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Posted by on Mar 29, 2019 in Blog, Essays, Las Vegas, Personal, Politics | 4 comments

Lyft’s IPO: Buyer Beware

 

 

Buyer Beware:  Why Lyft’s Current Business Model is Unsustainable and the Stock is Probably a Losing Long-Term Investment

 

A few hours from now, the rideshare company Lyft will go public.  Shares of stock will be offered on the NASDAQ.  A few people are about to become insanely rich overnight.

Lyft began operating in 2012.  In the seven years since, the high-tech startup has grown into the second-largest rideshare transport company.  Uber, which ranks first, enjoyed a four-year head start on their rival.

However, some analysts now believe Lyft’s long-term prospects are brighter given the number of cities where the company operates (300) and growth projections within those markets.  Certainly, Lyft will be an attractive investment for initial speculation in what’s been a booming American economy.  The timing of Lyft’s public launch couldn’t be better than now.

However, Lyft is beset with many questions and potential problems.  What are my credentials to make this statement?  Well, admittedly, I know nothing about the company’s ownership, its management team, its technology, or anything whatsoever to do with its finances.  What I do know is its current business model is badly flawed and hence, unsustainable.  Lyft can’t continue to operate as it’s now doing and expect to generate much of any profit for investors.  In other words, don’t expect dividends to be paid soon.  In fact, profits may never come.

We’ve seen this false hype before — high-tech stocks and even great ideas that seemed they couldn’t miss, go from boom to bust.  Anyone remember the late 1990s?  Apparently not.

Lyft is expected to sell 32.5 million shares at around $72 each in the initial public offering phase (IPO), taking place on Friday, March 30, 2019.  The company will instantly be valued at $25 billion, a remarkable degree of investor confidence for such a young company that has yet to produce a profit in any of its seven years of operations, to date.

Read that again — yet to produce a profit.

Sure, Lyft (and Uber) have set the stage for what seems like a transformative enterprise that could change how millions of people get around in urban centers.  Most of us have used the service and do find it appealing.  The convenience of simply pulling out a smartphone on any city street, typing in an address, and getting a car direct to your doorstep within minutes is an attractive feature.  Moreover, ridesharing doesn’t require the handling of cash since all transactions are done by credit card (which is already on file when the consumer signs up for an online account).  Finally, ridesharing fares cost significantly less than taxis and other means of private transportation.  And therein lies the problem.

Lyft and Uber have been competing in a heated rivalry, especially over the last year or so, which has really been great for riders, but bad for both companies and especially their drivers, which are not employees but independent contractors.  The battle to inflate market share has kept fares ridiculously low in some cities, which has resulted in drivers’ pay being cut.  Lyft has been able to weather financial losses until now, and the infusion of IPO capital surely will give the company a huge boost.  However, there’s simply no way to generate profits in the long-term based on any of the current numbers.

Why not?  :et me explain.

Presently, Lyft is losing money.  To make a profit, the company must either:

  1.  Raise prices
  2.  Reduce labor costs
  3.  Ramp up technology (which will reduce labor costs)

Sorry, riders — but paying $8.45 for a six-mile ride cannot continue.  That fare isn’t feeding all the mouths that need to be fed when it comes to operating a motor vehicle, maintenance, fuel, labor, customer service, management, marketing, insurance, and other associated costs.  Making up the current deficit and then generating a profit for shareholders will require implementation of one or more of the options above.  There’s a reason the taxi costs $12 while the Lyft ride costs $9.  It’s because the trip is somewhere between $9 and $12 in cost, and Lyft is undercutting the competition.

If prices increase to a level that offsets costs and generates profit, ridesharing won’t be nearly as attractive to consumers.  Right now, many people are turning to ridesharing because it’s cheaper than a taxi.  That won’t be the case if fares go up by a substantial margin, which is probably inevitable given the costs of driving in urban markets.

