
In Search of Uber’s Unicorn - aetherson
http://www.slate.com/articles/business/moneybox/2014/10/uber_driver_salary_the_ride_sharing_company_says_its_drivers_make_great.single.html
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jordanpg
Unless I'm missing something, the claim that becoming a taxi driver can become
a well-salaried, middle-class job for a significant number of people is
_patent nonsense_. There is a reason that taxis look the way they do and are
driven by the people who currently drive them, and regulations and licensing
is only a small part of that.

Uber might disrupt the taxi industry, maybe for the better, but once
equilibrium is reached, incomes for drivers will have shifted to the right
slightly, _at best_.

It's hard for me to understand what the long play is for Uber's investors.
Given the sheer volume of demand for rides, the relative ease of copying this
service, and the number of cars owned by Americans, I don't see how their
large revenues can be anything other than temporary. I think the investors are
playing the short game.

~~~
JumpCrisscross
> _Given the sheer volume of demand for rides, the relative ease of copying
> this service, and the number of cars owned by Americans, I don 't see how
> their large revenues can be anything other than temporary. I think the
> investors are playing the short game._

The long game is in capitalizing on (a) network effects and (b) the effects of
changing technology on consumer behavior and market structure.

Start with network effects. I live in New York. There are many transportation
options. Like my tendency to default to a "top of my wallet" credit card, I
tend to fire up Uber first. Other options are considered if Uber disappoints.
It seldom does; Uber remains at the top of my "stack". This leads to me
demanding several rides a day more from Uber than from its competitors. That,
in turn, makes Uber marginally more attractive to drivers. The technology is
easy to copy, but the ecosystem is not: network effects.

Let's now consider the effects of changing technology on consumer behaviour. I
can walk out of the aeroport in San Francisco, Paris, Austin or Abu Dhabi and
have an Uber fueled and ready. Uber has been the driving factor behind me
abandoning my driver's license, and with it expectations of ever owning a car.

Here's another technology: driverless cars. Driverless cars reduce fleet costs
and risks, and increase scalability on the supply-side (i.e. scale is no
longer limited by driver availability and quality). If I were writing Uber's
strategy, everything until the availability of fully automated automobiles
would be geared towards establishing a strong opening for driverless cars. The
tactical phase deploys in force only after the supply side of the scaling
problem has been kicked away.

~~~
jordanpg
But neither network effects nor technology will change overall number of
people who need rides (demand) and the fact that driving cars is unskilled
labor.

If Uber pays more, taxi drivers will make rational decisions and become Uber
drivers. Or Lyft drivers. Or whatever other competitor.

If Uber has nicer cars or more efficient service, taxi services will adapt or
go out of business. The drivers will go elsewhere, not change industries.

And so on.

~~~
JumpCrisscross
> _But neither network effects nor technology will change overall number of
> people who need rides_

It did with me (granted, N=1). I reduced my own driving to zero and replaced
it mostly with Uber. That isn't just a shift in my quantity of rides demanded,
it's a shift in my demand curve.

> _driving cars is unskilled labor_

I would not have given up driving if the alternative were yellow cabs. New
York taxi drivers are not knowledgeable about routes. Further, it is not
uncommon for a trip to end with a debate over whether the credit card reader
works. I will pay extra for even a minimally professional Uber driver over an
unprofessional yellow taxi.

The correlation between driver skill and rider experience is one of the
problems Uber is running into when it considers scaling. That limitation is
one that would be mitigated by driverless cars.

> _The drivers will go elsewhere, not find other jobs_

Network effects limit the viability of alternatives: there will be less demand
on those platforms. As mentioned above, I do not believe most yellow taxi
drivers would do well as Uber drivers–the supply is not fungible.

~~~
jordanpg
If Uber _significantly_ affects demand, then we might see seismic shifts in
the demographics of drivers.

