But there’s more to it than that. Silicon Valley elites justify the subsidies in the name of monopolistic growth expectations and the building of “eco-systems”*. They believe if monopoly status is achieved, profitability will follow naturally from that point.
Yet, as FT Alphaville has long maintained, there is no reason to assume Uber’s obliteration of local competition across the planet will create a sustainable business in the long term. Costs are costs, even if you’re a monopoly. As long as people have cheaper alternatives (public transport, legs), they will defect if the break-even price is higher than their inconvenience tolerance threshold.
The fact Silicon Valley thinks otherwise is sadly symptomatic of the emperor’s new clothes groupthink dominating the sector. Though it does explain the sector’s obsession with popularising the idea that public transport can be done away with. (Less investment in public transport will lead to fewer competitively priced alternatives, empowering the Uber monopoly in the long run).
Note the FT is addressing the basic economics of the model, not the ludicrous “all the drivers are self-employed, nothing to do with us, Guv, we’re just a tech platform” position Uber presented when losing a recent employment tribunal case. As the FT noted then: Uber could indeed be no mere provider of transportation services in one way. Its true business edge is legal and regulatory arbitrage.