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A job for the Ubermensch

While walking his 2 Roam’n war dogs, Trajan listened into the local NPR station where Marketplace was playing. Generally we consider Marketplace to be rather lightweight when it comes to economic news but there was an section on there about “Uber”. It apparently has been valued at $18 Billion.

The latest venture-capital investment in Uber, a mobile app that allows users to hail a ride in a town car or taxi, pegs the company’s value at more than $18 billion. That’s more than United Airlines or Sony, just shy of what car-rental Avis and Hertz are worth together. That may seem high for a company with direct competition like LyftSidecar and the entire taxi industry.

For Uber to be worth what investors are betting, the company might need to capture half of the worldwide market for taxis, says Andy Brennan, author of a recent report on that industry from IBIS World Research.  “I can’t see that ever happening,” he says. “Generally taxi customers are quite price-conscious.”

A ride in one of Uber’s town cars costs more than a cab. “The average person who gets a taxi is not necessarily going to use Uber on a regular basis,” Brennan says.

However, competing with taxis isn’t Uber’s goal. The company’s CEO has identified a much bigger competitor: The personal automobile.

$18B for an app that allows you to book a car at a higher price than a Taxi ? If the Venture capitalists are telling you this, then it is likely an example of “the Greater fool” theory. They need to stoke up the hype to get you to buy it from them during the yet to be determined IPO.

Not only that but the Uber model itself faces an uphill struggle for acceptance. In San Antonio, the police chief is threatening users of Uber’s sister app – Lyft  – with jail on the grounds that they do not conform to Taxi restrictions. Afterall, police have the protection of the cities revenue stream public safety  to consider. Continue reading..