
Uber and Lyft Suggest the Days of Cheap Rides Could Be Over - monsieurpng
https://www.wired.com/story/uber-lyft-suggest-cheap-rides-could-be-over
======
6gvONxR4sf7o
> ...the company’s upcoming pricing algorithms, which they hinted might be
> able to more precisely predict what riders might be willing to pay for a
> ride.

I hate the whole idea of this. If they track you around, maybe realize you
order from fancy places on uber eats, then they will raise prices on something
that costs them the same. There's something that strikes me as especially
awful about automating the "how much is this _individual_ willing to pay."
It's like the worst parts of searching for air fare.

Yet another reason to advocate for privacy, so they can't just buy records
about you to determine your price sensitivity from the rest of your life.

If everything everyone bought had perfect information on what they're willing
to pay, I wonder what markets would look like. Would getting a raise
immediately cancel itself out?

~~~
tmerr
Knowing the max someone was willing to pay could help an actor set their
prices optimally where there is no competition. Where there is competition,
setting price to the max someone is willing to pay could drop overall profits
since a competitor would happily undercut. So it does not change the rules of
the game.

Companies already price by predicting what people are willing to pay, by
theory and experimentation. I wouldn't expect them having perfect information
change much other than quicker convergence to the prices they would set
anyway.

~~~
ldoughty
Except corporations have already agreed to not seriously undercut each
other... Geographic monopoly, understood collaborative price hikes... Forced
plan changes post-capture that eliminate the most common plan and squeeze out
an extra $5 per customer....

Simply having another player in the field is not competition, despite the
federal government's claims.

~~~
AnthonyMouse
That effectively requires a cartel with high barriers to entry, otherwise not
doing that is an immediate competitive advantage to any new challengers. It's
pretty hard to build your own last mile telecommunications network, how hard
is it to build a ride sharing app?

~~~
zonidjan
It's not hard to build a ride sharing app.

It _is_ , however, hard to get drivers and customers FOR your ride sharing
app.

~~~
AnthonyMouse
Not if you can undercut the existing ones on price.

~~~
eric-hu
A ride sharing app is a dual marketplace. If you're cutting the price for
riders past a point, you're cutting the pay for drivers.

~~~
AnthonyMouse
That's assuming the incumbents are giving the premium for those customers to
the drivers.

But even if they were, the drivers are in a competitive labor market. If you
get the customers with lower prices then you can also get the drivers because
they'd rather be working for your rate than not at all.

~~~
zonidjan
But you will never get customers without drivers and you will never get
drivers without customers.

Plenty of Uber/Lyft competitors have tried and failed. Heck, a few different
companies tried here in Austin once we grew a spine and banned Uber/Lyft, only
to die as soon as they came back to town.

------
paxys
Honestly, it's probably for the best. Over the last decade it has become the
expectation that - at the tap of a button - a taxi will appear and take you
across the city (or three blocks over) for a few bucks. People need to realize
that this isn't reality. The entire industry has been subsidized by VCs and
desperate drivers working below minimum wage since day 1.

If, after paying drivers fairly, complying with local laws, reaching
profitability etc., we find that prices are where most people can still afford
to take Ubers everyday - great! If not, well, that's how things have been for
~150 years. Keep urging your city to invest in public transit and bike lanes.

~~~
tessting
I don't understand why it's a moral imperative that people not take advantage
of the VC funding subsidy? The VCs are wealthy interests looking to find a
10-20-100x exit at the end of this. I don't care if the Saudi Royal family
places an enormous bet on automation over the next 10 years. Why is it for the
best that all the people who use Uber not have that? I just don't
understanding cheering that one of the few subsidies that is tricking down is
being phased out, and I disagree with the suggestion that any of this is
driving toward the end of paying drivers more.

~~~
lifty
Because it puts out of business other legitimate businesses which can’t access
cheap money but that would otherwise be profitable. It can lead to a situation
where a company becomes a monopoly, and at that point it can take advantage of
the consumer.

