Le Show; 2019-12-01

From deep inside your audio device of choice, we start off today with the apologies of the week. Ramona Shelburn, a senior writer at ESPN issued an apology for comments you need, suggesting that the backlash towards Anthony Davis and his trade request last season to be traded away from the New Orleans Pelicans was due to racism and New Orleans being in the south. Since my appearance, an LA radio I've spoken to many people and now realize that I inappropriately oversimplified a very complicated and emotional situation Shelburn said in a statement, put out by the ESPN Public Relations Department. So you know it came from her, quote, I sincerely apologize for that mistake and to the city of New Orleans. She had said from her Los Angeles base that the booing Davis received last season was due to race and the reason the country was playing it and not because people presented him saying, I got to get out of here and playing his last game in a appearing for his last game in a t-shirt that read,

that's all folks, a mayor in Fairmont in Southwest Minnesota is apologizing to victims after dozens of criminal cases that for so long they can no longer be charged. Mayor Deb Foster said the city is now doing everything humanly possible to ensure it doesn't happen again. She apologized for the actions of former city attorney, Elizabeth Brumquist. Brumquist left her job earlier this year over concerns about her job, performance after she left the city learned she had sat on criminal cases for years, including cases of domestic violence, city now says a total of 50 cases expired under the statute of limitations. Or as we call it now, the statute of criminal question. Rapper T.I. says he was joking when he said he goes to the kind of colleges with his daughter every year to make sure her hymen is, quote, still intact. A former who received backlash when the comments went viral told Jada Pinkett Smith on a talk show that he also apologized to his daughter. I began to embellish and exaggerate and I think a lot of people kind of took it extremely literal.

Planned parenthood and others blasted T.I. when he told the ladies like us podcast that he takes yearly trips to the kind of colleges with his daughter now 18. He says he went to the kind of colleges with his daughter when she was 15 and 16. Yes, his daughter's mom was present at the appointments. Oh, that made... Then land Baltimore inside the courthouse in Baltimore. There were tears and hugs from family members and friends who said they've been waiting for this moment. For 36 years, three men. Alfred Chestnut, Ransom, Watkins, and Adden Drew Stewart were arrested on Thanksgiving in 1983 accused of killing a 14-year-old in a junior high school over his jacket. 36 years later, the Baltimore State's attorney Marilyn Mosby said a re-investigation brought forth new evidence and testimony from witnesses that proved the innocence of the three men who always maintained their innocence. Investigators found new evidence and testimony from four witnesses who have since recanted saying they were pressured by police into changing their statement at the point of the finger

at a different man. You were all arrested on Thanksgiving? 1983, now you're free to spend the holidays with your loved ones at the state's attorney. You and you and you should never have seen the inside of a jail cell. So on behalf of this system, I apologize to you and your family. Unquote. Review committee report on clerical sexual abuse of all things. This is the culmination of a month's long survey of sexual abuse cases in the Vancouver Archdiocese since 1950. First report of its kind released by any diocese in Canada. The report contains 31 recommendations and responses named Vancouver Pre-Soup and criminally convicted named in settled lawsuits are the subject of other public cases. The Archbishop accepted all the committee's recommendations. In a past or a letter, he addressed the victims.

I realized no expression of regret can repair the horror of what happened, he said. Although nothing can undo the wrong, it was done to you. I nevertheless wish to offer each of you my heartfelt apology for the trauma, the violation and body in soul in the sense of betrayal and abandonment by the church that you feel. For those occasions when we fail to protect you or when we were more concerned with the church's reputation than with your suffering, I'm truly sorry and ask for your forgiveness. He said it is taking the global Catholic church far too long to address the particularly devastating consequences of abuse by priests. To a Kimmelwilder, notice that. Hey, it's Canadian. By the way, they can't name all of the priests who may have done this because in Canada there are privacy regulations that would prevent it. That's Canada. A fashion brand is withdrawn and now ladies and gentlemen, news of apologies connected to Nazis. A fashion brand is withdrawn and outfit for sale after critics said it looked like a concentration camp uniform worn by victims of the Holocaust. Luxury Spanish fashion house, Low, launched the outfit as part of its collection.

Some items were being sold for upwards of $5,000. A fashion industry watchdog cited similarity to the concentration camp uniform which also had vertical stripes. Low apologized via Instagram and has now removed the product from its website. With absolutely never our intention, we apologize to anyone who might feel we were insensitive to sacred memories. The products featured have been removed from our commercial offering. The item was advertised as a stripe workwear jacket white slash back. And Germany's military is apologized after it posted a vermacht outfit as part of a uniform and fashion social media campaign. Years, the verm Bundeswehr has been trying to combat dwindling recruitment with far reaching marketing campaigns. It posted a picture of a Nazi uniform on its Instagram story with the word retro on top of it. After outraged Instagram users and German media picked up, the Bundeswehr detected, sorry, deleted the image and posted an apology. Duke Community, we apologize.

