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The real magic of Uber is that it allows drivers to convert the depreciation of their car into cash at a time and schedule of their own choosing. For the reaso

The real magic of Uber is that it allows drivers to convert the depreciation of their car into cash at a time and schedule of their own choosing. For the reasons discussed in the story, this may still technically be a net negative in the long term compared to driving a regular cab fulltime, but a) drivers find it far preferable to/cheaper than alternatives like payday loans, and b) many Uber drivers have multiple jobs and are not in a position to drive regular cab shifts.

avs733 5y ago
I would be curious to see independent citations of these claims.
- thematrixturtle 5y ago
  This is hardly an original insight: https://www.wsj.com/articles/how-uber-makes-its-drivers-pay-11565737028 https://www.wsj.com/articles/how-uber-makes-its-drivers-pay-... And WSJ's survey (above) indicates that many Uber drivers are not actually aware that this is where the money is effectively coming from.
  - germinalphrase 5y ago
    “ And WSJ's survey (above) indicates that many Uber drivers are not actually aware that this is where the money is effectively coming from” Which is another way of saying that they don’t understand the economics enough to know they’re accepting a bad deal?
    - chipotle_coyote 5y ago
      Yes, basically. And it's certainly not in Uber's interest to help them understand.
- emteycz 5y ago
  Talk with the driver few times? I never had a Uber driver who said they would rather have a normal job. 500+ rides.
  - justinpowers 5y ago
    Selection bias…
    - emteycz 5y ago
      So non-uber drivers don't want to be uber drivers and uber drivers want to be uber drivers? Or what? There was practically nothing else in common between each driver other than their desire to continue working with Uber as they do now. Where's the bias? 500+ rides (probably significantly more bcs I have two accounts) are large enough sample.
      - justinpowers 5y ago
        The selection consists solely of current Uber drivers, excluding all drivers who chose to stop and take an alternative job. As well, drivers in the act of driving are less likely to admit that they do not want to be doing what they are currently doing, due to cognitive dissonance. Additionally, there likely exists a framing bias along with a false dichotomy, if they were asked whether they’d rather Uber or take a “normal job”. There are of course plenty of alternatives that are not “normal jobs” (whatever that is exactly). Anyways, anecdotally, I’ve had drivers who were not happy with Uber and continued only out of lack of current options or plain inertia.
    - this_steve_j 5y ago
      Survivorship bias, which is a subtype of selection bias, is what I was contemplating along those lines. https://en.m.wikipedia.org/wiki/Survivorship_bias https://en.m.wikipedia.org/wiki/Survivorship_bias Now if I could somehow know whether I have any biases I should be aware of, I’d greatly appreciate that information, Steve.
      - 5y ago
- imtringued 5y ago
  As someone whose virtual in-game company has grown so much that I lost track how much things cost and how much money I am actually making. I would argue it is very common. This is in a game where there are already turn key spreadsheets that tell you how much profit you are theoretically getting per day. The problem is that your "pipelines" are long and you may end up stock piling stuff for two weeks buying at one price and selling another. I doubt most Uber drivers are whipping out a spreadsheet and pondering for 3 hours before they commit to the job. That is how much time I spend before I build a new base and lots of those were canceled before they got build.
  - greiskul 5y ago
    What game are you talking about? Is it eve online?
    - TheaomBen 5y ago
      Sounds like it could. The logistical pipeline for advanced industries used to be... Intricate. And usually depended on exploiting "gig economy" miners at the bottom, come to think of it.
acchow 5y ago
You are 100% correct. This is the magic There are people who want to make a positive return on their time + vehicle depreciation. But they are on the open market competing against people who are in a cash crunch and happy to have a net negative return on the same, as long as it temporarily allows them to convert depreciation into cash. This is why drivers will always lose in the long term. They are racing against each other to the bottom. I've also had Uber drivers who don't need the money at all - they just like talking to new people and are bored on a Saturday night. This of course drives the price down further. These are often the ones with a very nice car. As other sibling comments have mentioned, many Uber drivers have no idea that this is what their gig is doing - converting depreciation into cash flow in a net-negative way. Maybe Uber's marketing style to drivers needs to be amended by law?
- bombcar 5y ago