------
hdlothia
I'm fine with paying taxi prices with uber and lyft experience. The taxi
experience was awful. Spotty acceptance of debit cards, racism, half truths
from dispatch. They were insulated from innovation for so long

~~~
alkonaut
It's poor competition. In cities where there is a free taxi market Uber is
just like every other taxi company (so every taxi company has apps for
booking, has nice cars, has pre-payment etc). In cities with medallion systems
or other artificial monopolies, you aren't going to get that.

------
bad_user
I'm from Romania and a taxi/Uber ride is somewhere between $2 and $5, which is
pretty cheap compared with other countries.

I used to ride with Uber and Bolt a lot, however they've been raising pricing
during rush hour and I'm not stupid enough to not notice the bill at the end
of the ride and these costs add up.

So several months back I stopped taking car rides altogether. I walk a lot, I
don't mind walking 3 Km on foot. I ride my bike to and from work, which is
actually more efficient than driving a car in this city. And now in winter due
to weather I also use public transportation. I also have a driver's license
and own my own car.

I'm not worrying about prices set dynamically. People can notice the bill and
Uber is not competing just with Lift or taxis, it's competing with walking on
foot, with public transport, with owning your own car and if their prices
aren't reasonable, they won't survive.

~~~
Vadoff
The minimum wage in Romania is also €446/mo or $496/mo, so ~$2.86/hr. Compare
that to the federal min wage of $7.25 or California's $12/hr.

------
bransonf
This article’s a couple months old, so it misses what I think is going to be a
lot more definitive against Uber/Lyft.

That is, workers are starting to _successfully_ unionize. Both companies have
delayed it as long as possible, but it’s going to happen. And when it does, it
will either burn more of their cash or up the customer cost.

~~~
cheriot
Would a union be able to stop non-union drivers from signing up? It seems too
easy for new workers to cross the picket line for a union to have much power
here.

~~~
bransonf
To clarify, in many cases it’s actually states declaring Uber/Lyft as
employment. They’ve managed to stay legally bound to the terms of hiring
‘contractors’ but states like CA are putting an end to this.

------
admn2
Pretty crazy with Juul, WeWork, DoorDash, and Uber / Lyft all struggling (or
showing their true colors) that all the things they sought to kill are coming
back. Taxis, cigarettes, picking up your own food! It's amazing to me that
people were having food delivered from a half mile away.

~~~
Barrin92
>Pretty crazy with Juul, WeWork, DoorDash, and Uber / Lyft all struggling

Given that the entire value-added of a company like Uber is getting a taxi to
you slightly faster it's not surprising at all. Uber didn't make cars cheaper,
drivers faster or added productivity in any other way plus they have a
gigantic and expensive tech overhead, so it was never at all clear to me how
they're supposed to be both competitive and more profitable than a regular
bunch of taxi companies.

It's just like movie pass. As long as you have investors throwing money at you
you can pretend that you're actually doing something but selling people a
dollar for 75 cents isn't a business.

~~~
wilde
That’s an oversimplification. Uber’s primary innovations were social. They
convinced riders that it was safe to jump into a stranger’s car, and drivers
that it was safe to run an illegal taxi business. They managed to do both of
these things effectively in large enough volumes to change how people think
about taxis. Both of these things seem boring and normal now, but they were
radical a decade ago.

~~~
Barrin92
that's not an innovation that captures any unique value for Uber and more of a
positive externality if anything, because strangers still want to be paid and
if anything customers aren't willing to pay them more than a regular taxi
company.

On an economic level, if anything Uber suffers from inefficiencies because
every driver being their own insurer, repairman and so on is a disdavantage
compared to employment by a traditional taxi business. Which is of course why
taxi drivers organise in firms to begin with. In a way, the entire sharing
business model is a sort of weird backwards move that wilfully ignores the
division of labour.

~~~
wilde
That’s the billion dollar question. Uber chose to commoditize their drivers
from a very early stage. This made sense when most of the drivers were actual
ride shares and amateurs. As the driver population professionalized, I do
wonder if Uber missed a bet to move from being an aggregator to being a
platform. In the Azores, taxi drivers will hand you their card and build a
relationship with you. Is there room in US cities for more specialization than
UberX vs Uber Black? I don’t know, but I think it might have accrued more
durable value to the Uber ecosystem if they had let the drivers build
differentiated personal brands.

------
awinter-py
If two companies that have been operating at a loss for N years simultaneously
stop, is it price collusion?

