8 ms·

Bill Could Destroy Uber's Unsustainable Business Model

32 points by howard941 7y ago

webwielder2 7y ago
How about people get guaranteed certain rights and services by the government so we don’t have to worry about whether someone’s an employee or contractor?
- mamon 7y ago
  We can’t because what some low paid contractors call “rights” others call “burden”. Self employment has its perks for those of us that have enough bargaining power
- pyrophane 7y ago
  There is still the question of compensations. There are limits to how little you can pay an employee, and that will still be an issue in a situation like this unless, perhaps, we have something like universal basic income.
  - Zigurd 7y ago
    Well, another reason for UBI. And universal access to a high standard of health care. If you make the right policy decisions, you can have high workforce mobility, competitiveness, and efficiency at the same time as having worker dignity.
- hello_asm_world 7y ago
  This.
- rsweeney21 7y ago
  Because Americans don't like paying taxes. It's why we revolted against the British in the first place.
  - cma 7y ago
    That was about taxation without representation, which doesn't help explain why DC residents don't get to vote.
    - votepaunchy 7y ago
      Given modern travel, why not disperse the federal government and simply dissolve the federal district (as was already returned to Virginia)?
willio58 7y ago
Eh.. just charge people more money to use Uber. Yeah they would lose a lot of regular riders but will those people really go back to using cabs? Uber could double their prices and I would still use them over taxis 9/10 times.
- Waterluvian 7y ago
  Where I live, Uber managed to force taxi services to evolve and embrace technology like mobile apps and GPS and flat estimates. And now the local taxi is much better than Uber, in my opinion. I'm not sure what the free market textbook says about this but as a consumer it's a huge win.
  - skinnymuch 7y ago
    Where do you live? This seems like an anomaly.
    - tonmoy 7y ago
      I have seen similar things happening in a lot of countries outside of US. So maybe not as anomalous as you think
      - TeMPOraL 7y ago
        In various cities of Poland, the transformation was already halfway done before Uber. The main thing missing was an app, but arguably it would've happened without Uber.
        dvtrn 7y ago
        There's an interesting market emerging providing solutions for mobile-first Uber-like services covering all three sides of the transaction: order taker/business, the agent, and the customer all get mobile apps to track in real time their service/good being delivered. I came across it while talking with a bar fly at my neighborhood pub who owns and operates a freight brokerage, he's been getting sales calls from such companies and is about to make a switch to some platform that has fewer features than the one he uses now, but apparently has exactly the ones he needs (or as he put it "I can get by") and for cheaper.
jacques_chester 7y ago
A pedant might argue, and cogently one might add, that Uber's unsustainable business model is what will destroy Uber's unsustainable business model.
- TeMPOraL 7y ago
  The story of Uber is one of how surprisingly long they can keep an unsustainable (and illegal) business model running. They were supposed to be dead for a long time now. They're still kicking.
  - jacques_chester 7y ago
    Yes, though speculative investments can last for a long time. There's also the confluence of macroeconomic factors: the emergence of China, continuing massive savings rates in Japan with little to invest in domestically, the decision by Saudi Arabia to open a massive sovereign wealth spigot and the quantitative easing that occurred after 2008. Financial capital is incredibly cheap by historical standards. That said, I find myself using one of the classic defences of a confident prognosticator: I am right / I will be right, except about the timing[0]. But to make more verifiable predictions I would need to start assigning probabilities to particular dates. [0] Tetlock's Expert Political Judgment: How Good Is It? How Can We Know? is still a brilliant and amusing empirical study of opinionated forecasting: https://www.amazon.com/Expert-Political-Judgment-Good-Know/dp/0691175977/ https://www.amazon.com/Expert-Political-Judgment-Good-Know/d...
  - jquery 7y ago
    What is Uber doing that you consider illegal?
    - TeMPOraL 7y ago
      Operating taxis in cities around the world. Google it, it's not only not news, it's pretty much the core defining thing of Uber.
vikramkr 7y ago
But they aren't employees. I still dont understand why people who get to work on demand whenever they want without a boss to report to or set hours are employees. The company doesn't get the benefits of having employees (schedule them in for rush hours, reliable controllable labor base), so why should drivers get the perks of becoming an employee without having to give up their flexibility and everything?
- jakelazaroff 7y ago
  But are they truly contractors? They don't set the price for their own labor and can be fired for declining too many rides.
  - rsweeney21 7y ago
    As with any independent contractor, the market sets the rate. Uber is just a really efficient marketplace since an Uber ride is a complete commodity with no specialization.
