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The 144 Million Dollar Button (unwieldy.net)
147 points by endtwist on May 13, 2012 | hide | past | web | favorite | 74 comments



Your math for the $144 million button makes for a good headline, but seems a bit dodgey. Plus, why is this article linked to instead of the New York Times article it references with actual information?

WHEN TIP WAS 10%: BASE REVENUE = 82,497 TIP REVENUE = 8,250 TOTAL REVENUE = 90,747

TIP UP TO 22%, ASSUMING SAME BASE REVENUE BASE REVENUE = 82,497 TIP REVENUE = 18,149 TOTAL REVENUE = 100,646

TIP REVENUE INCREASE = 9,899

CREDIT CARD FEE AT 1% = 1,006 2% = 2,012 3% = 3,018 4% = 4,024 5% = 5,030

13,267 CABS

LETS ASSUME THAT EVERY FARE WERE PAID WITH CC.

ASSUME 5% CC FEE, BECAUSE THE NEW YORK TIMES ARTICLE SAYS "higher tips are tempered by a 5 percent service fee applied to fares that are paid with plastic," TOTAL REVENUE, LESS CREDIT CARDS = 95,616

TOTAL TIP INCREASE = ~131.3 MILLION TOTAL CC FEES = ~66.7 MILLION

TOTAL INCREASE FOR CABS, LESS CC FEES = ~64.4 MILLION

Now, since the credit card tips are going to have to be fully declared for tax purposes, since they will come back to cab drivers in paychecks and with 5% of the TOTAL FARE taken out, I would actually guess cab drivers are seeing LESS MONEY than they were before the credit card machines were installed. I would bet that the 10% tip average pre-card machine is actually low based on undeclared cash tips, and having tax taken on a full 22% will drop the net significantly. When factoring in credit card fees and taxes, cab drivers are probably making less on this deal. But hey, at least Visa and MasterCard must be psyched.

NYT: Told of the statistics that showed higher tips, some drivers scoffed. “I know that’s not true,” said William Lindauer, a driver and coordinating member of the New York Taxi Workers Alliance. “They get no tips, or less tips.”


Why are you using all-caps?

The tax and credit card implications are irrelevant to the point of the linked article, which is about the framing / convenience aspect of having suggested tip percentages. Whether taxi drivers are making more money from credit cards (and you seem to have an interest in believing they aren't) is orthogonal to whether tip suggestions help them make more money.


Powera, this was my first thought as well, but even looking at the question this way is not realistic because the variables don't match. To answer this question, we would need to test (a) credit card machine payment without tip suggestions vs. (b) credit card machine payments with tip suggestions. By comparing machine vs. cash, the fact that cash tips would never be declared accurately skews the results to where the test fails.


People like to pimp their own blogs on here, which is basically only a half step up from liking your own posts on Facebook.


I'm not sure that sharing on HN is analogous to liking on FB.


Not being from the States I really don't like tipping, I guess at least with this system it gets rid of the variables, like is tipping expected? How much is acceptable? etc.

To me, tipping is just a sign that a business isn't charging enough for the service.


I don't see the need to tip either as I live in a country with a decent minimum wage. I worked in a bar as a student and tips were rare. As a result I see tipping as some kind of failure by businesses. If employees are paid fairly and the service is always good why should customers tip? (Honest question)


Tipping creates an incentive for service staff to do a good job. If you do a great job of keeping customers happy, you get paid more money.

It's a much tighter feedback loop than "if you suck, maybe your manager eventually notices, then complains to you, then fires you."


I can't help but think tipping in the US is a false economy. Having arrived a couple of months ago, I've felt obliged to tip to subsidize wages rather than reward good service. I've been told off for not tipping enough rather than asked what was wrong with the service.


I see tipping as the opposite (and wage laws make it easier). Unlike most professions, there's no asking for a raise each year to keep up with inflation or reward your progress at getting better at your job. It's immediate feedback and compensation for doing a better job. Not leaving a tip signals that you would have been better off not being served by them. If a person whose main income is from tips (and gets the 2.xx/hour wage because of it), they declare and are taxed on their tips. If they don't make enough in tips in a pay period to receive the prevailing minimum wage (i think 7.xx/hour, but I don't remember for sure), the business is required to pay them minimum wage. If someone yells at you for not tipping them, just ask to talk to the manager, explain why they didn't deserve a tip (based on their service) and the fact that they berated you for it. Nearly every time they will be fired on the spot (or at the end of their shift) because it's the same as saying the business expects you to pay for crappy service.


