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I usually enjoy priceonomics posts, but this analysis is disappointing. The sharing economy is a way of deploying labor and capital. So the operating question i

by jvm 9y ago

I usually enjoy priceonomics posts, but this analysis is disappointing. The sharing economy is a way of deploying labor and capital. So the operating question is, is it a good way of doing so on net? In some sense the market is spoken in that many people are willing to sell in these marketplaces. However, an argument could be made that services like Uber actually exploit the hidden costs associated with selling through the service. How many Uber drivers have done a fully netted anlaysis of their cost basis when driving on the service, including capital cost and depreciation of the vehicle? Rather than attempting to dig into the financial viability of these services for sellers, this article focuses on the most superficial metric: monthly revenue. $500/mo on average would be consistent with $50/hour fully netted earnings, which would be amazing, or even a negative income if true costs tend to exceed earnings.

ivanbakel 9y ago
>$500/mo on average would be consistent with $50/hour fully netted earnings Based on what?
- isostatic 9y ago
  10 hours a month?
bpodgursky 9y ago
I think it's pretty patronizing to suggest that people spending 40+ hours a week driving for Uber / Lyft are too incompetent to calculate out their own finances. I've talked to a lot of drivers who understand in-depth cost per mile they are able to deduct from depreciation for tax purposes, the impact of buying a new car on Uber black, the cost savings per mile of buying a Prius, etc etc.
- frgtpsswrdlame 9y ago
  No one is saying they're too incompetent. What's being said is that they're not doing the analysis for whatever reason. And while you may know some who have run the numbers I also know some uber drivers who haven't. Furthermore, we shouldn't apply this only to people who drive 40+ hours. I bet as we transition down to people who drive 20 hours, 10 hours and less we'll find a lot of people who are barely breaking even or worse once other costs are considered.
  - sokoloff 9y ago
    I suspect a lot of those low-hour, occasional drivers were going to have all of the fixed costs of the vehicle anyway and are only looking to cover the marginal costs. That's a perfectly reasonable strategy and the fact that they aren't covering average cost is irrelevant, so long as they're covering the marginal costs of driving Uber/Lyft.
    - frgtpsswrdlame 9y ago
      I think those low cost drivers, if they even think about it, believe they're more than covering their marginal costs. They idea that they're essentially paying depreciation plus a small premium to themselves would not go over well if it were more apparent. Perhaps what we need is another anti-ride-sharing calculator where you can plug in a whole bunch of details about your car and insurance, normal driving habits and ride-sharing driving habits and it will tell you how much you make minus the hidden risks/costs.
      - nostrademons 9y ago
        The car's going to depreciate whether you drive for Uber or not. Most car owners treat the car as a sunk cost that you need to live in America today, and figure they might as well earn some extra money if they have to pay that cost anyway. I really doubt there are many people going out there and buying cars just so they can drive for Uber.
        saimiam 9y ago
        There are businesses which will sell/lease you a new car just to get you into the car-share business. If such companies exist, I'm willing to bet people are buying new cars to start driving for Uber.
        Shikadi 9y ago
        That's problematic thinking, putting more miles on a car wears it out faster. Sunk cost or not, say you drive twice as much because you're an Uber driver, you will now have to perform maintenance and repairs twice as often, give or take based on differences in driving and whether or not the car starts cold every time. Maybe the numbers work out, but ignoring them probably doesn't make sense, especially if you drive a car that is known to be on the less reliable side.
- ceejayoz 9y ago
  > I think it's pretty patronizing to suggest that people spending 40+ hours a week driving for Uber / Lyft are too incompetent to calculate out their own finances. Your average person isn't great at calculating out their own finances. I don't see any reason to assert Uber/Lyft drivers are better than average in this regard. I'd suspect this is one of the reasons 96% of Uber drivers don't last a year. http://www.cnbc.com/2017/04/20/only-4-percent-of-uber-drivers-remain-after-a-year-says-report.html http://www.cnbc.com/2017/04/20/only-4-percent-of-uber-driver...
  - rch 9y ago
    You could use that same number to support the proposition that they are accurately calculating their returns.
    - yorwba 9y ago
      Yes, but only in hindsight, when they realize they have been losing money or didn't make as much as they expected.
ThrustVectoring 9y ago
You can't really avoid taking a position on the distributional aspects. All "willing to sell in the marketplace" gives you is that their choice is better than their next-best alternative. It tells you nothing about whether the system as a whole provides fair choices and opportunities for people. It tells you nothing about whether rents are getting extracted through coercion. It passes no judgement on who gets the surpluses from trade.