    - TeMPOraL 7y ago
      It's Uber who sets the price, not the market, so this doesn't apply.
    - celticmusic 7y ago
      What a crock, Uber is setting those prices not the market. The market says Uber should be going out of business with the prices it sets, except investors keep dumping money into it.
      - cle 7y ago
        Doesn’t Uber have competitors? And why shouldn’t we consider investors part of the market? (Pardon my ignorance if these are dumb questions...)
        7y ago
icebraining 7y ago
What will it do to the taxi business model? In the US, traditionally, cab drivers are classified as contractors too, and they've also been suing companies in the last few years regarding this issue.
- Atavism 7y ago
  The taxi business model emerged relatively recently and was the inspiration for Uber’s. In all likelihood, there will be a reversion to the historical norm which actually operates more efficiently than taxi cabs (which believe it or not operate as or more efficiently than ride shares in many scenarios). But we will have to see. Anything is possible because of how many billions are at stake.
deleted 7y ago
[deleted]
paulsutter 7y ago
Im baffled to imagine drivers really want to lose all those tax deductions - and get paid less - to be employees rather than contractors. Being an employee is just about the worst possible tax situation. A better change in the law would be the opposite. Give the benefits of being a contractor to all folks currently forced to be categorized as employees. And fix healthcare so it’s not tied to your job.
- caymanjim 7y ago
  Being an employee means you can unionize, you must be paid minimum wage, you have protection against arbitrary termination, and myriad other benefits. Many drivers prefer the current arrangement, but many also want to make the tradeoff.
  - closeparen 7y ago
    >you have protection against arbitrary termination https://en.wikipedia.org/wiki/At-will_employment https://en.wikipedia.org/wiki/At-will_employment
    - caymanjim 7y ago
      That's all fine and good on paper, but what do you think really happens when an employer fires an at-will employee, without cause, who doesn't like what happened?
      - danaris 7y ago
        Maybe the employee gets their lawyer involved, and then the company gets their entire cadre of highly-paid lawyers specializing in exactly this thing involved and regardless of whether the law's on the employee's side, he gets a legal fight that will just drain his resources for years and years (or until he's broke).
        caymanjim 7y ago
        I'm not saying the employee would win, but nor would your scenario occur, in most cases. They'd just pay them off. It's easier to avoid that entirely and offer severance. To get back to my original point, being a real employee rather than a contractor means there's a cost to arbitrary termination, which provides the employee with some additional job security. This is one of the many reasons why one might prefer to be an employee, rather than a contractor, even if there are tax implications.
iandanforth 7y ago
"Uber has never made a profit and has actually lost over $14 billion in the last four years alone. In the prospectus, Uber insists that these five major metropolitan markets are essential to its path to profitability. In reality, what Uber actually relies on is the $20 billion in funding raised over the past decade and the $8 billion in new investments after going public in May. This investor welfare covers the cost of low prices that render each rideshare trip unprofitable, of driver incentives to combat the high turnover rate of drivers, and of promotions used to drive up demand." Article nails it, Uber is an investor funded welfare program. Certainly Uber's tech employees are benefiting from this welfare a lot more than drivers, but does asking a massively unprofitable company to be even more unprofitable aid drivers' long-term interests?
- bobthepanda 7y ago
  A fair amount of businesses were probably put out of business when we banned child labor. Doing anything to restrict any business will reduce profitability and make their balance sheets redder, but as a society we can define the minimum standards that a company is expected to meet; otherwise they'll just feel free to dump the externalities of treating their workers poorly onto society and the general taxpayer will have to pay for it.
Atavism 7y ago
Hey I’m the author of this piece, let me know if you all have any specific questions about AB5, the ABC test, and this gig economy business model!
anovikov 7y ago
It all seems to work for a while only because self-driving cars are delayed...
koolba 7y ago
> Uber, Lyft, DoorDash, and Postmates derive a huge share of their sales from California: 41 percent of all Postmates' US sales are in California, 27 percent with DoorDash, 24 percent of Lyft's rides, 17 percent of Uber's rides, and 13 percent of UberEats' sales. Not the main topic of the article but I'm surprised at how concentrated Uber and Lyft's revenue is the state of California. I can imagine smaller / newer companies getting started in one location and being lop sided in their sales, but those two are huge and have been around for years. That's some serious concentration of regulatory risk!
- berbec 7y ago
  SV & population

