
Ensuring a Level Playing Field for Rideshare - mlthoughts2018
https://blog.lyft.com/posts/2019/1/30/ensuring-a-level-playing-field-for-rideshare
======
dvt
The "gig economy" bites back. For those wondering, here is a breakdown of the
TLC's implementations[1]. Without a doubt, Lyft is bemoaning "Minimum Driver
Pay" where "Each app company will have its own rate, which will be set by TLC
and adjusted periodically, and those with lower utilization rates will have to
pay their drivers more per trip than companies with higher utilization rates."

While it's true that higher-utilization apps (like Uber) will have to pay
their drivers less, this puts drivers in a position of power and Lyft in a
position of higher driver demand. I think this is a good thing both for
drivers and consumers. _Drivers_ get to arbitrage working for either Uber or
Lyft -- depending on the utilization/pay scale -- while being protected
financially by the TLC's policies.

Lyft can cry wolf all it wants, but it's not as "small a player" as it makes
itself out to be. By the way, this also protects new players in the space.
These rules only apply to businesses doing, on average, 10,000 dispatches a
day.

[1] [https://www.chauffeurdriven.com/news-features/in-this-
issue/...](https://www.chauffeurdriven.com/news-features/in-this-
issue/2049-new-rules-and-regulations-taking-effect-in-nyc.html)

~~~
dnautics
As a former driver I have to say lyfts logic is accurate. Also, why should a
company with less dispatches be subjected to different rules from those that
don't?? That's extremely anti-driver.

~~~
TylerE
The general logic is that larger players have more economies of scale so
making regs apply to all makes it _even harder_ on the small guys.

~~~
mlthoughts2018
Except in this case it’s the reverse. The larger players, which have it far
easier in terms of utilization rate, are _rewarded more_ than smaller players
working their tails off to reach better, but not best, utilization.

So it’s even worse than applying a single rate to all and tacitly advatanging
larger players. It’s actively basing that advantage on largeness.

~~~
Buge
Are you saying the law advantages providers with over 10k/day and hurts
providers with under 10k/day? I don't understand how that could be. The law
doesn't apply to providers with under 10k/day, so they should have freedom to
do whatever they find optimal.

~~~
mlthoughts2018
The utilization formula part of the law advantages each operator individually
according to that operator’s numeric utilization score.

Imagine if utilization was like a credit rating and the TLC wants laws that
ensure good credit ratings among operators. So they incentivize reaching a
good credit rating.

One option could be to say, hey if you get a credit rating about 700, that is
good for the people, so you get a tax break or something.

Instead they are saying, hey if the size of your business already makes it
easier for you to build a high credit rating, then you get _even more_ tax
breaks than others do, giving you even more advantage over them.

This is not about the 10k/day part at all, only about how if Uber’s position
as current market leader leads Uber to already lead on raw utilization rate,
then the new law automatically rewards Uber with a labor price break _more
than_ the price break Lyft would get, and more still than Via or Juno.

~~~
Buge
dnautics and TylerE were talking about the 10k/day boundary. If your reply
isn't about the 10k/day boundary, then I think you misunderstood them.

~~~
mlthoughts2018
No, I understood them. Despite my commentnot being directly about the 10k/day
part of the issue, my reply is directly relevant to the parent comments.
Perhaps you misunderstood my first comment?

~~~
Buge
TylerE was only talking about the 10k/day boundary. Why did you reply to
TylerE if you wanted to talk about something else? You should have replied to
someone else. As-is, the thread just became really confusing.

~~~
mlthoughts2018
> “Why did you reply to TylerE if you wanted to talk about something else?”

Because my comment was related to that. Not all related things had to be
squarely about the 10k/day item. My reply, which was very related to the
parent comments, just wasn’t about the 10k/day part.

It’s not necessary for a reply to focus on or discuss precisely the 10k/day
item in order to be related and merit being a reply in this subthread.

------
koolba
> Examples of this back and forth that have benefited drivers include Lyft’s
> pioneering in-app tipping and instant payments for drivers, features Uber
> has since copied.

In—app tipping is the worst thing that ever happened to ride share services.

~~~
slfnflctd
If you have ever tried to work as a ride share driver, you would quickly
discover that without tips it wouldn't be nearly as viable a source of income.

Honestly, I don't mind not getting tipped by the old man or single mother
going home with a few bags from the grocery store, I know they're broke. On
the other hand, I appreciate it when the businesswoman headed to the airport
gives me a bigger tip than I expected, I know she can afford it.

