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There is nothing that prevents Uber/Lyft from being a race to the bottom re driver revenue. I think that should've been obvious to anyone looking at the model f

There is nothing that prevents Uber/Lyft from being a race to the bottom re driver revenue. I think that should've been obvious to anyone looking at the model from the beginning. One of the first questions is to ask about a business is whether there are any barriers to competition. In the case of Uber or Lyft, they have network effects but the drivers themselves have no barrier. Years ago some Subway franchisees sued Subway because they were selling franchises right across the street from existing franchises. Same issue. There will always be more drivers, Uber/Lyft control the rate, so no limit to how far drivers can be squeezed.

freehunter 12y ago
But one of the biggest complaints about taxis is the artificial scarcity of medallions driving up prices. How would Uber creating an artificial scarcity of drivers (to drive up prices) be any different?
- pfortuny 12y ago
  The parent did not ask for it, he simply states the obvious: no barrier to competition means difficult business, no more.
  - freehunter 12y ago
    I wasn't posing the question to challenge him, just as an addition to his comment.
    - pfortuny 12y ago
      I misunderstood your comment then, sorry about that.
- unreal37 12y ago
  I once talked to a taxi driver (who didn't own the medallion), who said he paid the owner $1,500 per month to drive for him. Plus the cost of his car, gas, and high insurance. He had to earn $3,000 per month just to break even. Taxi drivers never made a lot of money, even in the old system. But at least the system protected them to a degree by limiting competition. Now there is no protection. It's a free market. Anyone with a Toyota Yaris can fire up Uber-X and compete during the busy couple of hours of the night. It will be a race to the bottom for driver incomes, for sure.
  - greggyb 12y ago
    Except in the Uber/Lyft scenario, we see no $1500/month deadweight loss going to an economic rent. There's also no reason to presuppose that personal transportation SHOULD provide a livelihood. The goal of companies like Uber/Lyft is to take advantage of the currently wasted extra carrying capacity in personal vehicles. There's no reason to expect a priori that the value of extra capacity is enough to provide an income. The goal of these companies is to provide cheaper transportation to those without cars, not to provide a living for those with cars. If less money overall is spent on transportation (which is >90% means to an end, excepting joyriding and competition), which is the case when currently excess capacity is utilized, and consumers also spend less (and consequently capital tied up in personal vehicles), then more capital and income is available for other goods and services. Obviously, any major paradigm shift in the provision of a good or service will cause some level of upset for those accustomed to the current paradigm, but that does not make the shift a negative one. Further, attempts to ease the transition only draw out the period where we operate in a lossy manner. In another manner of speaking, when I heard of Uber and Lyft, I did not think that I could quit my day job since I have a car, nor would I have decided to go buy a car if I didn't have one for the purpose of earning income. I did think that they could be a valuable way to defray a portion of my already sunk cost of owning a vehicle. If I hadn't owned a vehicle, these services may have lowered the marginal cost of acquiring a vehicle enough that I could now reasonably afford one. In both of the above lines of reasoning (currently owning or deciding to purchase), they are not a means of supporting myself, but a means of sharing some of my costs with others who are willing to pay. A car still costs money, but by renting space in it, I can lower the cost. Think of it more akin to AirBnB - if I own an apartment with an extra room, I don't expect to pay my whole rent with AirBnB-ing out the extra room, but I certainly expect to pay part of my rent out of it. The only difference is that Uber/Lyft rent room in a car.
    - mkhalil 12y ago
      "no reason to presuppose that personal transportation SHOULD provide a livelihood" This. It's not Uber's goal to make it so you can live off of Uber. It's to provide people with extra money the side. Does this hurt the livelihood of regular taxi company drivers in the long run? Of coarse. But with so many cars on the road, maybe it's an outdated occupation.
- theorique 12y ago
  It would drive the revenue into Uber's pockets rather than into the pockets of taxi medallion owners. So for Uber, it's a plus. For others, not so much.
- williamcotton 12y ago
  What if, and just humor me here, but what if taxi medallions are a good idea after all?
forrestthewoods 12y ago
I'd take it a step further. Not only is there nothing that prevents it but that it's the natural order. It's basically a commodity. Margins on such things are thinner than razor thin. In a great twist of irony I'm sure we'll soon see Uber lean on regulations to protect their foothold as that will eventually be their only competitive advantage.
- golemotron 12y ago
  I predict that as soon as self-driving cars become available, Uber, Lyft, or whoever occupies that space will march in and start replacing drivers. The only way this doesn't happen is if drivers gain regulatory or bargaining power in the duopoly. And if that happens a startup will come along, adopt self-driving cars and eat the duopoly's lunch. To survive, they have to stay unencumbered by regulation that would get in the way of replacing drivers.
sp332 12y ago
Drivers can switch companies pretty easily too. Some drivers work for both Lyft and Uber already. If a new player enters who is able to lure drivers away from the incumbents, they might have an advantage.
- deleted 12y ago
  [deleted]

freehunter 12y ago

But one of the biggest complaints about taxis is the artificial scarcity of medallions driving up prices. How would Uber creating an artificial scarcity of drivers (to drive up prices) be any different?