Better than no tip is the one-cent tip. No tip may be someone forgetting; one cent makes the point clear.

To be clear myself, in ~15 years of being the paying party I have done this precisely once, so I'm not advocating making a habit out of it. I'm just saying, it makes the point that much more.


Same happend to me in NYC. We did not tip enough and the waiter dropped the f-bomb on us and told us to never come back. He even threw the tip after us.

I did not get it. Where i live we usually tip 10% and in other countries i have been they sometimes refuse to take tips at all.

For me it looks like in many restaurants in the US the tip is part of the paycheck.


I understand that perspective. However it's not something I would favor as a customer. Managers are essentially offloading their duties onto customers to keep their employees in check. It's interesting to contemplate the societal implications though. Where I worked we had a lot of tourists. US tourists, fairly or unfairly, had a reputation for being more critical and short tempered with staff. I wonder if that culture of being more responsible for staff performance creates that situation.


Well, as a US tourist, I think being short tempered is also a matter of mismatched expectations.

Americans are used to receiving customer service of a quality much higher than the rest of the world. (This is true of both service staff who receive tips and others.) For that reason, they don't recognize that the surly attitude of a waitress or supermarket cashier is just a cultural difference rather than a personal affront.


I would unconsciously give feedback for the whole experience, because I'm not able to discern who benefits from my tip, and what I'm really tipping. So the waitress gets punished for the bad food and atmosphere and the taxi driver for a horrible credit card interface.


Ditto on the horrible credit card interface.

Should've waited a few years and outfitted with Squares.

Or better yet, a NYC-based Square competitor if there is one!


Square actually approached the NYC tlc about replacing current systems. That experiment will be happening some time in the next year. Likewise there will be several other services enterIng the market this fall, some of which have some very interesting ideas for the market and are currently in quasi stealth mode


I have some personal knowledge about /involvement one of the projects underway. Theres some really interesting mathematical and algorithmic challenges that pop up from the get go in trying to create interesting product/service and build software that works™ (I'm talking problems where the perfect information versions with deterministic outcomes are NP-Hard, but then you add an online new info component and probability on top of that.).

Anyone who'd like to learn more about that stuff and is in NYC (and not affiliated with other companies in the same space), drop me a line and I'm more than happy to chat about the space in more detail :)



While this is true, an unintended consequence is that no other waiters care at all about you. If yours is neglecting you, you're going to have trouble getting another who's not receiving a tip from you to care.


Having lived in the US for 30+ years, eating out a lot all over the country, and working during college at a restaurant, I have to wonder where you are getting this idea. Would you care to explain?


It has been my experience too that other waitresses do not serve you. I'm in Boston and often when I get another waitresses' attention, instead of helping me they quickly rush off and signal that they will get my waitresses attention. Also, during peak hours waitresses are generally territorial. Once they've served you they expect you to order through them at all times. I've been told numerous times that I must order through them and not at the bar.


That's probably because each waiter is in charge of specific tables, so they can't serve whomever they want, or they'd lose track.


Tipping only does this when it's actually used as a reward. Having it be standard, like in the US, defeats that purpose. In Greece, tipping is not expected, as everyone pays fairly. Tipping is done to reward a good job.


Optional tipping like we do in Spain as well doesn't seem to me to actually encourage people to do a good job. I assume it's because it ends up being a low amount. If the reward is not significant then it loses its motivational power.

Moreover, in some cases I have seen that all tips are put together and then split after work, so you lose the direct connection between doing a good job and getting more $.

I have always found american's standard tipping uncomfortable, but the few times I've made a point to not tip, and the generally more attentive service there, keep me convinced that the system in fact works.


That's incorrect. Tipping is standard, but the percentages are not set. Thus it is still a reward and is not defeated by being a standard practice.

Sales people work on commission typically, and that system is absolutely not harmed by that on average. It's enhanced dramatically by it. A tip is a commission system that encourages the same way a traditional sales commission pay system does, including rewarding up-selling and efficiency.