Would I rather make a flat extra $7 an hour? Yeah, probably overall. But
allowing tipping (in an environment where it's been a tradition for
generations) costs the company nothing and results in more income for
underpaid drivers. If it's that or simply make less money, well, it may not be
the perfect shining ideal of How Things Should Be Done, but I'll take it.

~~~
koolba
> If you have ever tried to work as a ride share driver, you would quickly
> discover that without tips it wouldn't be nearly as viable a source of
> income.

That’s why having tipping be part of the app is so ass backwards. The pricing
shown to the customer is what the customer agreed to pay. Some fraction of
that goes to the driver and that amount should be enough to be a viable source
of income. Banking on an expected X% bonus that’s not listed in the price
presented to the customer for the system to be able to operate is
disingenuous.

> Honestly, I don't mind not getting tipped by the old man or single mother
> going home with a few bags from the grocery store, I know they're broke. On
> the other hand, I appreciate it when the businesswoman headed to the airport
> gives me a bigger tip than I expected, I know she can afford it.

And if she doesn’t tip do you feel sleighted?

> Would I rather make a flat extra $7 an hour? Yeah, probably overall. But
> allowing tipping (in an environment where it's been a tradition for
> generations) costs the company nothing and results in more income for
> underpaid drivers. If it's that or simply make less money, well, it may not
> be the perfect shining ideal of How Things Should Be Done, but I'll take it.

Tipping for drivers has always been possible, in cash, outside of the world of
the app. Having it total external prevents “expected tip” shenanigans for min
wage calculations like goes on in the food service industry. That also has the
advantage of being off the books for the drivers (let’s be honest, none of
them are claiming taxes on a fiver given in cash by a passenger).

------
mself
Stop calling it “rideshare”. The driver is a not “talking a ride” and
“sharing” it with you. They are a paid driver. This is a taxi service — not a
carpooling service.

~~~
throwaway415415
Aren't you sharing the ride with other passengers?

~~~
alkonaut
How many Uber rides have other random passengers in it?

~~~
676339784
Uber pool is pretty popular

------
alkonaut
Can someone explain the argument here - isn’t the point of the minimum wage
that a company has to ensure the employees (drivers, contractors, whatever)
make at least the minimum wage. I realize Lyft doesn’t like it - it costs them
money - but what’s their argument that they shouldn’t have to pay their
drivers a living wage?

Something something higher Utilization Uber? I read it twice but it’s still a
little muddy to me. Are they arguing that since Uber drivers have higher
utilization, Uber has to pay less minimum wage padding - so they get an
advantage? Isn’t that fair? Or is this more complex than I’m hoping?

~~~
mlthoughts2018
It’s a much more complex issue than you are reading into it.

Lyft here is not opposing a plan to ensure drivers make a minimum wage nor
opposing a plan to incentivize companies to increase their utilization rate,
which is a measure of how much _productive_ traffic they add to the city
instead of unproductive traffic.

On the first issue, Lyft is saying that the specific implementation of a
minimum wage policy is going to hurt drivers by lessening ride demand overall.
Their reasoning is that the policy mandates the wagechange must apply
individually to every single ride, rather than applying in aggregate to each
driver over longer time spans like a week.

If Lyft can compete through price changes on a ride by ride basis, yet still
ensure that at an aggregate level the driver meets or exceeds the wage
requirement, this gives Lyft more levers they can pull to keep prices lower
for customers and/or strategically decide which types of traffic patterns
ought to be paying higher prices that subsidize the wage requirement.

The current policy disallows this type of “smart pricing” and instead insists
that all rides must raise in price, which is likely to lead to decreased
demand overall, especially for short rides that are less problematic in terms
of return-trip utilization risks.

This issue had little to do with Uber except maybe that Uber had greater
capitalization to ride out more losses while this law kills off competitors.
But Uber drivers could be just as negatively affected as any other drivers
from the specific way that a wage requirement is being carried out.

The other issue is very different, it is about rewards given to companies
based on the company’s demonstrated utilization rate, which is in part a
function of the amount of ride liquidity that company has, which is basically
a proxy for market share.

Lyft is asking, hey, if the goal here is to reduce unproductive traffic in
line with some studies on traffic congestion, etc., then why is there an
individually-calculated reward on a company by company basis that is partly
calculated using a proxy for market share? How does that solve the city
congestion problem?

For example, let’s say that the city did some research and knows that if
companies operate with utilization rate of 60% or higher, this is “good,” and
they want companies to have a financial incentive to reach that.

One way would be to offer a price break, freedom to pay drivers less than the
new minimum wage requirement, as a reward for hitting the utilization mark.

Instead of that, the law is choosing a formula not based on something like
that 60% number from studies or other factors. Instead, it is saying, hey so
Uber had a utilization rate of 45% (pretty bad for the city, way less than
60%), but their 45% number (partly due to their market share) is better than
say Lyft’s utilization at 40% or something.

In that case, Uber would get _more price break_ than Lyft, because 45% is
higher than 40%, despite neither one hitting the mark necessary at 60%.

Worse yet, because Uber’s ability to engineer 45% utilization is largely just
because Uber happens to have a larger volume of ride inventory, the reward had
nothing to do with proactive policy on Uber’s part, but is instead literally
codify the idea of “the rich get richer.”

Many alternatives make more sense in terms of helping the city and preserving
fair competition, for example:

\- basing price breaks on city-wide utilization target levels that apply to
everyone.

\- basing price breaks on the amount utilization increases over time, so that
the people making the biggest improvements get the biggest rewards.

