
The 144 Million Dollar Button - endtwist
http://notes.unwieldy.net/post/22958656041/the-144-146-165-button
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pscheufele
Your math for the $144 million button makes for a good headline, but seems a
bit dodgey. Plus, why is this article linked to instead of the New York Times
article it references with actual information?

WHEN TIP WAS 10%: BASE REVENUE = 82,497 TIP REVENUE = 8,250 TOTAL REVENUE =
90,747

TIP UP TO 22%, ASSUMING SAME BASE REVENUE BASE REVENUE = 82,497 TIP REVENUE =
18,149 TOTAL REVENUE = 100,646

TIP REVENUE INCREASE = 9,899

CREDIT CARD FEE AT 1% = 1,006 2% = 2,012 3% = 3,018 4% = 4,024 5% = 5,030

13,267 CABS

LETS ASSUME THAT EVERY FARE WERE PAID WITH CC.

ASSUME 5% CC FEE, BECAUSE THE NEW YORK TIMES ARTICLE SAYS "higher tips are
tempered by a 5 percent service fee applied to fares that are paid with
plastic," TOTAL REVENUE, LESS CREDIT CARDS = 95,616

TOTAL TIP INCREASE = ~131.3 MILLION TOTAL CC FEES = ~66.7 MILLION

TOTAL INCREASE FOR CABS, LESS CC FEES = ~64.4 MILLION

Now, since the credit card tips are going to have to be fully declared for tax
purposes, since they will come back to cab drivers in paychecks and with 5% of
the TOTAL FARE taken out, I would actually guess cab drivers are seeing LESS
MONEY than they were before the credit card machines were installed. I would
bet that the 10% tip average pre-card machine is actually low based on
undeclared cash tips, and having tax taken on a full 22% will drop the net
significantly. When factoring in credit card fees and taxes, cab drivers are
probably making less on this deal. But hey, at least Visa and MasterCard must
be psyched.

NYT: Told of the statistics that showed higher tips, some drivers scoffed. “I
know that’s not true,” said William Lindauer, a driver and coordinating member
of the New York Taxi Workers Alliance. “They get no tips, or less tips.”

~~~
powera
Why are you using all-caps?

The tax and credit card implications are irrelevant to the point of the linked
article, which is about the framing / convenience aspect of having suggested
tip percentages. Whether taxi drivers are making more money from credit cards
(and you seem to have an interest in believing they aren't) is orthogonal to
whether tip suggestions help them make more money.

~~~
pscheufele
Powera, this was my first thought as well, but even looking at the question
this way is not realistic because the variables don't match. To answer this
question, we would need to test (a) credit card machine payment without tip
suggestions vs. (b) credit card machine payments with tip suggestions. By
comparing machine vs. cash, the fact that cash tips would never be declared
accurately skews the results to where the test fails.

------
ticks
Not being from the States I really don't like tipping, I guess at least with
this system it gets rid of the variables, like is tipping expected? How much
is acceptable? etc.

To me, tipping is just a sign that a business isn't charging enough for the
service.

~~~
lunarscape
I don't see the need to tip either as I live in a country with a decent
minimum wage. I worked in a bar as a student and tips were rare. As a result I
see tipping as some kind of failure by businesses. If employees are paid
fairly and the service is always good why should customers tip? (Honest
question)

~~~
yummyfajitas
Tipping creates an incentive for service staff to do a good job. If you do a
great job of keeping customers happy, you get paid more money.

It's a much tighter feedback loop than "if you suck, maybe your manager
eventually notices, then complains to you, then fires you."

~~~
todsul
I can't help but think tipping in the US is a false economy. Having arrived a
couple of months ago, I've felt obliged to tip to subsidize wages rather than
reward good service. I've been told off for not tipping enough rather than
asked what was wrong with the service.