If labor costs are cut, which means driver’s pay is slashed, rideshare companies won’t be able to attract new talent, nor keep those the drivers they have.  Uber and Lyft have been in a war to the bottom to see which company can pay its independent contractors less, presumably in an attempt to make their balance sheets look good.  With high turnover, rideshare companies are now bombarding social media channels desperately trying to attract new drivers, even offering so-called incentives to sign up.  Check your Facebook feed after visiting the Lyft page sometime and see what pops up.

Ridesharing is still a relatively new phenomenon and many drivers may be fooled into thinking it pays more than what’s actually accrued after time, investment, fuel costs, and wear and tear on personal vehicles — not to mention the inherent risks that go along with working odd hours driving on the streets (crime, traffic tickets, auto accidents, and so forth).  As the word spreads that many Lyft drivers make barely above minimum wage, it will be increasingly difficult to find the gullible.  Furthermore, the low rate of pay (which based on my personal experience varies between $8-14 per hour, and that’s — before taxes and zero benefits) will inevitably discourage better drivers and attract people of lesser quality.  Seriously, who can live in cities like New York, Washington, San Francisco, or Los Angeles on $11-an-hour?

Poverty-level wages, essential to profits, will attract marginal people — both in quality and character.  Increasingly, expect to see problems (like Uber sexual assaults, which have risen significantly).  There’s simply no way to attract a viable workforce paying $11 an hour with no benefits.  It’s a lettuce picking job behind the wheel.

Investors may be attracted to the company’s high-tech prospects, which could be on the horizon.  The most revolutionary component of ridesharing of the future is autonomous vehicles.  If Lyft (and Uber) can convert cars into a driverless experience, that eliminates significant labor cost.  Inner-city transportation would never be the same again.

But let’s not get ahead of ourselves, just yet.  While the technology does exist and the rideshare giants undoubtedly would chomp at the bit to convert to driverless cars if given an option, nevertheless, significant legal and practical objections do remain.  How many cities and states will allow hundreds or perhaps thousands of cars to be driverless and how long would this process take?  Additionally, what happens when a driverless car kills someone, as happened last year in Phoenix?  Accidents are part of the equation and are bound to occur (even if they aren’t caused by technical malfunctions).  Will city and state governments allow this controversial new technology on the streets?  Perhaps the biggest hurdle of all — what about consumer confidence and traditional habits?  Will riders get into a car that doesn’t have a living person as the driver?  Sure, high-tech might make driverless cars statistically safer and perhaps these concerns shall be overcome.  But I’m not convinced that either Lyft or Uber will be able to convert to a driverless vehicle fleet, not anytime soon.  Any investor would be a fool to think this is the game changer that will suddenly make rideshare companies profitable.

Hence, rider fares must increase (jeopardizing profit), labor costs must be reduced (jeopardizing profit), or high-tech must become the lifesaver for Lyft and Uber (probably the only viable option).  Then, add the uncertainty of gas prices now at a historic low (when adjusted for inflation), rising automobile acquisition and repair costs, and other economic uncertainties, and it’s impossible to imagine a better climate for ridesharing companies that right now nor how things will improve.  If Lyft and Uber can’t make a profit in these extraordinary conditions, how will they make money when the inevitable slowdown or downturn occurs?

This isn’t to say Lyft and Uber are doomed to fail.  To the contrary.  Ridesharing is here to stay.  It’s great for consumers.  But it won’t be nearly the bargain later on when operating costs and shareholder expectations create pressure to raise fares.  A ride from the airport can’t be delivered at $12 when the actual cost is higher.  It’s unsustainable.

No doubt, Lyft is going public at the ideal time for their owners.  Uber will likely be following suit, soon.  Unfortunately, those who invest in all likelihood have never driven for the company, seen the day-to-day operations, nor done the math.  I have.

Those who buy shares in these companies early and then hold rideshare stocks could end up in a riderless investment, with no idea when to bail out.  Short-term, Lyft could be an attractive investment.  But as reality sets in, no one knows where the profits will come from.

My advice is, don’t get in.

