7 ms·

It's becoming abundantly clear the real innovation from on-demand services (including ride-sharing companies), is their ability to transfer more money from labo

by boh 7y ago

It's becoming abundantly clear the real innovation from on-demand services (including ride-sharing companies), is their ability to transfer more money from labor to capital with complex pay structures. For many if not most of these companies, its their only means towards profitability. For instance, any rise in revenue Uber experienced in the last 3 years was exclusively due to cuts in pay for drivers. Tech has long lost the glow that prevented the public from scrutinizing whether a VC subsidized, underdeveloped business model is good for society. So far the answer seems to be no.

soared 7y ago
> any rise in revenue Uber experienced in the last 3 years was exclusively due to cuts in pay for drivers Outrageous claim. Source?
- boh 7y ago
  Uber's own P&L. An article regarding the P&L: https://www.nakedcapitalism.com/2017/12/can-uber-ever-deliver-part-eleven-annual-uber-losses-now-approaching-5-billion.html https://www.nakedcapitalism.com/2017/12/can-uber-ever-delive...
- mlthoughts2018 7y ago
  It’s outrageous to say that is an outrageous claim at this point. To suggest Uber had other means of obtaining profitability would be the incredible claim needing tons of new evidence, not the other way around.
scarface74 7y ago
How could cutting drivers pay without cutting prices to increase demand raise revenue? It would raise profit possibly or in Uber’s case reduce losses.
- Lavery 7y ago
  The cost to Uber users is not the same as revenue to Uber corporate. Uber corporate revenue is net of driver pay.
  - sithlord 7y ago
    revenue is all monies before any kind of expense...
    - jagged-chisel 7y ago
      While money after expenses (“profit” to the layman) is “income”
  - scarface74 7y ago
    You pay Uber and Uber pays drivers. Revenue by definition is money that Uber gets before expenses.
    - boh 7y ago
      Uber does not pay drivers. Passengers pay drivers who pay Uber to use their platform (otherwise they'd be employees which Uber is fighting to avoid).
      - jdmichal 7y ago
        That may be how Uber wants to phrase it, but I'm pretty sure the thing that shows up on my CC statement is Uber, not the driver's name... IE, if they're claiming that, it's a legal fiction. Whether that legal fiction would stand in court is up to the court.
        nybble41 7y ago
        > I'm pretty sure the thing that shows up on my CC statement is Uber, not the driver's name That just means that Uber is acting as a payment processor for the driver. If you buy an app or make an in-app purchase in the Google Play Store then Google's name appears on your statement; that doesn't make the app publisher Google's employee. The same goes for non-app vendors using Google Pay or similar services such as PayPal. The point of Uber is to connect riders with drivers and provide standard systems for payment and review—the actual transportation is up to the users.
- boh 7y ago
  They increased their share of the passenger revenue, taking a greater percentage. Uber defines drivers as consumers of their app, not employees.
  - scarface74 7y ago
    And on their P and L they also count as expense “driver incentives” where they pay drivers more than what riders pay for a ride. For any less shady business, drivers would be considered contractors for Uber. Uber is merely trying to get around riders being considered employees.
swiley 7y ago
I expected to see something like this here. I had a period where I wasn't doing any class work but didn't have my degree and couldn't get a job because of that. The ability to trade time and tires for some of the extra VC money was kind of awesome honestly and I'd imagine it gives people who are in worse situations options they really need (essentially borrowing against car components.) I know in a few years it will change when they try to become profitable but there will be another thing by then.
- untog 7y ago
  Both things can be true. The gig economy can provide people with the kind of flexible work that wasn't possible. It can also utterly fleece workers that would like to having full time jobs but cannot.
- dsr_ 7y ago
  The article points out that for many DoorDash workers, they aren't getting paid a positive sum, even if they count their time as worth zero. Look, we have the technical ability to handle millions of people as hourly workers on timescale granularities of seconds. Require these companies to treat their "contractors" as part-time employees being paid minimum wage: start paying them when they accept their first job on day, pay them for periods of up to ten minutes between jobs, and stop being reviled by everyone who hates slave labor.
  - swiley 7y ago
    I'll agree you absolutely have to watch what you're doing and count miles and whatnot, but having the option is a powerful thing (even when you're making negative money) and I wonder if regulating it too aggressively might take that away.
    - dsr_ 7y ago
      I am 100% ok with using regulation to take away the ability to earn negative money.
AlexandrB 7y ago
Most of the gig economy companies are Movie Pass but with a longer runway.
- deleted 7y ago
  [deleted]
Balgair 7y ago
I recently got into EconTalk and burned through a few of their podcasts [0]. Roberts mentions his 'distain' for the minimum wage a fair bit during the shows. Many economists do not like the minimum wage at all for many reasons. However, with these gig economy jobs, there effectively is no minimum wage. Yes, things are murky here about the definitions of wage, employee, boss, etc. But the effective hourly rates are all well under the minimum wage. So, these companies can uncover the 'real' minimum wage that the market will deal with (again, suuuuuper murky definitions). It turns out, that number is very low, so low that most people aren't rationally taking those jobs. Factoring in depreciation, I often hear that they loose money to work (not always, but damn close). I wonder what Roberts has to say on how the minimum wage and the 'wage' that these gig-econ companies pay relate. It seems to me that having run the experiments now, the theories that the economists that Roberts is like, well, maybe they should update those ideas. [0] Excellent deep dives with interviewees, highly recommended: https://www.econtalk.org/ https://www.econtalk.org/
- cuchoi 7y ago
  If you change slightly the economic assumption and go from a completely competitive labor market (where workers get paid the marginal revenue productivity) to a monopsony labor market (there is only one employer), then the minimum wage can increase employment and wages. https://open.lib.umn.edu/principleseconomics/chapter/14-2-monopsony-and-the-minimum-wage/ https://open.lib.umn.edu/principleseconomics/chapter/14-2-mo... A monopsony labor market is highly unlikely to happen, but something similar can be said of a highly competitive labor market.
- boh 7y ago
  There's no such thing as "real" minimum wage since the factors that result in having minimum wage must be included (taxes/regulations/cost of living etc). Just as looking at the wages of illegal immigrants doesn't represent the "real" economy, the gig economy, whose companies largely operate under artificial, VC inflated markets, and depend on heterogenous labor markets,can't gage "real" wages. If you're wondering how low a wage can be and still retain employees, the answer is pretty close to zero. Even baring the no/very low wages that predominated human history, in the 20th century mining companies were able to avoid paying their employees money at all and instead provided tokens serviceable in stores the mining companies owned. The goods in those stores were sold with inflated prices, essential making the cost of labor close to zero. The case against minimum wage is largely based off of highly isolated factors typically favoring shareholder economics.
lacker 7y ago
the real innovation from on-demand services is their ability to transfer more money from labor to capital DoorDash hasn't transferred any money to capital! They are still private. In fact, it is the opposite. Transfers have been from the capital of their investors to labor and to consumers. There is plenty of innovation here - Uber is a lot nicer than phoning up the taxi company, and DoorDash is a lot nicer than phoning up some small restaurants to get food delivered. The lack of innovation is not the problem. The problem is that there is no moat. DoorDash, Uber Eats, Postmates, and GrubHub are all providing the same service. There are millions of people capable of being a driver for these services. So competition is currently squeezing profits to zero or negative, and squeezing worker pay. Competition isn't helping the VCs, it's helping the consumers. Eventually, if some of these companies go out of business, the remaining ones will be able to raise prices, which will be worse for consumers but better for the investors and perhaps better for drivers.

