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Disrupting Uber (jacobinmag.com)
199 points by azuajef on July 31, 2016 | hide | past | web | favorite | 220 comments



Good luck with the co-op idea.

The problem is that drivers feel like their services are worth a lot, and passengers simply don't believe it. The reason why Uber is a success is that they created new demand by dropping prices. Everyone I know, including myself, would never have taken an Uber as frequently as we do if the prices were as high as taxis.

You can't replicate this unless you keep pushing prices down, and this is what Uber is doing.

So, as long as drivers want to keep their prices high, the riders won't come, which will prevent more drivers from entering the co-op, which will mean riders will wait a long time before their drivers arrive, which means they will just go to Uber, etc. The co-op will never reach critical mass that way and will fail.

The article doesn't even mention the massive amounts of driver incentives that they pour back into the drivers. One driver told me that if they worked 2 hrs during rush hour, Uber would guarantee $50/hr. That's $100 for 2 hrs worth of work, which is pretty damn good and makes the rest of the day less stressful about trying to hit your numbers to become profitable.


> drivers feel like their services are worth a lot, and passengers simply don't believe it

That's an interesting issue. We see the same thing in real estate -- seller's think their homes are worth way more than anyone will pay for them. I think this is one of the reasons For Sale By Owner (skipping realtor fees) hasn't taken off yet in the US. The FSBO seller will price too high, the home will sit on market for a while and people will think there's something wrong with it so they'll stop considering it entirely. As an anecdote, someone approached us the other day wanting to sell their family home for ~$4M that would realistically fetch about half that based on recent comparable sales in the area. At our current scale we can talk him down from that ledge, but we'd really like that listing process to be self-service and online. Traditional agents will say you need a selling agent there to talk the seller down to a reasonable price but my gut says we could solve this with computers.


But the problem with Uber is not that sellers are listing too high, it's that Uber keeps jacking up the spread. This is not a true functioning marketplace because the buyers and sellers don't have good information. Only the market maker itself has all the information.

Also it isn't really true that Uber lowers prices for riders when they lower prices for drivers. Uber practices active price discrimination to discover the highest price a rider will pay. If you get ten people together on the same street corner and everyone calls for an UberX, you'll get ten different prices.


> If you get ten people together on the same street corner and everyone calls for an UberX, you'll get ten different prices.

That would be a huge story and would be much more interesting than the typical Uber hit job. If it were true, I have to imagine that it would have been covered by a journalist intent on attacking Uber.

Care to share some actual evidence?


Wouldn't it be simple to claim that more demand (for any given corner or area) is immediately reflected in the price? That doesn't sound like a scandal; it's harder to arrange for 10 cars to arrive at a spot than 1.


I don't think the Uber surge threshold is so sensitive that you're likely to be the marginal customer driving pricing up.

More importantly, there's simply no way that you would have 10 different prices. Ten people on a corner might be enough to flip that area into surge pricing, but each individual would not get their own personal price.

It's not like this is something which is untestable. If people actually think Uber is discriminating on price between different users, that's trivial to test.


It's the surge multipliers that I am talking about and yes it is trivial to test. During surge I've been with friends all of whom get different multipliers.

Outside of surge everyone pays a published rate.


> Wouldn't it be simple to claim that more demand (for any given corner or area) is immediately reflected in the price? That doesn't sound like a scandal;

Absolutely not. This is why price-discrimination always happens jumping through a weird hoop or other. Imagine the typical example of price discrimination, S/M/L coffee for widely spread prices that don't have much to do with the cost for the amount of coffee with prices that wildly change up and down depending how busy it is, customers would be rightly pissed for getting screwed because they're obviously not getting a fair price. Price differentiation needs some sort of trick to obscure this fact.

Otherwise it's like saying "getting away with this is perfectly fine because capitalism", which is motivated purely by greed, not the possible benefits of a free market.

> it's harder to arrange for 10 cars to arrive at a spot than 1.

I think you forgot to divide by ten, there. Try this statement for a fairer comparison:

to arrange for 10 cars to arrive at 1 spot vs 10 cars at 10 spots

Seems to me that the 10 cars at 1 spot should be cheaper.

The only reason they get away with this price differentiation going the other way is because they are able to hide these prices from the customers. Driving up profits from unequal information availability is also known as "screwing people over", so yeah that'd be a scandal (except for all the HNers that will go "I am genuinely curious why this is so *surprising" to anyone" -- because getting screwed should be a surprise, otherwise you should've gotten mad sooner, like when we said there's no proof of getting screwed)


Serious question: how do you know Uber's spread is increasing?

I'm not even sure if it's positive or negative, given that they subsidize markets (running a loss) sometimes.


Again it's hard to tell because only Uber knows. Prices for UberX have gone up a lot in San Francisco. The minimum fare went from $5 to $6.55 in the space of only four months leading March 2016, and the service fee went from $1 to $1.55 in the same time. Meanwhile the drivers keep complaining their rates are going down, so I have to conclude that Uber's share increases.


Ask your drivers. I know if SF and Vegas they will all complain about how Uber increased their take. (Around the same time we saw a lot of articles about "unit economics" at startups.)


> Uber practices active price discrimination to discover the highest price a rider will pay

Wait really? Has this been written about? That would be very interesting!


It's simple market economics. Driving for Uber requires basically:

1) Owning a car

2) Having insurance and good driving/criminal history records.

3) Willingness to do the work.

Even assuming Uber also has minimum age requirement, that's a very large supply of potential drivers, which is going to prevent wages from rising very high, unless there is artifical pressure such as regulation.


Sounds like another industry ripe for disruption.


Working on it :)


How much of Uber is the ability to burn down the massive investments made into the company?

As they transition to a more normal company that needs to make money, can they afford those incentives?


Well some of it is from them ignoring business regulation that taxis had been held too. When there's no medallion over head you can charge less and that applies to a hypothetical dispatch co-op too.


"When there's no medallion over head you can charge less and that applies to a hypothetical dispatch co-op too."

This is wrong for two reasons:

1) In general, overheads don't directly affect how much you choose charge for something. By definition, overheads are fixed (i.e. don't change with the output), so don't affect your marginal decision about whether to drive or not.

2) In the specific case of taxis, prices are set via a combination of lobbying and regulation. Taxi tariffs are not set by the market in response to the market value of medallions.

In summary, you have it backwards. Taxis tariffs aren't high due to the cost of medallions. Medallions are worth a lot because taxi tariffs are high.


Overheads absolutely affect marginal decisions. For a Uber driver, their income is revenue - car payment - fuel - other expenses. To remain solvent, that formula needs to be > 0.

For a cab it's similar, except you have labor cost and medallion cost as well. With rates fixed by regulation, the only way to increase profit is to drive more.


"With rates fixed by regulation, the only way to increase profit is to drive more."

That's the reason right there. The rates are totally set by regulation. The number of medallions is similarly set. If medallion rental cost were to go up or down by 20% this wouldn't affect whether the marginal ride would be worthwhile for the driver.


Sure it would. The market of people looking for a ride in price sensitive. If the medallion cost goes down, you need to drive less to breakeven and hit your target profit. If it goes up, you need to drive more to attract more rides.

Likewise, there are mental and affordability factors that influence passengers. When I was still going out to downtown clubs, I lived in a close suburb of my mid-sized city. Cabs were regulated by the city, but unregulated outside. That meant that predatory cab companies would charge as much as $50 for a 5 mile ride, and something like $10 for a 4.8 mile ride within the city.

In NYC, historically this has meant that many cabs are kept in motion 24x7, and are concentrated in specific areas in Manhattan to maximize the number of fares.


You're assuming people have a "target profit", and will keep driving only until they reach it. That's not the way people make decisions.


The incentives likely don't matter in the future because the future of Uber is driverless cars.


In the future, we'll have unicorns towing magic carpets, so Uber won't matter.


I'd also like unicorns towing magic carpets and appreciate the sarcasm, self driving cars are not the 'unicorn' anymore. Uber is actively investing in prepping for a self-driving world.[0][1]

https://newsroom.uber.com/mapping-ubers-future/ http://www.theverge.com/2016/7/31/12338268/uber-maps-investm...


When a ~$100k Tesla can't successfully avoid a stationary guardrail or a turning semi, even under the limited conditions that it's autopilot actually attempts to run under, I'd say it's massively premature to suggest that there's anything like a driverless future coming in even the medium-term for affordable vehicles. There's just too many variables on our roads and the stakes are too high.

If they are coming, it's more than 25 years away IMO. Remember 25 years ago, cars weren't super different from today. ABS was first in a production car in 1971. I think the average car on the road now is 11 years old, so there's bound to be unpredictable manually-driven cars still on the road for a long time that any driverless cars would still have to contend with as well.

Self driving cars are pretty much unicorns.


