
The Secret to the Uber Economy Is Wealth Inequality - elemeno
http://qz.com/312537/the-secret-to-the-uber-economy-is-wealth-inequality/#
======
NickPollard
The main thesis here - that an Uber-like service requires people who will work
for less money than customers are prepared to pay for - is a truism, and
probably the #1 principle of any business.

There's a definite relevance that the current inequality leaves people with
less other choices for work; I'm sure a lot of Uber-drivers would not be Uber-
drivers if they had other, better paying work, but similarly, a lot of
Supermarket checkout staff, or bartenders, or waiters, or other low-paying
jobs, would not be doing those jobs if other jobs were available.

In the current age, driving is unskilled labour, and so the supply pool of
workers is very large. It is not surprising that driver wages are low.

The bigger issue with Uber is one of monopoly effects and competition. The
interesting part of Uber - the middle-man part run by Silicon Valley
technologists - is the ride allocation part, which by virtue of network
effects probably tends towards monopoly. If Uber gains too strong a market
share, which it looks like it might be doing, that is when the real problems
begin.

In a way, the best thing might be if the cities themselves licensed and ran
the ride-ordering technology, as a public good.

~~~
ctdonath
_the best thing might be if the cities themselves licensed and ran the ride-
ordering technology, as a public good._

Isn't the inevitable problems therewith, as exemplified by NYC's taxi
regulation system, exactly what led to the rise of Uber?

~~~
wozniacki
Yes. This.

Municipalities everywhere are notoriously inefficient at running anything
sensible that isn't burdened by politicking, group-pandering, graft and
ultimately riddled with short-sighted reactive decision-making.

Perhaps we should ask why our governmental - local or federal - bodies are
prone to these kind of malaises.

Could it be that our best minds are increasingly not wanting to serve in the
public sector? [1]

[1] 'Pro-Government' Millennials Take Government Jobs, Discover They Suck,
Move to the Private Sector

[http://reason.com/blog/2014/12/17/millennials-take-
governmen...](http://reason.com/blog/2014/12/17/millennials-take-government-
jobs-discove)

~~~
tormeh
Part of it is also the political climate. If everyone in government is
stereotyped as incompetent and corrupt, who do you think would want to soil
their reputation by entering a government job? That's right, the people who
already are incompetent and corrupt. As for the people who aren't, what are
their incentives for doing their jobs honestly? They're going to be accused of
incompetence and corruption anyway. (some jobs, like teaching, social work and
partly policing, attracts people with idealistic personal incentives, but I'm
talking about the administration)

Distrust in government is a self-fulfilling prophecy. "Trust but verify" seems
like a better strategy.

~~~
dnautics
it's certainly a _self-reinforcing prophecy_ , but you don't suppose there is
something inherent about being able to force people to do things that attracts
moralizing ninnies and those with corrupt intentions _in the first place_?

~~~
tormeh
Power in any form (government, church, big business) corrupts and power
attracts corrupt people, yes. Thing is, power is incredibly resistant to
egalitarian distributions, so someone has to have it. We just have to make the
best we can out of it, and the best is substantially much better than the US
government.

~~~
dnautics
economics is not a zero-sum operation, though, if two people exchange money
for a service or good it is only because a person values the service or good
more than the money, or vice versa.

Moreover, in order to wield money as a form of power you have to be willing to
give it away. This is not necessarily true of the other types of power.

~~~
tormeh
That's only true for small and medium business. If businesses become big
enough, they practically speaking become part of the government except with
private profits. Then there are monopolies and competitors who are a bit more
coordinated than they should be. Big business' power is more limited but in
return they get less oversight and a lot more independence. It evens out.

There are many situations where corporations can take your money without
permission. A monopoly in a sector you can't do without or a company willing
to work the government are obvious examples. Far more insidious are companies
who own media, as shown by Berlusconi, Greek oligarchs, Fox News et. al.

------
100k
Massive wealth inequality combined with few jobs leads to servants. Servants
more-or-less stopped being a job in the US after the last Gilded Age with the
rise of the middle class, but with Uber and other service apps, they are back,
fractional reserve-style.

There's a corollary to this, which is that if the economy starts growing again
(for regular people, not just programmers) people now doing 1099 piecework
employment are going to find better options, and these services are going to
have to increase their prices to attract workers. The cheapness of Uber has
been subsidized by investors and made possible by desperation.

