The Ride Sharing Business: Is a Bar Mitzvah moment approaching?

I did a series of three posts on the ride sharing business about a year ago, starting with a valuation of Uber, moving on to an assessment of Lyft, continuing with a global comparison of ride sharing companies and ending with a discussion of the future of the ride sharing business. In the last of those four posts, I looked at the ride sharing business model, argued that it was unsustainable as currently structured and laid our four possible ways in which it could be evolve: a winner-take-all, a losing game, collusion and a new player (from outside). While ride sharing continues its inexorable advance into new markets and new customers, the last few months has also brought a flurry of game-changing actions, culminating with Uber’s decision about a week ago to abandon China to arch-rival Didi Chuxing. It is a good time to take a look at the market again and perhaps map out where it stands now and what the future holds for it.

The Face of Disruption

While there is much to debate about the future of the ride sharing business, there are a few facts that are no longer debatable. 

1. Ride sharing continues on its growth path: Ride sharing has grown faster, gone to more places and is used by more people than most people thought it would be able to, even a couple of years ago. The pace of growth is also picking up. Uber took six years before it reached a billion rides in December of 2015, but it took only six months for the company to get to two billion rides. For just the US, the number of users of ride sharing services is estimated to have increased from 8.2 million in 2014 to 20.4 million in 2020. 

   Year	Number of US ride sharers (in millions)	% of US adult population
   2014	8.20	3.40%
   2015	12.40	5.00%
   2016	15.00	6.00%
   2017	17.00	6.70%
   2018	18.20	7.10%
   2019	19.40	7.50%
   2020	20.40	7.80%

2. It is globalizing fast: In the same vein, ride sharing which started as a San Francisco experiment that grew into a US business has become global in just a short period, with Asia emerging as the epicenter for future growth. Didi Chuang, the Chinese ridesharing company, completed 1.43 billion rides just in 2015 and it now claims to have 250 million users in 360 Chinese cities. Ride sharing is also acquiring deep roots in both India and Malaysia, and is making advances in Europe and Latin America, despite regulatory pushback. 
3. Expanding choices: The choices in ride sharing are becoming wider, to attract an even larger audience, from carpooling and private bus services to attract mass transit customers to luxury options for more upscale customers. In addition, ride sharing companies are experimenting with pre-scheduled rides and multiple stops on single trip gain to meet customer needs. 
4. Devastating the status quo: All of this growth has been devastating for the status quo. Even hardliners in the taxicab and old time car service businesses recognize that ride sharing is not going away and that the ways of doing business have to change. The price of a New York city medallion which was in excess of $1.5 million before the advent of ride sharing continues its plunge, dropping to less than $500,000 in March 2016. The price of a Chicago cab medallion, which peaked at $357,000 in 2013, had dropped to $60,000 by July 2016.

In short, there is no question that the car service business as we know it has been disrupted and that there is no going back to the old days. If you own a taxi cab or a car service business, the question is no longer whether you will lose business to ride sharing companies but how quickly, even with the regulatory authorities standing in as your defenders.

A Flawed Business Model

Disruption is easy but making money off disruption is difficult, and ride sharing companies would be exhibit 1 to back up the proposition. While the ride sharing option is here to stay and will continue to grow, ride sharing companies still have not figured out a way to convert ride sharing revenues in profits. In making this statement, though, I am relying on dribs and drabs of information that are coming out of the existing ride sharing companies, almost all of whom are private. Piecing together the information that we are getting from these unofficial and often selective leaked information, here is what seems clear:

1. Raising capital at a hefty pace: In the last two years, the ride sharing companies have been active in raising capital, with Uber leading the way and Didi Chuxing close behding. In the graph below, I list the capital raised collectively by players in the ride sharing business over the last three years and the pricing attached to each company in its most recent capital round.

