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Disrupting Uber
- imgabe 10y ago> Yet again, an investigative report has found that Uber underpays its drivers. Aren't the fares proportional to how many drivers are available? If the fares are too low, don't drive. If enough people stop driving, the fare will go up.
- Avshalom 10y agoIf you're driving for beer money you won't care that the fares are low. If you're driving as a career you can't just not work and hope the fares go up.
- zaroth 10y agoWhich is exactly why no one should drive for Uber thinking it's a career. It's not W2, there are no benefits, there are no opportunities for advancement, and your pay can only decrease. If at least rates increased as you logged more miles and 5-star reviews that would be something. But it's quite obvious that Uber drivers are fresh meat for the machine. Not only that, but Uber is investing heavily in ways to eliminate drivers altogether. Literally everything about this screams do it for fun, for pocket cash, this is not a career.
- brownbat 10y agoIt's an important point, that these concerns are always about careerists, not the beer money group. But there are two groups here. The beer money group could be significant: retirees, students, people who want extreme flexibility because they have another primary job or responsibility. Half of all drivers is a significant block. On the other hand, careerists legitimately face an impossible situation, since so much of their life is in the hands of one company that's constantly tinkering with its economics. The common policy response across similar situations seems to demand every single job must work as a 40 per week career with benefits, killing any pure beer money jobs. I don't know whether that's a wise policy solution or not. Maybe the benefits do outweigh the costs. But it's certainly not pareto optimal. Restrictive policy responses hurt one group of people in an attempt to protect others. I'd feel better about such policies if proponents showed awareness of who they were hurting. Like if proponents said, "ok, honestly, we're going to hurt retirees with this jobs protection measure, but we think that's ok, because we value single moms over retirees." Though if you get that far, you could just reduce it to a wealth transfer. Let Uber do what it wants, then tax retirees and give the money to single moms. Similar effect. One group loses, one group benefits. Though of course then you'd stop and ask why you're taxing people supplementing a fixed income. Maybe you'd rather tax some other group first. And that line of analysis is how you end up supporting deregulation combined with aggressively progressive taxation where the benefits are targeted to vulnerable groups.
- tnecniv 10y ago> Restrictive policy responses hurt one group of people in an attempt to protect others. That's the definition of Pareto optimality
- brownbat 10y agoOk, pareto optimal describes a state, and I was abusing the term to apply it to a change of states. Definitely could be ambiguous: Are you moving towards pareto optimality, or starting at PO? When I've heard others commit similar abuses, they use "pareto optimal [change]" or "pareto efficient [change]" as synonyms for "pareto improvement." ie, moving towards pareto optimality. ie, a change that makes someone better and doesn't hurt anyone. But you're right, "pareto improvement" is really the proper term there.
- SilasX 10y agoI think the parent was referring to how "you're at a Pareto optimum when any change has to make someone worse off", and was applying that (incorrectly IMHO) to the situation you described where a regulation makes someone worse off. I say "incorrectly" because "some regulation R makes some group worse off" (as you were saying) does not imply "all reg changes would make someone worse off" (Pareto optimality).
- protomyth 10y agoThis isn't exactly a unique problem to Uber. The minimum wage conflict is basically a battle between people wanting it to be a living wage and the beer money / need experience / part-time folks. Favoring either side destroys the opportunity of the other. Living wage means an end to starter, beer money, retirement jobs. Market wage, means no career minimum wage jobs.
- zaroth 10y agoJust this. How can you underpay for a job which isn't even contracted for a specific number of hours? It's like saying I underpaid for AAPL because my limit order executed. Uber offers a certain amount of money per mile to any driver who wants to take it. They don't even price discriminate against drivers who; drive more hours, have better ratings, have better cars, etc. I just don't get it, it's not a right to drive for Uber and be paid a certain amount. If a driver leased a Prius to drive for Uber and saw the rates cut, even still, there's no contract with Uber guaranteeing a certain rate. We've even seen cases where they've exited a market altogether. Uber can disappear from a market tomorrow and those drivers will need to find someone else to drive for or get a different job. Likewise a driver can cut their hours or walk away with zero notice. If Uber cuts their rates and still ends up with enough drivers, perhaps the only thing you could say is that they were overpaying. There's only one thing the article touches on which seems worth investigating, drivers which get "stuck" driving more and more to try make their minimum required income. The anecdote of the driver doing 19 hours in a day. First, the driver app should not let you log 19 hours in a day. Second, if Uber is somehow "trapping" drivers to work more for less, I'm not sure I really understand the problem, let alone the solution, but it's something worth exploring, e.g. if there were false promises by Uber.