There are lots of factors here that could drive a decision to raise prices:
both went public this year = increased scrutiny, moviepass & wework fiascoes =
decreased tolerance for bad business models, driverless experiments have
failed.

But it also feels like there's a wink happening.

If the DOJ / courts takeaway is 'yes it's collusion and they're getting
slapped with a company-killing fine', it has interesting implications for the
ability of unicorns to operate at a loss for long periods.

Effectively banning negative unit economics for large companies would be a new
chapter for the startup economy.

------
gamblor956
This policy has actually been pretty great for me. Ubers that once cost $4-5
started costing $10-$15, so I started walking and taking public transportation
more.

Actually ended up getting to places faster than taking Uber, since I didn't
end up waiting 10-15 minutes for the Uber to work its way through traffic to
me, or the extra 10-15 minutes taking an Uber would entail due to drivers
missing turns or getting lost (despite having a phone providing directions
right in front of their faces...).

------
heavyset_go
Prices have been more expensive than traditional taxis in my market for over a
year now.

~~~
aabhay
This. Clearly this has to be the stable state for these services. A taxi is
naturally free to operate in a way they see fit (finding narrow strategies and
routes) while an Uber is constrained by a routing system. If you find a taxi,
you can expect to pay a more optimized fare considering market dynamics, while
an Uber has to suffer very suboptimal requests.

In cities like Vancouver, taxis seem to spend much less time idling than Ubers
in SF.

------
throwaway857384
I'd say, once people stop dumping money into these companies and they can no
longer operate at a loss, the real price of a ride/delivery will become clear.

~~~
ghaff
It's a reasonable working assumption that "ride share" prices end up somewhere
around where taxi prices are--with the possible exception of places like
London where black cabs are somewhat of a premium service relative to
minicabs, etc.

~~~
seriesf
I don’t see how the Uber model can ever approach the price of a taxi.
Traditional taxis had purpose-built vehicles, shared garages, parts bought at
wholesale, and cars on duty all day every day. Uber drivers have disposable
Toyotas, pay individually retail prices for insurance, maintenance, and parts,
and their vehicles are usually parked. The traditional model has the advantage
on cost.

~~~
heavyset_go
The Uber model relies on an underclass whose need for cash right now overrides
any concerns they might have down the line about vehicle depreciation, the
consequences of operating a taxi on a consumer insurance plan, the high self-
employment tax burden, health insurance or actually breaking even after taking
those factors into account.

~~~
seriesf
I'm assuming the population of dupes will eventually be depleted.

~~~
heavyset_go
I doubt that the pool of people who are willing to trade their time and
vehicle's value for a paycheck today is going to shrink any time soon.

~~~
lotsofpulp
There has been a severe drop in the quality of Uber drivers and vehicles since
a few years ago, I can only surmise that they have had to relax their
standards hence indicating a lack of sufficient supply.

------
blhack
Here’s how I wish Uber pricing worked:

When I hail a ride, I say: I’m going from A to B and am willing to pay C
(which Uber can recommend to me) for it.

Now if nobody responds, I increase C until they do. This way the drivers know
where they are going, how much I’m paying, etc. When a driver “accepts” a
ride, I see their vehicle and rating, and get to choose from the people who
have accepted.

And on the other end, they bid on my ride. If I offer $20, they might ask $25
instead, and it is up to me to either accept or reject that.

I really want a system where the drivers are happy, the riders are happy, and
everything is transparent and open for negotiation.

~~~
esoterica
Drivers usually accept new rides while in the middle of driving though. Do you
really want an army of distracted drivers on their phones participating in a
complicated bidding process?

~~~
ghaff
And, for those relatively unusual occasions where I do take Uber, I probably
have zero interest in entering into an online bidding competition. And do you
really want a system where you're trying to save a few dollars by getting a
bid accepted by the most financially desperate drivers?

~~~
blhack
Uber is already finding the most financially desperate drivers and filtering
for them only. They’re competing for the lowest price, but actually price is
only one of the things I would like to be able to select for.

------
Invictus0
I'm having trouble articulating my thoughts about this. Here we have 2
companies losing many hundreds of millions of dollars per month, and everyone
here is losing their minds that they want to raise their prices. Price
discrimination is just the market side of progressive taxation: everyone
agrees that the rich should pay more, but not when it comes to cab fares? If
you don't like the price, don't pay it: Uber v. Lyft is a false dichotomy
anyway and ignores all the other cabbies in the market.