Ride Sharing Company	Amount Raised in last 12 months (in millions)	Investor	Company Priced at (in millions)
Didi	$7,300.00	Apple, Alibaba, Softbank & Others	$28,000
Uber	$3,500.00	Saudi Arabian Sovereign Fund	$62,500
Lyft	$500.00	GM	$5,500
Ola	$500.00	Didi & Existing Investors	$5,000
Grabtaxi	$350.00	Didi & CIC	$1,800
Gett	$300.00	Volkswagen	$2,000
Via	$100.00	VC	NA
Scoop	$5.10	BMW	NA

2. At rich prices: As the table above indicates, the investors who are putting money in the ride sharing companies are willing to pay hefty prices for their holdings, with no signs of a significant pullback (yet). Uber, at its current pricing, is being priced higher than Ford or GM. Note that I use the word “pricing” to indicate what investors are attaching as numbers to these companies because I don’t believe that they have the interest or the stomach to actually value them. If you are confused about the contrast between “value” and “price”, please see my blog post on the topic.
3. From unconventional capital providers: The capital coming into ride sharing companies is  coming less from the traditional providers to private businesses and more from public investors (Mutual funds, pension funds, wealth management arms of investment banks and sovereign funds). The reasons for the shift are simple on both sides. Public investors want to be invested in the ride sharing companies because they have visions of public offerings at much higher prices and are afraid to be left on the side lines, if that happens. The ride sharing companies are for it because some of them (Uber and Didi, in particular) are getting too big for venture capitalists to capitalize and perhaps because public investors are imposing less onerous constraints on them for providing capital.
4. While burning through cash quickly: As quickly as the capital is being raised at ride sharing companies, it is being spent at astonishing rates. Uber admitted that it burned through more than a billion dollars in cash in 2015, with a significant portion of that coming from its attempts to increase market share in China. Its competitors are matching it, with Lyft estimated to be burning through about $50 million in cash each month ($600 million over a year) and Didi Chuxing's CEO, Jean Liu, openly admitting that “We wouldn’t be here today if it wasn’t for burning cash”. 

The cash burn at ride sharing companies, by itself, is neither uncommon nor, by itself, troubling After all, to grow, you have to spend money, and a young start up often loses money because of infrastructure investments and fixed costs, and as revenues climb, margins should improve and reinvestment should scale down (at least on a proportional basis). The problem with ride sharing is companies in this business are losing money only partially because of their high growth. In fact, I believe that a significant portion of their expenses are associating with maintaining revenues rather than growing them (ride sharing discounts, driver deals and customer deals). I am afraid that I cannot back up that statement with anything more tangible than news stories about ride sharing wars for drivers, big discounts for customers and the leaked statistics from the ride sharing companies.  In effect, it looks like the business model that has brought these companies as far as they have in such a short time period are flawed, because what allowed these companies to grow incredibly fast is getting in the way of converting revenues to profits, since there are no moats to defend.

If you are skeptical about my contention, here is a simple test of whether the cash burn is just a consequence of going for high growth or symptomatic of a business model problem. Assume that the growth ends in the ride sharing business tomorrow and that the ride sharing companies were to compete for existing riders. Do you think that the pieces are in place for these companies to generate profits? I don't think so, as ride prices keep dropping, new ride sharing businesses pop up and the costs continue to increase. 

The Bar Mitzvah Moment

In a post in November 2014 on Twitter’s struggles, I argued that every young growth company has a bar mitzvah moment, a time in its history when markets shift their attention away from surface measures of growth (number of users, in the case of Twitter) to more operating substance (evidence that the users are being monetized). I also argued that to get through these bar mitzvah moments successfully, young growth companies have to be managed on two levels, delivering the conventional metrics on one level while working on creating a business model to convert these metrics into more conventional measures of business success (revenues and earnings) on the other.

