Is This Uber's "Theranos Moment"?

Authored by Mark St.Cyr,

There comes that moment where the veiled threats against logic such as the go-to excuse of “it’s different this time” are exposed against the harsh light of reality for all to see with such clarity, “it’s different this time” is precisely the apt statement to show why it was all fallacy to begin with.

Uber™ has just had that moment, and the resulting fallout as I’ve iterated before: Will. Be. Legend.

To think, let alone, believe that the current implosion (and yes, I mean implosion) will be isolated within Uber is as much of a fantasy as was believing: “it’s different this time.” Why? Because: It is precisely that.

I believe (and have written) the remaining unicorns along with entire “tech” or “Valley” model for valuation are now facing what I called, “an extinction event.” Or said differently: The moment Uber is made to state publicly its current valuation going forward? It’ll be the equivalent for both “The Valley” and “unicorn” metric modeling – as was for the dinosaurs. e.g., Stick a fork in it, it’s done.

Now to be fair Theranos™ was/is caught up in what has been deemed as fraud for their product offering, Uber is not. However, why I use the “moment” appraisal is this: Once it was shown that the whole “so worth it” valuation metric was no longer above reproach? The jumping-of-ship for those closest happened so fast even rats took notice.

Ms. Holmes publicly declared any, and all, accusations as false before finally having to recant in the form of pulling, or re-verifying prior testing results. But as she was doing that publicly, quietly many either working for, or involved in management were reported to be heading towards any and all exits. Then, precisely one year ago this week (yes, it’s the anniversary) Forbes™ revised, and declared Ms. Holmes net worth had gone from $4.5 BILLION – To Nothing. And just like that it was over almost as fast as it had began.

So exactly where is the equivocation argument? Good question, and it is this:

The revising of valuations and more came when suddenly everyone no-longer could justify the valuations based on “it’s different this time” arguments.

That argument works fine when the Fed’s QE program is in full effect and works like some magical cloak to hide the naked fallacy that a company with less than $100 Million in revenues is worth some $9 BILLION because the VC’s invested say it is. (I can’t help myself from laughing as I typed that, it’s so far beyond ludicrous.)

But once the term “law suits” and more get thrown across a unicorns saddle? Let’s just say – viewpoints, and valuation metrics begin to change, and change quickly.

Uber is currently valued via all reports at around $68 BILLION dollars. And with that valuation it is currently the #1 unicorn, and most valued startup, and private tech company, in the world. And it’s core product? It’s an app to hail a cab.

Re-read the above line a few times, and let it sink in. Because as I implied earlier – this is where the equivocation moment comes. e.g., When all-hype suddenly meets law suits? All, and I mean just that – all – perspective changes. Especially for those of the unicorn variety.

Theranos, for all that it was going through at that time, one could argue (and some did making snake-oil salesmen look trustworthy) that there was at least some possible future if the law suits turned out to be defendable, or were misplaced. After all, it was about patented machines, diagnosis, and more. Nevertheless – it was over with near immediacy once it was blatantly obvious people once loyal and intimately involved, along with companies using the service publicly began jumping ship.

Suddenly every “news” outlet that once couldn’t get a flattering story out quick enough tripped all over themselves to re-write the now how, and why, for the imminent collapse of the once storied unicorn.

This time – is no different, for the stories have already begun. Again, once the unquestionable becomes questioned? I believe you already know the answer. But if you need reminding  – again – just look to Theranos.

Now, much like Ms. Holmes, the founder and CEO had to quit, or resign, to appease those calling for change. And, much like the previous example – those closest, and who should be the greatest ally for change and stay as to help weather out the storm are also jumping. Sound familiar?

The optics of such a “jump” while in the midst of such a sh*t-storm at Uber, from my perspective, shows only one thing: You know the jig is up, it’s all about managing the fall, and there’s no need to do that in plain view.

If I’m wrong, then why would such a staunch defender of the company and its CEO resign when the negative optics of such a move are clearly visible? Unless? See above.