~~~
alkonaut
This sounds overly complex. I don't see why regulation would need to worry
about utilization, pricing structure, etc. Of course inefficient use of
roads/vehicles is bad for a city - but even low utilization is probably better
than private drivers? And low utilization is also bad for any company so why
have any need to regulate based on it, all companies still want the highest
utilization possible?

I guess what I'm asking is: why doesn't a regulation Just say "drivers should
all have decent working hours (enough working hours, shifts not too long or
short etc) and they should be paid at least the minimum wage for each of those
hours _regardless of whether they are driving or not_.".

~~~
mlthoughts2018
It’s quite complicated. For example, in economic studies of taxi services
there’s a well-known “round trip” problem with rides that go from an urban
center to a relatively less dense outerlying area. Around NYC this might be a
ride from the financial district out to a far out region of Queens or
something.

Once you drop off the rider, you’re less likely to immediately pick up a new
rider in that random outlying area, so there’s some “return trip” extra cost
built for everybody, in terms of paying the driver to get back to a place with
a lot of passengers, the driver spending time to get there, and society
bearing a zero utilization period for the driver to get back.

As a result, this typically makes prices for these rides go up to reflect all
these built-in costs. And naturally this reaches some equilibrium that
reflects what people in the outlying area are really willing to pay for the
convenience, and somewhat weighted by the natural demand for rides there.

But one criticism of Uber has been using investor capital to artificially
reduce those costs down to levels totally unsustainable in terms of the actual
demand and built-in costs. Essentially taking a loss to artificially over-
service those areas, leading to huge increase of zero-utilization return trips
and huge losses to cab companies that don’t have investor cash injections to
artificially suppress the real prices in an attempt to win monopoly market
share like Uber is trying to do.

This is just one issue, and there are many more involving ride supply, driver
pay, smart pricing, business pricing, etc.

All these things combine to create a really complicated situation for the TLC
to genuinely ensure that drivers are paid fairly and companies like Uber don’t
just use investor cash injections to skyrocket unproductive “rides in waiting”
floating around to artificially make rides more available for market capture.

As a result, very simple policies that do not dig into operating details are
unlikely to succeed at all and would be easily gamed, especially for larger
operators.

~~~
alkonaut
> one criticism of Uber has been using investor capital to artificially reduce
> those costs down to levels totally unsustainable in terms of the actual
> demand and built-in costs. Essentially taking a loss to artificially over-
> service those areas

This would seem at first glance to either be a case of predatory pricing, or
it is not?

I still don’t see the why regulators shouldn’t separate the issue of minimum
wage from the other issues (competition etc). Even if the regulation means
killing Uber’s competitors, isn’t it the right decision to impose a minimum
wage? Is there a similar debate about e.g what a minimum wage does to small vs
large actors in retail?

If Uber uses a dominating market position unfairly or uses predatory pricing
with investor money that should be addressed, but if Uber needs to “pad” their
drivers wages $2 per hour and Lyft needs to pad $4 to reach minimum level due
to Uber being able to use its size to get higher utilization, then that seems
like competition as it should work?

