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Uber and Lyft’s sole “innovation” is in driving down the value of driving by reclassifying drivers as contractors and not having to pay benefits while the drive

Uber and Lyft’s sole “innovation” is in driving down the value of driving by reclassifying drivers as contractors and not having to pay benefits while the drivers barely earn more than they spend to keep working, so I don’t think they’re going to give in easily. It’s a shame the initial investors already got away with IPOs and foisting the consequences off onto general investors before the underlying business models collapse.

SilasX 6y ago
Cab companies had long been classifying drivers like that. Also, the bidding process for cab rental generally drove net wages to the bare minimum, so Uber/Lyft weren't new in either respect. Edit: reword to be easier to read.
stevehawk 6y ago
weren't they contractors before? where the taxi driver rented the car and the medallion from the company that owned them?
- pengaru 6y ago
  When Uber first started destroying the cab business there were numerous interviews of NYC cab drivers talking about how far in debt they were to buy the medallion that enables them to work in the city. That left me with the impression that cabbies rented the money to buy access to the market, and were paid enough to afford it.
  - 908B64B197 6y ago
    It degenerated to medallions being expensive enough that cabbies had to work extremely long hours to make the payments on them. Wasn't uncommon to have two cabbies, one for the night and one for the day, drive the same car just to break even. That and the financing for medallion often came from the seller. Not a lot of banks would touch these assets so the interest rates were horrendous on these.
    - caturopath 6y ago
      That actually is uncommon in NYC - very few yellow cab medallions are owned by small timers. https://en.wikipedia.org/wiki/Taxicabs_of_New_York_City https://en.wikipedia.org/wiki/Taxicabs_of_New_York_City says "most medallions (and most cabs) are owned by investment companies and are leased to drivers"
      - 908B64B197 6y ago
        And the price at which they lease means that the car has to run pretty much 24h a day. Often with drivers splitting shifts. All that to make below minimal wages and no benefits.
pmoriarty 6y ago
"the drivers barely earn more than they spend" When figuring in all the costs, like car depreciation and maintenance, they actually earn less than they spend.
- VBprogrammer 6y ago
  That can't possibly be true surely, a whole industry of people can't have failed to notice that they are losing money over time.
  - aeturnum 6y ago
    There was a study which suggest this is the case about 30% of the time[1], though they have also been criticized by Uber and others as under-counting the amount of money gained from ridesharing[2]. I think it's fair to critique the ridesharing companies for using a business model that requires their workers to do far more complicated calculations than most workers in order to ensure that they are working in a financially beneficial way. [1] https://orfe.princeton.edu/~alaink/SmartDrivingCars/PDFs/Zoepf_The%20Economics%20of%20RideHialing_OriginalPdfFeb2018.pdf https://orfe.princeton.edu/~alaink/SmartDrivingCars/PDFs/Zoe... [2] https://www.vox.com/2018/3/3/17074782/uber-mit-study-less-than-4-hour-flawed https://www.vox.com/2018/3/3/17074782/uber-mit-study-less-th...
    - DangitBobby 6y ago
      Found this [1] in the Twitter thread linked in the Vox article. MIT revised upward their estimation of taxi-app drivers' income significantly after taking into account some criticism of their methods: 1. https://www.npr.org/sections/thetwo-way/2018/03/07/591430857/researcher-says-criticism-is-valid-will-revise-study-finding-low-uber-and-lyft-p https://www.npr.org/sections/thetwo-way/2018/03/07/591430857...
amelius 6y ago
Can someone please give me one example where a "business model" was actually an innovation?
- SpicyLemonZest 6y ago
  Walmart is the canonical recent example. They're just stores, and lots of people have stores, but Sam Walton's specific business model allowed his stores to sell a wider variety of goods at lower prices than any of his competitors' stores could.
  - amelius 6y ago
    What business model are you referring to? As far as I can tell they reduced prices mostly by (1) keeping wages as low as possible, and (2) by using their gatekeeper position to put their suppliers under pressure. I wouldn't call this an innovation. Also they improved their logistics, but I wouldn't consider this part of a business model.
    - ghaff 6y ago
      Low-cost supplier is absolutely a classic business model. If you want another one in retail compare and contrast with Costco. Which limits its number of SKUs (and actually has a reputation for paying workers relatively well by retail standards).
- cortesoft 6y ago
  FedEx... the innovation was to ship all items to a central location and then ship them out.
  - amelius 6y ago
    That's an innovation in logistics, not a business model.
caturopath 6y ago
> Uber and Lyft’s sole “innovation” is in driving down the value of driving by reclassifying drivers as contractors and not having to pay benefits This is supremely untrue: a huge part of Uber and Lyft's value proposition is not cost related at all. (Also, cab drivers generally aren't employees most places.) They are more faster in most places. Other than some urban cores and transit hubs, it is much faster to get a pickup by Uber/Lyft than it ever was a taxi. They are more reliable in most places. When you call a taxi, it may or may not show up, and you won't be told whether they're going to no-show after you call them. They are more convenient. Ordering an Uber/Lyft is really easy. Most places, if you want to call a taxi, you have to use the telephone or use an inferior smartphone app. When they started growing, it was almost always the former. They are a more pleasant experience. My worst experience in an Uber/Lyft ride is day-to-day in a taxi. I've had truly terrifying experiences with taxis. Many of these factors are actually irrelevant to their labor practices. Some of them do relate (for instance, drivers are very vulnerable to rider low-ratings, in part since firing them is easier than firing employees), to be sure.
- graeme 6y ago
  Good list. Some more: * You can predict when it will show. In a lot of cities you had to call a cab 10-15 min in advance * You don’t need to pay. This says 2-3 min at the end * It’s all above board. This varies by location but taxis always wanted cash, to hide earnings, and they would create incredible fuss over giving receipts for business expenses * Not only is it above board, it’s automatic: business receipts from uber go straight to my accountant. Expensing is much easier.
- mamon 6y ago
  Ok, so it seems that taxi service in US sucks. In Europe traditional taxi companies caught up pretty quickly, you can now order taxi ride via app that has UX similar or even nicer than Uber, and you get licensed taxi driver, car with taxi signs, so that you no longer need to stare weirdly at all black Priuses approaching you, and the driver can speak your language, and knows his way around the city. To recap: traditional taxi service is of much better quality than Uber, and only slightly more expensive, therefore much preferred. The only time I used Uber was in the US, once I came back I don't miss it at all. I don't know what exactly is wrong with US taxi market, but Uber and Lyft aren't the only solution.
908B64B197 6y ago
Medallions drivers were also contractors, despite not being able to set their rates.