------
carfacts
> “We are focused on improving profitability in this market.”

Seems like some kind of collusive price signalling announcement to Lyft. Eg,
“we’re going to up our prices, here’s your chance to do the same”.

------
Jedi72
Hopefully this bullshit opens up a new market for digital obfustication
services. Pay me $100, I will show you how to save $300/yr in Uber fees by
changing your digital appearance.

~~~
thundergolfer
Or we could just regulate these practices away and save the trouble. Man I
would hate having to shop around for a service like that just so I can avoid
being vulnerable to price gouging.

------
arielweisberg
In theory if I check both Uber and Lyft the price of one or the other should
be lower since they want my business to offset their fixed costs. The price I
am willing to pay Is simply the lowest price I can get for the service.

How rich I am has nothing do with it per se.

So when does it turn into price fixing when they both independently figure out
how much I am willing to pay and charge the same amount?

Right now they are uncannily good at charging the same amount for the same
trip. Maybe the price is already competitive?

------
freyr
The article was written back in August, so are we already seeing the higher
prices?

~~~
pen2l
> I've noticed this. I can reliably count on Uber/Lyft to price gouge me
> whenever they get the chance.

Yeah but come on though, the cut the driver has to take, the cost of car
maintenance, the cut Uber is entitled to for giving you a reliable service of
connecting you to a driver (and co-pool-riders) and making this process smooth
-- compare all of that with what a taxi used to cost, it's still pretty cheap
in my opinion. Well, at least in the center city where I am (5 dollars
yesterday for a ~5 mile ride, not bad).

~~~
OnlineGladiator
Why do you assume that cost isn't being subsidized? Uber and Lyft are both
still hemorrhaging money. I'm willing to bet the real cost is at least twice
what you mentioned.

Yesterday it cost me $30 to go 5 miles via Uber, and I chose that over Lyft's
$40. Not a busy time of day so no price surging. This is in San Francisco for
a frame of reference.

~~~
rightbyte
How much would it be renting a car for a day in that area?

~~~
OnlineGladiator
I own a car so it's not an issue of cost but convenience. Driving downtown is
just not worth it (a broken window will ruin your weekend). I bought a car for
leaving the city, not for going into the city.

I'd imagine renting the car is cheaper before you take into account parking,
time, and potential theft. Car break-ins here are so bad people have become
blasé about it. I went looking for a news story (there are many about how
problematic property crimes are in SF) but found this instead:

[https://twitter.com/sfcarbreakins](https://twitter.com/sfcarbreakins)

------
ETHisso2017
Prediction: this is going to lead to an antitrust investigation at some point.
In fact, it may present a catch-22 from a pricing algo perspective:

a) the algos don't collude, but simply adjust driver "supply" in particular
geos across each other's platforms via surge adjustments until they act like
they are colluding; or

b) the algo designers try to make their algos not collude and they
inadvertently use data from the other platform that is nonpublic or in a way
that can be determined to harm consumer welfare.

Both a) and b) create a situation where every pricing decision by the
algorithm - in every city, across every driver/rider interaction - has to be
done in a way that is not collusive. All the DoJ has to do is find an
anomalous pricing pattern - which isn't hard - and then pin both these
companies with a fine and onerous compliance regulations. Ironically enough,
this may be what kills them.

------
taytus
The day cheap rides are over is the day that uber and lyft are over.

~~~
randyrand
And walking everywhere will become the norm?

~~~
taytus
Not necessarily, cheap rides are the only competitive advantage both of them
have.

More and more companies without the massive VC support Uber and Lyft have will
pop up fragmenting the market.

~~~
ghaff
Right now, I take them because most of the time they're more convenient than
cabs. (The one common exception is departing from airports when a line of cabs
is right there. I also pre-book cars to and from my home airport.)

That said, absent their price advantages because of subsidies, I don't doubt a
more fragmented market would probably arise.