We have posted a photo of a vermacht uniform used for a movie. The uniform is an exhibited in our military history museum in Dresden. The intention was to show a photo story of a century's long influence of uniforms on fashion. Extremism of any kind is a no-go in the Bundeswehr. We're now investigating what went wrong and how we can prevent it in the future. Heads will roll. The Korean Prime Minister Lee Nak-Yoon has apologized on behalf of all governments for the cancer cluster in a village near Ik-san. First time the government has officially apologized for the cancer cluster. There's a fertilizer plant leading to a high number of cancer cases in the village. Now just to apologize for the occurrence of cancer alley in Louisiana, won't you? Not you, but a British Columbia newspaper accidentally published an advertisement for a Christmas fair that invited children to take photos with Satan instead of Santa. They apologized. Peter Townsend has taken to Facebook to quill a firestorm of criticism when he told Rolling Stone that he thanks God the Keith Moon and John Ent was there no longer around.

They were effing difficult to play with, he said. I understand a lot of long time who fans will be hurt by the way that comes across in a headline. He later said on Facebook, I only hope they know me well enough to know I tell the truth as much as I can, but I also tell both sides. The upside is missing in the headlines. I was being ironic in my own English way by suggesting it was something good I'm glad about. I can be grateful to be free as a player and writer, but sad about losing old friends. It does feel ironic. It also makes me angry. The apologies of the week. A copyrighted feature of Hello. Welcome to the show. I can't explain. I feel good now. Yeah, but can't explain. Is he in the end? I don't feel blue.

The things you said were maybe that true. Get on a dream together again. I know what I mean. Can't explain. I think it's love. I've sent you. When I feel blue. Can't explain. Can't explain. Can't explain. Is he in the end? I don't feel bad. My friends you said got me real mad. I can't explain. I think it's love. I've sent you. When I feel blue. Can't explain. Can't explain. Can't explain. Can't explain. Can't explain. Can't explain. Can't explain.

I think it's safe to say only two brand names that have become generic in the way that let's say I'll grab a Kleenex, Kleenex became a generic noun for sneeze tissue in an earlier age and those two brand names are Google. I'm going to Google it and Uber. I'll take an Uber which usually does refer to the

actual brands involved but has become sort of genericized and usage. So in the ten years that it's been around Uber has ascended to that iconic generic status as a brand and my guest today on the program knows a lot about the company. Hubert Horan graduated from Wesleyan with a BA in honors in economics and graduated from Yale's School of Management with an MBA degree. He's a consultant, transportation consultant with four decades of experience in the airline industry, management positions with Northwest, America West, Swiss Air and Sabina, a leading expert on international airline alliances. He developed the original Northwest KLM alliance, the template for all subsequent global joint ventures. He's published a range of articles on airline competition, mergers and industry consolidation. He has no financial links with any urban car service industry competitors, investors or regulators or any

firms at work on behalf of industry participants and he's the author. Of so far, I think 21 part series on the economics of Uber called Can Uber Deliver, I believe, published in nakedcapitalism.com. Hubert Horan welcome to the show. How did somebody from the air substantially interested in the airline business get interested in Uber? If you go back five years when the Uber was, you know, first coming to widespread recognition, people that I knew in the transport said this is just the greatest company in the world and I looked into it and I discovered that the Uber business model only worked if everything that all of us who've been in the transportation industry for the last half century realized everything we believed is totally wrong. Everything Uber does is a 180-degree opposite from the way every successful transportation company has managed. And so I started digging into it

and said, oh, well, maybe they've discovered some secret sauce and I started digging into it and discovered that they hadn't. Now, I think investors keeping drawn to Uber, the way investors were drawn in the early years to Amazon and that comparison is often made by Uber supporters. Amazon lost money notoriously, never showed a profit for many years as it's had spent every penny of income on expansion and growth. Is that what Uber's been doing? No, Uber's been trying to create the false impression going back ten years that it has the same economics as Amazon and has the same growth and profit potential. None of that was ever true. Amazon number one started with a whole series of legitimate product and productivity breakthroughs. They really

revolutionized how warehouses and distribution worked. They developed, you know, major breakthroughs in e-commerce. Now, they weren't making, quote-unquote, big profits because they were plowing the money back into the business, but they were, they had a core business that was legitimate and generating strong positive cash flow. Uber after ten years has never generated any positive cash flow. But they keep telling we're going to become the Amazon of transportation and we've got years of spectacular growth. They fundamentally don't have any of the scale economies that a digitally-based company like Amazon or Google to use your other example have. They drive cars around cities. There are no scale economies. I think at one point in one of your articles you you based on that premise say that's why there's never been in the hundred or 110 or 120 years that taxi companies have been around in