- chrisseaton 10y agoI can't even work out what they think they mean by 'underpay'. Is this less than the minimum wage? Less than they were promised in a contract? Less than taxi regulations allow? Something else? I see they say it's not the same as what some other article claimed, but unless Uber was promising drivers that this still isn't underpaying by any definition is it?
- pmorici 10y agoThe article is making an assertion that isn't supported by the facts they themselves cite. They say that "Buzzfeed found that drivers in Detroit, Houston, and Denver “earned less than an average of $13.25 an hour after expenses”" If that is true then Uber isn't under paying their drivers at all. They are paying them at a slightly above average rate. You can easily look up the average salary for a Taxi / Limo driver in the US on the BLS website[0] and you will find that the national mean hourly wage for this job is $12.53. They also have data by state. Now, a couple years ago Uber was running adds on Facebook to recruit drivers in average cost of living areas that said things like "Make $70,000 a year driving for Uber". Those were clearly misleading if not outright false when the average taxi driver makes $27k. Perhaps that is where the narrative that they are underpaid comes from. [0] http://www.bls.gov/oes/current/oes533041.htm http://www.bls.gov/oes/current/oes533041.htm
- mrweasel 10y ago>If the fares are too low, don't drive. It's still better to be under paid, than make no money. Some people simply can't afford to take the morale high ground. It's societies job to ensure that employers don't take advantage for people in unfortunate positions. While I understand the reasoning and appeal behind Uber, I still think it has a weird business idea. Very few people seem to want to discus the fact that ordinary taxi drivers aren't exactly well paid either. This is despite the fact that their in an artificially limited market, with little or no competition. Uber is an important part in increasing service, which is apparently extremely poor in some countries. In terms of pricing, the salaries don't appear to leave much room for lowering the cost.
- guaka 10y agoIt's a bit silly to leave out any mention of self driving cars in an article called "Disrupting Uber". Driving around cars around all day is a silly job, ideally a job that should not exist in 5 years from now. We'd better discuss basic income instead of co-op taxi companies.
- deleted 10y ago[deleted]
- jessaustin 10y agoI'm trying to think of a job that isn't "silly", in the sense that it couldn't eventually be done by robots, and I'm drawing a blank... Do you intend to say that working is "silly"?
- back_beyond 10y agoThe silly spectrum, as defined culturally.
- paulddraper 10y agoTaxi drivers are "silly", but paying for nothing is serious stuff. Grand.
- thanatropism 10y agoThe more interesting problem being, of course, how to build a co-op anything that really works within a market economy. The Leftist Uber Killer may well be the killer app for socialism. If you a mange to do it, of course.
- deleted 10y ago[deleted]
- jsemrau 10y agoI still believe that Uber artificially creates a market by subsidizing a price point that is attractive to the drivers.
- Hydraulix989 10y agoDefinitely. Even as a consumer, I am able to order food from UberEats, and the total costs less than the cost of the food on the menu at the restaurant because of Uber's promotions.
- zaroth 10y agoKey word, promotions. CAC is a thing, so is CLTV. But negative gross margins are something different.
- Hydraulix989 10y agoWell, that was a rather condescending explanation of concepts of which my post didn't necessarily imply I didn't already know about.
- zaroth 10y agoIf their unit economics are positive than this is not true. If their unit economics are negative then it will be a spectacular show when the music stops. This is aside from promotional costs for the first few months when they enter a new market, as long as those costs actually decrease within the first year in a new market.
- corin_ 10y agoThat view doesn't look at the big picture - it's very possible that they are allowing for, and happy with, losing money to grow market share for many more years, maybe even until they can offer driverless rides to turn market share into profit.
