End of the Line for Uber
Accounting tricks and tech gimmickry don’t matter when the coffers are empty.
Uber is a bezzle (“the magic interval when a confidence trickster knows he has the money he has appropriated but the victim does not yet understand that he has lost it”). Every bezzle ends.
Uber’s time is up.
Uber was never going to be profitable. Never. It lured drivers and riders into cars by subsidizing rides with billions and billions of dollars from the Saudi royal family, keeping up the con-artist’s ever-shifting patter about how all of this would some day stand on its own.
Like the pretense that self-driving cars would eliminate all their labor costs. They knew this would never happen. They spent billions on a doomed effort, then had to bribe another company with a $400m “investment” to take its window-dressing away.
Uber didn’t need self-driving cars — it needed us to think it would have self-driving cars. That way the company’s Saudi owners could raise investment capital from subsequent “investors” (AKA “suckers”) all the way up to the IPO, cash out, and walk away, whistling innocently.
That’s the bezzle at work — a dazzle op that keeps new money flowing in, convincing people that a pile of shit this big must have a pony beneath it. But as the years went by, the stories that Uber told us about its path to profitability got more and more fanciful.
Take the story that Uber could be a substitute for public transit. Private cars can’t substitute for buses, light rail and subways. It’s just fucking geometry. Number of cars * area occupied by cars * increased distances created by roads = infinity.
Uber increased road congestion.
Uber also made cities more hostile to bicycles, by turning bike lanes into Uber drop-off/pickup spots. No worries — cyclists can just take an Uber!
When Uber ran out of fairy tales about its impending quantum leaps in AI and its sorcerous capacity to defy the laws of geometry and reduce traffic by increasing the number of cars on the road, it created a food-delivery business…that lost billions.
The bezzle was an equal-opportunity ripoff. It didn’t just steal money from credulous investors — it also victimized workers, riders, cities and restaurants. After all, if no one drove, rode or ate from an Uber, investors might wise up about its impending financial doom.
So within days of Uber’s IPO, it jacked up prices for riders and ratcheted down wages for drivers (drivers were already losing money at this point, but Uber relied on their unfamiliarity with capital depreciation calculations to hide this).
Cities, meanwhile, experienced a lost decade of transit activism. It’s true that Uber had upsides, like bringing transport to underserved communities of color — but because Uber was always doomed, this was a temporary mirage that would strand those communities again.
In other words, Uber was not incrementalism in service to sound, sustainable and resilient urban transport — it was a shiny distraction that made it harder to do stuff that does work, like dedicated bus lanes.
Removing private vehicle lanes is a hard fight under normal circumstances, but when Uber gridlocks whole regions by pouring private vehicles into the streets, it becomes politically impossible.
Meanwhile, Uber predated upon restaurants, using SEO to trick people into thinking they were ordering from restaurants directly, nonconsensually opting restaurants into its delivery service, subsidizing meals to set prices below break-even.
Once Uber had diverted a restaurant’s customers into relying on its service, it put the screws to restaurants, forcing them to pay “marketing fees” on pain of having searches for their business diverted to Uber-affiliated ghost kitchens.
Thousands of locally owned restaurants will not survive the pandemic thanks to this parasitic conduct, and Uber does not have anything to put in their place, because Uber is a bezzle, it is out of money, and it is about to die.
And of course, Uber helped raise more than $200m to pass California’s Proposition 22, which formalizes worker misclassification, allowing employers to fire union workers, rehire them as “independent contractors” and take away their pay, benefits and rights.
There is really only one person you need to read to understand Uber: Hubert Horan, a senior transportation analyst who has been dissecting Uber’s public claims, financial statements, and regulatory battles since 2016.
Horan’s got the whole package — he’s not just there to talk about the logical and logistical problems with Uber’s “business” model, he’s also reliably scathing when analyzing Uber’s financial statements, which are the most innovative thing about the company, honestly.
Uber loses a lot of money. A lot of money. Billions. But it claims it’s making money. How does it do this?
Uber eschews boring old generally accepted accounting principles (GAAP) and invents fanciful new forms of mathematics where losing money is good, actually.
Every quarter, it releases new lies laid out like a profit-and-loss statement, and every quarter, Horan shows it’s losing money. Here he is on the company’s $6.8 billion (with a B!) loss last summer, predicting the company would be broke by mid-2021.
It’s mid-2021. Uber is going broke.
Yesterday, Horan published his 26th (!) analysis of Uber, breaking down its Q2–21 financials. It’s been quite a year.
Uber bailed on (or got kicked out of) China, Russia, India and Southeast Asia, flipping its local divisions to local money-losing startups, who follow Uber’s practice of making up farcical valuations for their doomed businesses.
This gives Uber a great new financial trick: they can put the inflated valuations of these regional Uber-alikes on their balance sheet to make it look like the company is sitting on a mountain of cash that will let it continue with its losses for years.