American cities. There's never been a move by anybody to buy them all up and create a national taxi company. If you any city in the country, you know, Denver, Atlanta, Boston, you name it, there was never any natural tendency for the taxis to all consolidate because, you know, the one number, there are certain industries where the number one company gets a huge advantage and just slowly drives the little ones out. Not true in taxis, it never happened. And there was no case where okay, we're the successful taxi company in Denver. Let's expand them in theapolis. Let's expend a Seattle and so forth. No, there were none of these economies, but Uber went out and told everyone that magically overnight and we can't explain how we've turned the taxi industry, which has been incredibly fragmented for a hundred years, we turned it into the same kind of winner-take-all that you see with Google, that you see with Facebook. And but the economics weren't over there. Now as I understand it, what Uber came up with that would be comparable

supposedly to the revolutions and logistics that you cite from Amazon is an app. And within a couple of years of Uber's popularity becoming evident, taxi companies that I'm aware of, I'm particularly aware of taxi companies in London, which to me is the gold standard of taxis in among cities I'm familiar with. They began rolling out apps that were almost identical to Uber's app. You could hail a car via your phone and follow its progress to your house. Did Uber ever try to sue these people for patent infringement? No, because they hadn't infringed any patents. This is simple. I don't know if you saw it. Larry Ellison of Oracle came out with a quote a couple months ago where he said, Uber's app was less sophisticated than what his cat could have developed.

Larry Ellison's cat is pretty smart. It's a pretty smart one. Well, okay. But people in the early days when I started following this story five, six years ago, oh, but it's a neat app. Well, no, you don't create a hundred billion dollar company because of a really nice user interface. The app showed all of this service at much lower prices because of the massive subsidies. It nothing to do with the app ever. I live here in Phoenix and back then five, six years ago, one of the local competitors bought a software company and put out an app with the exact same functionality. But you turn it on and there were no cabs available because they could only put cabs on the street that would cover where the revenue would cover the cost. People loved Uber's apps because they didn't have to pay for it. It showed all this extra service and it showed a ton of service on Saturday night when none of the other cab companies could afford to put anything out

there. So never had anything to do with the app. So what are this? What's Uber's economics like? Why can they afford to do that? Think of the Amazon business model and it kind of applies to Google and Facebook as well. And each of those companies went and they actually, based on, as I said with Amazon, legitimate productivity advances. There was a real business there and they turned it in to something that could a core business that could generate positive cash flow. Wasn't worth all that much, but it was an honest to God business. Then once you had a domination because of those digital scale effects, where once you were Facebook, you really couldn't be a competing social network. Once you had control of the e-commerce business, everyone else was small fry. So they get this monopoly position or extremely powerful position and they can then use that all the

stratospheric valuation that the previous unicorns had was because of exploiting that kind of artificial market power once they had a viable, profitable core business in place. That was based on the scale economies which meant they were immune from competition. Uber didn't have a core business. It didn't have positive cash flow. It didn't have the kind of scale economies that would protect it from competition. It's simply the Uber's investors were not stupid. Could say they were evil and not acting in the interests of the rest of us in society, but they said, oh, we'll just skip all that hard stuff, like finding productivity advances or building a business. We'll put in $13 billion of cash and just simply bulldoze every competitor into bankruptcy. Uber needed 2,300 times more pre-IPO financing than Amazon did because Amazon had a legitimate

business that could produce cash flow and Uber didn't. So it's the, okay, it's just pure predatory competition. I'm going to bring a large enough bucket of cash and blow companies that are actually more efficient and lower cost than I am at a business. And no one in the government's going to do anything about it. And if any local government pipes up, we'll just use our lobbying power to destroy them. Uber's owners hope, well, if we become the dominant cab company and everyone in every major city around the world has to have our app on their phone, then you get to that kind of Amazon Facebook stratospheric valuation monopoly power and pricing power. They just, they never got there because they didn't have a scale account, but that that was their strategy all along. The culture, the Travis Kalanic, the growth at all costs, this hyper competitive

monomaniacal culture was an absolutely integral part of that and everyone on the Uber board supported it fully. Because if you don't have legitimate economics, if you've got no competitive advantage, you have to behave like the biggest bully in the world to drive competitors and get that kind of growth. If I understand you correctly, Uber was subsidizing every ride with that big bucket of cash and that's why they could massively, massively. So they had not figured out a way to do ride hailing more efficiently. No, not at all. And it's your turn and they're still haven't figured it out. In fact, the only margin improvement that, you know, that total losses have kept going up. Billions, right? Bill, it's, again, they've lost 20 billion dollars in the last five years. You know, you and I are old enough to know that a company that