This may be premature but I have sense that the bar mitzvah moment has arrived or will be arriving soon for ride sharing companies. After an initial life, where investors have been easily sated with reports of more ridesharing usage (number of cities served, rides, drivers etc.), these investors are starting to ask the tough questions about how ride sharing companies propose turning these impressive usage statistics into profits. What’s driving investor uneasiness?

• The first factor is that the public investors who have put their money into the ride sharing companies operate under shorter time horizons than many VC investors and the fact that an IPO is not imminent in any of these companies adds to their impatience to see tangible results. 
• The second factor is that the belief that there will be a winner-take-all, who can then proceed to charge what the market will bear, has receded, as all of the players in the market continue to attract capital. 
• The third factor is that the possibility that big players like Apple and Google will enter the market is becoming a plausibility and perhaps even a probability and their technological edge and deep pockets could put existing ride sharing companies at a disadvantage.

In my view, it is this perception that change is coming that is leading the flurry of activity that we have seen at ride sharing companies in the last few months. In conventional business terms, the ride sharing companies are trying to shore up their business models, generate pathways to profitability and build competitive advantages. Broadly speaking, these efforts include the following:

1. Increased Switching costs: The ride sharing companies are working on ways to increase the costs of switching to their competitors, both among drivers (who I described in a prior post as uncontracted free agents) and customers. Uber’s partnership with Toyota, where Toyota will lease cars on favorable terms to Uber drivers, will benefit drivers but will also bind them more closely to Uber, and make it more difficult for them to threaten to go to Lyft for a few thousand dollars. GM’s agreement with Lyft is not as specific but seems to be directed at the same objective. 
2. Cooperation/Collusion: In my ride sharing post in October 2015, I raised the possibility that the ride sharing companies would follow the route of the Mafia in the United States in the middle of the last century, where crime families divided the US into fiefdoms and agreed not to invade each other’s turf. Uber’s decision to abandon the Chinese market to Didi in return for a 20% ownership stake in that company, in particular, seems to be designed to accomplish this no-compete objective. Uber’s China move specifically seems to be designed to stop the mutually assured destruction that a free-for-all fight with Didi will create. 
3. Higher Capital Intensity: Though there is little that is tangible that I can point to in support of this notion, I think that the ride sharing companies now recognize that their absence of tangible assets and infrastructure investment can now operate as an impediment to building a sustainable business. Consequently, I will not be surprised to see more investment by the ride sharing companies in self-driving cars, robots and other infrastructure as part of the phase of building up business moats.

As we witness the breakneck pace of change in the ride sharing business, the big question if you are considering investing in these companies is whether these actions will work in laying the groundwork for profitability. Well, yes and no. If the ride sharing business were frozen to include only the current players, it is probable that they will come to an uneasy agreement that will allow them to generate profits. The problem, though, is that the existing structure of this business is anything but settled, with new ride sharing options popping up and large technology companies rumored to be on the cusp of jumping in. The unquestioned winners in the ride sharing game are car service customers, who have seen their car service costs go down while getting more care service options. . 

Uber: An updated valuation

In September 2015, I valued Uber at $23.4 billion, based upon my reading of the market then. In assessing this value, I incorporated what I saw as Uber’s strengths (its reach globally and across many different businesses) and its weaknesses (an out-of-control cost structure and the elimination of many of the insurance and regulatory loopholes that allowed ride sharing to gain such an advantage over conventional car service).  In the last year, as I see it, here is how the fundamental story has been impacted by developments in the last year: 