SilasX 6y ago

Cab companies had long been classifying drivers like that. Also, the bidding process for cab rental generally drove net wages to the bare minimum, so Uber/Lyft weren't new in either respect. Edit: reword to be easier to read.

stevehawk 6y ago

weren't they contractors before? where the taxi driver rented the car and the medallion from the company that owned them?

pengaru 6y ago
When Uber first started destroying the cab business there were numerous interviews of NYC cab drivers talking about how far in debt they were to buy the medallion that enables them to work in the city. That left me with the impression that cabbies rented the money to buy access to the market, and were paid enough to afford it.
- 908B64B197 6y ago
  It degenerated to medallions being expensive enough that cabbies had to work extremely long hours to make the payments on them. Wasn't uncommon to have two cabbies, one for the night and one for the day, drive the same car just to break even. That and the financing for medallion often came from the seller. Not a lot of banks would touch these assets so the interest rates were horrendous on these.
  - caturopath 6y ago
    That actually is uncommon in NYC - very few yellow cab medallions are owned by small timers. https://en.wikipedia.org/wiki/Taxicabs_of_New_York_City https://en.wikipedia.org/wiki/Taxicabs_of_New_York_City says "most medallions (and most cabs) are owned by investment companies and are leased to drivers"
    - 908B64B197 6y ago
      And the price at which they lease means that the car has to run pretty much 24h a day. Often with drivers splitting shifts. All that to make below minimal wages and no benefits.

pmoriarty 6y ago

"the drivers barely earn more than they spend" When figuring in all the costs, like car depreciation and maintenance, they actually earn less than they spend.