And just like Theranos – Uber’s valuation has already began slipping.

The real difference here? Remember: Theranos was said to be worth $9 Billion when their fall from grace began. And that was all based upon the idea that they were involved in life changing medical technology. Uber? They are said to be worth $68 BILLION – and they’re an app to hail a cab. Think about that, again.

And lest one forget – Uber burns through, not makes: $BILLIONS. And its “world domination” thesis has already been cleaved when it gave up on China. And that realization alone has yet to be priced in, or out, one might say. Add to that just some of the above and “cleave” might be an understatement for future valuation adjustments going forward.

Just ask Ms. Holmes.


DaddyO Sun, 06/25/2017 - 14:42 Permalink

Where is that bitch, Ms. Holmes anyway?I'm sure she's enjoying the "good" life somewhere with all the millions she was able to secret away...DaddyO

Miffed Microbi… DaddyO Sun, 06/25/2017 - 15:06 Permalink

That company was 100% fraud. I could have told them so but they didn't need my opinion on what they obviously knew themselves. Had I tried to duplicate it, I'd be thrown in jail fast. She touted a dubious technology that is fraught with issues and the rest was garden variety lab testing she offered below operating costs. Absolute fraud. She and the rest of her partners in crime should be pounding rocks.


In reply to by DaddyO

swmnguy Miffed Microbi… Sun, 06/25/2017 - 15:47 Permalink

From what you've said over the years, I have no doubt you knew Theranos was a fraud from the git-go.  I started to wonder when Elizabeth Holmes became such a media darling, what with her obvious Steve Jobs impression.  Even Steve Jobs wasn't in it to be Steve Jobs, that was just part of it all for him.  For her, it seemed like the whole purpose, which leads enquiring minds to consider "Maybe it's all fake."  As trendy and catchy a market sector she was trying to dominate; yeah, didn't take much for a complete layperson to start wondering about that.As for Uber, Kalanick's just the kind of jerk who wants to be the erratic genius visionary entrepreneur demigod.  Yawn.  I've seen just a few too many of them to get too excited.  The app works.  The company isn't much though; it depends totally on outsourcing their costs onto their employees, and simply evading other costs.  When Uber had to circumvent local regulations for any cab company (as opposed to local regulations put in to keep Uber out; I don't care about those); that was a bad sign.For me the worst sign for Uber is the story of Jeff Jones.  I know that guy vaguely.  He was Target's VP Mktg. for a while.  He was the one who took to social media to address anonymous grumbling about Target's inbred middle-school-lunchroom culture.  That needed doing and he had the brains and the guts to do it, so good for him.  When Jones left Target I thought that was a bad sign for Target.  That he went from Target to Uber surprised me a lot, so I started paying attention to Uber.  Jones didn't stay there long, and when he left we were just starting to hear the rumblings of an outrageously out-of-control corporate culture.Uber's cooked.  The company isn't worth more than a tenth of its supposed valuation.  Great app.  It probably took a jerk like Kalanick to get it up and running but there's more to running an actual company than just being an asshole.Uber isn't and never has been a scam.  The valuation is a scam of the first order, though.  If that company were to do an IPO, that would be one to watch with popcorn, and the wallet locked in a drawer.

In reply to by Miffed Microbi…

Miffed Microbi… swmnguy Sun, 06/25/2017 - 16:48 Permalink

Steve Jobs' product was innovative. Her product was to take a laboratory and wrap a black turtleneck around it and call it cutting edge. Moronic.

Besides. Fingersticks hurt. Also, you must "milk" the finger often to get enough blood which can affect certain tests. Venipuncture is more efficient and unless the phlebotomist screws up, you have plenty of blood for repeat testing if warranted. Unless you are a hemophiliac what difference does it make to draw 5 ml of blood or 5 drops? It's all about the accuracy of the testing.