__________

 

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Posted by on Aug 29, 2017 in Blog, Essays, Personal, Uncategorized | 1 comment

True Heroism

 

 

Today, I woke up in a cozy bed.  I drank a fresh cup of coffee.  I took a hot shower.  Then, I turned on the television set and devoured a hearty breakfast.

Right then and there, as the ghastly images of an unprecedented natural catastrophe in Houston flashed before my eyes, it occurred to me that several million people living in Texas and Louisiana weren’t able to enjoy the simplest of pleasures most of us take for granted.

Deep down, I do think most people are good people.  I believe most people want to help others when they can.  Despite our differences, I’m convinced that most people want to help their neighbors and fellow citizens in times of crisis — even those they do not know.  And, I’m just as certain that most people don’t care about the color of someone else’s skin, or how he or she votes in an election, or what lifestyle is chosen — good people will usually do the right thing when acts of human compassion are needed the most.

The relief effort now underway in Houston shows the better side of all of us.  Yes, we are petty.  Yes, we are spiteful.  Yes, we are flawed.  Yes, we make mistakes.  But we also care.  We want to reach out and help people in their time of need.  Many have already done so.

Yet, some people do go the extra mile.  Some people make the added sacrifice.  Some people risk their own lives to try and save others.  These are the true heroes.

In the past few days, I’ve seen and read amazing stories of some remarkable people.  They have opened up their homes to total strangers.  They have driven hundreds, sometimes thousands of miles, towing ramshackle boats to rescue those who are stranded in their flooded homes, who are waiting for a hero to arrive.  They have donated money, and food, and emergency supplies.  They have taken in pets and moved them into foster homes.  They have worked tirelessly around the clock — all while I slept, while I drank a fresh cup of coffee, while I took a hot shower, while I watched television, while I devoured a hearty breakfast.

A Houston police officer even gave his life.  His name was Steve Perez.  Wait a minute….his name *IS* Steve Perez.  Say that name.  Say it aloud.  He deserves to be known and remembered, not as a “was” but an “is.”  Steve Perez is a hero.

I’ve written before that I’m far more impressed by casual acts of kindness and random good deeds than the supposed marvels and talents of those who are rich and famous.  We sure have a peculiar way of defining our “heroes,” all too often associating personal valor with the talent to throw a ball or look beautiful in a movie.  Too frequently we misconstrue heroism with money, fame, and power.  Willfully accepting these shiny objects of superfluous celebrity stands as the very antithesis of being heroic, since doing so calls attention to oneself instead of one’s character and deeds, and letting genuine acts of human compassion speak for themselves.

Alas, the true heroes among us are not famous.  More often than not, true heroism is anonymous.  Heroes work in nursing homes, often for appallingly low pay and for little recognition.  They serve as caretakers, sometimes without the reciprocity of simple gratitude.  They willingly volunteer to help the less fortunate.  They fight to defend wildlife and protect the environment.  They commit their lives to justice.  They go out on nightly patrol, trying to keep our streets and neighborhoods safe.  I will admit, these heroes are much stronger than me.  They perform admirable deeds that in some cases I do not think I could do.  I think that’s what makes them heroes.

Right now, Houston has a serious problem.  It’s a problem of unfathomable size and scope.  Dealing with these problems will not be easy.  But solving the very worst of Houston’s immediate problems will be an absolute given, a certainty, all thanks to the many heroes out there working and volunteering as I type and you read, heroes with names we do not know.

 

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Posted by on Jul 24, 2017 in Blog, Essays, Picture 1, Travel, Uncategorized, What's Left | 1 comment

The Greatest Photograph Ever Taken

 

 

[This is the follow up post to the article “WHAT’S THE GREATEST PHOTOGRAPH EVER TAKEN?” and subsequent discussion HERE which took place on Facebook.]

 

You’re looking at the greatest photograph ever taken.

It’s an astonishing image, spellbinding even, especially given the unforeseen interlude of the snapshot and the tumultuous times unraveling back on earth at the instant that it was taken.  The image is a blaze of contrasts, and for many — an inspiration and a call to action.