But Uber is nearly broke. A true accounting of the last quarter has Uber losing 38 cents on every dollar it took in. $3.7b of its assets are actually worthless paper from failing overseas ridehail companies.
Uber’s cash reserves declined by $4.7b in 2020 and $937m more in the first half of 2021. They’ve got $6.7b in the bank, down from $14.6b in 2019. To increase the appearance of a pony under this shit, Uber’s invented a new field of accounting: “Adjusted EBITDA profitability.”
EBITDA is “earnings before interest, taxes, depreciation, and amortization.”
“Adjusted EBITDA” is “bullshit.”
Uber ignored $2b in expenses, declaring its rideshare division to be “profitable” (if you’ve read “Uber turns a profit!” stories, that’s what’s going on there).
The pandemic destroyed rideshare demand, and also made a lot of driver reconsider whether rideshare was worth risking their lives for. Uber plans to to spend $250m on bonuses to lure drivers back out — but can’t explain why those drivers will stay when the bonuses stop.
I live in Burbank, where Ubers were never more than 5 minutes away. Now, a 30 minute wait is common — and the fare is comparable to the licensed taxi company, which is literally one app away from achieving feature parity with Uber.
All of this is exactly what anyone with a shred of critical reasoning would have foretold from the very early days of Uber, but the company has managed to put up a surprisingly durable reality-distortion field that kept the investments pouring in.
To understand how that narrative machine runs, we need to turn to Horan’s twenty-seventh Uber report, “Despite Staggering Losses, the Uber Propaganda Train Keeps Rolling.”
Here, Horan shrewdly describes Uber’s ability to turn SARS into sarsaparilla, by using its myriad scandals to deflect from its foundational grift. For example, Maureen Dowd’s fawning NY Times profile of Uber CEO Dara Khosrowshahi.
The 4,300 word article focuses on all the ways that Khosrowshahi is a better boss than Uber’s founding CEO Travis Kalanick — a fratty bro who created a culture of dishonesty, physical and sexual harassment and abuse, and criminality.
It’s true! Khosrowshahi is a better human being than Kalanick (who, to be clear, is one of the worst people alive today). But Khosrowshahi is still presiding over a company that can never, ever be profitable, and which is destroying cities, restaurants and drivers’ lives.
But the problem with Uber wasn’t that just that it was a rapey, crimey, crooked grift — the other problem with Uber is that it is doomed, and only exists today because of accounting fraud. Khosrowshahi didn’t fix that part. He’s not going to fix that part.
Glowing lifestyle profiles aren’t the only weapon in Uber’s propaganda arsenal. It makes a routine practice of sponsoring dubious academic work to give it the veneer of sustainability, then overstating the studies already-charitable conclusions to a gullible press.
Take the WSJ’s “How Uber and Lyft Can Save Lives,” which regurgitates Uber’s nonsense claims about preventing drunk driving, using a laughable methodology to take credit for a 6.1% reduction in alcohol-related fatalities.
To be clear, that’s not even what the Uber-funded, non-peer-reviewed study claims — it’s lifted from Uber’s press-release, as is the article’s opening sentence, “The value of ride-sharing apps has been proven in the marketplace.”
That’s a funny thing to read in a business paper about a company that is losing 38 cents on the dollar. I mean, I love public goods that have no market case — health care, education, transit — as much as the next commie, but these are not “proven in the marketplace.”
They’re public services, and they’re only sustained by public subsidies — private firms cannot perform these functions.
Uber is not a public utility, and the only way it could become one is by being too big to fail and getting massive bailouts.
Even as a public utility, Uber is doomed. The company can’t make money even by robbing workers and restaurateurs, nor by pretending that adding cars will solve traffic jams. Uber is a menace, and while its doom is clear, it’s not going quietly.
The company has committed another $100m to a Prop 22-style ballot initiative in Massachusetts, which will formalize worker misclassification, ban unionization, and destroy workers’ lives. The sooner Uber dies, the better.
Cory Doctorow (craphound.com) is a science fiction author, activist, and blogger. He has a podcast, a newsletter, a Twitter feed, a Mastodon feed, and a Tumblr feed. He was born in Canada, became a British citizen and now lives in Burbank, California. His latest nonfiction book is How to Destroy Surveillance Capitalism. His latest novel for adults is Attack Surface. His latest short story collection is Radicalized. His latest picture book is Poesy the Monster Slayer. His latest YA novel is Pirate Cinema. His latest graphic novel is In Real Life. His forthcoming books include The Shakedown (with Rebecca Giblin), a book about artistic labor market and excessive buyer power; Red Team Blues, a noir thriller about cryptocurrency, corruption and money-laundering; and The Lost Cause, a utopian post-GND novel about truth and reconciliation with white nationalist militias.