lost 20 billion and five years would have been dead and buried years ago. They're still widely seen as wonderful and innovative and successful. But no, they have higher costs than every category. Wow. And anyone who knows anything just sort of looks, I mean, taxis are one of the simplest businesses in creation. It's very hard to explain healthcare to people. It's very hard to explain military because they're really complicated businesses. Taxis are easy to explain. There's a car, there's a driver, there's a fuel, and then there's sort of the corporate functions like dispatch and advertising. That's all. Uber hasn't done anything more. If they were more productive, you would see Uber vehicles driving around with passengers a much higher percentage of the day than anyone else. It's like airlines having higher load factors. They haven't done that.

Airline load factors have gone up phenomenally, as you know, in the last 30 years. That was a productivity advance. We're filling empty seats. Uber drivers are no more productive than anyone else. It's if I understand it correctly, airline load factors use computer technology to take the amount of demand and regulate supply more closely so as to reduce empty seats. Is that right? There's a lot more to it that, but that's a very key part. Again, I've been in the industry my entire career. Uber's pricing is way less sophisticated than what airlines were doing in the mainframe error 30 years ago. Wow. Uber was doing the opposite of what all of us in the transportation industry had learned. Airlines, and you see this with hotels and cruise ships and certain other businesses, have figured out how to do variable pricing

in a way that benefits both consumers and the business. Uber hasn't done that. In other words, it used to be that on Friday night, you know, when airlines charge the same fare on every flight, well, everyone wanted to go Friday at five o'clock. Well, now if we can get certain people to go Wednesday at 11 a.m. and we charge more Friday at five o'clock, you not only make, you increase the market because you can get all those additional people who didn't have to go Friday and give them a killer fare. And you need a lot fewer planes because you didn't have this peak demand at five o'clock and then have the plane sitting around burning empty capital for all the rest of the day. Urban transportation just happens to be fundamentally different than long-haul inner city transportation. And Uber was up against the exact same problems that the Long Island railroad faces, that the Chicago transit authority faces, that expressways face.

There's a big demand peak. For taxis, it tends to be Friday, Saturday night in most places as opposed to sort of normal commuter rush hour. But there's a peak and the cost of serving that peak is five times more than the cost of serving people Tuesday afternoon at 11 o'clock. The Long Island railroad has a huge number of tracks, all those communication systems, thousands of workers, all those really expensive railroad cars that are really only used 20 hours a week. You know, if they had the same demand, a flat demand 10 hours a day, they could they could cut their cost by about two thirds. Uber hasn't figured out how to cut the cost of people who want a taxi at the touch of a button on Saturday night. Well, wasn't the point of surge pricing to sort of in the guise of guaranteeing availability dampened demand a bit? Well, that's the sort of analogy of Lexus lanes.

Everyone wants to commute to work at 8 a.m. Let's just charge $12 tolls. Well, yeah, but that's not going to get the fella in the pickup truck. Oh, I think I'll move to the night shift to get a cheaper toll on the highway. No. No one who wants to go out with his friends on Saturday night for dinner in a show is going to say, oh, wait a minute, the taxi fare is really high. Let's do this Wednesday morning. That's not how urban transportation works. Uber hasn't solved anything here. And really, one of the interesting things in the research I did, the demand for taxis is sociologically bipolar. It's very strange. It's not like transit demand as much. That literally a third of all taxi demand is people who earn more than $100,000. And half of it is people who earn less than $40,000. The people in the middle take the bus or they describe their car.

The people at the top want, hey, I want to have a night on the town and maybe I'll drink and I want a car. And the people at the bottom are like the ones washing the dishes for those other people. And not so much in New York or Chicago. But in most cities, the transit system shuts down at 10 p.m. So that's their only way to get to work. They work in a warehouse or a hospital on the night shift. Taxis is how, and so when Uber comes along and said, let's eliminate transit service that helps all those people get to work. So that that rich fella won't have to wait as long to get home from the restaurant. You're explaining how Uber is a non sensible economic player in terms of what companies are supposed to do, make money for their investors and hopefully serve the public. What about Uber and its drivers? Is it good for drivers?