~~~
rayiner
When my family lived in Bangladesh, we had servants, and never managed to get
comfortable with the arrangement. I have a deep and visceral reaction to
anything like that arising in the U.S., but I fear that increasing wealth
inequality might lead to that outcome. I'd rather have lower GDP, less money
in my own pocket, etc, than go back to living in that kind of society.

------
thinkling
The interesting bit of this article comes right at the end: in the comment on
how middlemen like Uber create a barrier-of-entry for workers who want to
become small business owners. The easiest place to see this is in house
cleaning services, where capital investment to start a business is low. The
path from worker to small business owner is one that allows (allowed?) one to
build some equity and entry into the middle class. To the extent that
technology-based middlemen like Uber create a barrier to this, they may worsen
income inequality.

~~~
100k
Particularly galling is Uber's contention that it helps its "partners" run
their own small business. Yeah, right. A small business that Uber can take
away from you at any time for any reason. Uber drivers are employees in all
but name and tax treatment.

------
yummyfajitas
From the article: _In my hometown of Mumbai, we have had many of these
conveniences...This narrative ignores another vital ingredient, without which
this new economy would fall apart: inequality._

Only one problem with the narrative: India (Gini 33.9) has considerably less
inequality than the US (Gini 48).

[https://en.wikipedia.org/wiki/List_of_countries_by_income_eq...](https://en.wikipedia.org/wiki/List_of_countries_by_income_equality)

Oops!

~~~
refurb
_Only one problem with the narrative: India (Gini 33.9) has considerably less
inequality than the US (Gini 48)._

You point out the problem with measuring inequality using the Gini co-
efficient.

A country where everyone is equally poor has a lower (better) Gini co-
efficient than a country where few are poor and few are very rich.

~~~
parennoob
_A country where everyone is equally poor has a lower (better) Gini co-
efficient than a country where few are poor and few are very rich._

How is "equally poor" bad from the point of view of inequality enabling
services like Uber though? In the extreme case, if everyone in India was
"equally poor" as you put it, no one should be able to do jobs as cheaply as
the author mentions.

------
percept
It's built on the backs of the drivers, and their willingness to expose
themselves:

[https://www.quora.com/How-much-money-does-an-average-Uber-
or...](https://www.quora.com/How-much-money-does-an-average-Uber-or-UberX-
driver-earn-in-a-day-What-about-people-that-drive-full-time-for-
Uber/answers/3934880)

(Not unlike freelance programming marketplaces.)

~~~
MSM
He isn't getting paid well, I agree with him there. However, factoring your
car payment and car insurance into your hourly wage just because you happen to
work from your car is kind of silly. If I work from home do I factor my house
payment into my hourly wage?

~~~
dismal2
Are you serious? Imagine if you are a programmer but your computer takes an
obscene amount of maintenance (like a car: tires, oil changes, preventative
maintenance) to keep it running so that you can keep freelancing as a
programmer. If you didn't factor this into your costs of being a "freelancer"
you would be an idiot.

~~~
MSM
Everyone needs a car. If my car breaks down I would likely have to take a sick
day to get it to the shop. No one factors that into their pay. I need to wear
pants when I go into the office, do I get to allocate pants into my wage?

A car is something almost everyone needs. He's going to end up factoring it
into his hourly wage and then getting a car for free.

~~~
dismal2
a. not everybody needs a car.

b. the amount you drive even with a lengthy commute is nowhere close to what a
person driving 8 hours a day 5+ days a week does. the amount you spend on gas
alone is huge never mind maintenance and having the right insurance for
driving that many miles (many drivers don't and can get totally screwed over
if anything happens and the insurance company finds out they don't have the
right coverage).