- 10y ago
- aresant 10y ago"The drivers who don’t completely depend on their work with Uber to pay their bills — a group that makes up about half of the company’s workforce — depress full-time workers’ wages." I bet this creates a larger defensive moat than most competitors assume. Uber is a supply/demand driven model (eg success w surge pricing) and even modest additional supply generates lower rates. Lacking that same supply efficiency in full time driver platforms will keep their prices higher and without a significant price advantage consumers will stay with the known brands. Not to mention the end game which is going to drop human drivers from the equation all together.
- hiou 10y agoUber is a investment fueled churn machine right now. Supply and demand(even as overly simplistic that model is) has yet to come into the equation. We will not have any idea the validity of the business model until the never before seen massive expenditures in driver acquisition subsides. Which probably won't be for several years or more.
- pfarnsworth 10y agoThe CEO already said that the top 30 cities produced over $1B in profits. I don't think your information is correct anymore.
- davidf18 10y agoWell, if this information is correct, then there is room for disruption starting with the cities with the highest taxi prices. Therefore instead of writing an article, build the app. Let it fly in NYC and offer 30% lower rates.
- massysett 10y agoOh wow, so Kalanick opened his mouth and a huge number came out. Does he have anything on paper to back this up? An audited financial statement? Even a napkin with numbers on it?
- deleted 10y ago
- eistrati 10y agoIt looks like post-Austin exit of Uber and Lyft, smart guys jumped on the opportunity to fill the gap. I really hope Arcade City will be able to provide sustainable & scalable solution! P. S. I have no affiliation with either Arcade City or Christopher David. Read about this effort here: http://www.vocativ.com/327333/a-world-without-uber-dispatches-from-austin http://www.vocativ.com/327333/a-world-without-uber-dispatche...
- cyan_atrus 10y agoyou're betting that a facebook group is a scalable solution? arcade city is a great example of unintended consequences -- instead of safer rides, austin's regulations led to consumers choosing a much riskier ridesharing option (no GPS tracking, no recourse when something goes wrong, no background checks at all, etc) http://www.bizjournals.com/austin/news/2016/06/21/austin-cracks-down-on-unsanctioned-ridesharing.html http://www.bizjournals.com/austin/news/2016/06/21/austin-cra... http://countercurrentnews.com/2016/06/dwi-arrests-skyrocket-uber-lyft-kicked-austin/ http://countercurrentnews.com/2016/06/dwi-arrests-skyrocket-...
- orblivion 10y ago> you're betting that a facebook group is a scalable solution? As I understand, they had an experimental phone application. They took down support for it, and are building a next version.
- cyan_atrus 10y agoAh, interesting, hadn't heard that -- is it the same as https://austinstartups.com/rideaustin-turns-tnc-lemons-into-lemonade-df841accfd32#.idfh3zxsv https://austinstartups.com/rideaustin-turns-tnc-lemons-into-... ?
- orblivion 10y agoI think the company is actually based in New Hampshire. http://arcade.city/ http://arcade.city/
- skybrian 10y agoWhat they're missing is that higher wages depend on some barrier to entry (there are many kinds) that protects the people who have jobs at the expense of anyone who is looking for a job. As someone who works for a company with high hiring standards and correspondingly high pay, I have mixed feelings about this. It seems like there should be some jobs that are easy to get without much training, and taxi driver is a good candidate for this. If we build fences around every kind of job, life gets even harder for the unemployed. So I'm not automatically on the side of workers with more "skin in the game." I'd need a stronger argument about why we should support them rather than part-time drivers.
- jessaustin 10y agoI don't disagree, but why would Uber have lower fences than Swift? At least some of the part-timers must be surge-seeking: do their higher pay requirements reflect that they have higher skills than the 13-hour-day drivers?
- skybrian 10y agoIf you have some other obligations so you can't work full time, that already rules out most jobs, so it could be a barrier to entry all by itself. I don't know how many people that is. It would be interesting to find out.
- jessaustin 10y agoThat is an interesting question, but does Jacobin expect Swift to exclude part-timers? That would be a tricky philosophical position...
- bobcostas55 10y ago>that protects the people who have jobs at the expense of anyone who is looking for a job. And also at the expense of the customers.
