Uber Meltdown

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Big Red Car, which is not involved with Uber as a car or a driver, here on a slightly cloudy day with a warmer afternoon promised. Hey, it’s June and it’s Texas.

So, Uber is having a tough time. The entire leadership is melting down. Huh?

As we chat, dear reader, Uber has just dismissed its #2. [Note, the Big Red Car is not going to name names even if you already recognize the plight of Emil Michael, the bonehead who famously wanted to use the Uber travels of journalists to their disadvantage.]

Uber VP pic

So, as we write Uber has vacancies at COO, CFO, CMO, general counsel, and now at #2. There is talk of the CEO, Travis Kalanick taking a “leave of absence” to deal with a personal tragedy — the death and critical injury of his mother and father respectively in a boating accident. Condolences.

What’s going on at Uber, Big Red Car?

If you have been asleep for the last seven years, Rip van Winklevoss twin, you may not know that Uber is taking over the world of on-demand-people-drayage through a nifty bit of software. They have built the enterprise to a $70,000,000,000 perceived value and are flirting with going public. This is “herd of unicorn” valuation territory.

[Hint: In the Uber search for a new CFO, the specs call for someone with “public company experience.” So, the idea they are at the beauty salon getting their eyebrows threaded and their nails done to go public is not a stretch.]

In the course of this happening, they’ve developed an extreme “bro-culture” in which anything goes. It became bad enough the firm hired Eric Holder, former Attorney General under President Obama who was cited for contempt of Congress, to conduct an investigation.

The investigation resulted in the dismissal of twenty managers and, some will say, the departure of the Uber #2, right hand to the Uber alles guy, Travis.

What does this mean, Big Red Car?

What this means is there will be some leadership turnover — duh, Big Red Car, when they’re looking for a new #2 bro, a COO, a CFO, a CMO, and a general counsel, is that a revelation? No, Big Red Car, it is not.

Uber is also making wholesale changes at the senior manager level and at the board level to get more women to soften the whip hand of Travis the K. It is so obvious and ham handed as to acknowledge the magnitude of the problem.

Uber got its ass handed to it in China by the locals. Different story, but one which bears on the mid-term implications.

Uber has lost its first mover advantage and firms like Lyft, and others, are now starting to duplicate the magic which was once exclusively performed and bottled by Uber.

Add to this the constant turmoil between Uber and its drivers, local municipalities who do not want to turn over licensure and regulation to Uber, and you have a company in turmoil.

Prediction

Which brings the Big Red Car to one of his favorite things — predicting the future. So, here it is:

Uber will see a meaningful degradation in its perceived value. Something like a thirty percent haircut. The company will flirt with an IPO which will expose this weakness.

It will take much longer than anyone wants to make the C suite hires. 

Uber will survive. Travis Kalanick will learn the meaning of the word humility. He will endure a public flogging.

The company will go public at a humble pie eating price and TK will be gone within twelve months of the IPO.

So, there you have it on a cloudy, now sunny, Texas morning in June.

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. Be good to yourselves and go, Warriors!cropped-LTFD-illust_300.png

 

4 thoughts on “Uber Meltdown”

  1. Ah, for my prediction of no Uber IPO, two points of recent news:

    First, Uber’s CEO just resigned.

    Second, there’s an NYT (usually just lies and wrong but not quite always) with

    “Bill Gurley Is Leaving Uber’s Board”

    Bill, why’d it take you so long? Uh, Bill, why’d you join that board and, likely, make an investment in the first place?

    Uh, Bill, wanna make up the loss — I predict a big loss!

    Bill, Bill, Bill, a TAXI CAB company? Where does Silicon Valley get that really strong funny stuff it’s been smoking? Someone out there is passing out free money?

    High margin business? Nope.

    A business based mostly on information tech and can use that tech to lower costs and provide better results? Nope, not really. Bill, there’s been a LOT of work in optimization for dial-a-ride services. Bottom line: Mostly it doesn’t optimize. Uh, I had an opportunity to work on dial-a-ride optimization, guessed it would be a mess, looked into it to be sure, found that it really is a mess; and picked a different problem. The problem I picked, in stochastic optimal control (but don’t hope for help even from that for dial-a-ride or such things), was good, and I did well with it. Bill, part of success is good problem selection. When I saw dial-a-ride, it looked like bad problem selection to me. Bill, you need a tutorial on problem selection. Where you blew it, I did well, long ago. I was right then and am still right.

    Buffett moat? Nope.

    Bill, you might notice, no one, and I mean no one, ever takes a taxi cab from NYC to SF, or, really, on any long trips. Soooooo, Bill, sit down, listen up: The taxi cab business is a local business. That means it can be attacked locally. If Uber is in 100 cities, then they can face 100 different competitors. So, a big, all US or all world Uber, could have a valuable brand name? Not a chance. So, that Uber is big does not, never will, give them an effective brand name — instead the locals will decide for themselves what local brand they like; that might be Uber, but likely not.

    Is Uber labor intensive? Yup.

    Does Uber have legal problems, a struggle, different in every city? Yup.

    Will Uber be a unionization target? Maybe.

    And you actually invested in Uber?????

    I know; I know: “No guts, no blue chips.” But there’s also: “A fool and his money are soon parted.” And when you were at the Uber BoD meetings, looked around the room, and wondered who the suckers were, well, one of them was you!

  2. I’d predict:

    There won’t be an Uber IPO. Ever.

    IIRC, Uber loses money; the VCs keep sending cash, and Uber keeps losing it.

    Soon the VCs will quit sending cash at anything like the $70 billion pre-money evaluation. TK will be gone.

    For more cash, there may be a really down, down, way, way down hated “down round” with a pre-money evaluation in the $1 B range — that is, instead of $70 billion. That’s right: We’re talking a paper lost of $69 billion.

    The position of the investor community will be, Uber must MUST actually make actual money like right away or the VCs, any other investors, the BOD will just shut it down.

    Uh, what business is Uber in? The taxicab business you say? And what’s their big advantage, barrier to entry? A little bit of mobile device software you say, software easily duplicated, equaled, or improved on?

    But, Uber will be saved by self driving cars, I mean, autonomous cars with no driver at all, and it will be saved by the magic of artificial intelligence and machine learning, you say? Where’d BRC get that really strong funny stuff he’s been smoking?

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