by jvm 9y ago

ivanbakel 9y ago

>$500/mo on average would be consistent with $50/hour fully netted earnings Based on what?

isostatic 9y ago
10 hours a month?

bpodgursky 9y ago

I think it's pretty patronizing to suggest that people spending 40+ hours a week driving for Uber / Lyft are too incompetent to calculate out their own finances. I've talked to a lot of drivers who understand in-depth cost per mile they are able to deduct from depreciation for tax purposes, the impact of buying a new car on Uber black, the cost savings per mile of buying a Prius, etc etc.

frgtpsswrdlame 9y ago
No one is saying they're too incompetent. What's being said is that they're not doing the analysis for whatever reason. And while you may know some who have run the numbers I also know some uber drivers who haven't. Furthermore, we shouldn't apply this only to people who drive 40+ hours. I bet as we transition down to people who drive 20 hours, 10 hours and less we'll find a lot of people who are barely breaking even or worse once other costs are considered.
- sokoloff 9y ago
  I suspect a lot of those low-hour, occasional drivers were going to have all of the fixed costs of the vehicle anyway and are only looking to cover the marginal costs. That's a perfectly reasonable strategy and the fact that they aren't covering average cost is irrelevant, so long as they're covering the marginal costs of driving Uber/Lyft.
  - frgtpsswrdlame 9y ago
    I think those low cost drivers, if they even think about it, believe they're more than covering their marginal costs. They idea that they're essentially paying depreciation plus a small premium to themselves would not go over well if it were more apparent. Perhaps what we need is another anti-ride-sharing calculator where you can plug in a whole bunch of details about your car and insurance, normal driving habits and ride-sharing driving habits and it will tell you how much you make minus the hidden risks/costs.
    - nostrademons 9y ago
      The car's going to depreciate whether you drive for Uber or not. Most car owners treat the car as a sunk cost that you need to live in America today, and figure they might as well earn some extra money if they have to pay that cost anyway. I really doubt there are many people going out there and buying cars just so they can drive for Uber.
      - saimiam 9y ago
        There are businesses which will sell/lease you a new car just to get you into the car-share business. If such companies exist, I'm willing to bet people are buying new cars to start driving for Uber.
      - Shikadi 9y ago
        That's problematic thinking, putting more miles on a car wears it out faster. Sunk cost or not, say you drive twice as much because you're an Uber driver, you will now have to perform maintenance and repairs twice as often, give or take based on differences in driving and whether or not the car starts cold every time. Maybe the numbers work out, but ignoring them probably doesn't make sense, especially if you drive a car that is known to be on the less reliable side.
ceejayoz 9y ago
> I think it's pretty patronizing to suggest that people spending 40+ hours a week driving for Uber / Lyft are too incompetent to calculate out their own finances. Your average person isn't great at calculating out their own finances. I don't see any reason to assert Uber/Lyft drivers are better than average in this regard. I'd suspect this is one of the reasons 96% of Uber drivers don't last a year. http://www.cnbc.com/2017/04/20/only-4-percent-of-uber-drivers-remain-after-a-year-says-report.html http://www.cnbc.com/2017/04/20/only-4-percent-of-uber-driver...
- rch 9y ago
  You could use that same number to support the proposition that they are accurately calculating their returns.
  - yorwba 9y ago
    Yes, but only in hindsight, when they realize they have been losing money or didn't make as much as they expected.

ThrustVectoring 9y ago

You can't really avoid taking a position on the distributional aspects. All "willing to sell in the marketplace" gives you is that their choice is better than their next-best alternative. It tells you nothing about whether the system as a whole provides fair choices and opportunities for people. It tells you nothing about whether rents are getting extracted through coercion. It passes no judgement on who gets the surpluses from trade.