------
zonidjan
Surprise! Now that they've mostly killed off taxi companies, their rates will
be the same as taxi companies. Who could've seen that coming? Oh wait.

~~~
cmdshiftf4
One could argue, and I will anecdotally, that these companies have brought a
much higher standard of service into an industry renowned for providing
terrible (at best) service.

So if the outcome is that the price has fluctuated back to the norm, but the
service provided is of a higher quality, then the consumer has won.

What will be interesting to see is what consequences will arise from a
corresponding drop in demand when met with the normalisation of prices to the
previous mean. Especially given that you can't actively chose between the
drivers available to you through these apps i.e. if there's less demand,
supply will likely drop to meet demand (drivers don't want to be sitting
around all evening, or just doing 1-2 gigs per night), and there's no way for
the cream of the crop to come to the surface amongst their competition by way
of superior service and hence selective demand / consumers.

Intuitively, maybe it will result in harsher ratings from consumers (expecting
better service given higher prices) which, with sufficient accumulation, may
take lower quality drivers out of circulation and leave those deemed to be
best in the marketplace.

~~~
zonidjan
They did not win based on their "higher standard of service", but based on
their price, which was only possible due to their non-compliance with
regulatory requirements.

------
lsc
inevitable. After spending the last year or two without a car at all, in part
'cause lyft and uber had started subtly raising prices, I bought a car a few
months back.

I mean, I was a little sad, it was really really nice being driven
everywhere... but fundamentally, I'm not quite rich enough to pay market-
clearing prices to get driven everywhere. My own impression was that for the
last few years, softbank has been subsidizing my own luxury rides, which was
really nice! but it was also obviously not sustainable.

my own observation all along was that a lot of the price variation was
"specials" \- it used to be I could count on some discount several times a
week. the biggest price increase I experienced, the one that pushed me to buy
my own car, was seeing fewer of these.

Interestingly, now that I have a car and only use uber/lyft when drinking or
otherwise away from a car, I get more discounts and specials again.

From talking to drivers, it's similar for them; a significant amount of their
income consists of specials, for doing X drives in Y time period.

------
simonblack
Gee, maybe it could be a good idea to order a Taxi instead of a Uber.

When the investors stop propping up Uber and Lyft, both will collapse like
they've never been, leaving both investors and drivers high and dry. While the
company managers laugh all the way to their banks.

------
grizzles
Solidarity. Noice. Didi / Ola are still subsidizing. I can't remember the
exact pitch but an Uber driver pitched me the other day on a Didi deal to
install the app that was insane.

------
windexh8er
Rideshare can be profitable for everyone just like Craigslist is. The problem
is that Uber and Lyft decided they were large enterprise with a SMB profit
model. You could gut 80% of either and if all you had left was drivers making
good wages and the service fees for using the app to support the backend you'd
be sitting in a lucrative spot. Yet both companies jumped in way too far and
way too early. R&D at Uber hasn't delivered and they've continued to burn
cash. WeWork, Uber, Lyft - all built on a greed model. Most drivers that I've
talked to in the last few months complain how their pay stays the same or goes
down and the ride prices continue to increase. These companies are like
cancer: just there to take as much as they can and hopefully steamroll the
real drivers that bootstrapped them into autonomous ride services. If
Uber/Lyft fail someone else will come back around to pick up the key pieces
that can work. But for now your "cheap rides are over" \- because Uber and
Lyft have decided that is the answer to the problem they've created.

~~~
neffy
Don't know why you're getting downvoted - this is exactly the correct analysis
- the only missing part of the jigsaw is the pension crisis that will get
triggered, when the investors in that sector don't get the returns they've
been promised.

------
chadlavi
They already charge more than a regular yellow cab in New York. Hopefully this
price hike will inspire folks to turn back to the cheaper local option.

------
rossdavidh
I realize I'm in the minority on this, but I think both of these companies
will be gone 5 years from now.

------
chrismcb
Do they feel like they've put enough taxi companies out of business that they
can now raise heir rates?

------
jrobn
This just feeds the blackmarkets for any industry. When people get wise they
turn to the black market.

------
useful
I think it is still a race to the bottom while you can get all rideshare
prices in google maps.

------
maksimum
> more precisely predict what riders might be willing to pay for a ride

It's weird to me that this sort of price discrimination is legal.

E.g. given this information, my incentive as a rider is to never tip (so that
their algorithm doesn't identify me as "willing to pay" more). Maybe I could
also make a new Lyft account every time I need a ride?