The difference between earning 10% and 20% on average for tips can make a very large difference for a waiter. At a good restaurant that can add up to anywhere from $15k to $30k per year in difference. In the US, waiters can often make more than their managers because of the tip system.

The incentive is to earn as high a percentage as possible by doing as good of a job as possible. Everyone should not get paid fairly if they suck at their job and treat people poorly.

Waiters also have an opportunity to earn even more money by up-selling when it makes sense.


That's the ideal, however often people leave tips for things that have little to do with how well the water does his or her jobs. There are also feedback loops where water's tend to provide better service to people who regularly tip well.


> It's enhanced dramatically by it.

Not everyone would agree with your assessment. Case in point:

http://blog.fogcreek.com/why-do-we-pay-sales-commissions/


In a few professions (bellhop, restaurant waiter) tips are an expected, normal part of their wages. Sometimes it's legal to pay them below minimum wage, because it is expected that tips will make up the difference.


Tipping is pretty much 100% expected in the US for anything involving "personal" services such as sit-in restaurants, bars, salons, taxis, etc.

Typically, around 15% is acceptable - if you want to go bare minimum, 10% would probably suffice. Any less and it would be considered rude or indicates that you were unhappy with the service.


Not true. I'm not from the States either (Slovenia, to be exact) and I was working as a waiter/barman back in the student days. At the end of each month I earned more from tips than salary.

Why? Because I always went the extra mile to satisfy customers, entertaining them, telling them a joke, compliment, whatever. Telling jokes wasn't part of my job description but I did it anyway. And the only way for customers to let me know they enjoyed me serving them was by giving me tips. And it was an expensive lounge/club so they were charging enough for the beverages/service.

I guess the same goes with taxi drivers. They don't have to chat with customers. They drive them from A to B. But most of them do. To some customers, this means a lot - and they show their gratitude with tips.


I just like everything to be upfront with no hidden costs, rather than having the social pressures of paying for other people's employees. For example, would I receive a lower level of service than new customers if I returned after not tipping?


> For example, would I receive a lower level of service than new customers if I returned after not tipping?

Yes, if: 1) you had no reason not to tip 2) that person still works there 3) that person remembers you

Ideally though if the person serving you is bad enough that they aren't getting tipped, they won't be there long. Waitstaff have to report their tips, so management very quickly knows who's bad and should fire them.

If the person is good though and you're the lone dick who didn't tip him or her, don't expect good service from that person the next time you're there.


I don't understand that system either. I tip (more) when I get some extra service. Might be a beer over the mark, hint on what food to order, or even a smile. It's my choice to tip and it should be like that.


The figures are based on the tips that were reported by drivers. Drivers have an incentive to under-report cash tips (income that's not reported can't be taxed), but not credit-card tips (which can easily be audited).

It's possible that drivers aren't earning more, they're just reporting more.


Good. Call.

That was my initial reaction when I read this too.


I always wonder why they just don't build this tip amount into the price, factoring in a decent wage for the driver. These kind of things seems similar to having the cheapest price for something online but making up for it with inflated shipping charges.


You don't have to tip at all if you get poor service.


You haven't met New York cab drivers. A lot of them treat passengers like less than cargo. Here's the one time I didn't even tip at all.

I'd just had an enjoyable but naturally stressful night seeing an ex who came into the city from westchester for the day. I left her at grand central and couldn't be fucked to take the subway, but it was 11:30 at night on Friday at grand central - tough to find a free cab. But after only a few minutes of strategic searching, I finally manage to spot an open cab on the clock - score!

Now you should know this crucial NYC cab law:

> A Driver who has been dispatched must not refuse, by words, gestures or any other means to provide transportation to a person who has prearranged the trip with a destination within the City of New York, the counties of Westchester or Nassau or Newark Airport. [0]

All "prearranged" in a cab means is that the passenger is in the cab and told the driver a destination. It's a really important law - for one, it means cab drivers can't refuse destinations based on race/socioeconomic status/etc. Not all cab drivers like this law because it impacts their take, so they'll try to avoid picking you up.