Hell no. In the Uber model, as opposed to what how taxis had worked the previous 100 years, drivers have to purchase and finance and ensure and maintain their cars. And so basically, Uber model, let's take 20% of the total cost, shift it to the drivers. But we, the owners want to get an even higher cut of the returns. Then the taxi companies do. Right. Right. If I want you to come to work and do all my work, I'm going to then demand to cut your pay. Uber started out attracting drivers basically through blatant dishonesty. They literally made claims that Uber drivers in New York are $90,000 a year. And they always, I mean, and including five years after that, in all of their promotions to attract drivers deliberately misrepresented gross pay as your take home pay. And needles to say

a lot of the people who might consider Uber driving because they need some cash are not the ones who are going to be able to understand how to incorporate maintenance and intensive depreciation on their vehicle into their earnings calculation. So they were exploiting that. And that whole model, Uber actually brags about how their drivers have all this flexibility, which is not true. Because if you work at Walmart or McDonald's and you go in and you decide you don't like the work or your boss is terrible, you just find a better job. You just walk out the door. All those Uber drivers have locked into very expensive vehicle obligations. They discovered that no, they're getting paid a lot less than they were promised. And it's a lot uglier job. They can't leave. You know, I'm going to have to pay off this car. Oh, I see. The bank's not going to take it back. Yeah. So the whole Uber system

is designed to trap drivers into staying with them. They don't take away that flexibility. Before Uber, I mean, everyone knows taxi driving was a entry level unpleasant low paying work. Taxi drivers tended to average 12 to 15 dollars an hour to take home. But they had to work 65, 75 75 hours a week to get that. It wasn't great. Uber has actually cut driver take home pay by 40%. When I was taught economics, oh, okay, we have all these taxi drivers, new company Uber and the others come in, increased the demand for drivers. Oh, wages should go up. Conditions should improve. The opposite happened. Is what you're saying about Uber in terms of its economics, the case for Lyft as well? Yeah. Exactly. Business model Lyft never expanded aggressively overseas. But short answer, yes,

the at least with Uber, the owner said, no, our whole strategy is global industry dominance. No one can explain how Lyft thought, well, where we have no economics, no competitive advantage, we haven't in none of our technology improves the productivity or service quality. But we're going to make money with a 25% market share. I've been talking to other authors about the the turn in the internet experience over the last decade or two. And I've noted we've lived through the two decades of G Wiz coverage by media of all these different companies even after the first.com implosion. And through this period where internet companies are now not only affecting our experience online, but are affecting as with Uber, Airbnb, so forth,

our experience in the physical universe. Why don't people know all this stuff? Why do they have this image of Uber as a magical unicorn? Because Uber spent probably $100 million manufacturing that image. And because the media lapped it up in the early days of Uber and sort of bought it hookline and sinker. And as you know, once the mainstream media is going out telling everyone, Uber is the greatest thing since sliced bread, it's never going to then whoops, we were wrong. You know, weapons of mass destruction. There are many reasons that Uber is actually important. People say, why do you worry so much about a bloody taxi company? And which at that level is a reasonable question? But Uber actually illustrates a whole range. I mean, you raised this about the internet age. It's a way to illustrate a lot of systemic problems that are out there in ways

that are easier to explain to people. Again, it's hard to explain healthcare to people. You know, how do insurance companies actually work? How do the hospital, you know, people's eyes glaze over in the first five minutes. But again, it's taken years and years, but the idea, wait a minute, I just lost 20 billion in the last five years, maybe it's not going to become the next Amazon any time soon. Has is getting out there. And yeah, the hundred billion dollars they spent on advertising this image wouldn't have had the same impact on the public arguably. If the public weren't experiencing one ride at a time, what people perceive as greater value, the same ride for cheaper. All right. So step one, they spend all this money on promulgating these narratives about their fantastic technology and you know, everything before was caused by evil regulators and we're going to blow them off and we have this fantastic technology.

Let me just interrupt. Let me just interrupt. I remember one phrase from that early era of Uber that given your analysis of the taxi industry is particularly laughable in retrospect. They were always arraying themselves against big taxi. It was worse than that. The specific wording was the evil taxi cartel and I point that out as you may recall from stuff I'd written several years ago, all of Uber's initial narratives that the press swallowed hook wine and sinker were copied. I mean, literally copy paste from all of these think tank articles from the 1990s all funded by Charles and David Koch related think tanks. They had this propaganda campaign against various forms of urban governance, including taxi regulation. That propaganda campaign failed because when people went to local cities and say, please eliminate all your taxi rules. No elected officials

were well, you vaguely suggest this might be better, but I'm not sure. Uber came along with that $10 billion in subsidies. They said, oh, regulation caused all these problems. Our technology solved them and it looked to the man in the street like they have and those wealthy people that could suddenly get that Saturday night return taxi from the restaurant faster. This is fantastic and it's got a need app. So step one, the propaganda campaign, step two, the subsidies give it credibility it wouldn't have ever had. Step three was the media just decided that they were going to become the biggest Uber supporters in the world. And it was I'm not talking about, you know, reason magazine. I'm talking about the New York Times, the Wall Street Journal, Bloomberg, New