This photograph was snapped by William Anders in late 1968.  Anders was one of three astronauts aboard the Apollo 8 space mission.  Remarkably, Anders had no prior experience in photography, and yet his image has been called “the most influential environmental photograph ever taken.”   Not bad for an amateur.  The photo was even something of an accident.  It wasn’t planned.

Later named “Earthrise,” we see the earth in the distance which appears as an oasis of vibrant colors floating in the dark abyss of outer space.  The foreground shows the moon’s surface up close for the very first time, directly beneath the Apollo 8 spacecraft.  Contrast this image with grainy black and white television images transmitted back to earth from the lunar capsule, and the differences are striking.  We take these images for granted now, but at the time they were taken and later splashed around the world in media, we were in awe.

This image was a first in so many ways.  Earthrise was the first photograph to show the earth in its entirety.  While some of earth is concealed by a shadow and we can’t see the other side of the planet, it’s still the first comprehensive photo of all of humanity and the place we call our home.  Still, let that sink in.  Before this instant, we never quite knew what the whole earth looked like.  Previous manned space missions had beamed back many stunning images, but they were taken much closer to the earth’s surface.  Until this mesmerizing moment, we’d never seen ourselves truly as one.  In a sense, it’s the first “group shot” of everyone on earth.

This is us.

The timing of the photo also adds significantly to its power over us.  From space, we see what seems to be a peaceful planet.  But the historical backdrop to this photo was the terrible year that was 1968.  The world was in chaos.  This was the height of the Vietnam War.  The two superpowers were locked in a death-stare of conflicting ideologies, both sides stanchioned by thousands of nuclear warheads.  At the time, the U.S. didn’t even recognize the largest nation on earth, the People’s Republic of China.  Apartheid was the law of the land in South Africa.  Famine and starvation raged across parts of Asia and Africa.  Tensions were brewing in the Middle East, which had just come off a war between Israel and the Arab States in the prior year.  Central and South America were in the midst of their so-called “dirty wars,” as many countries were ruled by brutal military dictatorships.  Revolutionaries were active almost everywhere and had even launched a new tactic particularly loathsome to humanity, called “terrorism.”

The United States was also in crisis.  National Guard units patrolled the streets of many American cities.  There were nightly curfews.  Every major university had mass protests against the Vietnam War.  Race relations exploded into riots and burned many American cities.  There was a generational split on every cultural and political issue — the old didn’t like or trust the young, and the feeling was mutual.  Yes, 1968 was a bad year — Dr. Martin Luther King was gunned down.  A few months later, Robert F. Kennedy was murdered.  Even one of the national political conventions erupted into near anarchy.

Yet, none of these man-made troubles are apparent in this stunningly beautiful groundbreaking image.  This was the portrait of a seemingly very different world that was taken when Anders lifted a Hasselblad camera loaded with 70 mm film and aimed it at the earth.  The audio recording of the conversation between the three astronauts inside the spacecraft reveals just how spontaneous this moment was:

William Anders:  Oh my God! Look at that picture over there!  There’s the Earth coming up.  Wow, is that pretty.

Frank Borman:  Hey, don’t take that, it’s not scheduled. (joking)

William Anders:  (laughs)  You got a color film, Jim?  Hand me that roll of color quick, would you…

Jim Lovell:  Oh man, that’s great!

Here’s another thought:  Given these historical firsts, the ironies of what the year 1968 was like, and the accidental occasion to take such an iconic photograph, also consider the actual date this image was taken.

December 24, 1968.  Christmas Eve.

Some 240,000 miles away, a billion people were about to celebrate the holiest of holidays.  Many of us would later sit down to dinner just hours later with our friends and loved ones (I was 6-years-old at the time).  While many of us enjoyed our Christmas feast, three remarkably brave men were so very far away, locked inside a tiny compartment the size of a Volkswagon, circling the moon.  The mission set the stage for the first moon landing, some seven months later.

Now, take another look at the photo.