It isn't about single accidents; its about statistics. Autodriven cars don't get tired, or drunk, or fool around with the playlist. There is so much low-hanging fruit that its entirely conceivable that autodrive is already safer (statistically) than human drivers.

Add to this, that each time a special case comes along, the software can be patched and it won't happen again. Something humans are terrible at - learning from others' mistakes.


So when an autodriven car maims little Johnny, before they patch the bug to not run over future infants, then who's responsible and has to pay? What if other cars maim more infants before they get around to patching what is now a known bug?

You can't blame the driver, they weren't driving. The car manufacturers can't accept blame, as it costs a lot if you have to factor in the cost of a lifetime of support for a maimed infant. Even ignoring the fact that it only works on highways and not normal surface roads, Tesla's "beta" Autopilot feature takes no responsibility because the driver is still supposed to be holding the wheel.

Also as any software developer would tell you, software updates would also be a problem in themselves. If you propose that cars be auto-updated automatically, I wonder how insurance would work when the car is running different software to the software it was originally insured with. Critical saftey systems can't get auto-updated without a lot of testing. What if the auto-update mechanism gets hacked, or maliciously changed by a disgruntled self-driving car employee? What if a legitimate update causes another bug where it maims the elderly now instead of infants? Do they roll back to the infant-maiming software now? I'm being silly but updates on critical safety stuff isn't so simple, especially with the legal ramifications.

I think legal issues will be a problem for self-driving cars, maybe even a larger problem than the actual designing a working self-driving car problem. Someone has to be responsible for inevitable accidents (bugs?). After a century of being able to blame the driver, car companies won't want to change that status quo.

Maybe insurance will decide that they'll cover self-driving cars if they prove themselves to be safe, but we'll see.


This is the biggest problem that's really holding back self driving cars right now, and it isn't really new. It is called the trolley problem [0]. Wired has an article or two about this [1]

[0]https://en.wikipedia.org/wiki/Trolley_problem

[1] https://www.wired.com/2016/06/people-want-self-driving-cars-...


I think parent comment was suggesting that human-driven cars that behave erratically are better handled by opposing humans rather than software (that has not been exposed to dealing with the novel situation).

(Not that auto-driven cars don't produce less accidents when other human-driven cars behave expectedly.)


I'm imagining that driverless cars could work well on very predictable roads that are exclusively for driverless cars.

But on real roads with questionable maintenance and other unpredictable cars on it, I just can't see it happening unless there's some major change to the roads infrastructure.


No, it's about liability and risk. Uber is amazing, but offloads lots of risk and capital expense to the saps^H drivers and their judgement.

I associate self-driving Ubers with unicorns and flying carpets not because of self-driving car technology, but because of the total shift in business model for a future Uber.

Self driving cabs require, at a minimum:

- Owning or leasing capital assets (robot cars)

- Maintenance (from mechanical repair to removing puke and vandalism)

- Provide local infrastructure for them (real estate for storage, maintenance and charging)

- Own liability for all of the various mishaps that will naturally happen. (accidents, human-prompted mischief or criminal acts (Uber drive by shootings, prostitution, narcotics transport, etc)


> so there's bound to be unpredictable manually-driven cars still on the road for a long time that any driverless cars would still have to contend with as well.

Luckily unicorn-driven magic carpets don't face this problem.


>Tesla can't successfully avoid a stationary guardrail or a turning semi

It can. The problem wasn't that. The problem was that it wasn't able to differentiate the color properly and thought nothing was there. There's more info in Tesla's blog post. And it's not like it is an unsurmountable problem that is leading to accidents everywhere. It was an edge case and will probably be sorted out.

>massively premature to suggest that there's anything like a driverless future

I really think that's a very harsh opinion. And you're asserting this opinion on many intelligent people working towards a difficult solution. Thousands of people have used auto pilot without any problems and many lives were probably saved (consider if they were driving normal cars instead of self driving ones?)

>There's just too many variables on our roads and the stakes are too high.

Nobody is disagreeing with you on that. That's the reason it already took so long. Self driving cars first appeared in 2005 if not earlier [0]. And remember all of self driving is mostly a software problem, which greatly reduced iteration time for new developments unlike electronic or mechanical revisions.

>25 years away IMO

Funny how people predict things. Ray Kurzweil predicts AGI (general Artificial Intelligence) to arrive before the year 2045, 4 years after you say we get self driving cars. I'm not going to argue with you on that number since we probably have different opinions on what constitute self driving cars. Just so you know, I predict we'll have fully self driving cars on the road (with humans in them) in 5 years.

>Remember 25 years ago, cars weren't super different from today

Please tell me you're kidding. [1][2]

>Self driving cars are pretty much unicorns

At least those unicorns are achievable and people are trying towards achieving it rather than give up.

[0]https://en.wikipedia.org/wiki/DARPA_Grand_Challenge#2005_Gra...

[1]http://www.popularmechanics.com/cars/a11201/why-cars-are-saf...

[2]http://www.iihs.org/iihs/sr/statusreport/article/50/1/1


>>Tesla can't successfully avoid a stationary guardrail or a turning semi

>It can. The problem wasn't that. The problem was that it wasn't able to differentiate the color properly and thought nothing was there.

Really? You're arguing that it can avoid a guardrail if it was actually able to tell a guardrail was there?? lol.

>Funny how people predict things. Ray Kurzweil predicts AGI (general Artificial Intelligence) to arrive before the year 2045, 4 years after you say we get self driving cars.

Interesting. Who knows. I've heard people say that it will accelerate exponentially after the first AI is developed as the AI will be able to iterate itself.

>>Remember 25 years ago, cars weren't super different from today

>Please tell me you're kidding.

Sure, they're safer because of improvements in crumple zones/better brakes/steering/etc. I meant the basic technology of an internal combustion engine for power and a human in control. There have been incremental improvements but nothing like an autonomous car.

>>Self driving cars are pretty much unicorns

>At least those unicorns are achievable and people are trying towards achieving it rather than give up.

I think they're technically achievable with dedicated road infrastructure but on normal badly-maintained roads with non-autonomous cars to dodge, they're unicorns. Legal issues will be the biggest hurdle IMO.


I'm not aware of any particular ride sharing startup that isn't burning massive piles of cash. It's a cash arms race induced party by all of the free floating cash probably induced by multi-nation QE policies.


In Hong Kong taxi drivers operate private networks known as "80% taxi's". You'll see many taxi's with multiple phones in them with different drivers operating on a few networks.

http://hk-magazine.com/article/inside-hk/mr-know-it-all/1145...


Someone ought to disrupt market and create an app allowing Uber/Lyft/Blah drivers to use 1 device per bunch of providers.


Somewhat similar in Sydney, you can only haul taxis from Uber app and then it filled with tons of devices, cameras, etc.


I have seen that and I never knew that was the reason for the tons of phones stuck to the windshield.


Why Cant there be a "meta" ride-app giving you the best rides from a whole host of different services big and small


The only thing preventing that is each service's terms, assuming the aggregator uses official API access.

In some big cities, Google Maps can provide this, sort of, Uber vs bus fare, for instance.


Read the article more carefully, "they might be willing to switch to a co-op model that offers a cheaper price and solid service". A co-op can have lower prices and pay it's members more because they don't have to funnel profits to support the bloat of a central corporation like Uber.


Can they, though?

The corporation isn't some money-sucking black box. It's dispute resolution, software development to match rides efficiently (Uber Pool is tricky), and advertising.

Yes, it also skims money off the top to pay for things like driverless car R&D, but is a small, likely disorganized co-op going to be efficient enough at all the above to take advantage of that margin?


It's highly unlikely that a small, disorganized co-op is going to be efficient enough to take advantage of the situation and be able to out-compete Uber.

That said, the reality is irrelevant here. Jacobin is the kind of magazine where economic reality is treated as a suggestion, to be discarded as is convenient.


That's how economic reality should be treated. Our own reality is primary. We will take back our lives. What Jacobin is working towards is admirable. We believe in progress, that a better way is possible, and that the current state of affairs is suboptimal. We should encourage alternative economic thinking.


I am in favor of encouraging plausible, workable economic thinking. Jacobin is better described as leftist fever-dreams with roughly that level of connection to any reality.

Could things work differently? Absolutely. Are they going to work differently because some hack gets off fantasizing about how in abstract theory, the services Uber performs could be better performed by a co-op that pays workers more? No.

All the co-ops I've encountered or dealt with fall into one of three categories:

* Non-functional, incapable of making decisions or delivering value.

* Functional but completely unscalable. May depend on bizarro local economic conditions or be in one of the few cities where people are willing to pay 30% extra for pizza because it's a co-op.

* Function, scalable, and does not operate much like a co-op at the level of service delivery. REI falls into this category.

