Reading the financial press, or other source of news or commentary, disparate stories may seem to have no interrelatedness whatsoever. The Wall Street Journal weekend edition (5/11-12/19) headlined, “Uber’s High-Profile IPO Slips In Weak First Session.”  A “page 2” filler piece noted, “‘Financial Fragility’ Affects Middle Class.” What’s the connection?

The much-heralded initial public offering (IPO) of ride-sharing behemoth Uber on May 11, 2019, was a bit of a bust. Priced “conservatively” at $45 a share, the low end of estimated valuation, the stock ended the day down 7.6% at $41.57. Uber’s nearest competitor, Lyft, traded 29 percent below its earlier IPO debut price.

The other story reflected studies indicating “one-third of middle-class American adults couldn’t handle a $400 surprise expense, and some 6 percent couldn’t manage such a cost even by borrowing money or selling something.” The connection between the two stories? Choices! Understanding basic economic and motivational principles. Needs versus wants. The dynamics separating “financial success” and “financial stress.”

The most common path to financial actualization, besides “engaged working,” is prudent investing and the ownership of economic assets with growth and income producing potential. When you invest in “stocks for the long run” that’s what you’re doing. IPO’s like Uber fall into the “high risk speculation” camp, okay if you can handle volatility and potential losses. Uber is hemorrhaging money, profits are non-existent, the company faces headwinds of resistance from taxi unions, a rebellion among their own drivers over a “too low” share of the fares midst rising gas prices and car payments, competition from Lyft, and other factors. Uber is pure speculation at this juncture, not suitable for butter-and-egg or “pushke” money!

Here’s where disruption and personal choices come in. Struggling, hard working, cab drivers face an onslaught of Uber and Lyft competition. On a recent stay in La Jolla, Calif., for back-to-back business conferences, I could have taken cabs or rented a car. The prices for rental cars on internet sites are virtually double the daily quoted rate when fees are added. The hotels charged $33 a day for self-parking. Gas in California is about double Georgia prices, so filling up a rental car isn’t a bargain, either. Cheaper to use Lyft (my choice given the Delta tie-in). 

Try hailing a cab in a busy city. Phone/computer savvy younger generations, and increasingly aging boomers, embrace instantaneous digital contact with price quoting convenience. Needing a ride back to my hotel for my wife and I from Eddie V’s famous ocean view restaurant in downtown La Jolla (valet parking, $16 plus tip), a quick tap of my phone, and “poof,” a Lyft car in two minutes with a relatively cheap ride ($14 with tip). An efficient use of time and money. 

The lessons? Technology as a disruptor will continue to provide opportunities for investors, which should be matched with your individual risk/reward preference. Where technology can substitute for labor, that trend will accelerate, especially as politicians push seemingly well-meaning causes to help working men and women, that in reality increase the cost of replaceable labor. Workers will continue to face rising pressures to upgrade skills and knowledge in a race to stay competitive and employable. 

College students, and parents, must be realistic about the marketability of degrees and costs of living where graduates will work when it comes to college loan debt repayment. Mr. Market is a tough parent! 

Business owners face a skills shortage and every employee must be challenged to stay relevant, making a positive contribution to profit mandates. Choices. The alternative is career stagnation, disengagement, stress, termination, a broken retirement nest egg, financial fragility.

Owners cannot afford turnover and loss of skilled employees in our booming economy where workers have more choices. What are you doing, Mr. or Ms. Employer, to put human capital on the same plane as economic capital importance? What’s your strategy for attracting, on-boarding, development, and retention of valuable employees, associates, and potential successors?

You may not like the unsettling elements of an “Uber world,” but that’s reality. How you “survive and thrive” is a choice demanding well-informed strategies. Politicians will not save you. They’ll make things worse. More choices ...

 

Lewis Walker, CFP®, is a financial life planning strategist at Capital Insight Group; 770-441-2603.  Securities and advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative and investment adviser representative of  SFA which otherwise is unaffiliated with Capital Insight Group. He is a Gallup Certified Clifton Strengths Coach and a Certified Exit Planning Advisor (CEPA®).

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