Eli5: I saw that Uber is still not making money, how is that possible, they have a lot of people working for them, worldwide known and also if they dont make any money how are they still alive?
In: Economics
An investor will look at numbers besides profits. They look at the future. For uber, that’s looking ok. They turned a negative cash flow 2-3 years ago into positive operational cash flow today.
There’s other costs besides operational ones so they can still file a loss but we know
-rides cost less than they bring in. Good.
-it wasn’t like that a few years ago. it got better fast, and thus could get better still. Good.
Plus there’s a few long game technologies that will require significant investment so a huge company like uber is well placed to catch those.
Will we all be hailing self-driving cars instead of owning cars in a few years? Cars are just sitting in the garage or in parking lots most of the time. Doesn’t make much sense. That could change everything. Some part of the price is in that long term potential.
stock market and valuations are like a MLM scheme. you invest and hype up enough for other mopes to start investing. then you either cash out or hold in till a lot of other mopes join and drive the price high.
Investors see uber as an essential service (similar to google, amazon or facebook, synonymous with search and social media) that will dominate the world for decades to come. So even if Uber is not making any money now, it is still cheaper to invest now than when it will start making profit and the stock price really shoots up.
if you’re interested in a tin hat opinion, i don’t think some of their big investors care about them losing money.
Uber has been at the forefront of working legal cases against workers and lobbying against workers rights in many countries. lot’s of people with a lot to gain from large companies fighting to reduce employees rights, pay and working condition standards across the board.
but there’s a chance it’s the stock goes up option everyone else is saying and my point is just a happy byproduct for some.
A business never actually needs to be profitable on paper. There’s rarely much point to turn a profit, because profit is taxed. Instead, take what would be profit and invest it into the business to grow it further.
The purpose of business is to make money for those who own & work there, and for the investors if public.
It does all of that and will continue doing so.
My uneducated opinion as an observer would be that the do make money. That money is used to maintain the life of the business model and pay executives unjustifiable salaries until they sell the business model. The choice to spend more than they bring in is by design, it lowers their tax burden.
Because Uber, like most companies have this misguided belief of “infinite growth” regardless of how well they did previously, theres never a plateau and even if they do great, its never enough.
Because, just like any greedy corporation, they don’t want most of the money. They want ALL of it. So if they don’t make MORE money than last quarter, its considered “bad” or a “loss”.
Which leads them to do “regrettable” things like, firing hundreds if not thousands of workers to save their ever expanding “bottom line” before pocketing the rest, then print out blurbs that say workers today are too entitled, and that “no one wants to work anymore”. Whilst they sit and scheme to do what most corporations do these days, like buying a member of congress or maybe the supreme court?
They are losing money for two main things before they either raise prices or on path to profitability: 1) get enough people to use Ubers regularly and not own their own cars. 2) to survive until self driving cars are viable.
If none of the above happens in time Uber will die a spectacular death but live forever in college business text books.
They did become profitable which allow them to be listed on the S&P 500…. However if they can sustain it is another question because taxis are adapting and people still don’t want to give up their cars (except travelers and people too old to drive).
This is such a dangerous place for a company to be.
Usually means they will need to sell data.
The couple most upvoted comments have a good explanation but there are a lot of other commenters who are wholly unqualified to be giving an ELI5 answer for this
You just uncovered the secret sauce. If you have an idea that can generate millions or billions of revenue it doesn’t actually need to be profitable. You still get your $200k salary and live great, company can chug along for years losing money as long as its sustainable.
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