I’m often asked why I believe the way I do.  I’m asked what makes me champion the virtues of science and reason, and why I value cooperation over conflict, and why I’m an advocate for human and animal rights, and why I’m an environmentalist, and why I don’t believe in imaginary gods, and why I don’t think national boundaries or borders are a good thing when it comes to being a fully compassionate human, and why I’m convinced we’re all much more interconnected than the wedges of disagreement which divides us.

There is no mine.  There is only ours.

Never has one photograph instilled within us such an important task — to save what we see.

 

Note 1:   The Earthrise photo had been preceded by a previous image taken in 1966 by a robotic space probe.  However, that image was in black-and-white and didn’t generate nearly the impact.

Note 2:  Read more about the marvel of Earthrise here, from the official NASA website.

 

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Posted by on Jan 22, 2017 in Blog, Essays, Personal, Politics, What's Left | 17 comments

Trump’s War on Logic

 

 

The first course I ever took at the University of Texas was logic.

It wasn’t by design that I signed up for “Logic 101.”  It was by accident, really.  Logic sounded like an interesting subject and besides, the classtime fit perfectly into my schedule.  Thankfully, that unintended course taught me more about how to think than any other endeavor.  Being exposed to the rigorous practice, that’s to say the trial and error of how to properly test and discuss an idea set the tone for the remainder of my college years, and for my personal and professional life.

Taking Logic 101 also provided me with a clearer understanding of how and why science isn’t merely one subject of many, to be segregated into a separate classroom on its own aside math or literature.  Science was actually was the nitty-gritty all-inclusive machinery, of both means and methods, the gateway to every question in the entire universe — including what we (think we) know and what we’ve yet to discover.  Science is the handy toolbox allowing us to unlock all human curiosities.

All students everywhere should be required to take logic as a prerequisite for graduation.  If someone isn’t able to think critically, what’s the point of getting an education?  Without logic, whatever else follows is like constructing a skyscraper on top of quicksand.  The foundation collapses.  No amount of subject knowledge later on can compensate for a lack of understanding of how logic works, in other words — thinking logically.

When one speaks of logic, what this really means is thinking critically.  One must always be open to new ideas, even ideas which might initially seem strange or be objectionable, even repulsive.  Otherwise, there’s no opportunity to learn and evolve.  I’m terribly troubled where I hear someone say their mind can’t be changed on any given subject.  That’s not just close-minded.  It’s inherently self-destructive to the betterment of the body, mind, and soul.  Virtually all of us, anyone who is human, has changed an opinion on one subject or other — based either on personal experiences or when confronted with a preponderance of evidence.  That’s critical thinking.  That’s logic in practice, or at least the ideal reaction to logic.

Sadly, logic has become decreasingly relevant in modern society, particularly on social media, and even more so in today’s toxic political environment.  Logic is almost to the point of extinction.  Compelling evidence suggests that logic no longer matters, at all.  Hence, to be thoroughly logical (and trustworthy) with my readers, what I wrote in the previous paragraph isn’t quite true.  Yes, the sad fact is — you can build a house on quicksand.  Indeed, someone can be both successful, very successful, and illogical.  The new President of the United States is the perfect example.

President Trump and many of his most outspoken supporters often engage in illogical tactics.  A certain level of rhetoric is to be expected, of course.  But this is something quite different, something historically unprecedented.  The Trump Campaign, which has now morphed into the Trump Administration clearly intends to continue the same tactics used over the past two years, which is to deflect, to confuse, to frustrate, and ultimately to wipe out far more logical counterarguments.  This is entirely willful and premeditated.  The Trump camp knows precisely what they’re doing.  Unfortunately, it works.  Dark is the new light.

On what is the first full day of the new Trump Administration, today’s poisonous basket of outrageous, demonstrably false statements — made repeatedly by both President Trump (at CIA Headquarters) and a scumbag named Sean Spicer (at the White House Press Briefing) — prove beyond a shadow of any doubt that the new Administration intends to invent its own data, squash any conflicting facts, and then go on the attack all those who’s job it is to actually seek information and tell the truth in the public interest.  This isn’t just annoying, it’s absolutely terrifying.  Even Trump supporters should be alarmed when on the second day of the job, both the President and the Press Secretary tell bold face lies to cameras, particularly on an issue with most would consider to be trivial.