~~~
MSM
I definitely agree he should factor in costs that he wouldn't have been paying
before. I thought his including his entire car was a little disingenuous,
that's all.

------
michaelt
To be fair, it's not just wealth inequality that makes these services
affordable (although that certainly plays a big part) - there's also subsidy
from investors who think they're investing in the next big thing.

------
dnautics
The article is filled with loaded terms but misses the consequence that is
very important. The end effect is _wealth transfer from the wealthy to the
poor_.

Let's rephrase the thesis in this way, based on my personal experience. My
secret of ridesharing is that I was once part of an exploitative,
hierarchical, socialist organization (academic science) that kept me in a
cycle of poverty[0] intended to depress my wages, limiting my growth
opportunities and discouraging out-of-the-box thinking.

I then quit my job, and began working for 'ridesharing'. First, lyft, then
uber - and gave myself an immediate runway to launch a nonprofit science
organization to cure cancer. Not only did it afford me the independence to
pursue this, but I also gave myself a pay raise and began investments. Then, I
moved from San Diego (which has an economic climate that makes ridesharing
difficult in the 'equilibrium' condition, which had been reached) to San
Francisco (where drivers are in high demand and low supply) and gave myself
even more of a pay raise (almost 2x) affording me even more of a safety net
and more free time to work on the science.

Hell, I even have investments.

[0] spam the populace by telling them they ought to get degrees in STEM,
create an oversupply of PhDs, which lets you pay them 30k to work 80 hours in
a lab, and then restrict their ability to be promoted to professor so they're
constantly struggling.

~~~
bravo22
I think what the article is also saying is that you need an imbalance for this
new "model" to work. I agree that there is a slight net effect of wealth
transfer but if the gap was smaller to begin with then there would be no need
for the wealth transfer.

~~~
dnautics
I'm not disputing that either.

On the other hand, it's not only the rich that use Uber (and certainly not
Lyft), so the OP's argument is a bit hyperbolic. There is this very
interesting effect that DUIs have a disproportionately negative consequence
the poorer you are; and the price point for both services is low enough that
it makes using those services very attractive for people outside the top
income bracket.

------
VLM
Nobody is commenting on the middleman insight? Something I don't understand
about uber is it sounds like a dating service. If I met my wife on a dating
service, I'd pay for the privilege at that time, but I wouldn't continue
paying the dating service a piecework fee every time we have sex after 14
years of marriage.

Likewise whats the middleman solution to "Oh thanks for the ride, I'll pay
uber $10 and you say they pay you $5... well how about you come by my house
exactly a week later and I'll drop you personally $7 cash tax free and heres
my phone number to coordinate and ..." The middleman cannot be avoided in top
40 pop music 99 cent song downloads, but it seems pretty easy to work around
for taxi-like service.

------
wozniacki
Could someone tell me what's going on with HN submissions and if changes had
been made to how duplicates are handled.

Submitted this article a whole day ago, here:

[https://news.ycombinator.com/item?id=8757053](https://news.ycombinator.com/item?id=8757053)

~~~
sp332
Looks like this person just added a # to the end.
[https://hn.algolia.com/?q=http%3A%2F%2Fqz.com%2F312537%2Fthe...](https://hn.algolia.com/?q=http%3A%2F%2Fqz.com%2F312537%2Fthe-
secret-to-the-uber-economy-is-wealth-
inequality%2F%23#!/story/forever/prefix/0/http%3A%2F%2Fqz.com%2F312537%2Fthe-
secret-to-the-uber-economy-is-wealth-inequality%2F)

------
dlwj
Technology also allows 1 person to do the work of 10 creating a larger supply
of unemployed people. Since right-to-live-well is tied to "productivity" and
holding a job, technology in the abstract has also enabled this large pool or
workers indirectly.

The part about middlemen is interesting. IMO uber is a better/smaller
middleman than the previous one with taxi medallions. The technology that uber
provides is connectivity at large scale due to low cost. The article is
correct in that if there is nothing to connect, the business doesn't work.
It's still comparatively better though, and that's how improvements are made,
step by step as people want better and better.

------
known
Social issues cannot be solved with technology.

[http://india.blogs.nytimes.com/2012/10/16/as-india-
responds-...](http://india.blogs.nytimes.com/2012/10/16/as-india-responds-to-
latest-rapes-the-unanswered-question-is-why/)

------
thebiglebrewski
Can anyone else literally not load this article, getting continually
redirected to other articles based off of Quartz's facockta ad mechanisms and
scrolling to get to new URLs?

------
_craft
This is bogus. Imagine how much more valuable Uber would be if 100% of people
could afford to ride them on a regular basis.