Uber works because it's functional, scalable, and reliable. You can go to almost any major city in the US, boot up your Uber app, and reasonably expect to get decent service. It is, abstractly, possible for a co-op to do that. You and Jacobin are completely, totally, 100% correct on this point. Things could be different and better for the people who Jacobin has decided matter.

In fact, we all live in a framework where such a thing is possible! If only someone was brave enough to put their labor where their mouth is. Maybe the propagandists at Jacobin could... nah. They wouldn't go for that. They much prefer theory.


> * Function, scalable, and does not operate much like a co-op at the level of service delivery. REI falls into this category.

No true scot? The definition of a co-op is a group organized to meet economic or social desires through jointly owned business. What does this have to do with any particular approach to service delivery? You appear to be defining cooperatives as some unworkable theoretical concept and then any actual successful example of implementation is an exception. Convenient!

Vanguard also falls into this category but is absolutely a cooperative.


Workers at REI get sub-$12/hr. REI is structurally and technically a co-op. They are just a co-op that does not exhibit the benefits of a co-op that Jacobin would suggest will flow from being a co-op.

If it's structured like a co-op and exhibits none of the benefits of a co-op, what's been gained? I'm saying that co-ops generally have to sacrifice at least one of: structure, functionality, scalability.


REI is a consumer-owned co-op, not a worker-owned one. The entire co-op is designed around saving consumers money, not making the workers more.

So yes, REI does deliver the benefits of a co-op to its owners - high-quality goods at a lower price than they would be unable otherwise be able to get. This is the entire point of a consumer co-op. Workers can also be member-owners of the co-op, and frequently are, but the benefits are geared towards getting better discounts on the goods REI sells. This is in addition to the implicit benefits of being an owner of the company and having a say in its direction.


But the prices aren't actually lower than what can be had elsewhere even with the dividend you get back each year. The primary benefits of REI is how easy it is to return products you don't like or don't have a need for and the fact that you can get a product the same day if you live near one.


So whats the difference between a co-op and a stockholder organization? Is it a stockholder organization with 1 stock unit = 1 member and you can issue stock for each new member?


> If it's structured like a co-op and exhibits none of the benefits of a co-op, what's been gained?

At least you've cut out Wall Street and co.


The definition you just gave for co-op also includes any publicly owned corporation.


The economic or social desire is met for the owners, not for others. Perhaps I should have made that clearer.


United Dairy Farmers based around Cincinnati is one co-op you might find interesting. They are an ice cream shop / convenience store / occasional gas station (I know it sounds strange) that has grown to ~200 stores in our tristate area. I wish there more info about them online.

http://www.udfinc.com/about-udf

The founder and family made Forbes' billionaire list.

http://www.forbes.com/lists/2006/10/S22J.html


and then there's John Lewis.

and a few others.


You're confusing "economic reality" with "economic narrative". That's a superset of "capitalist narrative", "free-market narrative" (distinct from "capitalism"), and "socialist narrative". All parties (as you just did) spin their own stories about what ought to happen or why what does or should happen is morally justified, and all of these stories run up against the reality (measurable or unmeasurable) of coordination of supply, demand, and the interaction of voluntary and coercive power with that.


A small, disorganized co-op, sure. A large, efficient one on the other hand...

https://en.wikipedia.org/wiki/Mondragon_Corporation


Mondragon is a co-op by name only. If you look into how it's structured, its basically just a corporation with a twist. Source: The Ownership of Enterprise, available on Amazon.


I would say at this stage Uber really is just a money-sucking black box. The revenues they get from their commissions in established cities they pour into marketing and just flat out buying business in new cities. All existing drivers are working to expand Uber, and they do not benefit from that in any way. The point of a co-op would be to recapture the spread and put it back in drivers' and riders' pockets.


A flat rate could cover software fees and advertising. Dispute resolution should maybe be insured for each and every ride, but at nothing close to the ~20% cut currently taken.


That may be true. I'd imagine that a cheap median price and solid service will depend on the scale of Swift's supply side. Assuming there's plenty of demand (lots of Uber, Lyft customers switching over) then Uber's drivers would be more than willing to switch over to Swift. The co-op model would be a great incentive.

The issue is though how does one get drivers to switch from a reliable (though possibly imperfect, inefficient) source of regular income with a well-known brand to an upstart at a large enough scale to pose a direct threat to Uber, thereby forcing them to change their model or go out of business?

I'm living in LA right now and I typically wait 4 min for a car (longest has been 10 min). My last ride cost $4.44. That's less than a Big Mac! ($5.04 average price in the US). I can't imagine a new service being able to beat that from it's inception.

The other issue is that if drivers are allowed drive for Uber and Swift there could be a free rider dynamic: drivers get the benefit of belonging to Swifts' co-op but still get to be part of Uber's network. Sure Uber's service would suffer, but it would be a huge drain on Swift's resources and undercut their model (and reason of existing) from the driver's perspective.


> The issue is though how does one get drivers to switch from a reliable (though possibly imperfect, inefficient) source of regular income with a well-known brand to an upstart at a large enough scale to pose a direct threat to Uber,

Incrementally, starting to use the second for a small percent and then gradually more


You're right, I missed that line. But I also don't believe that prices would go down in a co-op model because individual drivers don't see the big picture.

It seems like a few lines later, it says:

By turning to co-op apps, drivers can retain the flexibility of working under a model like Uber’s while also having a say in their own wages and conditions.

If the workers have a "say" in their own wages that means increasing prices, unconditionally. And who is going to provide the assurances that drivers won't lose money if they drop prices. When Uber drops prices, they guarantee wages as per:

https://newsroom.uber.com/beating-the-winter-slump-price-cut...

How will this happen in a co-op? Spoiler alert: it won't.


Why doesn't Uber just raise prices, unconditionally? The same reason co-ops won't: competition.


You can't just call it "bloat", you have to prove that it is bloat.


True, I do know people who work at Uber who I have worked with before. Just kidding but I would like to show that worker owned business can be more efficient because of locality of information transfer and decision making. It's not my professional area so I have to rely on my beliefs. I am working toward creating software companies to embody these ideas.


> A co-op can have lower prices and pay it's members more because they don't have to funnel profits to support the bloat of a central corporation like Uber.

How?

What is the "bloat" of Uber that this taxi co-op would avoid. Uber's primary spending is on marketing and developer salaries. Without marketing, how do you expect anyone to use the co-op app?

Ultimately, I think it comes down to drivers (and leftists) not valuing developers. You're not going to build and maintain an app which competes with Uber if you're not paying for the "bloat" of developers.


The idea behind capitalism is that people who have money use it to start a company with the goal of making profits. For example, if it's a transportation company, they will use the money to buy cars or to hire drivers. Thanks to competition, they will have to make sure that they are providing a good service at a competitive price, and so if they want to get their profits, they will have to make sure that their company runs as efficiently as possible.

Those are the two ingredients of capitalism: competition and the profit motive. Once you take away one of them, things start breaking down. And that's why not-for-profits are notorious for being wastefully run and being taken advantage of by their senior management.


Non-profit consumer-owned collectives like Vanguard, you mean? How is that working out for them?


Credit unions are co-ops.


Right, but they still have to find the funds to pay someone to set up the system and get it bootstrapped, or find enough volunteer or discounted labor to make it happen. Considering the risks and difficulty of doing so, the money funneled away as profits may not rightly be called "pointless gatekeeper bloat".


What they're missing is that higher wages depend on some barrier to entry (there are many kinds) that protects the people who have jobs at the expense of anyone who is looking for a job.

As someone who works for a company with high hiring standards and correspondingly high pay, I have mixed feelings about this. It seems like there should be some jobs that are easy to get without much training, and taxi driver is a good candidate for this. If we build fences around every kind of job, life gets even harder for the unemployed.

So I'm not automatically on the side of workers with more "skin in the game." I'd need a stronger argument about why we should support them rather than part-time drivers.


These "barriers to entry" is called "economic rent". https://en.wikipedia.org/wiki/Economic_rent

Economic rents are harmful to the economy and keep new labor entrants out as you have pointed out making it harder for young people or others to get a job.

A way to complete with Uber and existing taxi services is to provide greener vehicles such as electric or hybrid (the new yellow taxi medallion cabs in NYC are all hybrid). Just as people are willing to pay more for organic food they probably be willing to pay for cleaner vehicles.


I disagree completely. Uber's inception/success was partly because of existing taxi services' "barriers to entry". Medallions were worth about $1 million each when Uber started in NYC (http://bloom.bg/2aCEeQA). That's a textbook case of an economic rent.

Taxi service was often discriminatory in NYC and other cities: taxi drivers often refuse to pick up black passengers assuming they won't pay once they reach their destination and I've had gay friends openly complain about how SF cab drivers used to throw them out on Pride or after a PDA with their significant other. This was the status quo for decades because of the barriers to entry of municipal taxi services' monopoly. They never had to anything about it since their was no competition and if you didn't like it, you probably shouldn't take a cab.