32 points by howard941 7y ago

How about people get guaranteed certain rights and services by the government so we don’t have to worry about whether someone’s an employee or contractor?

mamon 7y ago
We can’t because what some low paid contractors call “rights” others call “burden”. Self employment has its perks for those of us that have enough bargaining power
pyrophane 7y ago
There is still the question of compensations. There are limits to how little you can pay an employee, and that will still be an issue in a situation like this unless, perhaps, we have something like universal basic income.
- Zigurd 7y ago
  Well, another reason for UBI. And universal access to a high standard of health care. If you make the right policy decisions, you can have high workforce mobility, competitiveness, and efficiency at the same time as having worker dignity.
hello_asm_world 7y ago
This.
rsweeney21 7y ago
Because Americans don't like paying taxes. It's why we revolted against the British in the first place.
- cma 7y ago
  That was about taxation without representation, which doesn't help explain why DC residents don't get to vote.
  - votepaunchy 7y ago
    Given modern travel, why not disperse the federal government and simply dissolve the federal district (as was already returned to Virginia)?

willio58 7y ago

Eh.. just charge people more money to use Uber. Yeah they would lose a lot of regular riders but will those people really go back to using cabs? Uber could double their prices and I would still use them over taxis 9/10 times.

Waterluvian 7y ago
Where I live, Uber managed to force taxi services to evolve and embrace technology like mobile apps and GPS and flat estimates. And now the local taxi is much better than Uber, in my opinion. I'm not sure what the free market textbook says about this but as a consumer it's a huge win.
- skinnymuch 7y ago
  Where do you live? This seems like an anomaly.
  - tonmoy 7y ago
    I have seen similar things happening in a lot of countries outside of US. So maybe not as anomalous as you think
    - TeMPOraL 7y ago
      In various cities of Poland, the transformation was already halfway done before Uber. The main thing missing was an app, but arguably it would've happened without Uber.
      - dvtrn 7y ago
        There's an interesting market emerging providing solutions for mobile-first Uber-like services covering all three sides of the transaction: order taker/business, the agent, and the customer all get mobile apps to track in real time their service/good being delivered. I came across it while talking with a bar fly at my neighborhood pub who owns and operates a freight brokerage, he's been getting sales calls from such companies and is about to make a switch to some platform that has fewer features than the one he uses now, but apparently has exactly the ones he needs (or as he put it "I can get by") and for cheaper.

jacques_chester 7y ago

A pedant might argue, and cogently one might add, that Uber's unsustainable business model is what will destroy Uber's unsustainable business model.

TeMPOraL 7y ago
The story of Uber is one of how surprisingly long they can keep an unsustainable (and illegal) business model running. They were supposed to be dead for a long time now. They're still kicking.
- jacques_chester 7y ago
  Yes, though speculative investments can last for a long time. There's also the confluence of macroeconomic factors: the emergence of China, continuing massive savings rates in Japan with little to invest in domestically, the decision by Saudi Arabia to open a massive sovereign wealth spigot and the quantitative easing that occurred after 2008. Financial capital is incredibly cheap by historical standards. That said, I find myself using one of the classic defences of a confident prognosticator: I am right / I will be right, except about the timing[0]. But to make more verifiable predictions I would need to start assigning probabilities to particular dates. [0] Tetlock's Expert Political Judgment: How Good Is It? How Can We Know? is still a brilliant and amusing empirical study of opinionated forecasting: https://www.amazon.com/Expert-Political-Judgment-Good-Know/dp/0691175977/ https://www.amazon.com/Expert-Political-Judgment-Good-Know/d...
- jquery 7y ago
  What is Uber doing that you consider illegal?
  - TeMPOraL 7y ago
    Operating taxis in cities around the world. Google it, it's not only not news, it's pretty much the core defining thing of Uber.

vikramkr 7y ago

But they aren't employees. I still dont understand why people who get to work on demand whenever they want without a boss to report to or set hours are employees. The company doesn't get the benefits of having employees (schedule them in for rush hours, reliable controllable labor base), so why should drivers get the perks of becoming an employee without having to give up their flexibility and everything?