~~~
zellyn
Your comment is bogus. Imagine how much more valuable Learjet would be if 100%
of people could afford to buy their own jet airplane!

~~~
_craft
Income equality helps businesses and the economy grow. Consider the extreme
case of inequality where all the wealth is concentrated in just a few
people... there'd be no market for Uber.

------
michaelochurch
I don't like Uber or its founder, but I find it fascinating.

I'm starting to think that technological growth's self-limiting dynamic might
be the generation of cheap labor. Ultimately, technical progress _isn 't
needed_ if labor is cheap. You're not going to find much audience for modern
agriculture in countries where farm laborers can be paid $5 per day. Sure,
there are things that the very rich might theoretically want (just as Henry
VIII would have had a better life with antibiotics) but since they tend to
measure prosperity and status in relative terms, they don't have the
imagination to push anything forward. Instead, elites retrench and block
progress. It's only when labor is expensive (or in a war, which will make
labor expensive if it carries on for long enough, due to depopulation) that
anyone in power is willing to fund technology. Of course, those with the
resources would _rather_ find cheap labor overseas if that's an option;
excluding a small set of celebrity visionaries who are less than 1% of the
elite, they only invest in technical growth as a last resort.

Uber isn't at fault for the abundance of cheap labor that has made "the Uber
Economy" possible, but poorly managed technological progress is. If
technological progress slows in the 21st century (I don't expect it to halt or
regress, but it could slow to an uninspiring crawl and give us a disappointing
"lost century") it will be due to the demotivation of investment encouraged by
an abundance of cheap labor. For all the complaint about "talent shortage" by
Silicon Valley executives, the fact is that no such thing exists; there are
plenty of unemployed or underemployed PhDs out there. If there were a real
talent shortage, the classism and sexism and ageism that characterize the
contemporary VC-funded culture wouldn't be affordable, and you'd see all sorts
of people (currently below a ceiling) getting coveted opportunities.

In an ideal world, we'd stop this from happening by training people up, out of
the jobs no longer needed, in order to be ready for the new jobs created by
technology. In practice, this doesn't seem to be what's happening. Laid-off
factory workers in Detroit (and Ferguson, MO) aren't being sent to school and
trained for the new jobs; they've just been abandoned.

Uber seems to capture the next phase of the Silicon Valley society. There's no
basic research or fundamental innovation, but we're seeing new ideas around
what to do with the abundance of dislocated and unemployed or underemployed
people. Zynga's another one: capitalizing on middle-class ennui. Ultimately,
this might explain, in part, the increasing dislike of Silicon Valley that
we've seen in the past five years. Silicon Valley isn't singularly or even
mainly responsible for deindustrialization and cultural decay, but the modern
incarnation seems to be most strongly oriented toward profiting from it.

~~~
exelius
> For all the complaint about "talent shortage" by Silicon Valley executives,
> the fact is that no such thing exists; there are plenty of unemployed or
> underemployed PhDs out there. If there were a real talent shortage, the
> classism and sexism and ageism that characterize the contemporary VC-funded
> culture wouldn't be affordable, and you'd see all sorts of people (currently
> below a ceiling) getting coveted opportunities.

The problem is that unemployed or underemployed PhDs usually have all of the
technical skills, but none of the tradecraft. Things like how to work with a
version control system, working knowledge of one or two commercially used
development frameworks, security basics, etc.