In reply to by swmnguy

hooligan2009 Sun, 06/25/2017 - 14:55 Permalink

how about an electronic mail order company that earsn $5 a year and has a share price of $1,000 (PE of 200) with a market cap of $480 billionDe Nile is a river, just like De Amazon - full of shit too

decentraliseds… (not verified) Sun, 06/25/2017 - 14:57 Permalink

 Why waste time on this alligator when the swamp’s most critical economic and political problems revolve around the hegemony of a global corporate cartel, which is headquartered in the US because this is where their dominant military force resides. The US Constitution is therefore the “kingpin” of an all-inclusive global financial empire. These fictitious entities now own the USA and command its military infrastructure by virtue of the Federal Reserve Corporation, regulatory capture, MSM propaganda, and congressional lobbying. The Founders had to fight a bloody Revolutionary War to win our right to incorporate as a nation – the USA. But then, for whatever reason, our Founders granted the greediest businessmen among them unrestricted corporate charters with enough potential capital & power to compete with the individual states, smaller sovereign nations, and eventually to buy out the USA itself. The only way The People can regain our sovereignty as a constitutional republic now is to severely curtail the privileges of any corporation doing business here. To remain sovereign we have to stop granting corporate charters to just any “suit” that comes along without fulfilling a defined social value in return. The "Divine Right Of Kings” should not apply to fictitious entities just because they are “Too Big To Fail”. We can't afford to privatize our Treasury to transnational banks anymore. Government must be held responsible only to the electorate, not fictitious entities; and banks must be held responsible to the government if we are ever to restore sanity, much less prosperity, to the world. It was a loophole in our Constitution that allowed corporate charters to be so easily obtained that a swamp of corruption inevitably flooded our entire economic system. It is a swamp that can't be drained at this point because the Constitution doesn’t provide a drain. This 28th amendment is intended to install that drain so Congress can pull the plug ASAP. As a matter of political practicality we must rely on the Article 5 option to do this, for which the electorate will need overwhelming consensus beforehand. Seriously; an Article 5 Constitutional Convention is rapidly becoming our only sensible option. This is what I think it will take to save the world; and nobody gets hurt: 28th Amendment: Corporations are not persons in any sense of the word and shall be granted only those rights and privileges that Congress deems necessary for the well-being of the People. Congress shall provide legislation defining the terms and conditions of corporate charters according to their purpose; which shall include, but are not limited to: 1, prohibitions against any corporation; a, owning another corporation; b, becoming economically indispensable or monopolistic; or c, otherwise distorting the general economy; 2, prohibitions against any form of interference in the affairs of; a, government, b, education, c, news media; or d, healthcare, and 3, provisions for; a, the auditing of standardized, current, and transparent account books; b, the establishment of state and municipal banking; and c, civil and criminal penalties to be suffered by corporate executives for violation of the terms of a corporate charter.    

shovelhead Sun, 06/25/2017 - 15:01 Permalink

Make believe value always returns to the vapor that brought it.The problem is for those who pumped real value in, the imaginary value takes that with it like a black hole.

GooseShtepping Moron Sun, 06/25/2017 - 15:08 Permalink

None of these companies are worth their valuations. Facebook isn't worth it. Amazon isn't worth it. Netflix and Google and Apple sure as hell aren't worth it. The factors holding up these fraudulent valuations are are 1) QE money and direct central bank intervention (i.e. direct asset purchases by central banks); 2) Government collusion and contracting (i.e. crony capitalism, regulatory capture, lobbying, and areas of mutual self-interest such as social media enabling the surveillance state); 3) Momo trading (i.e. institutional investors chasing yield; and 4) A prevailing mood among the general public that all this technology is "here to stay" and is inevitable, the wave of the future, and just the way things are.Point 4 is the most important of all, for it is the underlying psychological gestalt that really upholds and validates all the others, and it is the one that is changing. Once the mood changes with respect to these Silicon Valley unicorns, no force on earth will be able to stop the avalanche and it will be far worse than 2008. Most people would have great difficulty imagining how these titanic tech companies could be suddenly wiped out, but it is inevitable because they don't really provide anything of value. All the dreams of the future based on the trends of the recent past will come to nothing. mark my words:-There will be no self-driving cars.-There will be no widespread automation and millions of workers replaced by robots.-There will be no Bezos bases on the Moon and Mars.-There will be no drone delivery of Amazon packages.-Crypto-currencies will not replace nationally issued banknotes.-There will be no great strides made in life extension technology.In fact, we will be lucky if we can even keep 75% of what we have now up and running over the next ten years. The combined forces of debt and demographics are sounding the death knell for globalism, and without globalism these companies have no value and these Utopian fantasies have no substance. Reality is about to reassert itself in a big way.I am not going to tell you to "be prepared," because there is no way to prepare for this. Just be aware of the fact that God is not mocked, that nature has the last word and that hubris is punished by nemesis. You can defy reality only for so long, and then comes the judgment.