Besides Uber's barriers to entry are it's scale (low prices and reliable service) and brand than de facto monopoly status (which I assume is what you're talking about since you mostly talk about competition beside summing up your link). The fact that a co-op could potentially "disrupt Uber" is evidence of that.


>> I disagree completely. Uber's inception/success was partly because of existing taxi services' "barriers to entry". Medallions were worth about $1 million each when Uber started in NYC (http://bloom.bg/2aCEeQA). That's a textbook case of an economic rent.

I live in NYC and if you look at my other posts to this article, you'll see I made the point that before Uber/Lyft the medallions went for $1.2 million.

Still, Uber/Lyft are way, way too expensive compared with other cities in USA and this is from the "legacy pricing" from the pre-Uber/Lyft days. Also, the "surge" pricing is really annoying and makes it Uber/Lyft far more expensive than taxis (they have the Arro app). I've had surge pricing on a Saturday morning! Hardly rush hour when it is raining! (I didn't use it).

>> Besides Uber's barriers to entry are it's scale (low prices and reliable service)

Uber does not have low prices in NYC. In other cities I've used it they are lower, eps. Uber-pool when it is available. Don't take my word for it. Check the Uber prices of NYC vs. Chicago or other large cities. NYC is about twice as expensive.


Most of the uber price goes to the driver. So higher prices means more money for the driver. Since NYC is a more expensive place to live, and people have more money, you have to charge higher prices to get enough drivers to drive.

Make NYC as cheap as new mexico to live in, and you will see new mexico prices.


Because of the limit on taxi medallions, the market value of a medallion was as high as $1.2 million. When drivers lease the medallion it can cost $125 per 12 hour shift or about $85,000 per year -- an amount Uber drivers don't have to pay and thus should result in much lower fares. Other US cities that are still expensive gave much lower fares.

Also there are many elderly on a fixed income that can't drive or negotiate mass transit easier.


While they're harmful to the economy, the economy really seems to favor them.


It is because special interests have a greater influence in lobbying for their good than the diffuse interests of the general population.


That's certainly part of it. But the economy rewards and enforces concentrations of power as a naturally emergent property. If you're Verizon you don't have to worry about too much about market entrance. If you create a highly demanded, new good or service then you'll quickly create all sorts of things empowering assets: market share, name recognition, and other 'incumbent powers'.


I think the most valid complain about Uber as an employer is that it is advertised as well a paying job but that there are hidden costs that most drivers won't consider.

It's similar to how programmers often look at consulting rates, but don't factor in non-billable hours.


And there are just as many hidden benefits that many people don't seem to realize. I've taken hundreds of Uber rides and always chat with the driver on their experience with it: many of them love the flexibility, extra income (which is really what this is, not a FT job), and it keeps them busy when they otherwise have nothing else to do (lots of retired people).


Agree to an extent, although I'd add that it's also similar in that people looking in from the outside frequently neglect to factor in the flexibility premium -- programmers who do consulting work frequently do so because they either enjoy or need to be able to set the amount of hours they work and when. Similarly, lots of Uber drivers seem to do it because they can just sorta fit in hours whenever they feel like it, without having to follow a manager's schedule.


There is an option to lease a car[0] with no limit on mileage at a fixed price/week which imho covers majority of maintenance charges also. Yes, there is a risk attached if the driver doesn't get enough rides.

[0] https://www.uber.com/p/carousel-vs-2/?exp=xcl_t1


Does Uber have substantially more hidden costs than, say, a pizza delivery driver.


Nobody looks twice at the car the pizza is delivered in. Pick up a few riders in a car that smells like pizza, and you'll no longer be an Uber driver.


So keeping a clean car is one of the hidden expenses?


I'd say keeping a care desirable to warrant a 5-star rating is, or any upkeep cost you would have to pay that Uber does not subsidize. I'm not a driver so I can't comment on specifics, but I doubt Uber pays for fuel, unless you're a full-time driver.


>that protects the people who have jobs at the expense of anyone who is looking for a job.

And also at the expense of the customers.


Workers making a living wage is more important than customers receiving a service at little cost.


Why should low-paid car drivers be the ones sharing their hours/pay with the othwerwise unemployed, while highly-paid professionals don't?

This is exactly the argument for minimum wage: by raising prices and limiting # of employed (which could mean more people at fewer hours for the same total pay, OR fewer people at more hours for the same total pay), there is more funding for the overall labor pool, instead of more worker-hours sharing a smaller pie of funding.


Why should low-paid car drivers be the ones sharing their hours/pay with the othwerwise unemployed, while highly-paid professionals don't?

That's only a relevant question if the policy being proposed is actually likely to achieve a transfer from highly-paid professionals to the unemployed. Which is certainly not obvious, let alone consensual.


I don't disagree, but why would Uber have lower fences than Swift? At least some of the part-timers must be surge-seeking: do their higher pay requirements reflect that they have higher skills than the 13-hour-day drivers?


If you have some other obligations so you can't work full time, that already rules out most jobs, so it could be a barrier to entry all by itself.

I don't know how many people that is. It would be interesting to find out.


That is an interesting question, but does Jacobin expect Swift to exclude part-timers? That would be a tricky philosophical position...


These "disruptors" need to work on wealth creation and not installing "economic rents." Economic rents, a term in Microeconomics, is trying to achieve profits beyond those in an efficient market (for example, creating artificial scarcity). The appear to be complaining because Uber is lowering the cost of overly expensive taxi fares when they should be working on a system that provides rides for less money while still helping drivers get more pay (if that is important to them).

In NYC, because of the legacy taxi medallion system which artificially limited the number of medallions to 13,000 (resulting in a medallion market value of $1.2 million now down to $700,000 after Uber/Lyft), taxi fares are still about twice that of many US cities. The artificial limit of medallions created artificial scarcity which resulted in "economic rents" thus ultimately requiring passengers to pay much higher fares that then went to the medallion owners.

One example would be to lower gas usage by using electric vehicles or hybrid cars (NYC Yellow Taxis are converting to hybrids) which not only lowers fuel costs but lower air pollution. They could make a financial deal with the city or state showing the lower health care costs from lower air pollution and have the cars financed.


> The[y] appear to be complaining because Uber is lowering the cost of overly expensive taxi fares when they should be working on a system that provides rides for less money while still helping drivers get more pay (if that is important to them).

This is a magazine for American Leftists, so they're really quite clear what they want: they want valuable services rendered to people with profits shared among the workers, not the gatekeepers to an arbitrary app. More than creating wealth, they want that wealth to be owned by the workers. To quote from the piece:

> This doesn’t mean drivers are better off working for a traditional taxi company. While Uber’s burdensome cost-shifting has come to define Uberization, the company merely digitized the taxicab industry’s already exploitative practices. The taxi medallion system, which requires drivers to pay their cab’s medallion owner at the start of each shift, deserved to be “disrupted.” But Uber’s employees face serious costs and risks nonetheless.

> The possibilities don’t have to be so restricted however. Ride-share drivers usually already own their vehicles, so in theory they could enter the ride-share marketplace themselves. By ditching Uber’s predatory practices for a cooperative model that uses the same technology, driver-owned apps could democratize the ride-sharing marketplace, fulfilling the initial promise of the so-called sharing economy.

Uber is really a place where the leftist case makes the most sense, because the means of production is already owned by the workers and are in effect paying a portion of their profits for the right to take part in an economy.


1) There is an assumption that Uber is not only profitable, but wildly profitable. There is no data to support this claim outside of Uber's press releases (obviously biased) stating "oh, yeah we just raised another billion but I promise we're profitable in a few markets". To argue that Uber is withholding profit from drivers, one would first have to prove that Uber is making profit, not just a positive contribution margin.

2) The high liquidity of drivers would imply a functioning market (not to say that it's perfect). The most obvious solution for drivers who are unhappy with the pay would be to get a different driving job, right?

3) The core issue is that the barrier of entry to driving for Uber is very low, increasing labor competition. This also keeps the price of a ride low. The wage of the driver is the agreement between the rider and the driver for the service, Uber is acting as a mediator. There is nothing in this article that comes close to proving that Uber is not fulfilling it's role as a mediator.

4) It will be interesting to see if the app works, but the strategy seems flawed. The constrained variable are the riders; there are already plenty of options. Paying drivers more doesn't seem to be a very compelling reason for riders to choose a different service.


