The additional rise above the true capital will only be imaginary; one added to one, by any stretch of vulgar arithmetic will never make three and a half, consequently all fictitious value must be a loss to some person or other first or last. The only way to prevent it to oneself must be to sell out betimes, and so let the Devil take the hindmost…
A participant in the South Sea Bubble quoted in “The South Sea Bubble”, John Carswell,
I’ve decided to keep a vague running tab on Uber. It’s an investment bubble, I don’t know quite how its’s going to pop… but it’s going to. My previous thoughts are here. In his Nobel award lecture “Speculative asset bubbles” Robert Shiller defines and investment bubble as:
[a] situation in which news of price increases spurs investor enthusiasm which spreads by psychological contagion from person to person, in the process amplifying stories that might justify the price increase and bringing in a larger and larger class of investors, who, despite doubts about the real value of the investment, are drawnto it partly through envy of others’ successes and partly through a gambler’s excitement.
Nothing seems to sum up the investment psychology of Uber more. Having watched the extraordinary returns others have made in companies such as Facebook, and seen a group of tier 1 VC’s get involved, the next round gets fund managers involved (at USD 40bn), and then gets a sovereign wealth fund involved to keep the valuation at USD 62.5bn. I quite like the irony of getting the Saudi’s to put in USD 3.5bn into an unprofitable Uber while convincing them to sell shares in Saudi Aramco… kind of like bait and switch only better… a new modern version of Petrodollar recycling but without the adverse consequences?
This week Uber announced the were gearing up for a flying taxi service:
Uber Technologies Inc. disclosed the initial steps of its air-travel vision this week, announcing five partner companies with various specialties aimed at making the sci-fi staple affordable and common. The initial testing is expected in 2020 in Dallas and Dubai, two car-clogged cities where aviation interests wield great influence.
“If you’re not planting the seeds for five, 10 years out, you have no company in five to 10 years,” Jeff Holden, Uber’s chief product officer, said.
The cynic in me see’s this a) as the equivalent of vapourware and b) a desperate attempt to show there may be some inherent value in a company that is clearly going backwards massively in terms at c. USD 2bn a year in cash terms. Uber are trying to fire the “gamblers excitement” that Shiller refers to (“don’t worry this taxi thing is just a smokescreen for our real route to profitability … autonomous drones…”)
But this line really tested my intellectual patience:
“There are a lot of compelling elements to this vision,” said Brian Wynne, president and CEO of the Association for Unmanned Vehicle Systems International, who attended the Uber event in Dallas this week where the plans were unveiled…
“Whether this becomes a niche service … and how quickly it scales is anybody’s guess,” he said. “But they’ve got the demand.”
Don’t you need a price to gauge (potential) demand? I’ve got a lot of demand for a new Concorde from London to NYC at £500 per ticket… at £500 000 per ticket much less. It’s just all hype an no substance.
It’s not just me either… FT Alphaville (hardly the doyen of left-wing communism) came to the conclusion that:
[u]ltimately Uber’s success comes down to convincing the world that it has made a progressive leap by allocating cheap human resources towards the job of waiting around at the beck and call of an increasingly powerful elite.
From an aggregate economic allocation and welfare point of view that’s an obviously nuts proposition. What it amounts to is a transfer of labour from high productivity sectors to ultra low productivity sectors on the assumption that if this workforce is given autonomy over their non-productive time they can deploy it more efficiently in the market than if it was being allocated by a scaled-up specialist operator.
Since that, by definition, inhibits specialisation or skill acquisition in labour markets, all it really encourages is the purposeful unscaling of the economy and thus the entrenchment of a suppressed, underpaid, servant class with no prospect to ever benefit from a consumer surplus.
I sometimes think that all you need is an idea so outrageous sometimes it will get funding because people don’t want to say no. I half joke that I am thinking of registering the name http://www.chinaflng.com and then raising 10bn from investors and using it to buy a couple of broken VLCC’s for conversion purposes… and then worry about what to do… it’s a better idea than a $400 juicer…
Doug Evans, the company’s founder, would compare himself with Steve Jobs in his pursuit of juicing perfection. He declared that his juice press wields four tons of force—“enough to lift two Teslas,” he said. Google’s venture capital arm and other backers poured about $120 million into the startup. Juicero sells the machine for $400, plus the cost of individual juice packs delivered weekly. Tech blogs have dubbed it a “Keurig for juice.”
But after the product hit the market, some investors were surprised to discover a much cheaper alternative: You can squeeze the Juicero bags with your bare hands. Two backers said the final device was bulkier than what was originally pitched and that they were puzzled to find that customers could achieve similar results without it. Bloomberg performed its own press test, pitting a Juicero machine against a reporter’s grip. The experiment found that squeezing the bag yields nearly the same amount of juice just as quickly—and in some cases, faster—than using the device.
On second thoughts I am going to go with this… It will be an FLNG company that uses blockchain and has a cloud computing element to it with a big data social media engine driving it’s utilisation…. any maybe a really good juicer in the galley… please leave VC details in the comments section…
One day over a beer remind me to tell you the story of guy who walked into my office and wanted to build a fake tropical island in an abandoned Zeppelin factory, and then tried to shoot the messanger…