Miffed Microbi… GooseShtepping Moron Sun, 06/25/2017 - 15:18 Permalink

My husband is now working for a subsidiary of his company which is in Silicon Valley. He is begging me to visit because he is having difficulty imparting to me the lunacy he is experiencing and wants me to see it firsthand. He has come up with a way, albeit quite difficult, to make that company profitable. You'd think they'd be wildly enthusiastic. On the contrary, things are fine as they are, why change them? I tell him stop banging you head against a wall. We may need those synapses intact some day.


In reply to by GooseShtepping Moron

Ex-Oligarch Miffed Microbi… Sun, 06/25/2017 - 16:51 Permalink

Miffed, I always enjoy your comments.  I hadn't read you for a while and I'm glad you're back if indeed you were away.I am viewing the phenomenon from afar, but it seems to me that my personal friends in the Bay Area (some in tech, some not) have changed remarkably in the past five or six years.  It is as if a culture of aggressively irresponsible self-delusion has taken over, in both the business and the political realms.  I'm not just talking about people who hold different views than yours truly, since that includes most everyone I know. What is so striking is that any statement that could be remotely construed as questioning their views or the facts on which they are based will prompt outright hostility and condemnation. Valuation of tech companies and the broader markets is almost as much of a hot-button issue as Trump, the Russians, or any attempt at political reform.  Talking with these people about anything is like walking through a minefield.

In reply to by Miffed Microbi…

Miffed Microbi… Ex-Oligarch Sun, 06/25/2017 - 17:21 Permalink

Unfortunately my life has become overwhelming due to forces not in my control so my time at zh is much more limited ( ok I had to take some time to go to Marfa) and if it weren't for a chest cold that has grounded me today I couldn't be here. However, I hope zh will always be a place I can go to hang my hat when I have the time.

As to your comment, I must agree it compliments my husbands observations. For a company that has lost a significant amount of cash in the past 5 years, they seem oblivious to basic budgeting. High end dinners with high end alcohol flowing freely. Perhaps there's a part of human nature that fiddles when the world is burning whether perceived or not. A collective insanity? We just plan our exit when the inevitable occurs.


In reply to by Ex-Oligarch

VK GooseShtepping Moron Sun, 06/25/2017 - 15:38 Permalink

Great comment. The idea of progress is so entrenched in society that it is a religion almost. The idea that we might be going backwards like every other civilization is the ghost in the darkness. Tech embodies the religion of progress like nothing else. The love of the new - neophilia. Just because something is new doesn't make it automatically good. Apple is dependent on a product that is essentially only slightly different every year, a luxury status symbol. Tesla is dependent on subsidies from .gov and we don't have enough lithium anyway. We haven't even made it back to the moon in 50 years let alone Mars. Life expectancy in the US actually dropped last year. So all in all civilization is toast. And cold fusion is still a pipe dream as are all the thorium reactors.

In reply to by GooseShtepping Moron

gregga777 GooseShtepping Moron Sun, 06/25/2017 - 15:58 Permalink

It's going to be far worse. The Thermodynamic Oil Collapse will mean that most of the servers in the world will go dark due to lack of electricity to run them and the air conditioning needed to cool them. Not that there will be many customers with the electricity needed to actually use them either. Oh, and forget about all that of those electric cars out there. They'll be junk, home to field mice and small birds, sitting in their disillusioned owners overgrown driveways and front yards.