1. Revenues: Uber’s growth continues, measured in cities and rides, though the rate of growth has started to slow down, not surprising given its size. Its decision to leave China, the largest ride sharing market in the world, even if it was the right one from the perspective of saving itself from a cash war, will reduce its potential revenues in the future.
2. Competition: Before you over react to Uber's exit from China, there is good news in that decision. First,by removing the costs associated with going after the China market from the equation, it reduces the problem of cash burn, at least for the near future. Second, its peace treaty with Didi Chuxing puts the smaller players at risk. Lyft, Ola and Grabtaxi, all companies that Didi invested in to stop the Uber juggernaut, may now be left exposed to competition. Third, in return for its decision to leave the China market, Uber does get a 20% stake in Didi Chuxing.
3. Costs: On the cost front, the ride sharing business continued to evolve, with most of the changes signaling higher costs for the ride sharing companies in the future. Seattle's decision to let Uber/Lyft drivers unionize may be the precursor of similar developments in other cities and higher costs for both companies. On the legal front, cities continue to throw up roadblocks for the ride sharing companies. Uber and Lyft abandoned Austin, after the city passed an ordinance requiring drivers for both services to pass background checks. One symptom of these higher costs is in the leaked financials from Uber, which suggested that the company lost more than a billion dollars in the first half of 2015. 
4.  Imminent competition: The Silicon Valley gossip continues about Apple and Google preparing to enter the ride sharing market, with Google announcing that it has entered into a partnership with Fiat and that a top robocist had left the self-driving car unit a few days ago. Never one to hide in the shadows, Elon Musk added car sharing to his long list of to dos at Tesla in his Master Plan for the company. It seems clear that while the timing of the change remains up in the air, change is coming to this business.

None of the changes are dramatic but tweaking my valuation to reflect those changes, as well as changes in the macro environment in the last year, my updated valuation for Uber is $28 billion, a little higher than my estimate last year of $23.4 billion. The loss of the China market reduces the total market size but it is offset by a higher market share of the remaining market and a 20% stake in Didi Chuxing. The pricing attached to this Didi stake is $7 billion, but since the same forces that have elevated Uber's pricing are at play across the ride sharing market, I have attached a value of $5 billion to the stake. The picture of the valuation is below:

Download spreadsheet

Clearly, the Saudi Sovereign fund, Goldman Sachs and Fidelity would disagree with me, since their estimated pricing for Uber is more than double my value. They could very well be right in their judgment and I could be wrong, but my valuation reflects my story about the company, which is perhaps not as expansive nor as optimistic as the stories that they might be telling.

What's next?
The ride sharing business is in a state of flux and the next few months will bring more experimentation on the part of companies. Some of these experiments will be with the services offered but more of them will be attempts to get business models that work at converting riders to profits. The ride sharing companies have clearly won the first phase of the disruption battle with the taxicab and car service companies and have been rewarded with high pricing and plentiful capital. The next phase will separate the winners from the losers song the ride sharing companies and it is definitely not going to be boring.

Update:  To the many people who have commented about this valuation, I thank you, even if you vehemently disagree with me. To give you some sense of what the feedback has been across my blog, email and twitter, more of you seem to think that I am being too optimistic than pessimistic about Uber's future. Whatever your point of view, I don't claim to have a monopoly on the right story for each company that I value in this blog and the resulting valuation. However, rather than take issue with what you think is wrong with my story/valuation, I would suggest that you download the spreadsheet that is attached and make it your story/valuation. Thus, if you believe that my total market size is too low and/or that my judgment on profit margins too pessimistic, replace them with your own and you will have your own valuation of Uber. 

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Last year's posts on ride sharing

1. On the Uber Rollercoaster: Narrative Tweaks, Twists and Turns
2. Dream Big or Stay Focused? The Lyft Answer!
3. The Future of Ride Sharing: Playing Pundit

Uber Valuations

1. June 2014
2. September 2015
3. August 2016

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The Ride Sharing Business: Playing Pundit

This is the third and final post in a series of three on the ride sharing business. In the first, I valued Uber and looked at the evolution of its business over the last 18 months. In the second, I valued Lyft and looked at pricing across ride sharing companies. In this one, I look at the future of the ride sharing business from the perspective of an outsider with no expertise in this business.