1) Regardless of whether or not Uber is making an actual profit, which is not the point of the article, it is quite easy to show that Uber is withholding more revenue from drivers than theoretically necessary - on all rides, Uber takes a percentage cut of the overall fare, along with ~$1 or so in fees. You could argue that Uber's cut goes to running Uber itself, but the whole point of the article is that there is no need for a monolithic company running the platform in the first place - the software running it is fairly easy to create (given that there are hundreds of ridesharing apps worldwide) and the server costs are minimal - if the average Uber fare is $10 and it takes a 20% cut, it is ludicrous to suggest each ride costs $2 in server time. $0.02c might be more accurate (or even $0.20, if you add in other operational expenses), but that's a delta of $1.98 or $1.80 not going to the drivers for every fare.

2) Yes, to a company that is owned by the drivers and gives them back the maximal share of the revenue, taking into account the (minimal) operating costs.

3) To call Uber a "mediator" when both the customer and the driver have no say in the cost of the fare is laughable. Uber unilaterally sets the price, and if you don't like it, you're shit out of luck.

4) Like the point I made in 1), Uber takes a much larger cut than what is truly necessary. Even if the hypothetical ridesharing co-op had the exact same fares as Uber, a much larger proportion of the fare goes to the driver. And I would disagree that riders are the only constrained variable - there is almost zero switching cost between different ridesharing services for not only the rider but the driver as well. If only Uber and the ridesharing co-op are the only options for ridesharing in a given city, and they have the exact same fares for customers, but the co-op pays the drivers better than Uber, any driver would logically switch to the co-op since they would be paid more, and the customers would quickly switch to using the co-op's app as well, since the waiting times would be shorter compared to Uber.


I think your analysis it on point except for one part: the barrier to entry for becoming a driver is actually non-trivial and perhaps more importantly there is not a large supply of drivers in a given region. The pool of people who are looking for a new job, do not mind being a taxi and have a suitable car is somewhat small, and this is why uber and lyft must campaign heavily to recruit these folks. If this pool of people took collective action it would be very hard for Uber to come in and replace them - they could likely flip a single region to a new coop if they could self-organize.

That said the fact it could happen it not really related to if it should happen - as you say it's unclear how much extra money would actually flow to drivers as potentially Uber is operating on thin margins.


I'm afraid I don't understand this, nor why I was downvoted.

Just as in buying computers, buying food, education, airplane fares, consumers want lower prices which is a good thing. In the case of taxis, that means the elderly who often need them because they can no longer drive and are on a fixed income can more readily afford them (surely a leftist notion).

There is no disagreement that "economic rents" are harmful to the economy, giving people artificially high profits (see the Wikipedia entry).

Are you saying that a politically left magazine want to harm the economy through economic rents instead of helping it through wealth creation? Who would be for that?


What is so hard to understand about this? These drivers could create an app that results in the exact same price for consumers, except that any profits go to the drivers instead of Travis Kalanick's pocket.


If they create their own app, they would have to offer lower prices than Uber which they'll be able to do from the money Uber was taking from them. Otherwise, people will use the incumbent service (Uber/Lyft).

Is that easy to understand?


This is simply false.

Assuming that Uber is profitable (this is not clear) then costs to riders could be lowered and drivers could be paid more, simply by splitting the profits going to Uber between these two ends. That's what a co-op is designed to do.

I didn't downvote you, but if I had it would have been because you applied the standard arguments about Uber/Lyft without considering the specific argument here: that co-op systems can benefit both the consumer and worker.


>> except that any profits go to the drivers instead of Travis Kalanick's pocket.

This is the comment I was responding to.

If the drivers provide a services at sufficient lower costs than Uber (something easy to do in NYC at least) then they won't have to worry about Uber.


You don't believe that network effects, or first-mover advantage, play any role in the ride-sharing markets? You think it's 100% about price?

Peter Thiel would like to have a word with you. We're supposed to be building monopolies that no natural market force can topple.


>> Peter Thiel would like to have a word with you. We're supposed to be building monopolies that no natural market force can topple.

For Netflix, sure.

People spend a considerable amount of money on Uber/Lyft etc at least in NYC where I live, thus many would respond to a competitor with a 20% to 30% discount or more. This is possible in NYC because the rates are so much higher than other cities.

But there are a lot of people who need taxi like services that are price sensitive. Think of elderly who aren't able to drive or use mass transit so well and are on a fixed income.


Uber doesn't make any profit though. The question is what percentage of driver revenue is actually required to pay for the engineers/servers/background checks/insurance/driver incentives and is it really any less than Uber's percentage?


Jacobin makes the core mistake of many economic radical leftists - they ignore that it's not just the good or service itself that's valuable. Quality assurance is valuable. Service discovery is valuable and so is rapid provisioning.

In Jacobin's world, the only person providing value here is the driver. In the world the rest of us inhabit, things like the star-rating system and the dispatch system are valuable too.


It is very helpful to have a firm with deep pockets that has a huge incentive to ensure their drivers are safe.

So, that they can be sued or lose lots of profits to a competitor if they don't have a fully safe system.

Large US airlines have a huge incentive to ensure that flights are safe. It is not only that they are afraid of losing market share if there is a large accident (and of course the loss of reputation for loss of life) but the average payout per killed passenger is $4.5 million.

In Germany, Lufthansa, the main carrier of Germany, owned a discount carrier where the pilot deliberately drove the plane into the ground, killing all on board. But in Germany the liability is limited to something like $75,000 per passenger instead of the $4.5 million in the US.

Which makes me more interested in flying with US carriers than, say, German ones, But also Uber/Lyft rather than "co ops."

This is real value provided. An especially important to women and the elderly who are most at risk from a problem driver.


Yes, that is an element missing in this article. I think in other places (The ABCs of Socialism by Jacobin) they have said that there will still be organizations and managers.

More generally, I'd push back a little: socialism strives to have the workers own the business (broadly, the economy) but there is of course still management and a need for QA, R&D,etc.

I like to point to Vanguard as an example of socialism that works well while people don't even realize it. The people who own Vanguard mutual funds and ETFs are collectively those who own Vanguard and control its direction. There is still a lot more than the service of a mutual fund that Vanguard provides, to the extent we don't realize its inverted corporate structure is a kind of cooperative. And all the time, the owners' financial interests come first in providing low-cost exposure to equity markets.

Why hasn't the broad mutual fund market engaged in a race to cut fees with each other? In fact it has been Vanguard's fees which have usually pushed others' lower.


There will still be organziations and managers and Q&A and R&D! We'll just starve them all of resources and wonder why we're being out-competed by corporations who use different economic models and structures.

That's not an abstract hypothesis. That's what happened to the Yellow Cab Co-op in SF.

Vanguard is a decent example, but it's in a unique market where information is shared very widely and customers are extremely sensitive to price. And nothing other than price relative to returns.


Well their innovation was really the idea that costs matter and that market-cap index mutual funds can work better for investors. They created the market. It was not always the case that investors chose the lowest-priced fund. There is a reason the S&P 500 fund was originally considered to be "Bogle's Folly". It was even maligned as un-American! But it worked well, and non-cooperative businesses are now forced to compete on this factor. However, they do so as a loss-leader for their more profitable (for the managers) products.

http://www.vanguard.com/bogle_site/lib/sp19970401.html


OK. So how does a hack at Jacobin and a true believer HN commentor (yourself) go about disrupting Uber by doing better with a co-op which is more efficient by virtue of not overcompensating managers?


Fascinating. I'm merely commenting on misconceptions and discussing what I think the intent of the article is. Your hostility to these ideas is directed at the writer ("hack") and those honestly discussing the article ("true believer" -- did I ever claim to be or even agree with the article?).

As for my personal knowledge at implementing this: I don't know how it can be done since I'm a scientist and not a business analytics person. But I know that a cooperative could compete well against the taxi cab industry. Perhaps not against Uber which broke lots of regulations to become an entrenched force in the industry.

Disengaging, I don't like to discuss with those who attack others while ignoring the evidence brought forward.


I don't agree that this article and the existence of Vanguard rise to the level of evidence in this instance. I am suggesting that those interested in producing evidence should roll up their sleeves and go produce some in the marketplace.


"are in effect paying a portion of their profits for the right to take part in an economy."

Not really, they are paying a portion of their profits for access to the connections to drivers that Uber provides. They have every right to participate in the ride-share market outside of uber.


> "are in effect paying a portion of their profits for the right to take part in an economy."

Through it's app, Uber is providing a known brand (as McDonalds does for burgers). People are welcome to open their own burger shops but when traveling, anywhere there is a McDonald's, I know it is safe.

Uber also provides the app technology which does cost money to maintain.

Like in the case of McDonald's, any driver is able to open up their own shop apart from Uber.


Yes, and socialists believe in democratized distribution of capital (and the connections between drivers and riders is a form of capital since this has value) to workers. If the industry were to be truly disrupted the profits would go more to those doing much of the labor.


well put, if your axiomatic paradigm is laissez-faire economics, whose credibility is fast being eroded as its negative consequences (exclusive returns to capital only) become all too awfully apparent. Terms meant as derogatory such as "economic rents" basically mean allowing some friction to the free market so that labour may obtain more of the returns, and consequently, workers may find some dignity, income stability, social cohesion, and solidarity. Thus some measure of economic rent-seeking should be tolerated, legislated, even if that means equity valuations may suffer, because the alternative is societal breakdown which destroys capital completely.