VBprogrammer 6y ago
That can't possibly be true surely, a whole industry of people can't have failed to notice that they are losing money over time.
- aeturnum 6y ago
  There was a study which suggest this is the case about 30% of the time[1], though they have also been criticized by Uber and others as under-counting the amount of money gained from ridesharing[2]. I think it's fair to critique the ridesharing companies for using a business model that requires their workers to do far more complicated calculations than most workers in order to ensure that they are working in a financially beneficial way. [1] https://orfe.princeton.edu/~alaink/SmartDrivingCars/PDFs/Zoepf_The%20Economics%20of%20RideHialing_OriginalPdfFeb2018.pdf https://orfe.princeton.edu/~alaink/SmartDrivingCars/PDFs/Zoe... [2] https://www.vox.com/2018/3/3/17074782/uber-mit-study-less-than-4-hour-flawed https://www.vox.com/2018/3/3/17074782/uber-mit-study-less-th...
  - DangitBobby 6y ago
    Found this [1] in the Twitter thread linked in the Vox article. MIT revised upward their estimation of taxi-app drivers' income significantly after taking into account some criticism of their methods: 1. https://www.npr.org/sections/thetwo-way/2018/03/07/591430857/researcher-says-criticism-is-valid-will-revise-study-finding-low-uber-and-lyft-p https://www.npr.org/sections/thetwo-way/2018/03/07/591430857...

amelius 6y ago

Can someone please give me one example where a "business model" was actually an innovation?

SpicyLemonZest 6y ago
Walmart is the canonical recent example. They're just stores, and lots of people have stores, but Sam Walton's specific business model allowed his stores to sell a wider variety of goods at lower prices than any of his competitors' stores could.
- amelius 6y ago
  What business model are you referring to? As far as I can tell they reduced prices mostly by (1) keeping wages as low as possible, and (2) by using their gatekeeper position to put their suppliers under pressure. I wouldn't call this an innovation. Also they improved their logistics, but I wouldn't consider this part of a business model.
  - ghaff 6y ago
    Low-cost supplier is absolutely a classic business model. If you want another one in retail compare and contrast with Costco. Which limits its number of SKUs (and actually has a reputation for paying workers relatively well by retail standards).
cortesoft 6y ago
FedEx... the innovation was to ship all items to a central location and then ship them out.
- amelius 6y ago
  That's an innovation in logistics, not a business model.

caturopath 6y ago

> Uber and Lyft’s sole “innovation” is in driving down the value of driving by reclassifying drivers as contractors and not having to pay benefits This is supremely untrue: a huge part of Uber and Lyft's value proposition is not cost related at all. (Also, cab drivers generally aren't employees most places.) They are more faster in most places. Other than some urban cores and transit hubs, it is much faster to get a pickup by Uber/Lyft than it ever was a taxi. They are more reliable in most places. When you call a taxi, it may or may not show up, and you won't be told whether they're going to no-show after you call them. They are more convenient. Ordering an Uber/Lyft is really easy. Most places, if you want to call a taxi, you have to use the telephone or use an inferior smartphone app. When they started growing, it was almost always the former. They are a more pleasant experience. My worst experience in an Uber/Lyft ride is day-to-day in a taxi. I've had truly terrifying experiences with taxis. Many of these factors are actually irrelevant to their labor practices. Some of them do relate (for instance, drivers are very vulnerable to rider low-ratings, in part since firing them is easier than firing employees), to be sure.

graeme 6y ago
Good list. Some more: * You can predict when it will show. In a lot of cities you had to call a cab 10-15 min in advance * You don’t need to pay. This says 2-3 min at the end * It’s all above board. This varies by location but taxis always wanted cash, to hide earnings, and they would create incredible fuss over giving receipts for business expenses * Not only is it above board, it’s automatic: business receipts from uber go straight to my accountant. Expensing is much easier.
mamon 6y ago
Ok, so it seems that taxi service in US sucks. In Europe traditional taxi companies caught up pretty quickly, you can now order taxi ride via app that has UX similar or even nicer than Uber, and you get licensed taxi driver, car with taxi signs, so that you no longer need to stare weirdly at all black Priuses approaching you, and the driver can speak your language, and knows his way around the city. To recap: traditional taxi service is of much better quality than Uber, and only slightly more expensive, therefore much preferred. The only time I used Uber was in the US, once I came back I don't miss it at all. I don't know what exactly is wrong with US taxi market, but Uber and Lyft aren't the only solution.

908B64B197 6y ago

Medallions drivers were also contractors, despite not being able to set their rates.