In my last two posts, I first valued Uber, with its expansive narrative, and then looked at putting numbers on Lyft's less ambitious storyline. In my Uber post, I argued that the ride sharing market was proving to be bigger, broader and growing faster than I had estimated it would be in June 2014. In the Lyft post, I examined how VCs were pricing ride sharing companies. In this post, I want to complete the story by looking at the current state of the ride sharing market and for scenarios for the market over time, with consequences for investors, car riders and drivers. 

The Ride Sharing Market: The State of the Game

In my posts on ride sharing, I noted that the ride sharing market has grown exponentially in the last two years, drawing in new users and redefining the car service business. That growth can be seen  in multiple dimensions:

1. Anecdotal & Qualitative evidence: I am usually wary about using anecdotal data but I have been keeping tabs on Uber usage in my travels and I have been amazed at the company's global reach. This summer, I did seminars in São Paulo, Moscow and Mumbai, and in each venue, a significant proportion of the attendants had taken Uber to the event. In fact, my children talk about Ubering to destinations unknown, rather than taking a cab, just as xeroxing and googling became synonyms for copying and online searching. 
2. Operating metrics at ride sharing companies: The operating metrics at the ride sharing companies individually, and in the aggregate, back up the proposition that this is a high growth business.

Company	Revenues in 2014	Revenues (2015)	Growth Rate (2015)
Lyft	$125	$300	140.00%
Uber	$400	$2,000	400.00%
Didi Kuaidi	$30	$450	1400.00%
Ola	$50	$150	200.00%
GrabTaxi	$15	$50	233.33%
BlaBlaCar	$30	$72	140.00%

3. Investor expectations: The increases in the values attached to ride sharing companies indicate that investors are also scaling up expectations of future growth in this business. Using Uber's estimated value of $51 billion in its most recent VC funding to illustrate the process, I estimated imputed revenues of $51.4 billion in 2026, which, if you hold its revenue slice share at 15% (my assumption) yields an imputed gross billing of $342.8 billion in 2026. If I repeat this exercise with the other ride sharing companies, the collective revenues being forecast by investors may exceed attainable revenues, an example of what I termed the big market delusion.

Company	Estimated Value (Price)	Revenue Share	Operating Margin	Failure Probability	Imputed Revenue(2026)	Imputed Gross Billing (2026)
Lyft	$2,500	15%	25%	10%	$2,800	$18,665
Uber	$51,000	15%	25%	0%	$51,418	$342,787
Didi Kuaidi	$15,000	15%	20%	0%	$20,044	$133,629
Ola	$2,500	15%	20%	15%	$3,927	$26,183
GrabTaxi	$1,500	10%	20%	15%	$2,392	$23,923
BlaBlaCar	$1,600	12%	20%	10%	$2,392	$19,935
Total	$74,100	NA	NA	NA	$82,974	$565,123

The growth in ride sharing has been accompanied with more intense competition and rising costs, as can be seen in the large and growing operating losses reported by the companies in this business. The reasons for these losses are manifold, as I noted in my Uber post. Some of the costs come from intense competition for drivers and customers, with companies following the Field of Dreams model, that Amazon has used to such effect in the last decade. Some costs come from outside, higher insurance costs and employee expenses, as ride sharing companies go from being fringe players to larger businesses. Some costs flow from legal fights with regulators, licensing agencies and other rule-writers, whose desire to control the business clashes with the market-driven imperatives of ride sharing. The optimistic view is that these costs will become smaller as companies scale up, but will they? As revenues scale up, the number of drivers will increase proportionately, and unless the competition disappears, the costs of fighting for drivers and customers will continue. In brief, the existing ride sharing model looks like a long term money loser, unless something fundamental changes.

 Future Shock

At the risk of playing market prognosticator in a market where I am a novice, I see four possible scenarios that can unfold in this market, all possible, but perhaps not equally probable.