pfortuny 12y ago
The parent did not ask for it, he simply states the obvious: no barrier to competition means difficult business, no more.
- freehunter 12y ago
  I wasn't posing the question to challenge him, just as an addition to his comment.
  - pfortuny 12y ago
    I misunderstood your comment then, sorry about that.
unreal37 12y ago
I once talked to a taxi driver (who didn't own the medallion), who said he paid the owner $1,500 per month to drive for him. Plus the cost of his car, gas, and high insurance. He had to earn $3,000 per month just to break even. Taxi drivers never made a lot of money, even in the old system. But at least the system protected them to a degree by limiting competition. Now there is no protection. It's a free market. Anyone with a Toyota Yaris can fire up Uber-X and compete during the busy couple of hours of the night. It will be a race to the bottom for driver incomes, for sure.
- greggyb 12y ago
  Except in the Uber/Lyft scenario, we see no $1500/month deadweight loss going to an economic rent. There's also no reason to presuppose that personal transportation SHOULD provide a livelihood. The goal of companies like Uber/Lyft is to take advantage of the currently wasted extra carrying capacity in personal vehicles. There's no reason to expect a priori that the value of extra capacity is enough to provide an income. The goal of these companies is to provide cheaper transportation to those without cars, not to provide a living for those with cars. If less money overall is spent on transportation (which is >90% means to an end, excepting joyriding and competition), which is the case when currently excess capacity is utilized, and consumers also spend less (and consequently capital tied up in personal vehicles), then more capital and income is available for other goods and services. Obviously, any major paradigm shift in the provision of a good or service will cause some level of upset for those accustomed to the current paradigm, but that does not make the shift a negative one. Further, attempts to ease the transition only draw out the period where we operate in a lossy manner. In another manner of speaking, when I heard of Uber and Lyft, I did not think that I could quit my day job since I have a car, nor would I have decided to go buy a car if I didn't have one for the purpose of earning income. I did think that they could be a valuable way to defray a portion of my already sunk cost of owning a vehicle. If I hadn't owned a vehicle, these services may have lowered the marginal cost of acquiring a vehicle enough that I could now reasonably afford one. In both of the above lines of reasoning (currently owning or deciding to purchase), they are not a means of supporting myself, but a means of sharing some of my costs with others who are willing to pay. A car still costs money, but by renting space in it, I can lower the cost. Think of it more akin to AirBnB - if I own an apartment with an extra room, I don't expect to pay my whole rent with AirBnB-ing out the extra room, but I certainly expect to pay part of my rent out of it. The only difference is that Uber/Lyft rent room in a car.
  - mkhalil 12y ago
    "no reason to presuppose that personal transportation SHOULD provide a livelihood" This. It's not Uber's goal to make it so you can live off of Uber. It's to provide people with extra money the side. Does this hurt the livelihood of regular taxi company drivers in the long run? Of coarse. But with so many cars on the road, maybe it's an outdated occupation.
theorique 12y ago
It would drive the revenue into Uber's pockets rather than into the pockets of taxi medallion owners. So for Uber, it's a plus. For others, not so much.
williamcotton 12y ago
What if, and just humor me here, but what if taxi medallions are a good idea after all?

forrestthewoods 12y ago

I'd take it a step further. Not only is there nothing that prevents it but that it's the natural order. It's basically a commodity. Margins on such things are thinner than razor thin. In a great twist of irony I'm sure we'll soon see Uber lean on regulations to protect their foothold as that will eventually be their only competitive advantage.

golemotron 12y ago
I predict that as soon as self-driving cars become available, Uber, Lyft, or whoever occupies that space will march in and start replacing drivers. The only way this doesn't happen is if drivers gain regulatory or bargaining power in the duopoly. And if that happens a startup will come along, adopt self-driving cars and eat the duopoly's lunch. To survive, they have to stay unencumbered by regulation that would get in the way of replacing drivers.

sp332 12y ago

Drivers can switch companies pretty easily too. Some drivers work for both Lyft and Uber already. If a new player enters who is able to lure drivers away from the incumbents, they might have an advantage.

deleted 12y ago
[deleted]