  I suspect that few Uber drivers have the time or ability to fully plot out depreciation costs, and instead do a simple “tank of gas + X hours = cash”. After all you end up with the same car afterwards, right? Taking advantage of people who don’t work it out for themselves is despicable at best, highly immoral at worst.
- hackernewds 5y ago
  The missing part of this jigsaw is that not everyone is _simultaneously_ seeking to _temporarily_ convert depreciation into cash. with enough market players, such a microsystem can sustain itself
  - acchow 5y ago
    There could be an equilibrium where players are net positive. But given the housing shortage, how expensive everything is, and how many people are raising children paycheck to paycheck, I just don't see how we'd be arriving at such an equilibrium in the US. Maybe in some rich Northern European country.
- ceeplusplus 5y ago
  That's because depreciation is a paper loss. If you're an average person you're not selling your car for a new one for at least 7-8 years after you buy it. By that time it's worth very little of its original cost anyways. The only actual cost incurred by the driver is repairs and maintenance, which is nowhere near the cost of depreciation on the car. In effect, the depreciation schedule changes, but on the time scales of your average person the net result after 7-8 years of ownership is the same total depreciation. For corporate owners who have to report depreciation as a loss this schedule is not great, but for individuals it's not a real loss.
novok 5y ago
Have you driven a cab before? Do you know for north america at least, the standard model is drivers are independent contractors and rent out the cars or the medallion license from medallion owners? Many medallion owners are not drivers themselves. Taxi companies are generally a collection of licenses, car rental, some branding and advertising and dispatch services. The angry taxi people you see protesting Uber or equivalents are more like the Canadian trucker convoy people who own their trucks than the actual typical poor long haul truck driver who doesn't own their truck. Also whats worse about the taxi model is you often are paying on a monthly basis to rent the car, so every month you are something like $3000 in the hole and you have to keep on grinding hard before you could break even and then start making money for yourself. It's hard to take a vacation unless you want to take a month long one with no pay, which for most people who are doing the taxi gig, is not financially tenable. Being a taxi driver SUCKS. At least Uber is an improvement because the fee system is done as you make money and you have way more flexibility as a result. Everyone is upset that low end relatively unskilled labor pay & life sucks in general, and being upset with Uber is just one facet of it. Amazon warehouse workers & some restaurant workers are another group. In the past the media obsession was walmart workers and immigrant farm workers, which you don't hear about that much anymore but life still sucks for them. Activists try to shove the responsibility of making the low-end labor life better onto the company that hires them, while ignoring what the real problem is the low-end labor life sucks in general, and if you made amazon and walmart and everyone else that is visible disappear, it's still gonna suck, because the problem isn't those companies per say, it's the entire global situation of being a low end laborer, and it's a situation that is properly covered by government than any specific company. Governments don't want to pay for it although, especially in America, which is why you see this kind of focus especially in the USA, where they make employers create something approximating universal healthcare, benefits, etc vs collecting it through an equivalent tax and making it a universally provided benefit set. If it was truly a government responsibility, it could go multiple ways, such as reducing the cost of living by not making housing an investment asset and more a consumer good / capital business cost like in Japan and changing food regulations to heavily tax obesogenic & carcinogenic products, so the total national healthcare expenditure of the nation goes down and so on.
- thematrixturtle 5y ago
treis 5y ago
I think people drastically overestimate the depreciation from mileage. When you go to sell your car in 15 years the difference between 150k and 300k miles is maybe a couple grand. You're taking about a few cents per hour.
- seoaeu 5y ago
  The amount (and cost!) of maintenance to get a car to last 15 years is going to vary significantly based on how much it is driven
  - djbusby 5y ago
    And where! Salty New England snow/slush will wreck the carriage, compared to winter in San Diego.
  - treis 5y ago
    Thats usually accounted for separately from depreciation
- kgbcia 5y ago
  I think uber has a rule in my country where the vehicle has to b seven years or newer.
encoderer 5y ago
It’s more than converting depreciation to cash, it’s borrowing against deferred maintenance. It’s the $800 tires and the $500 tie rod that they will need in a year that they aren’t even thinking about today. I guess they will just have to drive a lot that month to cover it.