Economic rents apply to workers as well: guilds and labor unions. Licensing for any work including barbers and hairstylist with licensing requiring expensive courses.

Even in medicine, it is much harder for foreign doctors to work in the US than in Israel, a country with lots of competent medicine.

It really applies to any group that uses politics, regulation, to give profits beyond those in a healthy, efficient market.

In the case of taxis, it is helpful to eliminate economic rents so that fares are more affordable.

Instead of using economic rents to ensure that drivers get undeserved income which works against wealth creation, the workers should focus on eliminating economic rents that creates higher living costs, chief among these are the use of zoning density restrictions to create artificial land scarcity which results in higher rents.

Since a significant portion of one's salary goes towards renting an apartment or house or paying for an overly expensive mortgage, then eliminating the onerous zoning laws will go much farther towards improving the economy.

It is because of zoning density restrictions that housing is so expensive in SF, NYC, Boston, LA, SD, and other coastal cities.


The phrase https://en.wikipedia.org/wiki/Regulatory_capture applies to what you're describing here more than "economic rent" does.


I deal with regulatory capture in my work (in healthcare and patient safety). Regulatory capture is when experts use expertise over (say) public regulators who have less expertise to give their industry economic rents.. In addition, there are problems with people working on these (often) public regulatory agencies later working as lobbyists for the very special interest groups they were supposed to regulate.

The wiki article you supply gives many examples of this from the FAA, to the NRC, to the Fed regulating investment banks, ....

The economic rents frequently are political laws passed to create special licensing requirements to create politically induced barriers to entry for people wishing to have a job. The economic rents also apply to other politically induced scarcities such as limitations on zoning density to create housing scarcity or taxi medallions to create taxi scarcity.


It seems to me that economic rents typically end up being friction that allows the owner of capital to capture returns, not something that helps workers get it.


It applies to both labor and capital. Overuse of licensing for jobs, including barbers and hair stylists.

Regarding labor, guilds or labor unions, or the American Medical Association that makes it more difficult for foreign doctors to work here than Israel makes it for foreign doctors to work there. And so on.


> Yet again, an investigative report has found that Uber underpays its drivers.

Aren't the fares proportional to how many drivers are available? If the fares are too low, don't drive. If enough people stop driving, the fare will go up.


Just this. How can you underpay for a job which isn't even contracted for a specific number of hours? It's like saying I underpaid for AAPL because my limit order executed. Uber offers a certain amount of money per mile to any driver who wants to take it. They don't even price discriminate against drivers who; drive more hours, have better ratings, have better cars, etc.

I just don't get it, it's not a right to drive for Uber and be paid a certain amount. If a driver leased a Prius to drive for Uber and saw the rates cut, even still, there's no contract with Uber guaranteeing a certain rate. We've even seen cases where they've exited a market altogether. Uber can disappear from a market tomorrow and those drivers will need to find someone else to drive for or get a different job. Likewise a driver can cut their hours or walk away with zero notice.

If Uber cuts their rates and still ends up with enough drivers, perhaps the only thing you could say is that they were overpaying.

There's only one thing the article touches on which seems worth investigating, drivers which get "stuck" driving more and more to try make their minimum required income. The anecdote of the driver doing 19 hours in a day. First, the driver app should not let you log 19 hours in a day. Second, if Uber is somehow "trapping" drivers to work more for less, I'm not sure I really understand the problem, let alone the solution, but it's something worth exploring, e.g. if there were false promises by Uber.


The article is making an assertion that isn't supported by the facts they themselves cite. They say that "Buzzfeed found that drivers in Detroit, Houston, and Denver “earned less than an average of $13.25 an hour after expenses”"

If that is true then Uber isn't under paying their drivers at all. They are paying them at a slightly above average rate. You can easily look up the average salary for a Taxi / Limo driver in the US on the BLS website[0] and you will find that the national mean hourly wage for this job is $12.53. They also have data by state.

Now, a couple years ago Uber was running adds on Facebook to recruit drivers in average cost of living areas that said things like "Make $70,000 a year driving for Uber". Those were clearly misleading if not outright false when the average taxi driver makes $27k. Perhaps that is where the narrative that they are underpaid comes from.

[0] http://www.bls.gov/oes/current/oes533041.htm


If you're driving for beer money you won't care that the fares are low. If you're driving as a career you can't just not work and hope the fares go up.


It's an important point, that these concerns are always about careerists, not the beer money group. But there are two groups here.

The beer money group could be significant: retirees, students, people who want extreme flexibility because they have another primary job or responsibility. Half of all drivers is a significant block.

On the other hand, careerists legitimately face an impossible situation, since so much of their life is in the hands of one company that's constantly tinkering with its economics.

The common policy response across similar situations seems to demand every single job must work as a 40 per week career with benefits, killing any pure beer money jobs.

I don't know whether that's a wise policy solution or not. Maybe the benefits do outweigh the costs. But it's certainly not pareto optimal. Restrictive policy responses hurt one group of people in an attempt to protect others.

I'd feel better about such policies if proponents showed awareness of who they were hurting. Like if proponents said, "ok, honestly, we're going to hurt retirees with this jobs protection measure, but we think that's ok, because we value single moms over retirees."

Though if you get that far, you could just reduce it to a wealth transfer. Let Uber do what it wants, then tax retirees and give the money to single moms. Similar effect. One group loses, one group benefits.

Though of course then you'd stop and ask why you're taxing people supplementing a fixed income. Maybe you'd rather tax some other group first.

And that line of analysis is how you end up supporting deregulation combined with aggressively progressive taxation where the benefits are targeted to vulnerable groups.


> Restrictive policy responses hurt one group of people in an attempt to protect others.

That's the definition of Pareto optimality


Ok, pareto optimal describes a state, and I was abusing the term to apply it to a change of states. Definitely could be ambiguous: Are you moving towards pareto optimality, or starting at PO?

When I've heard others commit similar abuses, they use "pareto optimal [change]" or "pareto efficient [change]" as synonyms for "pareto improvement." ie, moving towards pareto optimality. ie, a change that makes someone better and doesn't hurt anyone.

But you're right, "pareto improvement" is really the proper term there.


I think the parent was referring to how "you're at a Pareto optimum when any change has to make someone worse off", and was applying that (incorrectly IMHO) to the situation you described where a regulation makes someone worse off.

I say "incorrectly" because "some regulation R makes some group worse off" (as you were saying) does not imply "all reg changes would make someone worse off" (Pareto optimality).


Which is exactly why no one should drive for Uber thinking it's a career. It's not W2, there are no benefits, there are no opportunities for advancement, and your pay can only decrease.

If at least rates increased as you logged more miles and 5-star reviews that would be something. But it's quite obvious that Uber drivers are fresh meat for the machine. Not only that, but Uber is investing heavily in ways to eliminate drivers altogether. Literally everything about this screams do it for fun, for pocket cash, this is not a career.


This isn't exactly a unique problem to Uber. The minimum wage conflict is basically a battle between people wanting it to be a living wage and the beer money / need experience / part-time folks. Favoring either side destroys the opportunity of the other. Living wage means an end to starter, beer money, retirement jobs. Market wage, means no career minimum wage jobs.


>If the fares are too low, don't drive.

It's still better to be under paid, than make no money. Some people simply can't afford to take the morale high ground. It's societies job to ensure that employers don't take advantage for people in unfortunate positions.

While I understand the reasoning and appeal behind Uber, I still think it has a weird business idea. Very few people seem to want to discus the fact that ordinary taxi drivers aren't exactly well paid either. This is despite the fact that their in an artificially limited market, with little or no competition. Uber is an important part in increasing service, which is apparently extremely poor in some countries. In terms of pricing, the salaries don't appear to leave much room for lowering the cost.


I can't even work out what they think they mean by 'underpay'. Is this less than the minimum wage? Less than they were promised in a contract? Less than taxi regulations allow? Something else?

I see they say it's not the same as what some other article claimed, but unless Uber was promising drivers that this still isn't underpaying by any definition is it?


"The drivers who don’t completely depend on their work with Uber to pay their bills — a group that makes up about half of the company’s workforce — depress full-time workers’ wages."

I bet this creates a larger defensive moat than most competitors assume.

Uber is a supply/demand driven model (eg success w surge pricing) and even modest additional supply generates lower rates.

Lacking that same supply efficiency in full time driver platforms will keep their prices higher and without a significant price advantage consumers will stay with the known brands.

Not to mention the end game which is going to drop human drivers from the equation all together.


