

The Economics of UberX in NYC - jmover
http://justin-singer.org/blog/2014/11/the-economics-of-uberx-part-ii/

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morgante
While fascinating, this analysis seems to fall apart on two major fronts.

1\. It seems to completely discount surge pricing, which would likely change
these numbers significantly.

2\. It assumes that taxi and Uber behavior is very similar, but this seems
pretty dubious for 2 major reasons:

a. In dense areas it's far more convenient to use a taxi than an Uber (you can
hail one in a minute or two), while in less populated areas it's far more
convenient to get an Uber. This would definitely skew Uber significantly
towards longer, speedier trips.

b. Uber likely sees a greater proportion of utilization from airport rides.
For an expensive trip like that, people are more price conscious and most New
Yorkers know it's usually much cheaper to take Uber. When juxtaposed against
the prospect of waiting in line for a ~$60 + tip taxi ride, the immediacy of a
$63 Uber looks _very_ appealing. Additionally, I imagine Uber is seeing
disproportionate growth amongst tourists (who might already be using Uber
elsewhere but are intimidated by hailing NYC taxis).

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whiddershins
The author _does_ discuss surge pricing.

~~~
badusername
Nope, he does not. If he'd studied the blog post he's linked to, it is clear
that surge rates can go a few multiples at busy periods, which would make an
outsized contribution to total fares even at 10-15% occurrence.

If you look at the service area on the ubernyc page, it goes way beyond the
city limits (even a fixed price to the hamptons). Again, even if the
percentage of these rides are low, it isn't hard to see how average trip
length or average fare would be moved up significantly.

I read the article - even though it's written well, it makes a lot of
hypotheticals based on hazy assumptions that seem to lead well to a result
that the author probably wanted to put forward. Not the best article if you
want an objective analysis on the issue.

~~~
harryh
Did you look at the spreadsheet he linked to in the footnote where he
calculates the cumulative effect of surge pricing? Where would you like to
quibble with the math?

[https://docs.google.com/spreadsheets/d/1N4NiwuPLo78w9PaoqXRa...](https://docs.google.com/spreadsheets/d/1N4NiwuPLo78w9PaoqXRa-
eVwGxsexr1aFXdY_bvME-w/edit#gid=0)

~~~
badusername
Daily weighting is made up without any real insight into operations.
Furthermore, whatsthefare says that it bases its own approximations on
relatively sparse data from user's use of their systems, not realtime
monitoring on a service that's probably prone to constant change.

I think I mostly find it incorrect to essentially take a pin-hole view at the
data through 5-6 averages, and extrapolate it towards a somewhat biased
result.

~~~
harryh
Even if you drastically change the daily weightings you don't move the overall
output very much at all.

As for the other data they describe their collection methodologies, and the
numbers they produce are in line with trends that Uber has indicated. You're
certainly free to produce a dataset of your own but until you do that this one
doesn't seem especially bad or anything.

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untog
_for the next three months at least, Uber is indemnifying full-time drivers
against slow business. Good luck competing with that, companies-that-
don’t-have-a-$1.5-billion-war-chest._

This is what worries me. Uber are the freemarket dream child, but they're
using their financial heft to actively distort the market. They've already
driven Hailo out of the city, and I wonder who is next. I want Uber to become
the de-facto choice by providing good service, not by bullying everyone else
out of the city.

~~~
paulrosenzweig
I agree that this is concerning, but I think the risk is mitigated by the
relatively low tie in. I personally don't care which app I use. So, I end up
using whichever service will give me more VC-paid free credit.

Uber has the most VC by far. But, if they use that to kill competitors and
subsequently try to raise prices, I'd happily switch to the next upstart that
undercuts them.

The only big downside is that it necessarily requires _a lot_ of VC to compete
with them right now.

~~~
brownbat
> Uber has the most VC by far. But, if they use that to kill competitors and
> subsequently try to raise prices, I'd happily switch to the next upstart
> that undercuts them.

That's the rub of dumping. You basically have to do it indefinitely or you
eventually get competition. The lucrative "jack up prices" phase is really
hard to safely transition to. Barriers to entry, specifically long lead times,
will make dumping more feasible for certain goods or services. It's not
trivial to spin up a car service, but I'm not sure the barriers to entry are
high enough or not.

There are other ways you can behave anti-competitively without dumping too...

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pbreit
This guy's whole article falls apart based on one terrible assumption: that
Uberx behaviors are similar to taxis. There are a whole host of reasons why
this is not the case. Taxis are more likely to hang out in dense, Manhattan
areas contributing to short and slow rides. Riders would much prefer to take
an Uberx to the airport than a taxi. Surge pricing. Etc.

~~~
untog
Why would people be more inclined to take an UberX to the airport than a taxi?
The taxi has a flat fare. And from the map view I've seen using Uber, UberX's
absolutely do hang around in dense Manhattan areas.

