We’re going to meet a lot of lonely people in the next week and the next month and the next year. And when they ask us what we’re doing, you can say, We’re remembering. That’s where we’ll win out in the long run.

Ray Bradbury, Fahrenheit 451

Why does humanity continually repeat the mistakes of the past, when we live an age of unprecedented knowledge where recalling events is as simple ask telling your smartphone to tell you?

It is a philosophical consideration that is probably as old as time itself.

On March 10th, 2000 the NASDAQ hit a record high of 5,132.52 off the back of an unprecedented flurry of venture capital fueled tech companies going public in an orgy of gross speculation, a day known as the peak of the dot-com bubble.

By 2011, much of that wealth was gone, lost as the stock markets corrected themselves, as they have done for hundreds of years.

On Friday, July 31st, in the year 2015, the NASDAQ hit a high of 5,155.02 off the back of unprecedented interest in tech companies, many of those powered by massive amounts of venture capital. Initial public offerings in 2014 were the highest since 2000, and are expected to be higher again by the end of 2015.

One company that gained headlines that Friday was ridesharing service Uber, Inc. which raised $1 billion on a $50 billion valuation; sure, Uber hasn’t gone public yet, but the company, by its mere infamy or fame depending on which side of the fence you sit on, is nearly the poster child for everything that is wrong during the second great tech bubble.

Uber is a great idea, poorly executed.

You’ll struggle to find anyone who has used the service who dislikes it and there’s no question that the idea the company has brought to market is disruptive, challenging entrenched archaic, expensive legacy taxi companies across the globe.

While, arguably wrong that this is the case, the reality is that Uber operates illegally in nearly every city and country it operates in.

Where Uber hasn’t been forced to cease business outright (France, some parts of Spain) authorities harass, fine and even arrest Uber drivers for partaking in taxi services without appropriate licenses; Uber’s solution so far has been to pay the fines of their drivers and assist in any legal cases arising, a costly response.

In places where Uber drivers aren’t being harassed and targeting directly, authorities are discussing ways to deal with the service going forward, everything from introducing specific bans, through to even limiting the numbers of vehicles Uber can have on the road because apparently they cause traffic congestion (the Mayor of New York City is insane), through to more accepting locations where Governments are looking at introducing new licensing classes that would allow Uber to operate legally (Western Australia).

That Uber will be able to continue operating in some territories is a given, but realistically the bigger picture is where they’re not shut down or forced out (which could very likely be large swathes of the United States, Europe and Australia), their costs of operating legally against taxis through Government intervention in the form of licensing in many places will mean the cost of using Uber will cease to have the highly competitive rates it offers now.

It can be done better

Despite the massive investor interest and valuations, the reality is Uber could be doing what they’re doing far better, and you don’t have to look far to see the model they could be using, because it’s being used by its main competitor in the United States, Lfty, Inc., who actually provides the same service Uber does, but, shock horror, legally, in compliance with local laws and often even with the blessings of the Cities in which they operate.

It may be simplistic to put it this way, but if Lyft can do it, why can’t Uber?

As it is, Uber’s venture capital burn rate is staggering: the company is burning millions a day paying fines, legal bills for its drivers, battling court cases, and even trying to stop South Korea ordering their Chief Executive Officer be arrested and extradited to the country because Uber, surprise!, breaks local laws.

Disruption is one thing, but running a company that breaks laws nearly everywhere it goes is not a sustainable business model.

Value vs. hype

Even if we allow for the never ending list of legal problems Uber has, there’s another aspect of the company which was typical of so many now failed startups from the original dot-com boom: it’s not creating value versus hype.

When the bubble of the second great tech boom eventually bursts, and it will, every boom ends, the massacre at the end is going to be very different this time around as there are companies that are creating true value.

You could cherry pick any number of software-as-a-service companies that provide vital services used by millions of businesses that, while they might take a hammering when the bubble bursts, will still live to fight another day.

Xiaomi, Inc., a company often compared to Uber as it’s a fellow member of the unicorn club, is creating enormous value through its smartphone, and now wearables business and is doing so in markets that many in the West wouldn’t even know existed, let alone could find them on an app.

What true value does Uber bring to the table?

It’s a service, sure, but it doesn’t own any of the cars, doesn’t properly employ most of its workers, it acts illegally in nearly every market it operates, and last, but definitely not least, it could easily be copied and replaced by a competitor who complied with local laws.

Breaking it down, Uber offers an app that connects a buyer and seller of a service (not hard), they provide payment services (not hard), they supposedly background check their drivers (not hard, although Uber still manages to stuff it up), and then the company has general business support services such as accounting, marketing department, legal department, software support etc..

All of that can be replicated; it is true that it would require money to do so, but likewise it wouldn’t need $6.9 billion to do so, which is what Uber’s current funding total sits at.

And yet the investors still love the company, like they did of so many in the run up to 2000.

This post may have picked on Uber unfairly because it is far alone in the current market of offering hype over value, but when the rot starts near the top of the most valuable startup lists, that’s where you look first.

The overall tech bubble will eventually burst, it might be next year, it might be two or three years down the line, and it might be external economic factors that bring it to an end, but the interesting thing to watch will be whether Uber is even still operating when it occurs.

Image credit: automobileitalia/Flickr/CC by 2.0