York, Atlantic, all of these quote unquote liberal media were amplifying claims that had been written by libertarian think tank employees trying to eliminate the concept of transport as a public good and saying any form of regulation is inherently evil. And those those outlets were oblivious to what was going on. They were being played like a cheap violin. Why was taxi regulation necessary in the first place? I again go back to what I said about taxis are just another form of urban transport like the Long Island Railroad or the bus system or the freeway system. There are structural problems that you cannot do it on a laissez-faire private investment basis. No one has said, oh, if only my fellow billionaires could tick over the Long Island Railroad, we'd have fantastic service and generate 10% returns and I'd make a killing on, you know, on the

IPL. Because the peaking, the backhauls, it serves a broad group of society, only some of which could any come anywhere close to paying for the cost of the service. And so what you see in any other form of urban transport and what you saw for 100 years in taxi is this crude compromise where we hold the fares down a little bit. So most of those people that need to get to their warehouse job, late shift, can still kind of afford it, but there's still some taxi service for the people who want to get to the airport quickly and the drivers can earn a living wage and there's enough money to actually maintain the cars properly. And as with any other system, it was far from perfect, but no one's come up with a solution to that. Was one of the either reasons for that regulation or effects of that regulation to keep the number of taxis set, the number of taxis

licenses or medallions issued set at such a point to maintain driver revenue at a certain rate and also to keep the streets from being just flooded with taxis? Well, yes, that was always the reason and obviously taxis by definition are prone to overcapacity, meaning that if there are no entry limits, anyone can start a taxi service tomorrow morning and the people who might be tempted to do that might not. It's not another industry where you're talking about investors and managers who will do studies and try and figure out what the market is. Hey, it's growing. Here's the money we'd spend to get in. Yeah, we think we can make a profit. It's just, I need some money tonight. How about I drive a cab? And when taxi regulation was first put in, basically it was the model T. Prior to the price of cars coming down in 1920, taxis were a luxury service, but all of a sudden

it got flooded so they said, let's put in capacity controls. Now with capacity controls, you can go overboard and have them a little too tight. Again, there's no magic formula here that the one way to do it perfectly, it's an ugly compromise. But yes, and Uber has proven. Oh, we now have unlimited entry and there are billions of losses everywhere and even the most efficient producers can't make any money. And the experience I can cite from personal knowledge, LA airport has had to totally reconstruct its internal transportation corridors because Uber and lift drivers were just cruising the internal roadways of the airport, unlike taxis. And the traffic at the airport had become, automotive traffic at the airport had become twice or three times as bad as

it had been previously. Well, go back to the theme in most of your earlier questions. Uber has not invented the better mouse trap. And it can't, and it has no way of ever becoming profitable. So in other words, all the stuff you see out there, it's, if somebody had come along and said, we've actually figured out a way to provide car service at half the cost of yellow cab. Oh, okay. That's going to lead to more automobile congestion. How do we deal with that? But we never get to that point. It's, it's all an economic fraud to begin with. Anything positive that Uber is contributed to Americans in their world society? No. And in fact, again, that's, you know, when you explain Amazon or healthcare companies, you have to say, well, they do this well and that you need something like this in these places. And they did come up with some legitimate innovations. Uber's great. It's done nothing positive for anyone. It is pure wealth extraction is people

getting rich while while actually making everyone else in society worse off. You know, the entire corporate value of Uber was created out of thin air. Again, all of the perceptions that it did thing better were just subsidies that are totally unsustainable. Consumers are not better off because if those prices and service levels on Saturday night aren't sustainable, that's not a welfare benefit. Drivers, we've talked about there much worse off. And it's ridiculous to claim that a company that was blatantly openly pursuing global monopoly from day one of its existence. It could possibly be good for the rest of society. You know, those articles in the New York Times, the Atlantic, I said, well, wait a minute. Why would a totally unregulated monopoly Uber controlled by a bunch of Silicon Valley billionaires be a better way to organize urban transport system than a system that was subject to some control by the people who lived in that city?

The future, sometimes, that sketched out by supporters of Uber is well, but wait till driverless cars. Now, my first thought was, okay, so far, Uber has put the cost of buying and maintaining and ensuring and repairing vehicles on the drivers. But now Uber is going to be a fleet owner and it's going to drive prices down or drive costs down. The answer is driverless cars would massively be more expensive than what's out there now. And you've hit a couple of the important parts. Every new technology is very expensive at first. There's a big battle and we don't know whether it's going to be VHS or beta max and there's, you know, all the people who talk about driverless cars just are people who watch the Jetsons too much when they were children. And people jump from the world of today to the world of George and Judy Jetson and they sort of ignore what's in between.