~~~
albertwang
I live in Manhattan and I now prefer to take Uber/Lyft to the airport whenever
there's no surge pricing. Taxis are _supposed_ to have flat pricing but I've
never found that to be the case: given all the bridge/tunnel tolls, baggage
fees, and airport taxes, I'm consistently charged anywhere from $80-$120 one-
way from Midtown Manhattan to LGA (+tip). In comparison, Uber uses GPS
tracking to automatically figure out which tolls to tack on, and it costs me
$63.

~~~
harryh
NYC Taxis have a flat fare to JFK. This does not apply to LGA.

That being said I have no fucking clue how you're spending $80 or more on that
fare. Even if you're coming from the far west wide and sitting in traffic
forever you shouldn't be cracking $50.

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jhferris3
Not taking surge pricing into account probably plays a large role in
explaining this article's findings.

Another thing to note in his section with self driving cars: the pool of cars
would be fixed in that case, but the amount of uber drivers fluctuates
throughout the day. Now, uber doesn't _really_ care if drivers are 70%
utilized or 50% utilized, as their revenue doesn't depend on that, but they do
have an interest in keeping the drivers marginally satisfied

Also I don't have the numbers but at least in SF, taking an uber to the
airport is much cheaper than taking a cab ($25 vs 50 from my office, last I
checked), so I could imagine that something like that skews the distribution
of ride lengths.

~~~
mattzito
I think the distribution of ride lengths might partially have something to do
with the nature of cab hails in NYC vs. other cities. I travel a lot, and in
most cities, uber is my go-to cab service, because I don't know the local cab
system, I might have to call multiple companies, I can't street hail in a lot
of places, etc.

However, in NYC, it's often faster to street hail a yellow cab for short trips
than it is to wait for an uber. So here, I mostly use uber for long trips
(airports, midtown to the financial district, brooklyn, etc.) or for time-
sensitive situations.

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whiddershins
What's odd to me is trying to discuss Uber in NYC by comparing to yellow cabs.
We have a thing in NY called "car services" which basically everyone uses, and
which are much more comparable to Uber than taxis are. You call a car, they
come to your house, they pick you up, and they take you where you want to go
for a predetermined price.

In general, the car services I take are cheaper than Uber or metered taxis.
But not always. And they can be a little more annoying to deal with than just
using an app on your phone. Certainly Uber would be far less intimidating for
tourists.

Plus Uber was able to pick me up in the rain on Halloween, because of surge
pricing. And they only charged me triple!

But seriously: if you are talking about Uber in New York and not mentioning
Arecibo car service, which has several hundred of cars all over the city at
all times of the day and night, and is one of many such services in operation,
you are missing a huge part of the equation.

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haddr
The most important giveaway of this post is this: "But at the end of the day,
their business model boils down to taking a 20% rake of a large commodity
services business while pushing assets, costs, and liabilities off the
corporate financial statements and onto the shoulders of their not-quite-
employee-partners."

~~~
wdewind
And yet people still choose to drive for Uber. Are they all being taken
advantage of?

~~~
maerF0x0
And yet people work for walmart, are they all being taken advantage of?

There is a claim that some positions of power make people unqualified to make
choices. Think student/teacher or adult/minor sexual relations or maybe some
of the ideas around accredited investors -- non-accredited investors are not
allowed to invest in certain types of assets to protect them from predatory
practices.

I'm not commenting on morality here, but the state of current law.

~~~
wdewind
> Think student/teacher or adult/minor sexual relations

You are literally comparing working for Walmart to being raped? That's a bit
condescending not only to people working for Walmart but also to rape victims.

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francismcjaynes
As I move my startup forward I work as an Uber driver and have for the last 13
months. Very simply, fair prices have dropped substantially and it is much
harder to make the same amount of money as before, although operating costs
are the same or higher. Not to mention the constant risk of catastrophic
damage / injury .

Uber can massage numbers all they want but a driver can only take - on average
- the same number of fares per hour, so drivers work longer and harder. In
that way it is exactly like any taxi job on earth - long, hard hours for low
pay with zero equity value accruing. But that is ok, because that is the
nature of such a job. Uberx is a tremendous (r)evolution for the consumer but
for the driver... not so much. Driving for Uber is a blessing for me because
it allows me to control how many low-paying, high-risk hours I need to fulfill
to make my entrepreneurial nut per week - and it works for now. But for the
the mainstream driver - hey, the new boss looks a lot like the old boss in all
the ways that really count. Uber on!

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fatjokes
I've signed up (as a user, not driver) for Via, Gett and Lyft. I believe
drivers can do the same. As long as they don't collude and are constantly
competing, it could be good for everyone. That said, I still prefer yellow
cabs and use them when possible.

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jy1
surge pricing not taken into account?

