Pixel Envy

Written by Nick Heer.

The Most Revolutionary Thing About Tesla and Uber Would Be Their Long-Term Success

The Economist:

Investing today for profits tomorrow is what capitalism is all about. Amazon lost $4bn in 2012-14 while building an empire that now makes money. Nonetheless, it is rare for big companies to sustain heavy losses just to expand fast. If you examine the members of the Russell 1000 index of large American firms, only 25 of them, or 3.3%, lost over $1bn of free cashflow in 2016 (all figures exclude financial firms and are based on Bloomberg data). In 2007 the share was 1.4% and in 1997, under 1%. Most billion-dollar losers today are energy firms temporarily in the doldrums as they adjust to a recent plunge in oil prices. Their losses are an accident.

Ryan Felton, Jalopnik:

Oftentimes, talk about the bottom line of Tesla gets distorted because, really, the automaker could theoretically stay afloat in perpetuity, so long as Musk secures investors who’re willing to wait an unusually long time for profits to be delivered. (Again, this is unusual.) But, as the Economist puts it, “the longer it goes on for, the harder it gets.” More debt gets added on, the bigger the liability grows, and maintaining projections of huge, stable profits somewhere down the line just isn’t so easy.

If Netflix and Tesla were to go out of business, it would be sad, but likely trivial. The biggest worry would be for Tesla owners looking to repair their cars — parts would be scarce and repairs could require reverse-engineering the car’s software.

But the end of Uber would be deeply worrying indeed. Remember Wash.io? It was a Bay Area firm that offered an on-demand laundry service, and went out of business about a year ago. Andray Domise summarized its legacy in a series of tweets:

To recap, wash.io drives up the price of laundry, pushes laundromats out of business, makes cleaning clothes difficult for poor people…

And then crashes and burns anyway. Leaving bankrupt businesses behind, and entire neighbourhoods where you can’t even wash your damn clothes

Something I hear frequently from the people I know who use Uber is how much less expensive it can be than taking a cab. But it doesn’t occur to them that the reason it’s cheaper is because Uber can afford to hemorrhage $2.8 billion in a year, a rate of loss that no local taxi company could sustain. To be fair, the company’s losses shouldn’t be something for riders to consider, but it feels utterly predatory. And now Uber and Lyft are going after public transit.

So what happens if Uber shuts down, long after taxi drivers have suffered from their business practices? Is there a renewed appreciation for taxis and public transit? Or will people who cannot afford or cannot drive a car simply be left with few affordable transportation options?