As for the existing drivers, my point is that the effects you're touting are
temporary. Taxi companies that provide a lesser service will die off and be
replaced by others that follow the example of Uber. The overall economics of
the thing will not change unless there is a significant change in demand. I
don't think this is going to happen due to Uber any more than it did due to
ZipCar.

~~~
JumpCrisscross
> _Taxi companies that provide a lesser service will die off and be replaced
> by others that follow the example of Uber._

I don't think Uber in its present form will shift the demand curve
dramatically. Driverless cars will. A world with driverless cars could follow
two models. Let's call them Apple and IBM.

Apple: each household owns a driverless car. Perhaps it can be occasionally
rideshared via UberX, Lyft, etc. In this world, you are right: Uber tomorrow
will be Uber today.

IBM: Uber (or Google or Tesla...) owns (and finances and repairs and
replenishes) a fleet of driverless cars. Households pay it use fees. In this
world, Uber's strategic autonomy is dramatically improved over today. If I
were Uber, this is the long game I'd be playing for. I would be (a) training
riders to depend on hiring cars with minimal personal contact, (b) encouraging
the development of driverless cars, and (c) building a cash pile for rapidly
acquiring a vast fleet of driverless cars the moment they become viable.

~~~
jordanpg
You are far more optimistic than me about the future of driverless cars. Given
N driverless cars, some fraction p will eventually run over and kill small
children. Stand back and watch the hysteria and the end of driverless cars.

Also, before driverless cars become widespread, they will need to be first
proven and then regulated. Imagine the fantastic force of the driving lobby
that will oppose that from happening: taxi drivers, truck drivers, fleet
drivers.

Why do trains and subways still have a human sitting in them?

~~~
relate
You chose to make your point with probability, which is actually what will
most likely make people accept driverless cars in the end.

It's amusing to read the same reasoning after striking away "driverless":

"You are far more optimistic than me about the future of cars. Given N cars,
some fraction p will eventually run over and kill small children. Stand back
and watch the hysteria and the end of cars."

or with elevators:

"You are far more optimistic than me about the future of automatic elevators.
Given N elevators, some fraction p will eventually malfunction and kill small
children. Stand back and watch the hysteria and the end of elevators."

If the accident probabilities can be brought to acceptable levels, why
wouldn't we adopt them?

PS: With trains and subways we have 1 driver per dozens of passengers, where
the savings gained from reducing it to 0 may not outweigh the risk
increase/loss of safety feeling.

~~~
jordanpg
Good point. I totally agree that if the risk is low, we should adopt the
technologies.

I was addressing how I believe these sorts of accidents will portrayed in the
news and media, especially if there is an organization with an agenda behind
the coverage.

~~~
relate
Yes, I think (automatic) car makers will have to be extremely careful. If we
have dramatic accidents to soon, it may be hard to sway the public opinion
with statistics (as is the current case with nuclear power).

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pshin45
This is not based on any kind of deep analysis whatsoever, but I'm starting to
get the same vibe from Uber as I got from Groupon several years ago.

Groupon's promise to local business owners was that offering a Groupon deal
was an easy way to attract new long-term customers en masse, despite the
sizable up-front loss. History showed that that did not happen for many
businesses who used Groupon.

Similarly, so much of Uber's marketing is targeted towards the supply side
(i.e. drivers) and the promise of making more than they could at any other
available job, with "flexible hours" and other dubious perks. This is just the
latest article to show that that is not the case.

Groupon's and Uber's business both depend on acquiring and retaining the best
local businesses and drivers respectively, and as these kinds of stories keep
coming to light, I wonder whether Uber will be able to retain all the drivers
they acquire. Lyft has focused from the start on making their drivers happy,
which is a smart way to differentiate from Uber's mercenary mindset, but I
also wonder if that is enough to really differentiate itself in the eyes of
drivers, at least enough to make Uber really worry.

In all honesty, I am rooting for someone to beat out Uber. When I first
learned about them about 2 years ago, I marveled at their business model
innovation and their ability to execute. But everything I read (and personally
experience) about Uber tells me that they are becoming the new Investment
Bank, both philosophically and culturally.