~~~
ismarc
I see tipping as the opposite (and wage laws make it easier). Unlike most
professions, there's no asking for a raise each year to keep up with inflation
or reward your progress at getting better at your job. It's immediate feedback
and compensation for doing a better job. Not leaving a tip signals that you
would have been better off not being served by them. If a person whose main
income is from tips (and gets the 2.xx/hour wage because of it), they declare
and are taxed on their tips. If they don't make enough in tips in a pay period
to receive the prevailing minimum wage (i think 7.xx/hour, but I don't
remember for sure), the business is required to pay them minimum wage. If
someone yells at you for not tipping them, just ask to talk to the manager,
explain why they didn't deserve a tip (based on their service) and the fact
that they berated you for it. Nearly every time they will be fired on the spot
(or at the end of their shift) because it's the same as saying the business
expects you to pay for crappy service.

~~~
jerf
Better than no tip is the one-cent tip. No tip may be someone forgetting; one
cent makes the point clear.

To be clear myself, in ~15 years of being the paying party I have done this
precisely once, so I'm not advocating making a habit out of it. I'm just
saying, it makes the point that much more.

------
paulgb
The figures are based on the tips that were reported by drivers. Drivers have
an incentive to under-report cash tips (income that's not reported can't be
taxed), but not credit-card tips (which can easily be audited).

It's possible that drivers aren't earning more, they're just reporting more.

~~~
kevincennis
Good. Call.

That was my initial reaction when I read this too.

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robryan
I always wonder why they just don't build this tip amount into the price,
factoring in a decent wage for the driver. These kind of things seems similar
to having the cheapest price for something online but making up for it with
inflated shipping charges.

~~~
adgar
You haven't met New York cab drivers. A lot of them treat passengers like less
than cargo. Here's the one time I didn't even tip at all.

I'd just had an enjoyable but naturally stressful night seeing an ex who came
into the city from westchester for the day. I left her at grand central and
couldn't be fucked to take the subway, but it was 11:30 at night on Friday at
grand central - tough to find a free cab. But after only a few minutes of
strategic searching, I finally manage to spot an open cab on the clock -
score!

Now you should know this crucial NYC cab law:

> A Driver who has been dispatched must not refuse, by words, gestures or any
> other means to provide transportation to a person who has prearranged the
> trip with a destination within the City of New York, the counties of
> Westchester or Nassau or Newark Airport. [0]

All "prearranged" in a cab means is that the passenger is in the cab and told
the driver a destination. It's a really important law - for one, it means cab
drivers can't refuse destinations based on race/socioeconomic status/etc. Not
all cab drivers like this law because it impacts their take, so they'll try to
avoid picking you up.

Anyway, this cab driver notices I've spotted him from about 20 feet away and
starts rolling down the passenger window, asking where I want to go
repeatedly. If I tell him, and he doesn't like it, he'll get the fuck out of
there before I get in the cab. I knew exactly what was going on, but I'd had a
long god damn night and for once wasn't going to have it. So I just thought
"fuck it," didn't say a single word, and just got in the cab and told him my
block.

He's pissed as _fuck_ because _he_ knows that _I_ know he has to take me
there, since I ignored him outside the cab. He doesn't even try talking me out
of the cab, he just slams on the fucking gas and drives like a complete
asshole so he can try to get a better fare after me. I actually am sort of
glad to get home quicker but it's actually maliciously bad driving. I'll still
tip him though - that's a big part of his take-home.

I realize I don't have any cash, and it was only like a 9 dollar ride, but I
figure I'll tip him extra to make up for hit he'll take on the credit card.
When he sees the credit card he exclaims "oh come on, credit card? fuck..."

At that point, I reminded him that he _had_ to accept the credit card, just
like he _had_ to drive me to my home, and (in as many words) suggested he
accept the laws governing his trade. Then I tipped him 0 and told the stunning
blonde woman getting into the cab that the driver's a prick.

[0] §55-20a-1
[http://www.nyc.gov/html/tlc/downloads/pdf/2011rulebook_ch55....](http://www.nyc.gov/html/tlc/downloads/pdf/2011rulebook_ch55.pdf)

~~~
temphn
You are a lot wealthier than the cab driver. From his perspective, you made
him lose money by taking a route to Westchester, and then lose money again by
using a credit card, and then lose money a third time by not tipping him.

EDIT: Ok, not to Westchester but outside the city limits. Basically the law
forced a guy who doesn't make that much money to engage in a transaction with
you against his will. He wasn't the bad guy here.

~~~
yummyfajitas
The law also gives the guy a monopoly on selling taxi services, so it's hard
to have much sympathy.

I'm all in favor of letting cabbies pick and choose their fares. But if we do
that, we also need to allow competition in the taxi market.