avs733 5y ago

I would be curious to see independent citations of these claims.

thematrixturtle 5y ago
This is hardly an original insight: https://www.wsj.com/articles/how-uber-makes-its-drivers-pay-11565737028 https://www.wsj.com/articles/how-uber-makes-its-drivers-pay-... And WSJ's survey (above) indicates that many Uber drivers are not actually aware that this is where the money is effectively coming from.
- germinalphrase 5y ago
  “ And WSJ's survey (above) indicates that many Uber drivers are not actually aware that this is where the money is effectively coming from” Which is another way of saying that they don’t understand the economics enough to know they’re accepting a bad deal?
  - chipotle_coyote 5y ago
    Yes, basically. And it's certainly not in Uber's interest to help them understand.
emteycz 5y ago
Talk with the driver few times? I never had a Uber driver who said they would rather have a normal job. 500+ rides.
- justinpowers 5y ago
  Selection bias…
  - emteycz 5y ago
    So non-uber drivers don't want to be uber drivers and uber drivers want to be uber drivers? Or what? There was practically nothing else in common between each driver other than their desire to continue working with Uber as they do now. Where's the bias? 500+ rides (probably significantly more bcs I have two accounts) are large enough sample.
    - justinpowers 5y ago
      The selection consists solely of current Uber drivers, excluding all drivers who chose to stop and take an alternative job. As well, drivers in the act of driving are less likely to admit that they do not want to be doing what they are currently doing, due to cognitive dissonance. Additionally, there likely exists a framing bias along with a false dichotomy, if they were asked whether they’d rather Uber or take a “normal job”. There are of course plenty of alternatives that are not “normal jobs” (whatever that is exactly). Anyways, anecdotally, I’ve had drivers who were not happy with Uber and continued only out of lack of current options or plain inertia.
  - this_steve_j 5y ago
    Survivorship bias, which is a subtype of selection bias, is what I was contemplating along those lines. https://en.m.wikipedia.org/wiki/Survivorship_bias https://en.m.wikipedia.org/wiki/Survivorship_bias Now if I could somehow know whether I have any biases I should be aware of, I’d greatly appreciate that information, Steve.
    - 5y ago
imtringued 5y ago
As someone whose virtual in-game company has grown so much that I lost track how much things cost and how much money I am actually making. I would argue it is very common. This is in a game where there are already turn key spreadsheets that tell you how much profit you are theoretically getting per day. The problem is that your "pipelines" are long and you may end up stock piling stuff for two weeks buying at one price and selling another. I doubt most Uber drivers are whipping out a spreadsheet and pondering for 3 hours before they commit to the job. That is how much time I spend before I build a new base and lots of those were canceled before they got build.
- greiskul 5y ago
  What game are you talking about? Is it eve online?
  - TheaomBen 5y ago
    Sounds like it could. The logistical pipeline for advanced industries used to be... Intricate. And usually depended on exploiting "gig economy" miners at the bottom, come to think of it.

acchow 5y ago

You are 100% correct. This is the magic There are people who want to make a positive return on their time + vehicle depreciation. But they are on the open market competing against people who are in a cash crunch and happy to have a net negative return on the same, as long as it temporarily allows them to convert depreciation into cash. This is why drivers will always lose in the long term. They are racing against each other to the bottom. I've also had Uber drivers who don't need the money at all - they just like talking to new people and are bored on a Saturday night. This of course drives the price down further. These are often the ones with a very nice car. As other sibling comments have mentioned, many Uber drivers have no idea that this is what their gig is doing - converting depreciation into cash flow in a net-negative way. Maybe Uber's marketing style to drivers needs to be amended by law?

