Uber grew the taxi market rather than just cannibalizing it by competing on psychology — transforming the booking, waiting, and paying experience — not on the ride itself or on price, which reveals that the biggest opportunities often lie outside the product dimension everyone is measuring.
Rory argues that analysts underestimated Uber because they modeled it as cannibalizing existing taxi demand, but Uber tripled the market by removing psychological bottlenecks: showing availability, estimated price, the car's location, and simplifying payment — competing on the experience around the ride, not the ride. ✦ AI generated
Rory Sutherland · My First Million · 2026-07-27 · original ↗
starts at this moment · 46:13
“You know, you've said a couple of things that I I think are pretty fascinating. The first one that I wrote down was competing on a different dimension. So you mentioned the taxi verse Uber example. I love this because if you just sat down with a piece of paper, you gave somebody a creative assignment. You said, 'Hey, make a better taxi.' They would almost always focus on the ride. The cost of the ride would be the first. If I could make it way cheaper, that would be great. If I could make it way faster, that would be great. If I could make it way more premium in some way, the ride. And what you pointed out was that there was a psychological bottleneck that was preventing people from doing it.”
Everybody was looking at it as if it was purely cannibalizing an existing market. Now what the economists and what the Harvard Business Review would say is that they achieved this through lower prices. I don't think they did. I don't think Uber's actually reliably cheaper necessarily. Okay? I think they achieved it through better psychology. And the example I had of what I call these are the sort of fat tailed Jeff Bezos puts it very well. He says, you know, in baseball the most you can score is four, but in business you can hit a thousand. And I think that the fear of uncertainty and the and the unwillingness to experiment in business is causing people to endlessly try and sort of hit singles and at the expense of occasionally trying to hit a thousand.
verbatim transcript · starts at 46:13
45:54scientific advertising as they like to call it, which is, you know, you either test the single word or you come up with a completely different advertisement with a different visual. If you test five things, you can't be sure which one of the five is making a difference. >> Right. You know, you've said a couple of things that I I think are pretty fascinating. The first one that I wrote
46:13down was competing on a different dimension. So you mentioned the taxi verse Uber example. And I love this because if you just sat down with a piece of paper, you gave somebody a creative assignment. You said, "Hey, make a better taxi." They would almost always focus on the ride. The cost of the ride would be the first. If I could make it way cheaper, that would be
46:31great. If I could make it way faster, that would be great. If I could make it way more premium in some way, the ride. And what you pointed out was that there was a psychological bottleneck that was preventing people from doing it. When Uber first came out, I remember people thought it was overvalued. And I was living in San Francisco. They were raising money and they were doing these
46:49analysis of what percentage of the taxi market if Uber made up 25% if it if it took 50% market share of the taxi market. And what ended up happening was in San Francisco alone, Uber tripled the taxi market uh within a couple of years. I have a very brilliant friend who had the idea for effectively a dynamic market in transportation before Uber actually he patented something before
47:14Uber did and he has a letter responding to his idea from Guy Kawasaki which said I can't really see this working in the United States. He said Americans don't take taxis very much. maybe in New York. And actually, when you think about it, pre Uber, you know, LA was a motorist market if you were if you had a car and it was a public transport market if you
47:40didn't. It the taxi market was was relatively small. New York was an outlier. New York, obviously, the New York cabs were a major thing. But you're absolutely right. Everybody was looking at it as if it was purely cannibalizing an existing market. Now what the economists and what the Harvard Business Review would say is that they achieved this through lower prices. I don't think they did. I don't think Uber's actually
48:02reliably cheaper necessarily. Okay? I think they achieved it through better psychology. And the example I had of what I call these are the sort of fat tailed Jeff Bezos puts it very well. He says, you know, in baseball the most you can score is four, but in business you can hit a thousand. And I think that the fear of uncertainty and the and the unwillingness to experiment in business is causing people
48:28to endlessly try and sort of hit singles and at the expense of occasionally trying to hit a thousand. >> But how do I like Sean and I are both business owners. Like how do we go from being academic and also looking at past results to and analyzing past results? Because what's interesting is like you guys were talking about Uber. If you read their seed deck, even they said