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Comment by dfee | Hacker News Reader

Your comment helped me realize my alternate opinion - what I think is healthy about the SV ecosystem.

Changing the term, "natural market dynamics" to "regulatory captured markets", we get:

> or by throwing so much investor money at undercutting incumbents that the [regulatory captured markets] are temporarily skewed

And, taking my sibling comment from @simonkafan, let's change his term "well-functioning industry" to "regulatory captured industry":

> I feel that SC startups are like a horde of locusts flying over a [regulatory captured industry], pretending to improve it positively but all they do is destroy the competition

Consider, for a second, Uber and Lyft. Was the taxi industry well functioning? Did it have natural market dynamics? Definitely, assuming you acknowledge the predicate that the industry players are effectively cartels who control regulations.

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Also consider that Uber is unprofitable, has no real path to profitability, pays its drivers poorly and overcharges users. How is that healthy? It seemingly has failed in every possible way as a business yet people continuously prop it up as something to be envied or respected.

Uber service is profitable, they're just spending a lot of money on R&D for new stuff.

Your point makes sense. But, it largely chooses to be unprofitable (outside of corona times).

I’m not sure that it pays its drivers more poorly than the taxi industry, and I’m not sure that users overpay. Do note, though, that both of those points imply “healthy economics / markets” (dynamic pricing on both sides).

The profitability claim doesn't have a lot of merit for me. Uber is already priced at a level that many people don't accept, to become profitable they will likely have to charge prices that would drive massive sections of their userbase away. The assumption that somehow that they will be able to charge much more and lose no users makes no sense to me.

Where would you go? You don't have a car, don't really like public transit. Taxi fairs are higher. People will pay more and some will leave the net effect would be higher profits short term.

I remember taxi drivers when I was a kid rarely complaining about getting underpaid; they seemed to feel that they were entrepreneurs or entrepreneur-adjacent and generally made enough to get by. Almost as if they were real contractors with the ability to negotiate for wages.

But that doesn't forgive using regulatory capture to prevent anyone else from benefiting from the same things that helped you, that's just pulling the ladder up after you.

Uber did fix the problem of people who would happily make money driving a taxi being unable to because of regulatory capture. They made much worse the problem of drivers making a living wage, and when the sugar rush finally ends and they ultimately have to raise prices you know that extra margin isn't going to go to make the drivers whole and bring their wages back up to what a taxi driver used to make. It's going to go into Uber's investors' pockets.

Although personally I think Uber will just go the way of WeWork once people realize they own (close to) zero vehicles, have (close to) zero employed drivers, and lose money on every ride. What happens after that? Well, public transit has been gutted already so I guess... um... scooters?

One thing that is so often left out of this conversation is that Uber was making a profit in rides when they only had the black car service and Lyft hadn't entered the market yet with regular people driving their private cars. It's hard to tell how much of this is inherently unprofitable as opposed to different companies trying to price each other out of the market.

This makes me wonder what even would be a natural or desired state of any market like this. I don't want companies to have agreements on bottom prices they aren't gonna go under. At the same time this dynamic clearly is fueled by the desire and promise to turn a profit once the competitor is gone. We don't want to set a monopoly in any market. On the other hand why aren't we seeing this in older industries? Why aren't airlines trying to drive each other out of business on price?

Airlines are notoriously bad investments over long-ish time scales, so that may not be the best example.

I think for as much as people talk about businesses undercutting a market to capture it and then profiting from a monopoly position, very few businesses ever make it past the undercutting stage.

As wrong as the efficient market hypothesis is about certain things, a great many industries actually do exist in a sort of perpetual state of trying to balance capturing market share with low prices with staying profitable.

If Lyft can enter the market easily, then the market is a commodity market. A commodity market has very few returns. In fact, you can predict that it is a commodity market because of the existence of taxi monopolies. There is no barrier to entry to the taxi market: just get a car. Since there's no natural barrier to entry, they had to create a regulatory barrier to get profitability. Uber making a profit pre-Lyft is indicative of nothing; they are in a commodity market, so their returns will be low single-digits.

Uber most definitely doesn't overcharge users, the amount of hidden expenses from driving a vehicle are absurd (taxes fees repairs tickets insurance gas loan)

> Was the taxi industry well functioning?

Uber and Lyft do not seem to be in favor of a well-functioning industry either. The main strategy of Uber seems to be spending money to get a monopoly in the market and then increase prices and become profitable. How is that a well-functioning industry?

We forget that SV business are business that want to earn money. Regulatory captured industries and markets are not the problem, the problem is that those business aren't in them.

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