Yesterday’s New York Times Dealbook column, “Why Uber Might Well Be Worth $18 Billion,” is a back-of-the-envelope look at the company’s staggering estimated worth that concludes: “Here’s another way to think about Uber’s whopping valuation: It is still too low.”
I’m not going to get into Andrew Ross Sorkin’s bubble-bursting (i.e., there is no Silicon Valley bubble) here. I’m pointing at this particular piece as a reminder of the maxim, attributed both to Mark Twain and Winston Churchill, that a lie can travel halfway around the world while the truth is putting on its shoes.
In this case, the lie is a number pulled out of an asshole and presented as cold hard fact — which journalists, being too credulous or unschooled about a specific line of business or working fast to hit a deadline, rely upon and disseminate until it becomes so widely accepted that no one can question it without looking silly.
On May 29, I explained why Uber’s oft-repeated claim that UberX drivers make an average (!) of $90,000 a year almost certainly cannot be true. I am not alone. Over at Medium, Felix Salmon has arrived at the same conclusion.
Sorkin is a smart guy so he’s careful to explain that real income figures for yellow cabbies and Uber drivers are impossible to come by. Still, he takes Uber’s $90,000 figure more at face value than I would (emphasis is mine):
What’s more, Uber doesn’t own the limousines or cars. So far, its biggest costs are simply providing the technology that powers the network of cars as well as marketing and support costs for drivers, which means it is a very high-margin business. Because it is still private, we don’t know the hard numbers.
It’s all anecdotal evidence, but ask an Uber driver what they did before they started driving and many will tell you they were unemployed or working part-time jobs. According to Uber, the company says “at our current rate, Uber is responsible for directly creating 20,000 new jobs per month and powering billions in economic impact in cities around the world.
More impressive, these new jobs are not low-wage: In New York, the company says a driver for UberX, its lower-tier car service, is making more than $90,000 annually. A yellow cabdriver is estimated to make about $30,000. This doesn’t mean that all taxi drivers are persuaded of Uber’s benefits; Some are seeking a nationwide union, in part because of competition from Uber.
A casual reader will likely come away from this passage without much reason to doubt the accuracy of the $90,000 figure, even though Sorkin correctly sources it to the company. After all, while some companies may stretch the truth, few put it on the rack and full-out kill the bastard, as in this case.
I asked Sorkin how a lower (i.e., more accurate) income figure for UberX drivers would affect his assessment. “I don’t think it affects valuation,” he replied, but wouldn’t elaborate. If not, why mention it at all?
When he wrote his Dealbook column, Sorkin explained that he had no reason to doubt the information on Uber’s website. “I hadn’t seen the critique of the number…My anecdotal interviews with drivers in NYC suggested it was close to right.”
He went on: “Over the past couple months I’ve been quizzing UberX and taxi drivers just out of curiosity. I’ve heard lots of range, but I don’t think any UberX drivers in NYC I spoke with driving full-time said they were doing less than $50-60K. One guy told me he thought he’d make $120K.” One big question, which Salmon delves into, is how many hours drivers work in order to achieve these earnings. What about expenses: gas, insurance, repairs, accidents, tickets? Those can be substantial.
After reading my previous piece for Pando about Uber’s dubious numbers, Sorkin replied: “I dunno what the right number is but you make a persuasive case,” adding, “I cited Uber on this so I think your issue — and it’s a fair point — is with them, not me.”
I agree. Most companies don’t lie this much. I don’t blame Sorkin for buying Uber’s $90,000 fiction. And I won’t be surprised to see Uber’s bullshit continue to spread.
[illustration by Brad Jonas]