by boh 7y ago

soared 7y ago

> any rise in revenue Uber experienced in the last 3 years was exclusively due to cuts in pay for drivers Outrageous claim. Source?

boh 7y ago
Uber's own P&L. An article regarding the P&L: https://www.nakedcapitalism.com/2017/12/can-uber-ever-deliver-part-eleven-annual-uber-losses-now-approaching-5-billion.html https://www.nakedcapitalism.com/2017/12/can-uber-ever-delive...
mlthoughts2018 7y ago
It’s outrageous to say that is an outrageous claim at this point. To suggest Uber had other means of obtaining profitability would be the incredible claim needing tons of new evidence, not the other way around.

scarface74 7y ago

How could cutting drivers pay without cutting prices to increase demand raise revenue? It would raise profit possibly or in Uber’s case reduce losses.

Lavery 7y ago
The cost to Uber users is not the same as revenue to Uber corporate. Uber corporate revenue is net of driver pay.
- sithlord 7y ago
  revenue is all monies before any kind of expense...
  - jagged-chisel 7y ago
    While money after expenses (“profit” to the layman) is “income”
- scarface74 7y ago
  You pay Uber and Uber pays drivers. Revenue by definition is money that Uber gets before expenses.
  - boh 7y ago
    Uber does not pay drivers. Passengers pay drivers who pay Uber to use their platform (otherwise they'd be employees which Uber is fighting to avoid).
    - jdmichal 7y ago
      That may be how Uber wants to phrase it, but I'm pretty sure the thing that shows up on my CC statement is Uber, not the driver's name... IE, if they're claiming that, it's a legal fiction. Whether that legal fiction would stand in court is up to the court.
      - nybble41 7y ago
        > I'm pretty sure the thing that shows up on my CC statement is Uber, not the driver's name That just means that Uber is acting as a payment processor for the driver. If you buy an app or make an in-app purchase in the Google Play Store then Google's name appears on your statement; that doesn't make the app publisher Google's employee. The same goes for non-app vendors using Google Pay or similar services such as PayPal. The point of Uber is to connect riders with drivers and provide standard systems for payment and review—the actual transportation is up to the users.
boh 7y ago
They increased their share of the passenger revenue, taking a greater percentage. Uber defines drivers as consumers of their app, not employees.
- scarface74 7y ago
  And on their P and L they also count as expense “driver incentives” where they pay drivers more than what riders pay for a ride. For any less shady business, drivers would be considered contractors for Uber. Uber is merely trying to get around riders being considered employees.

