

The Don’t Be An Asshole Rule - kstop
https://medium.com/p/15857aaa06f2/

======
crazygringo
It's not that simple, and this topic comes up after every kind of natural
disaster.

The author is completely missing the fact that the flip side of "price-
gouging" is making sure that a scarce resource is only utilized by those who
need it the most.

If there are only 20 taxis, and there are 20 people desperately stranded who
need a taxi, and 200 people who would just "like" a taxi, then if a taxi costs
$200, those 20 people will happily pay for one.

But if a taxi costs only $20, then the taxis will mostly be used by the people
who don't desperately need them, and the ones that do might die (if it's that
desperate).

Likewise with charging $100 per bottle of water or batteries. It doesn't
necessarily make you an asshole -- it's the simplest way of making sure a
scarce resource is only allocated to those who truly need it.

And more than that, it incentivizes people to provide that resource -- extra
taxis ferrying passengers, extra people supplying water or batteries -- even
incentiving people with extra water/batteries at home to sell them to others.

Sure, when there are good networks of trust in a society, and the resource in
question isn't really scarce, price-gouging can be unfortunate. And ideally,
in cases of disaster, the government should be providing essential resources
for all.

But the author of this post seems to be completely and utterly unaware of the
positive and possibly life-saving effects of scarcity pricing.

~~~
wizzard
Again, wealth does not equal need. You're assuming all of the desperately
stranded people have $200 at the ready for a taxi trip that's normally only
$20. And some people will pay whatever price for convenience, because they
have plenty of money.

You can't just assume that everyone CAN pay whatever price is set, and just
decides not to because they don't need it enough. In this scenario, the poor
people die and the rich stay comfortably unaffected while using the resources
others are far more desperate for.

~~~
alangfiles
It seems like it's too hard to solve "who needs it" without employing some
flawed metric like money. But I'm not sure there's any better solution.

$200 would dissuade me, in situations where $20 wouldn't (unless I was in a
heavy bind). This isn't true for everyone, but it seems to work well in the
middle.

I think Uber did nothing wrong, but maybe they need to work on how to not be
perceived as assholes, they could have had customers queue up for lower
prices, and specify their need, and worked through the queue judging each
persons priority (but maybe you'd have even more angry folks).

~~~
rst
In this situation, first-come first-served is clearly imperfect, but it at
least avoids the bias that you get with surge pricing: service only to the
financially well-off.

------
mathattack
If you have one of only a small subset of programmers talented in ABCD, and
you charge $2000/day for them, are you gouging your customers?

If you want to build slack into the system, allow people to make profit off of
extra inventory. You want the hardware store to carry a couple crates of
batteries in the back in case of emergency? Let them charge enough money in
the once-in-a-lifetime storm to make it worth their while.

Taxis take risks riding in storms, if you want them to be available, let them
make money.

~~~
scott_s
There's a reason that stores _don 't_ charge you extra for batteries,
flashlights and water before a storm: you will be pissed off, and not come
back.

~~~
tsax
Actually this is usually because of local anti-price gouging laws pushed by
ignorant people such as the author of the above piece. You can thank these
people for mile-long gas lines, and general shortages all around, because to
them MORALITY has nothing to do with the consequences of disrupting supply in
an environment of sudden excess demand. Its all about feeling good and
punishing people for following market incentives to alleviate shortages.

~~~
scott_s
"Why Economists Love Price Gouging, And Why It's So Rare":
[http://www.npr.org/blogs/money/2012/10/29/163861383/why-
econ...](http://www.npr.org/blogs/money/2012/10/29/163861383/why-economists-
love-price-gouging-and-why-its-so-rare)

 _And, Kahneman argues, when basic economic theory conflicts with peoples '
perception of fairness, it's in a firm's long-term interest to behave in a way
that people think is fair._

~~~
mathattack
I guess it's just splitting hairs... On the one side is the classical
economist saying, "Customers shouldn't be screaming in indignation over this"
which is my reaction to the author's rant. The other is the behavioralist
which is saying, "This is just bad business if customers feel slighted."

~~~
tsax
That would be fine if the story stopped there. The balance could be found out
by experimentation between many companies and pricing models. But it doesn't
stop there. Regulations are brought in and you damn well believe that they are
enforced ruthlessly even in supposedly free-market friendly 'red' states.

------
tehwebguy
Who gets to say when demand based pricing is gouging?

On New Year's Eve in NY I don't think there's anything in the world wrong with
increasing the price to the maximum that customers are willing to pay.

The flood is different but I'm not sure where the line gets drawn? Uber
already has rates that range from similar (for very specific trips) to
drastically more expensive than taxi rates.

