# Is Uber a pyramid scheme?



## Krishna (Sep 4, 2014)

I don't know why I made that a question, we all know it is true.

1. Sucker drivers in with promises of real money to be made
2. Drivers discover they are not making money, so they stop driving
3, Then promise drivers they can still make money by referring new drivers.
4. The old drivers leave and are replaced by the new drivers
5. New drivers find they aren't making money...










Is it just me or is this promo sounding desperate?


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## chi1cabby (May 28, 2014)

Uber has a huge *Driver Retention Problem*. But that does not make Uber a Pyramid Scheme.

It just means that TravisK thinks that it's more strategic to pour 100s of millions per year into recruiting New Drivers than raising Rates to alleviate the high Driver Churn Rate.


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## Backdash (Jan 28, 2015)

Well if you got paid a percentage of the earnings from the drivers you signed up and a percentage of the earnings from the drivers they signed up and so on, then it would be a pyramid scheme.

But you don't, so it's not.


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## Huberis (Mar 15, 2015)

It is probably more of a kind of Ponzi scheme. Uber does not make any money and is comfortable if most of its drivers fail to make money too. Uber does use its operations to generate money from venture capitalists which is then invested in developing various technologies intended for patent and licensing. I don't know how well that fits the definition of an actual Ponzi scheme, but it seems in that realm.

I just had a pax tell me there is a leading antitrust law scholar at the local law school who loves to use Uber and Kalanick as examples of antitrust behavior. I am going to see if I can find some relevant papers he may have published. Apparently he cowrote a book concerning Microsoft's famous case.

http://press.uchicago.edu/ucp/books/book/chicago/M/bo5378462.html


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## Huberis (Mar 15, 2015)

chi1cabby said:


> Uber has a huge *Driver Retention Problem*. But that does not make Uber a Pyramid Scheme.
> 
> It just means that TravisK thinks that it's more strategic to pour 100s of millions per year into recruiting New Drivers than raising Rates to alleviate the high Driver Churn Rate.


Perhaps he is more comfortable having to constantly replace drivers than set a price point which would open his enterprise up to a competitive market. Uber's rates are meant to be non competitive. One person driving a rather new and expensive car for livery work, driven by one person is an expensive operation, particularly if you need to set rates high enough for cars to be not only maintained, but replaced.

My guess is that to do that would make him too vulnerable to losing market share, in come the antitrust concerns. Rates would really need to be raised substantially, to truly make the effort sustainable for a driver. His ability to leverage the value of being able to say he has a big time app on everyones phone is not something he wants to jeopardize.


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## toi (Sep 8, 2014)

chi1cabby said:


> Uber has a huge *Driver Retention Problem*. But that does not make Uber a Pyramid Scheme.
> 
> It just means that TravisK thinks that it's more strategic to pour 100s of millions per year into recruiting New Drivers than raising Rates to alleviate the high Driver Churn Rate.


I think ubers strategy is more like making the competition unhappy and give up business at whatever the cost is. With their huge funding rounds they can afford to do so .


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## Casuale Haberdasher (Dec 7, 2014)

Krishna said:


> I don't know why I made that a question, we all know it is true.
> 
> 1. Sucker drivers in with promises of real money to be made
> 2. Drivers discover they are not making money, so they stop driving
> ...


POST # 1/Krishna: Thank You for
this Thread you Started. It is a Topic that
will draw Considerable Content, always
a gratifying experience.

Please consider Posting more often ?

Bison Admires.
Bidon Inspires!


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## Michael - Cleveland (Jan 1, 2015)

Backdash said:


> Well if you got paid a percentage of the earnings from the drivers you signed up and a percentage of the earnings from the drivers they signed up and so on, then it would be a pyramid scheme.


Nope - that would make it multi-level marketing - MLM (like Amway, MaryKay, Avon).

There is nothing illegal about multi-level marketing.

"Pyramid schemes c*laim to be in the business of selling products to consumers in order to look like a multi-level marketing company*. However, little or no effort is made to actually market the product. Instead, money is made in typical pyramid fashion...from recruiting other people to _market the program_. Sometimes, new "distributors" are persuaded to purchase inventory or overpriced products/services when they sign up.

"*Pyramid companies make virtually all their profits from signing up new recruits* and often attempt to disguise entry fees as the price charged for mandatory purchases of training, computer services, or product inventory."
http://www.michigan.gov/ag/0,4534,7-164-17337_20942-208400--,00.html

A PONZI scheme takes money from new investors to pay off the earlier investors.
Eventually and it inevitably the scheme fails.
And that's why pyramid schemes are illegal.


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## PHXTE (Jun 23, 2015)

Not in the strict sense considering you don't have to pay Uber a fee to "join" like most pyramids require.


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## Michael - Cleveland (Jan 1, 2015)

William1964 said:


> Anywho uber collected 50 billion 18 billion in cash with promises of high returns. They're not making any money and they're still collecting funding.. The only thing that will save this thing from completely imploding is an IPO. The sale of stock will give uber enough money to pay all of its investors. Without it no one's going to get their promised hi return.


??? Step back... you don't really know what you're talking about.
Investing in a corporation is RISK, but that doesn't make it a pyramid scheme, or a PONZI scheme. Investors in Uber did not get 'promises', they got equity (or loan agreements). BIG DIFFERENCE. Uber doesn't have to 'pay-off' most investors, because most of Uber's funding is in equity, not debt. And the investors we're talking about here are not mom and pop investors, they are professional investors entirely capable of evaluating the risk they are taking... and if they do lose their shirts, so be it. That's what they do for a living. There isn't an investor in Uber that couldn't withstand the loss of every dime they have put up.


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