A minor issue which should have been yesterday’s news and largely forgotten was reignited by President Trump himself (not the media), who on the solemn occasion of supposedly honoring the hard-working professionals within the intelligence community, instead launched into a petty Dr. Strangelove-like tirade on one of the most irrelevant topics of any Day One presidency in the history of the United States.  Upright in front of the wall of honor, a marble memorial which pays tribute to the men and women of the CIA who gave the ultimate sacrifice (their lives), President Trump mocked the occasion and flipped into another campaign speech and then, much to the astonishment of the former CIA Director who was watching, used the awkward occasion to behave like a bratty thin-skinned kindergartner, bickering with his fellow schoolboys over who gets to play with the ball.  Several minutes were wasted arguing over the most trivial subject (the number of attendees at Trump’s inauguration), which had been settled already with proven facts by just about every media outlet in the world, with ample photographic and statistical evidence.

Yet, this behavior wasn’t anything unusual for a man and the movement which scares the hell out of many sane people who are more used to a Commander in Chief with which we have a common baseline for decision-making, despite past partisan differences.  Even those who hated LBJ or Ford or Carter or Bush knew there would be basic agreement on a set of easily verifiable facts.  If The Trump Administration can’t even accept basic factual evidence on something as meaningless as mall attendance at his inauguration, what happens at 2 am in the Oval Office when some kind of real executive decision needs to be made about North Korea firing a nuke or ISIS launching another terrorist attack?  What will the new President do in the not so distant future when bad inevitably things happen and we need strong and steady leadership which takes facts and evidence into account?

Well, it appears that the zebra never changes its stripes.  Self-delusion has been the modus operandi of Donald Trump his supporters, not just from the moment Dear Leader first announced his reality television show-brand driven candidacy, but from the very foundation of the ultra-reactionary Tea Party movement, which took fertile root in the rich dung of division and hate, then sterioded by a frantic obsession to destroy absolutely everything associated with the Black guy living in the White House with the Muslim-sounding name.  Logic be damned, even when the Obama Administration unquestionably saved the nation from plunging into a Great Depression, cut unemployment by 40 percent, saved the auto industry from total collapse, withdrew troops from two unwinnable foreign wars, or even tripled the grotesque profits of greedy Wall Street, which is something conservatives should have been rejoicing.  Had Republican posted President Obama’s identical record, conservatives would be lobbying for another face carved into Mount Rushmore.  The trouble was — the Republican hardliners couldn’t take any credit for all the good stuff this time.  So, when the facts weren’t political convenient, they made up their own.  And that’s exactly what President Trump and his supporters have done, and continue to do.  Nothing, it seems, will change.

Writer/pollster Nate Silver coined the term “the Spread,” which best describes the popular tactic used by Trump and his supporters, particularly on social media.  I’m told this term stems from his days as a high school debater.  The dubious tactic goes like this:  When losing an argument, respond aggressively by slinging lots of outrageous charges and counter-arguments, really fast.  Being bombarded with an abundance of nonsense often succeeds because it buries the more logical argument with confusion.  The solid fact-based argument eventually gets forgotten.  The more thoughtful fact-based debater is snowed under by an avalanche of misinformation.

From pivoting to different topics, to ad hominem attacks, to constructing false straw men, the Trump Administration has mastered one thing, at least, and it’s both dubious and destructive.  Telling a bold lie over and over and over again until it’s finally believed is an old tactic that was once used so effectively that it eventually led to one of the worst periods of human history.  Indeed, that’s all it took.  A few lies were repeated often enough and were by a charismatic leader that enough people believed them, and then they shut off their brains and abandoned logic.

If history repeats itself as some have suggested, we are living in dangerous times.

 

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