Uber is a investment fueled churn machine right now. Supply and demand(even as overly simplistic that model is) has yet to come into the equation. We will not have any idea the validity of the business model until the never before seen massive expenditures in driver acquisition subsides. Which probably won't be for several years or more.


The CEO already said that the top 30 cities produced over $1B in profits. I don't think your information is correct anymore.


Oh wow, so Kalanick opened his mouth and a huge number came out. Does he have anything on paper to back this up? An audited financial statement? Even a napkin with numbers on it?


Well, if this information is correct, then there is room for disruption starting with the cities with the highest taxi prices. Therefore instead of writing an article, build the app. Let it fly in NYC and offer 30% lower rates.


> "competing with Uber might seem intimidating, but in many respects the company is a paper tiger. Its massive valuation, which stood at $62.5 billion in January, comes from intellectual property — its brand and data — rather than from tangible assets."

Right... except that the brand is what creates the demand side of the market, the data is what makes the platform efficient and the IP provides strong defense against 3rd parties like this one.

Just to point out this is a thought-piece in a very socialist political magazine - and while I love Bernie as much as the next guy, this piece is a political folly and not really grounded in any business or technical fact.


If by 'not really grounded in business or technical fact' you mean not how things are typically done now, that's sort of the point. But there are some important precedents: Publix supermarkets for example, a Fortune 100 company with 170k workers, is wholly employee-owned.


Uber's brand did not and does not create the demand for catching a ride. The 400-year continuous existence of some form of ride service, starting with horse-drawn hackneys, tends to indicate a pre-existing demand, as does the fact that "taxi" is the same word in different languages all over the world.


You were able to pay a stranger to drive you around long before Uber came out. Even today if you loiter around any major airport you'll have plenty of people approaching you to offer a ride.

The difference is that I have 0 trust in a random person offering me a ride. I trust the Uber brand though.


Uber's brand created supply: before Uber, most customers would not choose to satisfy their demand by paying $10 to an unlicensed stranger.


I would argue Uber has definitely created demand for catching a ride. I use Uber tons more than I have ever used a taxi. That's because it's faster, cheaper, cleaner and has better customer service.


I still believe that Uber artificially creates a market by subsidizing a price point that is attractive to the drivers.


If their unit economics are positive than this is not true. If their unit economics are negative then it will be a spectacular show when the music stops. This is aside from promotional costs for the first few months when they enter a new market, as long as those costs actually decrease within the first year in a new market.


That view doesn't look at the big picture - it's very possible that they are allowing for, and happy with, losing money to grow market share for many more years, maybe even until they can offer driverless rides to turn market share into profit.


Waiting for driverless cars to make them profitable seems like one of the worst bets you could make. Even if they were content to wait, say, 20 years, when driverless cars hit the market, what's to stop anyone from buying a small fleet of them and tossing their own uber-like app up on the store?

Heck, I can even see it in the distant future, turnkey Uber-like businesses, you get your choice of franchise to buy into. You supply the cash for the cars, they supply you an app and a little branding.

Saying "Uber's playing a long game by waiting for driverless cars and THEN..." just seems totally implausible.


Uber is already lobbying for more regulation against competitors, and is making anti-competitive moves in the areas where they have the upper hand.

It’s clear they’re using the standard startup strategy: Getting a monopoly in a new market or by replacing an existing market, then abusing that.


good luck finding any competitor willing to sell you a small fleet of them and let you launch a competing service, not only that they are the ones in control so if you launch a competing service with them, they could disable your cars.

Uber, Apple and Google have all taken the approach that they will rely on their own autonomous systems retrofitted onto existing cars or potentially build new cars instead of relying on anything the existing car companies make, otherwise it makes no sense for any of them to be investing billions of dollars into research if they think they can just go to Ford/GM/Tesla/etc. in 2020 and buy enough cars to launch a fleet service.


So this is an interesting thought -- will the general public even be able to own their own self driving car? Or will self-driving functionality be locked down with DRM to such a degree, will the developers of the technology hoard it / control it to the point that they are the ultimate arbiters of what you can even do with a self driving car?

What scares me is that there is absolutely precedence for companies to act like this, and I can even imagine legal arguments about the hardware requiring certain oversight and maintenance to allow self-drive to be enabled. Kind of like John Deere exerting control over their tractors but even worse.

So to your point, in such a world, no one could go out and buy a self-driving car, and certainly not a fleet of them, and then just try to independently run this service. If you want the car to drive you from Point A to Point B you would be signing a TOS saying it was for personal use, yadda yadda, and all the APIs would be completely locked down like a walled garden preventing people from taking the self-driving platform and building on top of it. This would all be in the name of safety and limiting liability, of course....


Here is tesla's comment on it, but it seems like they will be fully in control of the fleet/app software and could potentially favor their own cars in cities where they are running their own fleets over your own cars you have added into the fleet as it benefits them financially more.

Potentially "jailbreaking" and building your own fleet/app would be an option, not sure how legal but if tesla issues a critical security update and the vulnerability gets published by the researcher and the the jailbroken ridesharing provider you are using hasn't updated yet/can't because it will break their jailbreak in the short term, you are exposed

"When true self-driving is approved by regulators, it will mean that you will be able to summon your Tesla from pretty much anywhere. Once it picks you up, you will be able to sleep, read or do anything else enroute to your destination.

You will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you're at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost. This dramatically lowers the true cost of ownership to the point where almost anyone could own a Tesla. Since most cars are only in use by their owner for 5% to 10% of the day, the fundamental economic utility of a true self-driving car is likely to be several times that of a car which is not.

In cities where demand exceeds the supply of customer-owned cars, Tesla will operate its own fleet, ensuring you can always hail a ride from us no matter where you are."

https://www.tesla.com/blog/master-plan-part-deux


I think Tesla has shown that jailbreaking the car is definitely not an option -- they will remotely brick your vehicle if they catch you.

So I think this a great example where you can add your Tesla to Tesla's own on demand service, but if you don't like the rates Tesla offers, and you want to put it in rotation with someone else's service, you likely run afoul of the ToS and risk bricking your car.

This probably helps explain why so many different companies, including Uber, are racing to develop their own self driving platforms. Because it won't be a bolt on feature by a supplier that anyone can build on, it will be a highly controlled and locked down service funneling the profits to the platform owners.


Its not playing the long game. Its playing the short game. Self driving cars are going to be here for consumers by 2020.

What protects Uber is the network effect. Even if I had a million self driving cars right now, nobody has my app installed, and I don't have an optimized pricing and logistics set up yet.

And if you have your own fleet of self driving cars, why would you build the whole setup yourself? Why not just rent them to Uber?


If you're Apple/Google you laugh at Uber while you make your app a default on every iPhone/Android.

I doubt very much customers will have much brand loyalty to Uber. There is very little differentiation of the actual service.

Uber must be prepared for a world with self driving cars. But if their entire model requires self-driving cars in order to work, if they are simply burning cash every year until then, then I think they will burn-out long before self driving is a reality.


> Self driving cars are going to be here for consumers by 2020.

I doubt this is true, at least if you're talking about all-weather driving. Not even the optimistic researchers I've chatted with are that optimistic; this timeframe would require all-weather driving to be basically solid at the research level by 2018 or so, which is not totally impossible but unlikely. Maybe if it's limited to Uber Phoenix, though.


To be fair, a lot of the self-driving car testing and research thus far has been done on rather linear freeways in immaculate California weather. It's pretty easy to become overoptimistic.

At least, Uber ATC is in Pittsburgh, where it can become more grounded in reality by potholes, haphazard construction, thin windy two-way roads without markings or lanes, and unexpected acute precipitation.


All weather no. But a partial roll-out still makes Uber a lot of money.

Self driving cars that work 90% of the day means Uber gets 90% of potential profits, and continues to use human drivers for the other 10% "surge" time period.


"Self-driving cars in 3 1/2 years" seems, to me, like "consumer electricity from fusion in 10 years".

For fans of a technology, that's a familiar optimism. I was young once, 20 years ago, I felt that way about fusion myself, hah!


Right, and by the time we get self-driving cars, whatever Uber is doing now will already be commoditized (cf. Arcade City).


Definitely. Even as a consumer, I am able to order food from UberEats, and the total costs less than the cost of the food on the menu at the restaurant because of Uber's promotions.


Key word, promotions. CAC is a thing, so is CLTV. But negative gross margins are something different.


Well, that was a rather condescending explanation of concepts of which my post didn't necessarily imply I didn't already know about.


Yes. Unfair competition.


Wouldn't it be more than competition since the market would not exist in the first place?


I know it's Jacobin, but where do they come up with the leading thesis that Uber "underpays its drivers." Relative to what? Even after expenses, Uber drivers make well above minimum wage.