~~~
mlyle
> > more precisely predict what riders might be willing to pay for a ride

> It's weird to me that this sort of price discrimination is legal.

I don't interpret this as charging different customers different prices per
se. But there are different prevailing conditions with different pricing
justified (other than simple congested/not congested). Knowing what your
service is worth to customers so you can extract a greater fraction of this is
pricing 101.

~~~
maksimum
> I don't interpret this as charging different customers different prices per
> se.

Based on my experience Lyft and Uber charge different prices to different
customers with identical trips. I've tested this by asking friends with who
I'm about to share a ride with to request the same trip as me, and compare
prices. We've observed differences of 10-20%.

> Knowing what your service is worth to customers so you can extract a greater
> fraction of this is pricing 101.

Where this becomes problematic is in the age of big data. When a company can
build an accurate profile of me, they can extract maximum prices from me. We
need laws that mandate what definition of "profile" is allowed to be used for
pricing.

I'm not sure why we accept price discrimination at the individual level for
airlines and Lyft/Uber. I'm pretty sure people would be outraged if Amazon
started price discriminating based on your purchase history.

------
daemonk
does this work both ways? can we get cheaper prices if we are not willing to
pay more and when it is not very busy.

------
wdb
Oh yeah, back to the black cabs then :)

------
pradn
"When will these darlings of Silicon Valley begin to turn a profit?"

The funny thing is criticism of these two companies has been vociferous on
Hacker News since the very beginning. I'm not sure what company I'd even call
a darling. Every example I can think of FAANG, Dropbox, Slack, etc all have
various criticisms. Perhaps Spotify? But it's not a Silicon Valley company.

~~~
fallat
I've been on a SharkTank binge just for fun, and one thing I notice is, every
time a Silicon Valley company goes to pitch, the idea has some pretty bad
problems:

1\. The margin is high but the idea is easily copied

2\. A ton of money has already been invested, and still not making money

3\. Other things I can't remember at this moment

I think SV has some sort of problem when it comes to starting businesses.
Rarely something is organically growing. It's like SV people just throw money
at a wall until something sticks, so it explains the thousands of failure
companies.

Seeing SV companies through the eyes of an investor, I'd be ultra cautious.
Companies and ideas are a dime a dozen there from what I see. Until you find
out each has had +$100,000 pumped into it various ways and operating at a
loss. It's almost like they want to force you to think the idea is good
because "look, it's existed for X years!".

~~~
askafriend
You shouldn’t be using SharkTank to form your view on Silicon Valley...

Some of the worst companies get on there, SV or not. Think about it, why would
a good company need to go on Shark Tank? They can raise from much better
investors if it was a good company.

~~~
sokoloff
Some small number seem to appear on SharkTank primarily for the free TV
exposure. That seems a viable strategic move.

------
rasengan
This is untrue. Without a doubt, with autonomous vehicles, efficient energy
usage, storage and harvest via non eco damaging sources like solar power, the
cost of rides will get cheaper.

~~~
heavyset_go
Costs don't dictate prices.

~~~
quotemstr
They do indirectly. A big gap between costs and prices invites competition,
which lowers prices. Part of the "play" that ride sharing companies are making
is building a moat around themselves so that they'll be able to discourage
competition for a while.

------
RaceWon
It would not work in some areas due to the collective demographical mindset:
having said that; Uber simply does not utilize a very obvious solution that
would Greatly increase revenue without raising fares for riders.

Insofar as what they burn on being the peeps that figure out self driving
cars... I mean that's looking to hit the sweepstakes. Chances are They won't
be the ones to cash in that particular ticket.

~~~
RaceWon
> Uber simply does not utilize a very obvious solution that would Greatly
> increase revenue without raising fares for riders.

Downvoting me??...

1) Stop making the ride App free. Charge $2.99 payable with the first ride.

2) Stop letting people sign up to drive for free. Charge $9.99 to sign up.

3) Start UberPay... sell prepaid rides for a discount then Lend that money out
via Uber Credit Cards to select peeps--> like the drivers.

4) No shot I'd share this idea. This is One is The Obvious idea I mentioned in
my Parent post.

Cheers

