RR Phantom
Location : Wasted Space
Job/hobbies : Cayman Islands Actuary
 |  Subject: Guardian idiot: Cheap cab ride? You must have missed Uber’s true cost  Mon Feb 01, 2016 12:47 am | |
| When tech giants such as Google and Uber hide their wealth from taxation, they make it harder for us to use technology to improve services
To understand why we see so few genuine alternatives to US technology giants, it’s instructive to compare the fate of a company like Uber – valued at more than $62.5bn (£44bn) – and that of Kutsuplus, an innovative Finnish startup forced to shut down late last year.
Kutsuplus’s aspiration was to be the Uber of public transport: it operated a network of minibuses that would pick up and drop passengers anywhere in Helsinki, with smartphones, algorithms and the cloud deployed to maximise efficiency, cut costs and provide a slick public service. Being a spinoff of a local university that operated on a shoestring budget, Kutsuplus did not have rich venture capitalists behind it. This, perhaps, is what contributed to its demise: the local transport authority found it too expensive, despite impressive year-on-year growth of 60%.
On the other hand, “expensive” is everything that Uber is not. While you might be tempted to ascribe the low costs of the service to its ingenuity and global scale – is it the Walmart of transport? – its affordability has a more banal provenance: sitting on tons of investor cash, Uber can afford to burn billions in order to knock out any competitors, be they old-school taxi companies or startups like Kutsuplus.
A recent article in The Information, a tech news site, suggests that during the first three quarters of 2015 Uber lost $1.7bn while booking $1.2bn in revenue. The company has so much money that, in at least some North American locations, it has been offering rides at rates so low that they didn’t even cover the combined cost of fuel and vehicle depreciation.
Uber’s game plan is simple: it wants to drive the rates so low as to increase demand – by luring some of the customers who would otherwise have used their own car or public transport. And to do that, it is willing to burn a lot of cash, while rapidly expanding into adjacent industries, from food to package delivery.
An obvious but rarely asked question is: whose cash is Uber burning? With investors like Google, Amazon’s Jeff Bezos and Goldman Sachs behind it, Uber is a perfect example of a company whose global expansion has been facilitated by the inability of governments to tax profits made by hi-tech and financial giants.
http://www.theguardian.com/commentisfree/2016/jan/31/cheap-cab-ride-uber-true-cost-google-wealth-taxation
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