Ultimately, it's impossible to satisfy all parties, particularly drivers. They want to be paid more, but most reports say Uber is not profitable. A co-op cannot rely on VC money to finance its expenses, so to pay drivers more they'd either have to charge more than Uber or avoid most of the expenses Uber incurs. I don't see either scenario leading to a competitive option: either you're the expensive option, or you offer a subpar experience.


The greatest problem of coops is that they don't have any incentive of getting rid of riders. With the feedback in Uber, an abusive driver would be kicked off soon. I'm tired of taxi drivers that don't take me where I want. I never had this problem with Uber.


Have you tried being white?


I'm an adult, white guy with lots of gray hair... but I live in Brazil.

BTW, other day I was talking to a black guy friend of mine. He was complaining that the taxis didn't even stopped for him. More than one he had to ask as policeman to stop a taxi for him. As a funny guy, he says that he asks the policeman: "Would you please stop a taxi for me. I'm not able to do it, maybe they are thinking I'm black!".


Uber is trying to keep prices low by removing the driver in the medium term. Any driver-owned service is going to have a hard time competing with that. There are less than 10 years of human driven transportation in urban settings. Still time to make a living, but not a career.


Here's a crazy idea for solving the problem with uber and taxis: public transport.


As someone who has lived in the Bay Area 17 years - it just never seemed to materialize.

Disclaimer: I work for Uber.


This prompted me to try to understand what a co-op really is. I read the wikipedia page, and still don't really get what keeps it separate from a regular business, except for ideals. At a co-op like this, they would still need programmers to fix inevitable bugs in the app, marketing/logistics people to figure out how to get traction (because that doesn't just happen by itself) and expand to new cities, and managers to coordinate, and everything else a regular company needs (financial, HR, etc). It ends up sounding like what I think of as a regular company. What's the difference?


The employees would own the company, including any programmers, etc. There would be no shareholders to pay out to, so the money that would have been paid out as dividends could be saved by consumers and/or given to employees.


Investors, shareholders, owners etc.


Uber has all the cards here. They came with a system that enables the drivers to use their time more efficiently, which dropped the price for the end user. Also lowered the entry barrier. Almost anyone with a car, smartphone and a driving licence can do it, which is why they afford the high turn over.

Is it worth it trying to compete with them? Definitely .

Will this lead to increased drivers profit ? Not really. Because the value that they provide is massively accesible,and with the advent of autonomous cars, fully replaceable.

Bad times for taxi drivers are coming quickly, and there's not much anyone can do about it...


They truly don't. They own the best technology but no driver OR customer loyalty.

If a cooperative treats their employees better and with higher wages then why should the best, most active drivers stick with Uber?


because that is where the customers are


If a coop doesn't have to pay investors, they can split that between the drivers and the consumers. Customers will switch apps for cheaper fares, all else being equal.


Precisely


Hi, we have found our "peer-to-peer ride share app" to be surprising popular[0]... in a different era, this was called carpooling. Which theoretically could disrupt Uber with "free" rides, but the article's premise seems to be on disruption through disintermediated profit sharing. Our app seems to indicate, at least in suburban areas, profit motive isn't the only driver in this market.

[0] http://www.snapridesapp.com/


It looks like post-Austin exit of Uber and Lyft, smart guys jumped on the opportunity to fill the gap. I really hope Arcade City will be able to provide sustainable & scalable solution!

P. S. I have no affiliation with either Arcade City or Christopher David. Read about this effort here: http://www.vocativ.com/327333/a-world-without-uber-dispatche...


you're betting that a facebook group is a scalable solution?

arcade city is a great example of unintended consequences -- instead of safer rides, austin's regulations led to consumers choosing a much riskier ridesharing option (no GPS tracking, no recourse when something goes wrong, no background checks at all, etc)

http://www.bizjournals.com/austin/news/2016/06/21/austin-cra...

http://countercurrentnews.com/2016/06/dwi-arrests-skyrocket-...


> you're betting that a facebook group is a scalable solution?

As I understand, they had an experimental phone application. They took down support for it, and are building a next version.


Ah, interesting, hadn't heard that -- is it the same as https://austinstartups.com/rideaustin-turns-tnc-lemons-into-... ?


I think the company is actually based in New Hampshire.

http://arcade.city/


Thanks! This article is very informative. DWIs are up thanks to Austin putting more stringencies on drivers than where I live, NYC, which is far more dangerous.

Uber/Lyft claimed that since their services began, DWIs in Austin had dropped by 23%. They have since risen about 7%.

Seems like Mothers Against Drunk Driving needs to get involved with Austin politics so that Uber and Lyft can again operate there. How many deaths will have to happen before Austin decides to not be more stringent than NYC, Boston, LA, Chicago, ....


Even in the unlikely case that the co-op could temporally get more customers than Uber, Uber could just artificially lower the prices for customers/increase rates for drivers and win customers/drivers back. A co-op could not do that since they have no money in the bank.

Except when all this happens on an own blockchain where people can invest in the co-op via tokens on that blockchain? Maybe this could even be combined with a prediction market which decides how to counteract attacks (on prices) from Uber?!


Vic Vaiana is naive. Co-op apps aren't 10X better than Uber so it's unlikely people will download them, let alone get people to switch from Uber and retain them long term.


I don't think the barrier is nearly that high. I could see people downloading co-op apps if they hear that they have more drivers or better drivers. Getting to that part is difficult, sure, but not out-of-hand impossible.


There is one big problem I have with uber: Uber takes PERCENT (20%) of ride value, while it has fixed cost associated with ride.

In fact it's a uber clever way to tax (sic!) workers.

I believe uber will be disrupted, either by nations (goverment must be ultra blind to allow burden its citizens by foreign corporation paying no corp taxes (EU case) plus having most of the cost in different country (all but US case) or by people themselves.


A driver's co-op is an interesting idea, but how long until the drivers are all replaced by self-driving cars?


It's a bit silly to leave out any mention of self driving cars in an article called "Disrupting Uber".

Driving around cars around all day is a silly job, ideally a job that should not exist in 5 years from now. We'd better discuss basic income instead of co-op taxi companies.


The more interesting problem being, of course, how to build a co-op anything that really works within a market economy. The Leftist Uber Killer may well be the killer app for socialism.

If you a mange to do it, of course.


I'm trying to think of a job that isn't "silly", in the sense that it couldn't eventually be done by robots, and I'm drawing a blank... Do you intend to say that working is "silly"?


The silly spectrum, as defined culturally.


Taxi drivers are "silly", but paying for nothing is serious stuff.

Grand.


The app in the article looks like vaporware (hope to be proven wrong). Anyone else trying to build P2P apps where the worker sees the full value of their work? I get the theory, it seems possible, but it been a few years since we started talking about building stuff like this on the blockchain and I've seen 0 activity. Every developer (including myself) who I've discussed this type of thing with has basically said the same thing: if I had a bunch of money in the bank and wasn't already working on a project that seemed interesting/important, I'd be down to try building it for some labor vertical (delivery, taxis, farming). From my vantage, it's public service in the same sense that doing a sabbatical with 18F is public service. Maybe 18F should try?


Does anyone know why I would be downvoted for taking the time to explain what is going on. Does someone have a problem with lowering overly high taxi fares. Uber has been doing that which is a good thing.


We detached this subthread from https://news.ycombinator.com/item?id=12197479 and marked it off-topic.


This is the cosmic microwave background of this forum. Lots of posts get down-voted in the first few seconds of them being posted, and then recover over the next few minutes.


You didn't consider the article's arguments in depth and applied your standard template response to these issues.


There are barriers to entry to most jobs than don't fit your saying they are all harmful "economic rents".


Correct, but the article is advocating that full time drivers capture rents from the market. This is justified by implying (without evidence) that Uber is engaged in rent seeking against the drivers.


Don't take it personal. It might be some uber fans thinking you are attacking uber. There are a lot of religions here on hn. :)


You are a wise being.


It's much easier to down vote something you don't want to be true than to engage in intelligent discussion.

And to answer your question: everyone wants the benefits of economic efficiency but none of the costs. It's much easier to say "low skilled labor should be paid more" rather than "let's increase the value of labor". Also, an easy counter argument is that Uber is engaging in rent seeking against it's drivers. I don't think this has very much merit given the liquidity of driving labor.


Downvoted with no comment! Oh, the irony.


It breaks the HN guidelines to go on about downvotes like this. Please don't.


(deleted)


I think this belongs in the "Hitler Uses Docker, Annotated" thread.


This is standard Uber practice. Use billions in its warchest to incentivize drivers into joining it, and offering huge benefits that gradually become less generous as it comes closer to market saturation.


What's a warchest?


I am referring to the billions it has got to spend, which it is using to fuel growth. War chest literally means " a reserve of funds used for fighting a war.". Seemed appropriate, since Uber is waging a war for market share




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