In reply to by GooseShtepping Moron

King of Ruperts Land gregga777 Sun, 06/25/2017 - 16:28 Permalink

So, smart entrepreneurs should be working on:

- More efficient software that does useful work in way less cycles

- Throwing out some computerizations all together. It turns out a book of entries and a slip of paper in duplicate was an efficient way to operate.

- Forget centralized box store model to serve a 40 mile radius. Bring smaller storefronts closer to customer. So customers can walk and afford to charge up their cars for a short but satisfying weekend drive.

- develop efficient lawn mowing and better more efficient landscaping.

In reply to by gregga777

montresor (not verified) Sun, 06/25/2017 - 15:28 Permalink

They're both private companies though.. their securities don't trade in any public markets.. Theranos was stripped of it's license to run a lab, banned from the Medicare/Medicaid reimbursement system, and ordered to pay everyone back for their labs..  That test she had, where a drop of blood was supposed to measure a large number of markers for disease.. Well it produces numbers but the numbers can't be validated with standardized test control groups.. Meaning, her numbers didn't match what would have been produced by the standard serum assays currently in use..     Uber wastes a lot of money on hookers, blow, marijuana, useless R&D, garbage ass tracking applications, stupid ads everywhere, this horrifying eric holder thing, they aren't focused..  If they focus, they can eventually haul in a hell of a lot of cash with just a skeleton crew to run the app.. Probably that's what Uber will actually do.. The shareholders will likely do an LBO among themselves from the Mitt Romney speculative playbook; that way they preserve the valuation!!!Here's what's killing Silicon Valley.. It's people not making a fucking thing anymore.. Nobody wants to build anything.. Nobody wants to do anything "hard".. People are actually so lazy, they use an application called Zapier to just plug and play the php scripts that are much more complicated than dolling up a one page scroller website that jerks people off about how it's saving the world by sending you a box of wilted second hand vegetables that the grocers rejected (blue apron).. Nobody is making anything important.. Almost none of it is actually "technology".. It's bullshit..  Slack? is bullshit.. Were people just unable to organize files and communicatie with each other before there was Slack?  Salesforce? is bullshit.. Salesforce, is the second most hated software in the world right behind the Taleo employment screener now shamelessly owned by Oracle.. There are salesforce hate groups. Linkedin, is bullshit.. Linkedin might be the stupidest god damned thing I have ever seen.. It's a jobs website not a networking application.. Twitter is a text message posted to a server that everyone is given access to.. HP? They sell cheap chinese printers.. Yahoo? Get rich with dumb bitch? Glad that's over.. Facebook? That code is from '94 it isn't technology, it's just an addictive application like flappy bird..   Netflix? video files on a server.  Youtube? It's under the control of the democratic party and it censors people..   Google? can't really trust their algos anymore now that they've moved on to their political ambitions.. Apple? They don't like making phones and computers anymore. That would be work!  So that's awfully bad news for Intel.. Ebay? All they do is fuck over their sellers..  Etsy? It's gonna be gone soon, they sold out to Chinese factories.. Cisco? Why when you have bullshit remote networking like slack right?  Who's left, Oracle right?  I think Oracle is your last man standing because they sell the enterprise level gear that actually runs almost all mid-large companies that are not SAP users..    So there you go.. The Valley is fucked.. Larry Ellison is the only one selling a business critical product/service that too many people can't live without.. The rest is a fucking economic wasteland of unprecedented malinvestment..

VK montresor (not verified) Sun, 06/25/2017 - 15:43 Permalink

The companies you mentioned are all in the business of distraction rather than actual productivity. Tells us a lot about society, people want distractions because their personal life situations aren't that great financially and emotionally. So these apps and websites are like electronic pacifiers, a giant distraction device meant to calm the crowd like E-Prozac.

In reply to by montresor (not verified)