~~~
2pasc
Quite honestly - do you believe that making more than $50,000 per year for a
HS grad is a bad thing? I am not saying that they should not make more, but
for most non college educated individuals - $50,000 is above US average
income. Uber may have shady tactics, and might be deceiving drivers - that's
true. But the reality is that the opportunities they are giving drivers are
not insignificant. Unfortunately - these drivers are paying with their wages
the price of a market equilibrium that has not been found yet in terms of
finding the right pricing model to match supply and demand. This is the
problem that has existed in all major Internet marketplaces where you deal
with people's businesses - with eBay, Uber, Amazon, oDesk, etc....

~~~
kilroy123
How are drivers making $50,000? According to the article it's more like ~$12
an hour. Working full-time, 40 hours a week, that's only ~25k. 12 * 2048 =
$24,576

~~~
2pasc
1/ They mention drivers making $1000/week. 2/ Smarter drivers are driving very
gas efficient cars with much lower gas costs 3/ Wages are way better if you
drive during peak hours. I did and it is pretty neat how much you can make.

~~~
quonn
Read again. $1000 / 40 hours a week is without costs subtracted. The drivers
end up with about $400. That's $20000/year.

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parfe
>Median uberX Small Business Income Per Year: $90,766 (NYC); $74,191 (SF)
[http://blog.uber.com/uberimpact](http://blog.uber.com/uberimpact)

Is it pretty much accepted that Uber is outright lying here? Does anyone
believe there is a driver out there banking $100,000 driving a taxi?

I know the company is shady but hoping they can generate enough new blood to
compensate for burnout of drivers chasing the dream seems abusive.

~~~
potatolicious
They may not be lying - that could be raw revenue. Unlike white collar jobs
driving a car for a living comes with a _lot_ of costs that kill your actual
take-home income, far above and beyond just taxes.

Maintenance, repairs, insurance, and gas are all direct costs that don't
really improve with economies of scale. Car payments too - though white collar
workers may also be hit with that, but probably less so.

I think there's a bit of deliberate obfuscation here where Uber wants you, the
office worker, to think of that $90K without all the strings attached, in
which case it would be a pretty decent income.

~~~
waterlesscloud
Even if it's raw revenue...where are the 100s of drivers making that much that
Uber claims exist?

~~~
saalweachter
Could this be, hmm, not so much lying as willful ignorance?

There are probably middle-men in the Uber industry just as there are middle-
men in the taxi industry, who own a car and pay people to drive it with Uber.
If they have one account per car, the account could me making $100k / year via
driving 24/7, and Uber could be choosing to believe that these accounts
represent a single self-employed driver.

~~~
shalmanese
Being a middleman would be extremely hard as you have to provide a profile
picture and passengers use the picture to verify they have the correct driver.

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bbd
We at Sherpa has collected around 1M trips from Uber and Lyft. The average
hourly rate of Uber driver is around $15 -- varies among cities. If you work 8
hours a day for 365 days, you will earn around $43,800. Of course, if you
drive for 24 hours a day, you will earn as much as $131,400.

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shiftpgdn
Do drivers collect the additional income during surge pricing or does the
delta simply line uber's pockets? It seems like you could game the system by
simply only driving during surge pricing.

~~~
baddox
The supposed purpose of surge pricing is to get more drivers on the street, so
that implies that the drivers see some portion of the extra payment.

~~~
aetherson
It's the same 80/20 split as usual. If your fare is $11 including a $1 "safety
fee," then drivers see $8. If you're in x2.0 surge and so your fare is $21,
drivers see $16. For UberX.

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jessejhernandez
Really cool article I found it pretty informative. I think the Uber/On-Demand
Taxi Service was a revolutionary idea but the question is how successful will
it be in the long term, and how much power does uber truly have over
controlling the price? I think they've taken a risky route and may be
susceptible to failure without some type of change.

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foobarqux
Why wasn't this story deduped?

[https://news.ycombinator.com/item?id=8519585](https://news.ycombinator.com/item?id=8519585)