Something else not mentioned: incentivizing additional drivers to go out and
work during a flood / the aftermath.

------
rinon
Really HN? I would make the case that price gouging occurs when your customers
are in a dire situation due to no fault of their own, and other options are
limited. While this make make a cheap buck, in the long run, fostering good
relationships with your customers is even more valuable. That's reason enough
not to, even without a moral argument, which I think is also clear.

~~~
fecak
This is the point I think others may be missing. Charging suffering people
more for something due to an "act of God" type scenario is where gouging comes
into play. When supply and demand don't meet due to natural changes in supply
and demand (more companies using Rails with even supply causes prices for
Rails devs to go up), no one faults higher prices being charged. When demand
goes up or supply goes down due to a natural disaster, you can be sure that
people will notice.

Is tripling the price on New Years Eve in NYC gouging? Not really - it's the
same as prices going up for flowers around Mother's Day or Valentine's Day.
Demand will be high and would likely not be met if prices remained the same.

Small bumps in price will probably be tolerated due to acts of God, but not
outright gouging.

~~~
tsax
Again you are missing the consequences. Acting indignant is not going to bring
you more oil/gas/water/ice/food. Letting the prices go up will do it. No
amount of moral indignation and Talmudic discourse on when its right to charge
what is going to change what incentives people follow to actually deliver you
the goods in times of disasters.

------
quantgenius
Anytime there is an event that leads to a massive reduction in supply or
increase in demand for a resource (in this case transportation), whether
because it's New Year's eve or because there is a storm, there needs to be
some mechanism to allocate the scarce resource. The best known mechanism for
doing this is price. That way if you can wait to travel you wait and if you
truly can't wait, you pay up and you get to use the resource (in this case
transportation).

If you don't raise the price, people who desperately need whatever it is that
there is temporarily a shortage of, may not be able to get it at ANY price
because people who don't actually need it are using more than they would at
the market clearing price. These users who wouldn't pay up do not receive as
much benefit from the resource as those who desperately need it and would pay
up. This ultimately leads to a reduction in the overall benefit that accrues
to society as a whole.

What Uber did here is absolutely the "right" thing. Ultimately the problem is
a scarcity of whatever the resource is. If you don't raise the price, you
still have to allocate it and you can't just allocate it based on some
arbitrary "need". The fundamental reason communism/socialism always fails is
because a you can't ever truly judge how much someone else "needs" something.
By asking people to pay up or not you make them evaluate the intensity of
their own "need" while at the same time creating strong incentives for people
to find substitutes, do without and for producers to produce more.

~~~
wizzard
The problem is that need doesn't necessarily correlate with wealth; in fact
there may be a reverse correlation. The people who need to travel the most
can't necessarily afford to spend six times the normal price to do so. For
others money is no object when it comes to getting home in time to watch the
game.

You're making an assumption that everyone can afford the increased prices and
it's just about making a rational decision to "pay up" or not.

------
chrisbennet
When there is more demand for my services than I feel like handling, I can
raise my rates. If a customer doesn't like it, they can find someone else.
They don't _need_ me.

However, when your business sells a necessity (like public transportation or
runs a hospital) don't expect your customers to understand that your decision
to charge them much higher prices during an emergency is simply done "to
better allocate a scarce resource". Keeping poor people from using all the
scarce resources is probably not the best thing to do if you want repeat
business.

~~~
reeses
Maybe Uber is different in Toronto, but in SF it's basically making use of
unallocated livery, i.e., Town Cars, etc. (with a useless taxi hailing
service) I'm not sure riding in a "luxury" vehicle with a private driver is a
public necessity.

Poor people don't use Uber. Poor people very rarely use taxis. Poor people
ride the bus or walk.

And yes, it sucks to be poor.

------
nickzarzycki
Under certain circumstances, often involving human suffering or vulnerability,
demand based pricing becomes price gouging. Uber's actions here look like
price gouging. It's all very simple.

Everyone defending Uber here seems to be either deploying the 'where do we
draw the line' fallacy, or claiming that there's no such thing as price
gouging.

If you want to defend Uber, you need to show me why what they did isn't price
gouging. Or you need to show me that price gouging doesn't exist.

~~~
tsax
More blather. Its irrelevant whatever you choose to call the phenomenon. The
fundamental problem is scarcity of goods and services. Its a shortage of fuel,
water, food and other goods the delivery of which won't be carried out because
you have determined that raising prices is morally bad. Prices are a signaling
mechanism. You focus only on the nominal price and its supposed "profit-
mongering" by the suppliers, but it signals where demand exists and for
tankers/suppliers to deliver the goods where the demand is highest. Or you can
stand in the street corner calling the suppliers immoral and demand that the
cops arrest them for price gouging. Great! But you won't get your
ice/fuel/water. Good luck.