- toomuchtodo 10y ago
- dotBen 10y ago> "competing with Uber might seem intimidating, but in many respects the company is a paper tiger. Its massive valuation, which stood at $62.5 billion in January, comes from intellectual property — its brand and data — rather than from tangible assets." Right... except that the brand is what creates the demand side of the market, the data is what makes the platform efficient and the IP provides strong defense against 3rd parties like this one. Just to point out this is a thought-piece in a very socialist political magazine - and while I love Bernie as much as the next guy, this piece is a political folly and not really grounded in any business or technical fact.
- rdiddly 10y agoUber's brand did not and does not create the demand for catching a ride. The 400-year continuous existence of some form of ride service, starting with horse-drawn hackneys, tends to indicate a pre-existing demand, as does the fact that "taxi" is the same word in different languages all over the world.
- srtjstjsj 10y agoUber's brand created supply: before Uber, most customers would not choose to satisfy their demand by paying $10 to an unlicensed stranger.
- jonknee 10y agoI would argue Uber has definitely created demand for catching a ride. I use Uber tons more than I have ever used a taxi. That's because it's faster, cheaper, cleaner and has better customer service.
- morgante 10y agoYou were able to pay a stranger to drive you around long before Uber came out. Even today if you loiter around any major airport you'll have plenty of people approaching you to offer a ride. The difference is that I have 0 trust in a random person offering me a ride. I trust the Uber brand though.
- glup 10y ago
- davidf18 10y agoThese "disruptors" need to work on wealth creation and not installing "economic rents." Economic rents, a term in Microeconomics, is trying to achieve profits beyond those in an efficient market (for example, creating artificial scarcity). The appear to be complaining because Uber is lowering the cost of overly expensive taxi fares when they should be working on a system that provides rides for less money while still helping drivers get more pay (if that is important to them). In NYC, because of the legacy taxi medallion system which artificially limited the number of medallions to 13,000 (resulting in a medallion market value of $1.2 million now down to $700,000 after Uber/Lyft), taxi fares are still about twice that of many US cities. The artificial limit of medallions created artificial scarcity which resulted in "economic rents" thus ultimately requiring passengers to pay much higher fares that then went to the medallion owners. One example would be to lower gas usage by using electric vehicles or hybrid cars (NYC Yellow Taxis are converting to hybrids) which not only lowers fuel costs but lower air pollution. They could make a financial deal with the city or state showing the lower health care costs from lower air pollution and have the cars financed.
- tanderson92 10y ago> The[y] appear to be complaining because Uber is lowering the cost of overly expensive taxi fares when they should be working on a system that provides rides for less money while still helping drivers get more pay (if that is important to them). This is a magazine for American Leftists, so they're really quite clear what they want: they want valuable services rendered to people with profits shared among the workers, not the gatekeepers to an arbitrary app. More than creating wealth, they want that wealth to be owned by the workers. To quote from the piece: > This doesn’t mean drivers are better off working for a traditional taxi company. While Uber’s burdensome cost-shifting has come to define Uberization, the company merely digitized the taxicab industry’s already exploitative practices. The taxi medallion system, which requires drivers to pay their cab’s medallion owner at the start of each shift, deserved to be “disrupted.” But Uber’s employees face serious costs and risks nonetheless. > The possibilities don’t have to be so restricted however. Ride-share drivers usually already own their vehicles, so in theory they could enter the ride-share marketplace themselves. By ditching Uber’s predatory practices for a cooperative model that uses the same technology, driver-owned apps could democratize the ride-sharing marketplace, fulfilling the initial promise of the so-called sharing economy. Uber is really a place where the leftist case makes the most sense, because the means of production is already owned by the workers and are in effect paying a portion of their profits for the right to take part in an economy.
- sunnytropic 10y agoThis is standard Uber practice. Use billions in its warchest to incentivize drivers into joining it, and offering huge benefits that gradually become less generous as it comes closer to market saturation.
- paulddraper 10y agoWhat's a warchest?
- sunnytropic 10y agoI am referring to the billions it has got to spend, which it is using to fuel growth. War chest literally means " a reserve of funds used for fighting a war.". Seemed appropriate, since Uber is waging a war for market share
- deleted 10y ago[deleted]
- davidf18 10y agoDoes anyone know why I would be downvoted for taking the time to explain what is going on. Does someone have a problem with lowering overly high taxi fares. Uber has been doing that which is a good thing.
