Unicorn Profits
Source: Uber lost more than $2.8 billion last year despite growth | Daily Mail Online
Whether we like it or not, we have become increasingly used to the irrational antics and bleats of large segments of western society. What’s particularly alarming is the vapidity of the opinions and sentiments often displayed by the generation of people going through the college process; those that will one day determine the shape of the nation. Rather than representing any insights into genuine social issues, entire armies of students are expressing naive and illogical views propagated by their academic mentors, who are typically estranged from reality as well.
This gossamer skinned worldview typically bursts once they collide with the realities of living in the actual, non academic virtual world. When the harsh reality of a theoretical education bumps against the need for practical skills, the resulting shock of having no marketable knowledge becomes horrifying.
The business world has historically been the ultimate reality check for those who had been weaned on fairy dust, since success or failure in business is mercilessly matter of fact, exempt from the wishful thinking of academic theory. At least that’s how it used to be.
This notion is being put to the test however as quite a number of large scale enterprises have managed to defy the very basic premise of a successful business; that is, that it makes money. While there have been some notable enterprises that have succeeded on the basis of projected revenues in the face of sizeable startup losses, notably Amazon, apparently the emphasis on projected revenues is dominating in top finance circles as justification for valuations. Imminent profitability has moved way down the checklist in the valuation exercise.
The accepted wisdom in finance circles appears to be, “if you build it, they will come”. The most marketable metric these days is ‘eyeballs’, or the supposed number of lurkers and app users that will translate into hard dollars once the venture hits its stride. It’s actually amusing how many of America’s top valued public companies today rely on exactly that model. Facebook, Snapchat, Netflix, Google, Yahoo and no doubt many other yet to be famous internet wunder companies waiting in the wings.
Tesla, while not strictly speaking an eyeball driven company, it has nonetheless managed to achieve a valuation larger than venerable auto makers Ford and GM on the premise that their electric car solutions will be the dominant paradigm. Maybe. But they still have to make money while making cars, regardless of the idealism of ‘free energy’. So far, not.
Uber, the ride share company is recognized worldwide for revolutionizing the taxi business; so much so, that Uber has become a verb in modern day language. While seen as a boon to intoxicated people everywhere, it has only cost them a mere $2.8 billion dollars in losses to be an iconic part of modern culture. It’s the opposite of the Starbucks model, wherein they overcharge consumers for a commodity product…which is brilliant.
If Uber can stay in business long enough to eventually become solvent, then we really look forward to the day when the airline business goes Uber. Can’t wait to fly to Hawaii for 12 bucks.