~~~
adgar
> The law also gives the guy a monopoly on selling taxi services, so it's hard
> to have much sympathy.

Sort of - the law gives the guy a monopoly on picking up street passengers.
But again, these laws are broken often - livery drivers will still pick you up
sometimes, depending on where you are. Definitely not in front of Grand
Central, though.

~~~
DannoHung
Yeah, never ever ever get in a Livery cab though without pre-negotiating a
price. I made that mistake once.

------
cperciva
Charities achieve the same effect with their donation tiers -- people very
often donate the minimum for a particular tier. Looking at the FreeBSD
Foundation donors page, they've received $148,968 so far this year, and adding
up the "minimum donation to be listed in this tier" numbers gets you up to
about $144,000.

For that matter, I did the same thing -- Tarsnap was towards the top of the
1000-4999 $ range from its December 2011 donation (which due to accounting and
postal delays counted as a 2012 donation) and yesterday I said "screw this,
let's hit the magic number" and wrote them a check for the remaining amount I
needed to be in the $5k+ tier instead.

I've seen multiple charitable organizations engage in lengthy debates about
whether they should add an $X tier and hope that people below that level will
bump up their donations or whether they'd lose too much from people who were
currently donating more than $X instead reducing their donation down to $X.

------
sdfjkl
The lesson here is that default settings are very important and you should
spend some thought on them.

------
sparknlaunch12
Why the increase? Thoughts:

1) Easier and quicker to push options (20/30/40%) than key in lower amount.

2) Pre set options may lead to mistakes.

3) Customer doesn't want to embarrass themselves by entering an anoint so just
pushes a button.

4) The average fare and average cash in hand leads to per tips versus card
payment. Eg Avg fare $9 and most payments with a $10 note.

5) Customers willing to tip higher due to preference towards card payments.

6) Peak in typing due to early adopters using technology.

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corin_
I wonder if they've ever AB tested, somehow doubt it.

Would tips go up if the buttons were changed from 20/25/30 to 25/30/35, or
would people type in their own amount more, or pay no tip more? What about if
there was only one suggested tip rate, 25%? Or a slider you could drag from X
to Y? Or...

~~~
maybird
Or maybe skip the fancy UIs and recommend paying cash for tips?

As someone who's worked service jobs in my youth, I'd really like to stress
the importance of cash over CC tips.

Pay is usually abysmal and CC tips don't always make it into the pockets of
the people who deserve it, not to mention the delay.

Also, cash is easier to split when necessary. For example, between the wait
staff and the kitchen staff.

So _please_ always tip in cash.

~~~
corin_
I was under the impression that generally (maybe this is a UK thing?) credit
card tips get pooled and shared out between staff, whereas cash tips, although
they sometimes get pooled, are more likely to go straight to the person you
give it to.

Either way, it's not really relevant to this story..

~~~
amirmc
I worked in a kitchen for almost a year (in the UK). CC card tips appeared on
my weekly payslip. Cash tips never got split with kitchen staff.

~~~
maybird
That's a real shame.

The client's impression of the wait staff is greatly influenced by the kitchen
staff. That's why we would split our tips.

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droithomme
If you're forced to pay a minimum 20% "tip", it's not a tip.

~~~
superchink
You’re not forced. You can enter any amount you wish. It's merely a
convenience.

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speg
Technically, three buttons.

~~~
ralfd
Technically correct -- the best kind of correct.

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almond
This number is revenue, but don't forget about cost. Cab drivers only started
incurring credit card fees when the city made them start taking cards. I tip
more when I use my card than when I pay by cash to help the driver offset the
few-dollar fees. It's not a very high-margin business.

~~~
PeterisP
There shouldn't be any "few-dollar fees". If they are paying more than 3%
(i.e., much less than the change in tips) for the card transaction, then they
are being robbed blind by the bank and/or corrupt officials.

------
adgar
You can also enter your tip manually - which I do often - so the 20%/25%/30%
buttons themselves necessarily don't account for _all_ of the change in
tipping patterns.