1. Winner-takes-all: The big prize in many technology businesses is that there is a tipping point, where the winner ends up capturing much of the market. That is the template that Microsoft used two decades ago with MS Office to capture the business software business and that Google used to scale the heights of online advertising. The payoff to such a strategy is that you not only control the dominant market share but that you get pricing power (and higher profits). It does seem to be the strategy that Uber is following in the ride sharing business, but there remain three road blocks that may get in the way. First, you have to remove your competitors from the playing field and while Uber had the cash buffer and capital raising upper hand last year, that advantage has narrowed as a result of partnerships and new capital flowing into other ride sharing companies. In a perverse way, Uber's best chance of succeeding at this strategy is if there is a hitch or stop in the flow of capital to tech companies, though that may work against its objective of going public in the near future. Second, you have to navigate your way through the anti trust and monopoly questions that will inevitably follow, not an easy or an inexpensive task, as Google and Microsoft have discovered over the last decade. Third, while technology remains a focal point for ride sharing companies, the car service or logistics business needs physical infrastructure, making it more difficult to preserve global networking benefits.
2. The Losers' Game: While the winner-take-all is alluring, its logical conclusion, if you have multiple players pursuing it, and none winning, is that you can make the business a loser's game, one in which the market grows as promised and companies generate high revenues, but make very little in profits. A big business can sometimes be a bad one, as I noted in this post on bad businesses and why companies in these businesses continue to invest and grow in them.
3. The Divide and Rule Game: As the old colonial empires discovered a few centuries ago, and the Sicilian crime families realized in the late 1920s in the United States, the most profitable end game, when competition is cut-throat (literally), is to negotiate a truce, where the spoils are divided up and each competitor is given control of a segment. In the ride sharing market, if the business boils down to two or three large players, they may be able carve up the global market and each player will get a free run in their carved up portion . This will be, of course, terrible news for drivers and customers and may attract regulatory or legal scrutiny, but for investors collectively, it will be most value-adding scenario. There are two potential weak links. The first is that this truce, by its very nature, will not be a friendly one and small violations can lead to it unraveling. The second is that it rests on the premise that there is no outside party that is powerful enough to step in and take advantage of the soft spots in the market.
4. The Game Changer: I believe that the existing ride sharing model is an unstable one. As I argued in my post on Uber, the very strengths of the models (bare bones infrastructure, drivers as independent contracts and no car ownership) makes it unsustainable in the long term, since ride sharing companies have to compete for drivers on a continuous basis, offering them incentives to switch from competitors, and customers, with special deals. It is therefore likely that a new model will emerge, though it remains an open question of whether it will come from one of the players in the game, or from an outsider. Thus, Uber's hiring of robotics engineers may be a precursor of a different ride sharing game, with driverless cars and infrastructure investments, or it may be Google or Tesla who enter the picture with a different way of operating this business. 

If these scenarios remind you a little little of the prisoner's dilemma, where two rational individuals are given a choice between cooperating and competing, there are parallels. Consider one possible version, where the ride sharing companies globally boil down to two competitors: Uber, as a global ride sharing behemoth, and the Not-Uber, an alliance of  national ride ride sharing companies (Ola+Didi Kuaidi + GrabTaxi + Lyft..). The box below captures the possible outcomes of this game, which will get infinitely more complicated if there is an outsider player lurking on the fringes.

Based on my very limited knowledge of the companies in this space, I would give the highest odds to the ride sharing business becoming a loser's game, attach about equal probabilities to it becoming a winner-take-all or a game changer emerging, and see the least chance that the ride sharing companies will collude to maximize profits and value. There are others, who know more about this business than I do, who see this game evolving differently over time. Mark Shurtleff at Green Wheels Mobility Solutions, the ride sharing expert that I referenced in my last post thinks that I am being too pessimistic on some counts and perhaps too optimistic on others and feels that there are small start ups that are finding a better business model than the big players. There are some who believe that I am underestimating the pull of the familiar and that ride sharing companies, once established, will be difficult to displace. 

