passively" in deciding not to disclose their mistake. They are comparable to a person who randomly fires a machine gun in a crowd.

David T

One of the ICCT engineers who uncovered this seems to be telling every news shop that will listen that people should be checking other automakers for the same problem. VW's behavior is so appalling and frankly stupid (destroy a company to sell a few diesels? It's not even their biggest product line) that it's hard to understand what they could have possibly been thinking. The general amorality of corporate culture may be part of it. But I wonder if there was a bit of "everybody else is doing it" going on here too. (BMW must be pretty happy that their car passed.)


Keith_Humphreys

Perfect movie reference(The Third Man, 1949). The sociopathic black marketeer Harry Lime is played by Orson Welles and his moral American friend Holly Martins by Joseph Cotten. As they ride in a Ferris wheel far above the people of Vienna, this exchange occurs:

Martins: Have you ever seen any of your victims?

Harry: You know, I never feel comfortable on these sort of things. Victims? Don't be melodramatic. [gestures to people far below] Tell me. Would you really feel any pity if one of those dots stopped moving forever? If I offered you twenty thousand pounds for every dot that stopped, would you really, old man, tell me to keep my money, or would you calculate how many dots you could afford to spare? Free of income tax, old man. Free of income tax - the only way you can save money nowadays.

Clip: https://vimeo.com/76843899

egorelick

Ok. This may be an extremely stupid question, but how do we know that this was illegal? Many regulations of this type in the electronics/telecommunications field are overspecified and everybody knows the tests (and they cheat in similar fashions if not so explicitly and in such wholesale fashion). If the regulation was written to state that an engine will pass the following test then that's what would be built. Unless there was an explicit prohibition in switching modes or a requirement that the test mode be comparable to driving mode then the engineers may have just seen it as a game. So I'm not defending the amorality of this, but the question of conspiracy is harder to prove if it may not be illegal except under the EPA's theory. And if it wasn't obviously illegal, then what is the moral obligation of the worker to trade-off their livelihood for exposing the fraud.

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