jakelazaroff 7y ago
But are they truly contractors? They don't set the price for their own labor and can be fired for declining too many rides.
- rsweeney21 7y ago
  As with any independent contractor, the market sets the rate. Uber is just a really efficient marketplace since an Uber ride is a complete commodity with no specialization.
  - TeMPOraL 7y ago
    It's Uber who sets the price, not the market, so this doesn't apply.
  - celticmusic 7y ago
    What a crock, Uber is setting those prices not the market. The market says Uber should be going out of business with the prices it sets, except investors keep dumping money into it.
    - cle 7y ago
      Doesn’t Uber have competitors? And why shouldn’t we consider investors part of the market? (Pardon my ignorance if these are dumb questions...)
      - 7y ago

icebraining 7y ago

What will it do to the taxi business model? In the US, traditionally, cab drivers are classified as contractors too, and they've also been suing companies in the last few years regarding this issue.

Atavism 7y ago
The taxi business model emerged relatively recently and was the inspiration for Uber’s. In all likelihood, there will be a reversion to the historical norm which actually operates more efficiently than taxi cabs (which believe it or not operate as or more efficiently than ride shares in many scenarios). But we will have to see. Anything is possible because of how many billions are at stake.

deleted 7y ago

[deleted]

paulsutter 7y ago

Im baffled to imagine drivers really want to lose all those tax deductions - and get paid less - to be employees rather than contractors. Being an employee is just about the worst possible tax situation. A better change in the law would be the opposite. Give the benefits of being a contractor to all folks currently forced to be categorized as employees. And fix healthcare so it’s not tied to your job.

caymanjim 7y ago
Being an employee means you can unionize, you must be paid minimum wage, you have protection against arbitrary termination, and myriad other benefits. Many drivers prefer the current arrangement, but many also want to make the tradeoff.
- closeparen 7y ago
  >you have protection against arbitrary termination https://en.wikipedia.org/wiki/At-will_employment https://en.wikipedia.org/wiki/At-will_employment
  - caymanjim 7y ago
    That's all fine and good on paper, but what do you think really happens when an employer fires an at-will employee, without cause, who doesn't like what happened?
    - danaris 7y ago
      Maybe the employee gets their lawyer involved, and then the company gets their entire cadre of highly-paid lawyers specializing in exactly this thing involved and regardless of whether the law's on the employee's side, he gets a legal fight that will just drain his resources for years and years (or until he's broke).
      - caymanjim 7y ago
        I'm not saying the employee would win, but nor would your scenario occur, in most cases. They'd just pay them off. It's easier to avoid that entirely and offer severance. To get back to my original point, being a real employee rather than a contractor means there's a cost to arbitrary termination, which provides the employee with some additional job security. This is one of the many reasons why one might prefer to be an employee, rather than a contractor, even if there are tax implications.

iandanforth 7y ago

"Uber has never made a profit and has actually lost over $14 billion in the last four years alone. In the prospectus, Uber insists that these five major metropolitan markets are essential to its path to profitability. In reality, what Uber actually relies on is the $20 billion in funding raised over the past decade and the $8 billion in new investments after going public in May. This investor welfare covers the cost of low prices that render each rideshare trip unprofitable, of driver incentives to combat the high turnover rate of drivers, and of promotions used to drive up demand." Article nails it, Uber is an investor funded welfare program. Certainly Uber's tech employees are benefiting from this welfare a lot more than drivers, but does asking a massively unprofitable company to be even more unprofitable aid drivers' long-term interests?

bobthepanda 7y ago
A fair amount of businesses were probably put out of business when we banned child labor. Doing anything to restrict any business will reduce profitability and make their balance sheets redder, but as a society we can define the minimum standards that a company is expected to meet; otherwise they'll just feel free to dump the externalities of treating their workers poorly onto society and the general taxpayer will have to pay for it.

Atavism 7y ago

Hey I’m the author of this piece, let me know if you all have any specific questions about AB5, the ABC test, and this gig economy business model!

anovikov 7y ago

It all seems to work for a while only because self-driving cars are delayed...

koolba 7y ago

> Uber, Lyft, DoorDash, and Postmates derive a huge share of their sales from California: 41 percent of all Postmates' US sales are in California, 27 percent with DoorDash, 24 percent of Lyft's rides, 17 percent of Uber's rides, and 13 percent of UberEats' sales. Not the main topic of the article but I'm surprised at how concentrated Uber and Lyft's revenue is the state of California. I can imagine smaller / newer companies getting started in one location and being lop sided in their sales, but those two are huge and have been around for years. That's some serious concentration of regulatory risk!

berbec 7y ago
SV & population