- asimuvPR 10y agoDon't take it personal. It might be some uber fans thinking you are attacking uber. There are a lot of religions here on hn. :)
- meeper16 10y agoYou are a wise being.
- DenisM 10y agoThis is the cosmic microwave background of this forum. Lots of posts get down-voted in the first few seconds of them being posted, and then recover over the next few minutes.
- abannin 10y agoIt's much easier to down vote something you don't want to be true than to engage in intelligent discussion. And to answer your question: everyone wants the benefits of economic efficiency but none of the costs. It's much easier to say "low skilled labor should be paid more" rather than "let's increase the value of labor". Also, an easy counter argument is that Uber is engaging in rent seeking against it's drivers. I don't think this has very much merit given the liquidity of driving labor.
- hansfr 10y ago(deleted)
- coredog64 10y agoI think this belongs in the "Hitler Uses Docker, Annotated" thread.
- zer0gravity 10y agoUber has all the cards here. They came with a system that enables the drivers to use their time more efficiently, which dropped the price for the end user. Also lowered the entry barrier. Almost anyone with a car, smartphone and a driving licence can do it, which is why they afford the high turn over. Is it worth it trying to compete with them? Definitely . Will this lead to increased drivers profit ? Not really. Because the value that they provide is massively accesible,and with the advent of autonomous cars, fully replaceable. Bad times for taxi drivers are coming quickly, and there's not much anyone can do about it...
- cbHXBY1D 10y agoThey truly don't. They own the best technology but no driver OR customer loyalty. If a cooperative treats their employees better and with higher wages then why should the best, most active drivers stick with Uber?
- xseven 10y agobecause that is where the customers are
- zer0gravity 10y agoPrecisely
- deleted 10y ago[deleted]
- fineIllregister 10y agoIf a coop doesn't have to pay investors, they can split that between the drivers and the consumers. Customers will switch apps for cheaper fares, all else being equal.
- pfarnsworth 10y agoGood luck with the co-op idea. The problem is that drivers feel like their services are worth a lot, and passengers simply don't believe it. The reason why Uber is a success is that they created new demand by dropping prices. Everyone I know, including myself, would never have taken an Uber as frequently as we do if the prices were as high as taxis. You can't replicate this unless you keep pushing prices down, and this is what Uber is doing. So, as long as drivers want to keep their prices high, the riders won't come, which will prevent more drivers from entering the co-op, which will mean riders will wait a long time before their drivers arrive, which means they will just go to Uber, etc. The co-op will never reach critical mass that way and will fail. The article doesn't even mention the massive amounts of driver incentives that they pour back into the drivers. One driver told me that if they worked 2 hrs during rush hour, Uber would guarantee $50/hr. That's $100 for 2 hrs worth of work, which is pretty damn good and makes the rest of the day less stressful about trying to hit your numbers to become profitable.
- svanderbleek 10y agoRead the article more carefully, "they might be willing to switch to a co-op model that offers a cheaper price and solid service". A co-op can have lower prices and pay it's members more because they don't have to funnel profits to support the bloat of a central corporation like Uber.
- nickparker 10y agoCan they, though? The corporation isn't some money-sucking black box. It's dispute resolution, software development to match rides efficiently (Uber Pool is tricky), and advertising. Yes, it also skims money off the top to pay for things like driverless car R&D, but is a small, likely disorganized co-op going to be efficient enough at all the above to take advantage of that margin?
- Kalium 10y agoIt's highly unlikely that a small, disorganized co-op is going to be efficient enough to take advantage of the situation and be able to out-compete Uber. That said, the reality is irrelevant here. Jacobin is the kind of magazine where economic reality is treated as a suggestion, to be discarded as is convenient.
- rgbrgb 10y agoThe app in the article looks like vaporware (hope to be proven wrong). Anyone else trying to build P2P apps where the worker sees the full value of their work? I get the theory, it seems possible, but it been a few years since we started talking about building stuff like this on the blockchain and I've seen 0 activity. Every developer (including myself) who I've discussed this type of thing with has basically said the same thing: if I had a bunch of money in the bank and wasn't already working on a project that seemed interesting/important, I'd be down to try building it for some labor vertical (delivery, taxis, farming). From my vantage, it's public service in the same sense that doing a sabbatical with 18F is public service. Maybe 18F should try?