And in any other, you know, how long did it take for PCs or color television to get widely adapted and no one got killed by a color TV or a PC. I mean, I don't think driverless cars will ever be widely adopted, but if they do its decades off and it'll depend on a lot of, it'll depend on communication technology that doesn't exist now. It'll depend on battery technology that doesn't exist now and it'll depend on every city, town and village everywhere redoing its streets to support that kind of thing. And by the way, if all of that magically happened, Uber wouldn't for the reasons you started laying out, isn't it going to be the company that makes a much, make us fortune off of it? Because all the costs of buying, maintaining vehicles is now transferred to Uber, right? And all of those initial driverless cars are going to be phenomenally, you know,

you could put Mercedes 5 series in place and it's going to be cheaper than what those initial driverless cars are going to cost. And you have to put in humongous systems, how do we sit in a central control office and with really elaborate systems that haven't been invented yet and maintain them and send them to parking lots and determine where they go next. Maybe solvable problems over many decades, but, you know, to talk about driverless cars in the context of one particular company that's struggling to get within $5 billion a year break even, is silly. Let me ask you a simple question as we get towards the end of our conversation. As I understand your analysis, Uber keeps attracting new investment money by holding out these promises of future Amazon-like behavior or domination so that the people who have invested and are getting a little

antsy can cash out and still, you know, make a profit on their investment. Is that not a Ponzi scheme? New money, bales out, old. It's not a well-organized Ponzi scheme, but yeah, the important point, no one has ever laid out a plausible theory on how Uber could become a sustainably profitable company. No one. It wasn't in the IPO prospectus. You know, I obviously read just about anything that's out in the press on the subject. There is no argument. I mean, I personally don't, I think it's totally impossible. This isn't a company that could tweak prices and cut back a few marginal markets to turn Uber from what you've seen in the last five years, you know, $22 billion of losses in the last five years to sustainable profits would be one of the biggest corporate turnarounds in world history. How would you compare Uber to the

other tech giants in the recent past? Again, they have legitimate core business foundations. Amazon really is a nice way to buy books. It's legitimately efficient. Now, it's used the power of that to cause huge damage to producers in 12 other industries where they can go and sort of demand, you know, tolls from people who want to sell electronics or clothing or 50 other things because we're Amazon and we control the e-commerce universe. That's purely anti-competitive. But they have a legitimate core business. People, I don't use it, but a lot of people seem to like Facebook social network. You know, does that solve the problem of eliminating civil society and journalism? I don't think so. But in other words, if you somehow stopped Facebook eight years ago and say,

you're not growing beyond this and you can't buy all these other companies, Facebook would still be out there. A mislegitimate company. Uber has no, that's one of the things. Well, it couldn't, you know, like with a bankruptcy case, couldn't Uber restructure. Again, my airline background, I've been through a lot of these bankruptcies and major restructuring. I know very intimately how it works and what's required. And I said, no, because all those other companies actually had a viable profitable core. They'd overexpanded. They'd been mismanaged over here. I shouldn't have bought these airplanes. They shouldn't have gone into these markets. But boy, scale back to that and then you can go back to healthy growth. Uber has no core. Karashani replaced Kalanik two years ago. He's done nothing, absolutely nothing that would make Uber more profitable or materially more profitable. He's cut some overhead staff. But I'm saying if you have this company that's lost 22 billion

and five years, what has he done to turn them to some path that at least is heading toward break even? Answer is nothing. And they've got a dilemma that the whole story, we are going to be the next Amazon and we're just not this little niche cab company, but we are, you know, a massive hundred billion dollar unicorn was, oh, we have these scale economies in our core business that are going to give us an impregnable core that's going to produce a lot of money. And then once everyone has their app on their phone, we can do this and do that and anyone who wants to sell services to urban citizen will have to come through us and we can charge them a lot of money. None of that's true. Everything they've expanded into actually has worse economics than taxis. Uber Eats. Uber Eats. I mean, you know, but if they suddenly say, you know, it's really stupid given all these losses to be investing in flying cars or, you know, robot car technology.