Silicon Valley has a talent shortage, but I would argue it's self-inflicted.
Companies in the valley expect their developers to be rockstar coders who know
a lot of languages and tools (Scala, Docker, nodejs, etc) that have very
little commercial adoption outside of startup culture. At the same time, few
startups have the time to let you learn on the job, so they'll overpay someone
who does have the skills. And if you think it's difficult to find a good Ruby
or Scala developer in the valley, you should try finding one somewhere else.
They either don't exist or aren't looking for work.

The reality is that, globally, your average developer probably isn't a comp
sci genius. They probably know Java pretty well, along with a few commercial
frameworks, but you wouldn't expect them to have the architecture skills that
many developers in the valley are expected to have. There are plenty of those
guys. But yeah, there's a talent shortage when you limit your pool of
applicants as much as a lot of companies in the valley do.

~~~
michaelochurch
_The problem is that unemployed or underemployed PhDs usually have all of the
technical skills, but none of the tradecraft. Things like how to work with a
version control system, working knowledge of one or two commercially used
development frameworks, security basics, etc._

Those skills can be learned. Incidentally, I'm not especially impressed by
most PhDs... but I do think they've shown enough intellectual mettle to learn
how to use Github.

 _Companies in the valley expect their developers to be rockstar coders who
know a lot of languages and tools (Scala, Docker, nodejs, etc) that have very
little commercial adoption outside of startup culture. At the same time, few
startups have the time to let you learn on the job_

That suggests that talent has a very weak bargaining position. If talent had
leverage, being able to learn on the job would be part of the deal they
struck. There may be a strong bargaining position inured to one with the luck
of a 100% match between one's technical experience and the trendy technologies
_du jour_ , but banking on always having a 100% match to the trends isn't a
sustainable career strategy.

Companies demand purple unicorns because they believe they can get them, and
that people will work 80 hour weeks or steal time from their employers
(risking job loss before they get the next gig) in order to meet their pre-
existing knowledge requirements, and that's probably because people do. This
indicates a _low_ bargaining position for software talent (not some startup
exigency that is largely fictional). Everyone else gets to learn on the job.
We don't, because even though what we do is important, we suck at organizing
for our own interests.

 _so they 'll overpay someone who does have the skills._

Overpaid software engineers are very rare. Most of the good ones are underpaid
relative to what they can do. A good engineer is easily worth $250,000 per
year (and, I'd argue, several times that) and very few get even close to that
number.

 _They probably know Java pretty well, along with a few commercial frameworks,
but you wouldn 't expect them to have the architecture skills that many
developers in the valley are expected to have._

Whatever the expectation may be of them, I actually find the average Valley
developer to be pretty unimpressive. The Valley may have more of the Jeff
Deans, but the 90th-percentile Silicon Valley programmer isn't any better than
the 90th-percentile programmer in the general population.

~~~
exelius
> That suggests that talent has a very weak bargaining position. If talent had
> leverage, being able to learn on the job would be part of the deal they
> struck. There may be a strong bargaining position inured to one with the
> luck of a 100% match between one's technical experience and the trendy
> technologies du jour, but banking on always having a 100% match to the
> trends isn't a sustainable career strategy.

I would argue that a significant portion of that compensation is essentially a
gamble that the company is going to blow up and become huge. Companies with
momentum or a founder with previous success have a lot easier time hiring good
people at the same salaries because there is this expectation of explosive
growth. That's the area where people do have leverage, because startups are
cash flow constrained and can't afford huge salaries - but that doesn't mean
you won't get rich (that's the line they sell us, anyway).

> Overpaid software engineers are very rare. Most of the good ones are
> underpaid relative to what they can do. A good engineer is easily worth
> $250,000 per year (and, I'd argue, several times that) and very few get even
> close to that number.