I appreciate your attempt to explain why and how this is complicated - and I
apologize for being thick here.

~~~
mlthoughts2018
> “if Uber needs to “pad” their drivers wages $2 per hour and Lyft needs to
> pad $4 to reach minimum level due to Uber being able to use its size to get
> higher utilization, then that seems like competition as it should work?”

The problem is that Uber’s higher utilization is an arbitrary metric, and if
we’re picking arbitrary metrics, why would we pick one that intrinsically
entrenches the current market leader?

Just because Uber’s utilization might be higher than Lyft’s, that doesn’t mean
either one of them is operating with a satisfactory utilization or an
unsatisfactory one. What if Uber operated at 99% utilization, and Lyft at 95%.
At that point, offering any financial incentive based on ranked utilization
would be a huge waste of taxpayer money.

Meanwhile, if Uber and Lyft are at 15% and 10% utilization, it’s equally a
waste to reward because those are such bad numbers that society is enduring
major congestion costs.

Here’s an analogy. Suppose in the US that the government decided sports teams
are a morally bad influence on society due to executive and athlete behavior.

As a result, they will reduce your team’s roster size unless you donate money
to charity.

Suppose they were to “unlock” one new roster spot for every $1 million of
charity donation. That seems possibly fair. Teams can each decide if it’s
worth it, and it’s a flat fee affordable even by the least financially well-
backed teams.

But instead suppose they tallied up all the donatioms to charity and ranked
each team. The top team gets all roster spots, the next team gets most of
them, and so on down to the teams that did not donate, which get no roster
spots unlocked.

What’s the problem with the second model? It seems like a nice auction sort of
way to do it, and that’s fair right?

Well one problem is that the whole point was to raise money for charity to
offset ethical problems, and the auction method does not necessarily cause
much donation to happen, only enough to be the winner, say. The winning team
might have only donated $500k total, but they are still rewarded like they did
something awesome. Society loses out.

The second problem is that it intrinsically favors teams with more money. They
can buy the roster spots just based on their size, regardless of whether it is
addressing the underlying ethical problem. For big teams it’s just a cost of
doing business and the players can keep on doing cocaine in the hotel room,
who cares. But for the small teams, even if they want to reform the underlying
problem, they may not be able to afford to unlock roster spots, which
reinforces that they won’t make as much money from winnings, which keeps them
unable to buy future roster spots, and so on.

The utilization reward policy is like this in many ways. It doesn’t reward
based on absolute levels of utilization or improvement of utilization... it
intrinsically rewards based on your _ranked_ utilization, which just
reinforces the market share of existing operators.

~~~
alkonaut
That utilization is an arbitrary metric is exactly my point! Why use _any_
metric in a minimum wage regulation? The regulation should be “drivers should
make a decent wage, that is they should get enough hours and enough pay for
each hour”. That’s it.

How the different market actors are affected (whether it strengthens the
incumbent) and how it affects congestion etc shouldn’t even be a concern! Road
congestion is one thing. Competition is a separate thing. Minimum wages is a
third thing. I don’t see any reason why regulation needs to consider any 2 at
the same time. Predatory pricing is (often) illegal, congestion should mean
raising congestion fees, min wages should be simple. Am I oversimplifying it?

If a $15 min wage was imposed in other parts of the market such as retail, who
would care if WalMart was unfairly benefiting from it and would there be
suggestions that regulation should be using a more complex metric so smaller
retailers would be allowed to dodge the min wage requirement somewhat?

~~~
mlthoughts2018
> “If a $15 min wage was imposed in other parts of the market such as retail,
> who would care if WalMart was unfairly benefiting from it and would there be
> suggestions that regulation should be using a more complex metric so smaller
> retailers would be allowed to dodge the min wage requirement somewhat?”

Yes! In fact, in NYC there is already a huge backlash against the minimum wage
increase stating that it unfairly hurts small businesses (who are forced to
fire people and/or cut benefits since they cannot meet basic operating revenue
requirements if they keep the same amount of staff and also have to pay them
the higher wage).

Many proposals have been suggested that there should be offsetting tax breaks
given to small businesses because the minimum wage unfairly hurts them more
than larger chains.

A theme I see in all of your replies is something like “just do X” where X is
enforcing a minimum wage or incentivizing rideshare utilization.

But it is way, way more complicated than that. If you “just raise the minimum
wage” it can actually turn out to hurt workers overall, if the resulting price
increases passed on to consumers cause demand to drop, or if businesses have
to fire some workers and require overtime from a smaller staff, etc.

It’s the same with rideshare policies and many other things. If you “just do
X” without understanding the economic ripple effects of X, you might end up
hurting the very people that X was supposed to help.

------
macawfish
I don't trust Uber, period. The idea of Uber gaining a monopoly on "rideshare"
services in NYC makes me damn near sick.