- Callmenorm 10y agoUber is trying to keep prices low by removing the driver in the medium term. Any driver-owned service is going to have a hard time competing with that. There are less than 10 years of human driven transportation in urban settings. Still time to make a living, but not a career.
- moflome 10y agoHi, we have found our "peer-to-peer ride share app" to be surprising popular[0]... in a different era, this was called carpooling. Which theoretically could disrupt Uber with "free" rides, but the article's premise seems to be on disruption through disintermediated profit sharing. Our app seems to indicate, at least in suburban areas, profit motive isn't the only driver in this market. [0] http://www.snapridesapp.com/ http://www.snapridesapp.com/
- tymm 10y agoEven in the unlikely case that the co-op could temporally get more customers than Uber, Uber could just artificially lower the prices for customers/increase rates for drivers and win customers/drivers back. A co-op could not do that since they have no money in the bank. Except when all this happens on an own blockchain where people can invest in the co-op via tokens on that blockchain? Maybe this could even be combined with a prediction market which decides how to counteract attacks (on prices) from Uber?!
- Paul_S 10y agoHere's a crazy idea for solving the problem with uber and taxis: public transport.
- michaelvoz 10y agoAs someone who has lived in the Bay Area 17 years - it just never seemed to materialize. Disclaimer: I work for Uber.
- imh 10y agoThis prompted me to try to understand what a co-op really is. I read the wikipedia page, and still don't really get what keeps it separate from a regular business, except for ideals. At a co-op like this, they would still need programmers to fix inevitable bugs in the app, marketing/logistics people to figure out how to get traction (because that doesn't just happen by itself) and expand to new cities, and managers to coordinate, and everything else a regular company needs (financial, HR, etc). It ends up sounding like what I think of as a regular company. What's the difference?
- fineIllregister 10y agoThe employees would own the company, including any programmers, etc. There would be no shareholders to pay out to, so the money that would have been paid out as dividends could be saved by consumers and/or given to employees.
- hiou 10y agoInvestors, shareholders, owners etc.
- neves 10y agoThe greatest problem of coops is that they don't have any incentive of getting rid of riders. With the feedback in Uber, an abusive driver would be kicked off soon. I'm tired of taxi drivers that don't take me where I want. I never had this problem with Uber.
- Consultant32452 10y agoHave you tried being white?
- neves 10y agoI'm an adult, white guy with lots of gray hair... but I live in Brazil. BTW, other day I was talking to a black guy friend of mine. He was complaining that the taxis didn't even stopped for him. More than one he had to ask as policeman to stop a taxi for him. As a funny guy, he says that he asks the policeman: "Would you please stop a taxi for me. I'm not able to do it, maybe they are thinking I'm black!".
- free2rhyme214 10y agoVic Vaiana is naive. Co-op apps aren't 10X better than Uber so it's unlikely people will download them, let alone get people to switch from Uber and retain them long term.
- alecdbrooks 10y agoI don't think the barrier is nearly that high. I could see people downloading co-op apps if they hear that they have more drivers or better drivers. Getting to that part is difficult, sure, but not out-of-hand impossible.
- morgante 10y agoI know it's Jacobin, but where do they come up with the leading thesis that Uber "underpays its drivers." Relative to what? Even after expenses, Uber drivers make well above minimum wage. Ultimately, it's impossible to satisfy all parties, particularly drivers. They want to be paid more, but most reports say Uber is not profitable. A co-op cannot rely on VC money to finance its expenses, so to pay drivers more they'd either have to charge more than Uber or avoid most of the expenses Uber incurs. I don't see either scenario leading to a competitive option: either you're the expensive option, or you offer a subpar experience.
- woodandsteel 10y agoA driver's co-op is an interesting idea, but how long until the drivers are all replaced by self-driving cars?
- rdslw 10y agoThere is one big problem I have with uber: Uber takes PERCENT (20%) of ride value, while it has fixed cost associated with ride. In fact it's a uber clever way to tax (sic!) workers. I believe uber will be disrupted, either by nations (goverment must be ultra blind to allow burden its citizens by foreign corporation paying no corp taxes (EU case) plus having most of the cost in different country (all but US case) or by people themselves.