They're not that rare - there simply aren't enough founders to support the
astronomical housing prices in the valley otherwise.

~~~
michaelochurch
_I would argue that a significant portion of that compensation is essentially
a gamble that the company is going to blow up and become huge._

Sure, because many engineers don't ask "the tough questions" about what their
equity actually means, or even how many shares there are. They gamble poorly,
taking a $40,000 pay cut, and working long hours, for equity less than 0.1% of
the company.

My attitude toward equity is that, unless you're a founder, you shouldn't let
it change what salary you accept, how hard you work, or how you prioritize
your career goals. If you want to work 70-hour weeks because it's helping your
career, go ahead. But don't make sacrifices unless you're a founder.
Otherwise, it's not going to be worth it. These days, founders and VCs don't
offer equity at a level that would justify any attitude other than free
agency.

 _That 's the area where people do have leverage, because startups are cash
flow constrained and can't afford huge salaries - but that doesn't mean you
won't get rich (that's the line they sell us, anyway)._

Of course, there are people who get rich on startup equity. It happens often
enough to keep the myth alive. However, there are much better and surer ways
to get rich. Valley engineers take it as an extremely fortunate windfall. VCs
take it for granted. And honestly, I don't think there's much to recommend the
VC-funded founder career over being a VC if you've got the connections for the
latter. A founder is a mid-level product manager in what is the first
postmodern corporate organization; but VCs are executives.

Silicon Valley is a fine place to spend your 20s while you figure out what you
want to do with your life, but if you want to stay in that world for the rest
of your career, the best way is to become a VC and be a real first-class
citizen.

 _They 're not that rare - there simply aren't enough founders to support the
astronomical housing prices in the valley otherwise._

Software engineers aren't buying those houses. That's a mix of VCs, career
executives in the startup world (who don't program and don't found, but get
paradropped in, by their buddies in VC and private equity, to companies with
executives) and house-rich natives and corrupt overseas officials.

Sure, there are a lot of rich people (managers, founders, VCs) in Silicon
Valley. There are also a lot of programmers in Silicon Valley. The
intersection between the two groups is very small. From _Game of Thrones_ :
"there are old sellswords and bold sellswords, but no old bold sellswords."

The Valley is constrained by the extreme NIMBYism and that, combined with
price inelasticity and low interest rates, is what makes house prices so high.

------
sighsigh
Bombastic click bait morality.

IPhones are affordable because of wealth inequality. Oil is cheap because of
wealth inequality. Organic food is purchasable because of wealth inequality.
Hipster clothes can be owned because of wealth inequality.

And yet, none of these goods are targeted because those who use them are
susceptible to pro-union shilling.

Stop the painfully forced guilt complex from this out-of-touch middle class
white perspective. I wish I could have easily sold my spare time for more
money when I first moved here with P2P labor systems like Uber... but I had to
wait for a central bank's liquidity push to eventually intice small business
hiring, some union to not bump a new guy for someone's seniority, or some
corporation wonk to figure out a new growth market. Oh, yes, I just felt so
equal in that system of waiting for people "smarter" than me to justify
needing me.

People should have access to the means to sell their time and labor where ever
and when ever they want. Period.

~~~
sp332
I don't know how you missed the recurring outrage about the wages and
conditions of iPhone workers. And the article isn't against your last point.
In fact the article isn't even blaming Uber for the problems. It's just
pointing out that Uber (and other services like it) only work where inequality
is pervasive.

~~~
sighsigh
Globalism works due to inequality. Nationalism works due to inequality.
Tribalism works due to inequality. The dirty secret of civilization is that
someone has to dig the graves. Why pretend it's an evil from your middle class
morally righteous soap box instead of allowing people the means to participate
as simply as possible?

~~~
sp332
Why don't I pretend it's an evil from the bottom of someone else's grave I
just dug?

~~~
sighsigh
Because that would make you... a believer of an out-of-touch white middle
class moral framework that has failed to predict anything.

~~~
samman
So, I'm kind of ambivalent about this thread so far, but it sounds like you
have thought about this a bit. What sort of moral framework do you find
preferable over the 'out-of-touch white middle class' one?