~~~
nickzarzycki
Let me ask you then: do you think that all scarce emergency supplies should be
allocated using price (perhaps via auction) during a disaster?

------
jtokoph
Maybe I'm naive, but I thought surge pricing was an automated change when
demand is about to outweigh supply. I don't think it's some asshole switch
someone flips.

~~~
schrodingersCat
This is probably true, but this story just proves that Hailo responded more
quickly to the situation. Allowing machines to dictate pricing in a situation
like this and not _immediately_ offer refunds and an apology will only serve
to alienate your customer base from your brand. Uber won't make that mistake
twice I'm sure. Halio now has customers for life

------
emhs
I agree that demand pricing has a valuable role in our economy. On the other
hand, notable kindness and lack thereof can easily have significant reputation
and PR effects, both positive and negative. The "Don't Be An Asshole Rule"
does not seem to be about preventing demand pricing in general, but instead
about the PR value and cost of such actions in the wake of a disaster. Clearly
Hailo is reaping a PR payout for leveraging its infrastructure to assist
Toronto residents.

The point is that Uber does not appear to have included the PR cost of surge
pricing in their calculus, and subsequently tried to deny that it happened in
order to recoup some of the PR losses. Perhaps they should have included an
earlier human intervention option.

Comments regarding the risks drivers bear going out in a storm also merit some
attention. Possible responses that come to mind easily:

* Cut the margin the company takes off the fee * Allow drivers to enable some form of hazard rate when things get dicey * Providing additional advice and hotlines and such things has nothing at all to do with rates, and gets PR points, if Hailo's experience is any indication

I'm sure the rest of y'all can come up with more suggestions. The point is
that demand pricing is not evil, but PR costs matter.

~~~
tsax
This is the most sensible comment in the whole thread to me. PR costs should
be factored in, and if I recall correctly Uber waived fees during Hurricane
Sandy in the NY/NJ area last fall.

------
tomjen3
If you sell batteries at 50 usd/pack after an earthquake you aren't going to
run out because, at the extreme, that is a high enough price that you can pay
a guy to fill up a backpack with batteries and walk them to you, even if that
would require him to walk 20 miles and he would have to be hired on a short
notice.

------
yitchelle
On Uber's Toronto's website [1], it says "• At times of intense demand, our
rates change over time to keep vehicles available. "

It looks Uber is invoking this clause to increase their pricing during a
really bad storm over Toronto. If this is true, please, Uber, have some
decency and help out the community.

[1] [https://www.uber.com/cities/toronto](https://www.uber.com/cities/toronto)

------
Zikes
It would have been great if Uber could have provided rides for free,
discounted, or even at regular rates, but at the end of the day they're still
a business. They have a responsibility to their employees and their investors
to make a profit, and adjusting their rates to match demand is a reasonable
way to do that.

Or you could act entitled and call them assholes.

------
fudged71
In Calgary, during our recent flooding (which was far worse than yours, not
that it matters), we crowdsourced information about which businesses were
price gouging (for water, ice, etc) and they were called out very publicly.

The mayor stepped in to say that this kind of opportunism _is_ illegal. Maybe
the laws are different in Toronto.

~~~
kstop
No denying that - Calgary's got real damage, we just have a lot of
inconvenience by comparison. Also you have the better mayor - not that that's
saying much.

------
tsax
There should also be a 'Don't be an economically illiterate douchebag' rule
which is seldom followed.

~~~
tomjen3
Agreed, but the better capitalism makes our society, the more people hate it.

~~~
johnjlocke
Better for who is the question.

If your service doesn't figure out what your response is going to be before
the disaster hits, then you are no better off than Enron diverting power to
another state in order to price gouge.

------
flipstewart
Who are you to say what is right and what is wrong? Furthermore, who are you
to judge another, especially individuals based on such limited examples of
their business?

Name calling doesn't solve problems. Childish bickering doesn't get results.

~~~
kstop
Not the author, just thought it would be interesting to see how opinions shook
out here.

And it has been! My own personal take is that this is bad policy. Calibrating
price to demand is well and good, doing it automatically is clever, but not
keeping an eye on it and overriding the algorithm in situations like this is
dumb. There's no way the few hours of extra income will make up for the lost
business over time.

Plus, Uber depends on a lack of regulation to operate. Doing stuff that only
helps the argument for regulation, and makes them look bad in the public eye,
could be suicidal for their business model.

------
MaysonL
Seems to me to be basic iterated Prisoner's Dilemma theory: you defect, and
you better expect to get tit-for-tatted until you stop. And lieing about it
will only make it worse.

~~~
aet
Isn't it just supply and demand?