Oh, wait a minute. Then that says you're not going to become the next Amazon. You're just a cab company. Well, cab companies valuation is one tenth of what my investment company said you were worth, but the time of the IPO. And so they keep doing it. They can't do anything to put Uber on a different direction. How does the Uber story end? The worst position a company with huge problems can have is to have a lot of cash in the bank because it means you don't have to do anything. It means all the board members who've been drinking the Kool-Aid for a number of years, you know, the benchmark capital doesn't want to stand up after telling everyone that this is one of the greatest investments in Silicon Valley history. Oh, it was all a mirage. We were totally wrong for 10 years. It doesn't want to do that. Dara Karashani said, oh, I came over to

save Uber and I didn't have a clue. He doesn't want to come out and really say that. So there is this paralysis that companies, you know, I learned from my airline experience, you can improve an industry when you get right up to the edge of the presses. And, you know, oh my God, we've got to do something. If we don't fire management, bring in somebody a little less tied to the past who's willing to, you know, make painful decisions, we're going to shut down. See, Uber just has enough cash in the bank, especially with the money they got from soft bank, to just tread water for a while longer. And when the next bear market comes? That's an interesting question, although I think the sequence, as you suggest, is bear market first, Uber second. But so much, and again, this is one of my, you know, why you worry about this bloody taxi company, it illustrates that so much of the

quote, growth in corporate value in America, are these manufactured narratives? Or it's the sort of raw monopoly power of the Googles and Amazon's and Facebook's, which is then the stock market thinks is, you know, worth 100 times more than it really is. Once that bubble bursts, oh dear, the fallout is going to go far and wide. Well, would you say that we work as a sort of a good warning signal of what's to come in the same way because it didn't really invent anything? I would like to think that. I would, I wanted to think that when Uber was forced to finally go public and Travis Kalanick fought that tooth and nail for years, Kalanick may be evil, but he's actually very smart because you knew he that they did once you let people look under the hood, they'd see there's nothing there. And you would think that all of those people putting up all that

money would have looked under the hood and blown the whistle they didn't. Now it, you know, they've got half as much money as they thought it was considered a bit of a train wreck. But it didn't fail, you know, a lot of people kind of knew it, but you know, the conventional wisdom hasn't changed. I, you know, would have liked it to have changed then as soon as you get scrutiny from honest to God, capital market people who are risking real money. Oh, that's the way the system worked. Again, the why is Uber important? There's so many indications that market capitalism is fundamentally broken. Things that were supposed to be the great virtues of markets can be subverted, have been subverted. And there is this massive misallocation of resources. I mean, Uber is an example of we, we allocated $100 billion from companies that were more efficient and gave it to companies that were less efficient. That is the opposite of how capitalism is supposed to work.

Let me ask you a one more slightly personal question. You've written 21 articles on the subject so far. Am I? Yeah. Naked capitalism has been wonderful. And I started writing stuff for there. I guess it was 2015, early 2016. It's just as the story was developing, it was a way to sort of get preliminary articles. And there've been 21 of them out. And there are two major general articles. There was one I published in the Transportation Law Journal that you know, it's 30,000 words where I wanted to get in a sort of with all the citations and footnotes and data evidence in one place that sort of took the story up to let's say the first 11 of those naked capitalism saying, no, here's why the economics are awful and will never work. And here was how they created that narrative program that's convinced everyone that's the greatest things since sliced bread. And there was another article beginning of this year in American Ferris Journal, which is a

rather more user-friendly. Here is the Uber story without a lot of the historical and nuts and bolts of taxi industry economics left out. You know, the headlines, but not the back up. That is sort of here's the story we've been talking about all sort of all in one place. So, when's the book? I don't know when's been sort of rushing to try and encourage that. It's been hard enough to get, you know, you get these things out by, and the first part is getting people to say, no, the economics are terrible. There never was anything valuable, innovative about Uber. It is higher cost than Yellow Cab. It's less efficient. And finally, the sort of 22 billion of losses in five years, it wasn't what I brilliantly wrote. It's that that has sort of gotten that message across. Five years ago, four years ago,

there was a range of Uber fanboys that if you wrote something, there would be all these counterarguments and there was all of this stuff in the tech media that were the, you know, the Uber point of view, no facts or evidence supporting it. That's going away. None of those people who defended Uber's fantastic business model five years ago are festing up to that fact anymore. But again, all of those people that defended the Iraq war were shown to be wrong, but none of them paid a dollar of penalty. And we're, you know, still have soldiers in Iraq. So if that takes long, I mean, again, I'm indicating a set of larger problems. Hubert Haran, thank you so much for your work. Thanks for plugging away on those 21 so far and looking forward to more in nakedcapitalism.com. And I'll buy the book.

So you'll get it for free. That's that old people who say that know they're going to get it for free. Great talking, dear. You too. Thanks so much. A typical of Shoshapa to Joe Bauman at the center recording in Phoenix and Billy Therio at AudioRooks in New Orleans for help with the days program as well as thanks to our San Diego Desk and Hem Hallstead as usual. And to Thomas Walsh at WWW and O New Orleans. See you next week. The show comes to you from Century Progress Productions and originates to the facilities of WWW and O New Orleans flagship stations that change this easy radio network. So long from London.