The Dance of the Disrupted

In a post from a few months ago, I looked at the the dark side of disruption, i.e., the businesses being disrupted, both with the intent of identifying the businesses most at risk and to look at the stages, at least as I see them, of how the disrupted business deal with the chaos of seeing established business models being upended. Using that five stage process, it seems to me that the taxi cab business is now at an advanced stage:

Stage of disruption	The Taxi Cab Business
1. Denial and Delusion	This is long in the past, but in the first year or two of Uber’s existence, there were many in the conventional car service and taxi cab businesses, who were convinced that not only was this a passing phase, but that no customer in his right mind would want to miss the comfort, convenience and safety of a yellow cab experience. (Irony alert!)
2. Failure and False Hope	With each misstep by a ride sharing company (and Uber in particular), whether it be an employee with a loose tongue or a assault by an Uber driver, the hope that this misstep will put an end to the ride sharing business rises among taxi operators and regulators. However, only the most delusional among these hold on this hope.
3. Imitation and Institutional Inertia	In the mistaken belief that all that separates the ride sharing companies from conventional car service is an app, taxi operators have turned to putting apps in the hands of drivers and customers. At the same time, any attempts to introduce flexibility into the existing car service business are fought by politicians, regulators and some of the operators who benefit from the current structure.
4. Regulation, Rule Rigging and Legal Challenges	This seems to be the place where car service companies are making their stand, aided and abetted by regulators, courts and politics. By restricting or even banning ride sharing, they are slowing it’s growth but as I see it, the fight is on its way to being lost, since it is the customers who ultimately will determine the winner in this game, and they are voting with their dollars.
5. Acceptance and Adjustment	It may be slow in coming, but a portion of the conventional car service business is adjusting to the new reality, sometimes because they realize that it is a fight that is unwinnable and sometimes because the financial hill is getting steeper to climb. This is especially true for cab operators who have borrowed much or most of the money that they used to buy medallions and are discovering that they cannot pay their debt.

So what does the future hold? Will there be no taxi cabs left on the streets of New York, London and Tokyo in a few years? I think that the taxi cab business will shrink, but not disappear, and that it will retain a portion of its business in those public spaces where regulators have the most say, airports, train stations and public arenas. If this is the future, it is also clear that there is more pain to come and it will take the form of continuing decline in taxi cab revenues and market capitalization at these companies. As for the private car service business, it will either adapt and share revenues with the ride sharing companies  (which still needs cars and drivers) or focus on corporate relationships (offering discounted and on-demand services to companies that do not want their employees using multiple ride sharing services). 

Coming soon to a business near you?

As I watch the traditional taxi cab business flailing and ride sharing companies grow at their expense, and am tempted to pass judgment on the inability of those in the business to adapt to the world that they live in, there are two general lessons that come to mind. From the disruptor's standpoint, I think that the success of Uber and its peer group in changing the car service business is a reminder that existing business models can be disrupted in short order by new technologies, but the collective losses reported by these companies are also a reminder that making money on disruption is much more difficult.

Looking at the same process from the perspective of the disrupted, it is a reminder that the pain inflicted on the car service business could very easily be coming to the business that you are in. If you are in the financial services business,  the entertainment business or the health care business, all of which are deserving of disruption, I wonder whether you would react any more rationally than the London cabdrivers who went on strike to stop Uber, and ended up getting many of their customers to try Uber for the very first time. I operate in the education business, a large and extraordinarily inefficient business, and there is no group more resistant to change and more unprepared to adapt than tenured professors at research university. I cannot wait to see this group, convinced of its intellectual superiority and attached to unreal perks (minuscule teaching loads, research assistants and sabbaticals),  go through the throes of disruption.

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Ride Sharing Series (September 2015)

1. On the Uber Rollercoaster: Narrative Tweaks, Twists and Turns
2. Dream Big or Stay Focused? The Lyft Answer!
3. The Future of Ride Sharing: Playing Pundit

Read More