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Yves here. By virtue of steamrolling local taxi operations in cities all over the world, combined with cultivating cheerleaders in the business press and among Silicon Valley libertarians, Uber has managed to create an image of inevitability and invincibility. How much is hype and how much is real?

As transportation industry expert Hubert Horan will demonstrate in his four-part series, Uber has greatly oversold its case. There are no grounds for believing that Uber will ever be profitable, let alone justify its lofty valuation, absent perhaps the widespread implementation of driverless cars. Lambert has started digging into that issue, and his posts on that topic have consistently found that the technology would be vastly more difficult to develop and implement that its boosters acknowledge, would require substantial upgrading in roads, may never be viable in adverse weather conditions (snow and rain) and is least likely to be implemented in cities, which present far more daunting design demands that long-distance transport on highways.

Tellingly, earlier this month, Bloomberg reported that JP Morgan and Deutsche Bank turned down the "opportunity" to sell Uber shares to high-net-worth individuals. The reason? The taxi ride company provided 290 pages of verbiage, but would not provide its net income or even annual revenues.

By Hubert Horan, who has 40 years of experience in the management and regulation of transportation companies (primarily airlines). Horan has no financial links with any urban car service industry competitors, investors or regulators, or any firms that work on behalf of industry participants.

Uber is currently the most highly valued private company in the world. Its primarily Silicon Valley-based investors have a achieved a venture capital valuation of $69 billion based on direct investment of over $13 billion. Uber hopes to earn billions in returns for those investors out of an urban car service industry that historically had razor-thin margins producing a commodity product. Although the industry has been competitively fragmented and structurally stable for over a century, Uber has been aggressively pursuing global industry dominance, in the belief that the industry has been radically transformed into a "winner-take-all" market.

This is the first of a series of articles addressing the question of whether Uber's pursuit of global industry dominance would actually improve the efficiency of the urban car service industry and improve overall economic welfare.

For Uber (or any other radical industry restructuring) to be welfare enhancing, it would have to clearly demonstrate:

The ability to earn sustainable profits in competitive markets large enough to provide attractive returns on its invested capital The ability to provide service at significantly lower cost, or the ability to produce much higher quality service at similar costs That it has created new sources of sustainable competitive advantages through major product redesigns and technology/process innovations that incumbent producers could not readily match, and Evidence that the newly-dominant company will have strong incentive to pass on a significant share of those efficiency gains to consumers.

Unlike most startups, Uber did not enter the industry in pursuit of a significant market share, but was explicitly working to drive incumbents out of business and achieve global industry dominance. Uber's huge valuation was always predicated on the dramatic growth towards global dominance. Thus if Uber's valuation and industry dominance were to be welfare enhancing, Uber's efficiency and competitive advantages would need to be overwhelming, and there would need to be clear evidence of Uber's ability to generate large profits and consumer welfare benefits out of these advantages.

While most media coverage focused on isolated Uber product attributes, or its corporate style and image, this series will focus on the overall economics of Uber, using the approaches that outsiders examining industry competitive dynamics or investment opportunities typically would. This first article will present evidence on Uber's profitability, while subsequent pieces will present evidence about cost efficiency, competitive advantage and the other issues critical to the larger economic welfare question.

Uber Has Operating Losses of $2 Billion a Year, More Than Any Startup in History

Published financial data shows that Uber is losing more money than any startup in history and that its ability to capture customers and drivers from incumbent operators is entirely due to $2 billion in annual investor subsidies. The vast majority of media coverage presumes Uber is following the path of prominent digitally-based startups whose large initial losses transformed into strong profits within a few years.

This presumption is contradicted by Uber's actual financial results, which show no meaningful margin