bombcar 5y ago
I suspect that few Uber drivers have the time or ability to fully plot out depreciation costs, and instead do a simple “tank of gas + X hours = cash”. After all you end up with the same car afterwards, right? Taking advantage of people who don’t work it out for themselves is despicable at best, highly immoral at worst.
hackernewds 5y ago
The missing part of this jigsaw is that not everyone is _simultaneously_ seeking to _temporarily_ convert depreciation into cash. with enough market players, such a microsystem can sustain itself
- acchow 5y ago
  There could be an equilibrium where players are net positive. But given the housing shortage, how expensive everything is, and how many people are raising children paycheck to paycheck, I just don't see how we'd be arriving at such an equilibrium in the US. Maybe in some rich Northern European country.
ceeplusplus 5y ago
That's because depreciation is a paper loss. If you're an average person you're not selling your car for a new one for at least 7-8 years after you buy it. By that time it's worth very little of its original cost anyways. The only actual cost incurred by the driver is repairs and maintenance, which is nowhere near the cost of depreciation on the car. In effect, the depreciation schedule changes, but on the time scales of your average person the net result after 7-8 years of ownership is the same total depreciation. For corporate owners who have to report depreciation as a loss this schedule is not great, but for individuals it's not a real loss.

novok 5y ago

Have you driven a cab before? Do you know for north america at least, the standard model is drivers are independent contractors and rent out the cars or the medallion license from medallion owners? Many medallion owners are not drivers themselves. Taxi companies are generally a collection of licenses, car rental, some branding and advertising and dispatch services. The angry taxi people you see protesting Uber or equivalents are more like the Canadian trucker convoy people who own their trucks than the actual typical poor long haul truck driver who doesn't own their truck. Also whats worse about the taxi model is you often are paying on a monthly basis to rent the car, so every month you are something like $3000 in the hole and you have to keep on grinding hard before you could break even and then start making money for yourself. It's hard to take a vacation unless you want to take a month long one with no pay, which for most people who are doing the taxi gig, is not financially tenable. Being a taxi driver SUCKS. At least Uber is an improvement because the fee system is done as you make money and you have way more flexibility as a result. Everyone is upset that low end relatively unskilled labor pay & life sucks in general, and being upset with Uber is just one facet of it. Amazon warehouse workers & some restaurant workers are another group. In the past the media obsession was walmart workers and immigrant farm workers, which you don't hear about that much anymore but life still sucks for them. Activists try to shove the responsibility of making the low-end labor life better onto the company that hires them, while ignoring what the real problem is the low-end labor life sucks in general, and if you made amazon and walmart and everyone else that is visible disappear, it's still gonna suck, because the problem isn't those companies per say, it's the entire global situation of being a low end laborer, and it's a situation that is properly covered by government than any specific company. Governments don't want to pay for it although, especially in America, which is why you see this kind of focus especially in the USA, where they make employers create something approximating universal healthcare, benefits, etc vs collecting it through an equivalent tax and making it a universally provided benefit set. If it was truly a government responsibility, it could go multiple ways, such as reducing the cost of living by not making housing an investment asset and more a consumer good / capital business cost like in Japan and changing food regulations to heavily tax obesogenic & carcinogenic products, so the total national healthcare expenditure of the nation goes down and so on.

thematrixturtle 5y ago

treis 5y ago

I think people drastically overestimate the depreciation from mileage. When you go to sell your car in 15 years the difference between 150k and 300k miles is maybe a couple grand. You're taking about a few cents per hour.

seoaeu 5y ago
The amount (and cost!) of maintenance to get a car to last 15 years is going to vary significantly based on how much it is driven
- djbusby 5y ago
  And where! Salty New England snow/slush will wreck the carriage, compared to winter in San Diego.
- treis 5y ago
  Thats usually accounted for separately from depreciation
kgbcia 5y ago
I think uber has a rule in my country where the vehicle has to b seven years or newer.

encoderer 5y ago

It’s more than converting depreciation to cash, it’s borrowing against deferred maintenance. It’s the $800 tires and the $500 tie rod that they will need in a year that they aren’t even thinking about today. I guess they will just have to drive a lot that month to cover it.