swiley 7y ago

I expected to see something like this here. I had a period where I wasn't doing any class work but didn't have my degree and couldn't get a job because of that. The ability to trade time and tires for some of the extra VC money was kind of awesome honestly and I'd imagine it gives people who are in worse situations options they really need (essentially borrowing against car components.) I know in a few years it will change when they try to become profitable but there will be another thing by then.

untog 7y ago
Both things can be true. The gig economy can provide people with the kind of flexible work that wasn't possible. It can also utterly fleece workers that would like to having full time jobs but cannot.
dsr_ 7y ago
The article points out that for many DoorDash workers, they aren't getting paid a positive sum, even if they count their time as worth zero. Look, we have the technical ability to handle millions of people as hourly workers on timescale granularities of seconds. Require these companies to treat their "contractors" as part-time employees being paid minimum wage: start paying them when they accept their first job on day, pay them for periods of up to ten minutes between jobs, and stop being reviled by everyone who hates slave labor.
- swiley 7y ago
  I'll agree you absolutely have to watch what you're doing and count miles and whatnot, but having the option is a powerful thing (even when you're making negative money) and I wonder if regulating it too aggressively might take that away.
  - dsr_ 7y ago
    I am 100% ok with using regulation to take away the ability to earn negative money.

AlexandrB 7y ago

Most of the gig economy companies are Movie Pass but with a longer runway.

deleted 7y ago
[deleted]

Balgair 7y ago

I recently got into EconTalk and burned through a few of their podcasts [0]. Roberts mentions his 'distain' for the minimum wage a fair bit during the shows. Many economists do not like the minimum wage at all for many reasons. However, with these gig economy jobs, there effectively is no minimum wage. Yes, things are murky here about the definitions of wage, employee, boss, etc. But the effective hourly rates are all well under the minimum wage. So, these companies can uncover the 'real' minimum wage that the market will deal with (again, suuuuuper murky definitions). It turns out, that number is very low, so low that most people aren't rationally taking those jobs. Factoring in depreciation, I often hear that they loose money to work (not always, but damn close). I wonder what Roberts has to say on how the minimum wage and the 'wage' that these gig-econ companies pay relate. It seems to me that having run the experiments now, the theories that the economists that Roberts is like, well, maybe they should update those ideas. [0] Excellent deep dives with interviewees, highly recommended: https://www.econtalk.org/ https://www.econtalk.org/

cuchoi 7y ago
If you change slightly the economic assumption and go from a completely competitive labor market (where workers get paid the marginal revenue productivity) to a monopsony labor market (there is only one employer), then the minimum wage can increase employment and wages. https://open.lib.umn.edu/principleseconomics/chapter/14-2-monopsony-and-the-minimum-wage/ https://open.lib.umn.edu/principleseconomics/chapter/14-2-mo... A monopsony labor market is highly unlikely to happen, but something similar can be said of a highly competitive labor market.
boh 7y ago
There's no such thing as "real" minimum wage since the factors that result in having minimum wage must be included (taxes/regulations/cost of living etc). Just as looking at the wages of illegal immigrants doesn't represent the "real" economy, the gig economy, whose companies largely operate under artificial, VC inflated markets, and depend on heterogenous labor markets,can't gage "real" wages. If you're wondering how low a wage can be and still retain employees, the answer is pretty close to zero. Even baring the no/very low wages that predominated human history, in the 20th century mining companies were able to avoid paying their employees money at all and instead provided tokens serviceable in stores the mining companies owned. The goods in those stores were sold with inflated prices, essential making the cost of labor close to zero. The case against minimum wage is largely based off of highly isolated factors typically favoring shareholder economics.

lacker 7y ago

the real innovation from on-demand services is their ability to transfer more money from labor to capital DoorDash hasn't transferred any money to capital! They are still private. In fact, it is the opposite. Transfers have been from the capital of their investors to labor and to consumers. There is plenty of innovation here - Uber is a lot nicer than phoning up the taxi company, and DoorDash is a lot nicer than phoning up some small restaurants to get food delivered. The lack of innovation is not the problem. The problem is that there is no moat. DoorDash, Uber Eats, Postmates, and GrubHub are all providing the same service. There are millions of people capable of being a driver for these services. So competition is currently squeezing profits to zero or negative, and squeezing worker pay. Competition isn't helping the VCs, it's helping the consumers. Eventually, if some of these companies go out of business, the remaining ones will be able to raise prices, which will be worse for consumers but better for the investors and perhaps better for drivers.