Anyway, this cab driver notices I've spotted him from about 20 feet away and starts rolling down the passenger window, asking where I want to go repeatedly. If I tell him, and he doesn't like it, he'll get the fuck out of there before I get in the cab. I knew exactly what was going on, but I'd had a long god damn night and for once wasn't going to have it. So I just thought "fuck it," didn't say a single word, and just got in the cab and told him my block.

He's pissed as fuck because he knows that I know he has to take me there, since I ignored him outside the cab. He doesn't even try talking me out of the cab, he just slams on the fucking gas and drives like a complete asshole so he can try to get a better fare after me. I actually am sort of glad to get home quicker but it's actually maliciously bad driving. I'll still tip him though - that's a big part of his take-home.

I realize I don't have any cash, and it was only like a 9 dollar ride, but I figure I'll tip him extra to make up for hit he'll take on the credit card. When he sees the credit card he exclaims "oh come on, credit card? fuck..."

At that point, I reminded him that he had to accept the credit card, just like he had to drive me to my home, and (in as many words) suggested he accept the laws governing his trade. Then I tipped him 0 and told the stunning blonde woman getting into the cab that the driver's a prick.

[0] §55-20a-1 http://www.nyc.gov/html/tlc/downloads/pdf/2011rulebook_ch55....


What cab driver doesn't want to go from GCT to chelsea at 11:30 at night? And how has that happened enough to you that you don't want to tell the cabbie until you get in the cab? Thats very contrary to my experience with cabs. Now, if you told them you were going to Brooklyn... then I've seen the behavior you expected.


I almost didn't tip in a cab once. I got into a cab and everything was great ... then the driver ran two red lights (not lights that just switched -- he went from a dead stop while it was red) and damn near hit a bike driver. I made a comment about it and he grunted and kept going. While most likely nothing would've happened, I decided to tip him simply because I didn't know what would happen if I decided not to; I'm sure the stories I've heard are overblown, but...


You are a lot wealthier than the cab driver. From his perspective, you made him lose money by taking a route to Westchester, and then lose money again by using a credit card, and then lose money a third time by not tipping him.

EDIT: Ok, not to Westchester but outside the city limits. Basically the law forced a guy who doesn't make that much money to engage in a transaction with you against his will. He wasn't the bad guy here.


The law also gives the guy a monopoly on selling taxi services, so it's hard to have much sympathy.

I'm all in favor of letting cabbies pick and choose their fares. But if we do that, we also need to allow competition in the taxi market.


> The law also gives the guy a monopoly on selling taxi services, so it's hard to have much sympathy.

Sort of - the law gives the guy a monopoly on picking up street passengers. But again, these laws are broken often - livery drivers will still pick you up sometimes, depending on where you are. Definitely not in front of Grand Central, though.


Yeah, never ever ever get in a Livery cab though without pre-negotiating a price. I made that mistake once.


The rate doubles when you leave the city to compensate for the driver having to get back without a fare.


I didn't go to Westchester, you misread. I live in Chelsea.

Consider that a cab ride from grand central to westchester would cost far more than 9 dollars.

Dude. Chelsea is in Manhattan. It's uptown of the west village. It was a 5-10 minute ride. Perhaps your comments would be better focused if you were familiar with... any of this.

On point, how you could possibly turn a 5-10 minute cab ride to a city resident's home into a victimized cab driver being forced into an unwilling financial transaction is literally - literally - beyond me. Especially when the transaction in question - driving a passenger somewhere - is pretty much the sole responsibility and contribution of a cab driver.


Another asshole cabbie move is to drive with the "off duty" light on, because a lot of chumps think this gives the driver the right to be selective on what fares he takes (because it's supposedly his last fare of the shift and any fares he takes along the way to his endpoint are "bonus"). So a lot of them drive with the off duty light on constantly.

It doesn't actually matter. Report him if he pulls this shit.


This is actually allowed. They are allowed to pick one final ride in the direction they are headed at the end of their shift.

That being said, report them anyway and they will have to prove the time and date actually corresponds to the end of their shift. The fines are pretty steep and the drivers almost never prevail against the taxi commission.


How do you tell if he's actually off duty or just dicking around?


The lights.

A NYC cab's lights look like this:

|O|Number|O|

Where "O" is "Off Duty" in smaller letters.

If just the Number is lit, they're available, on the clock.

If Just the Os are lit, they have a fare.

If both are lit, they're available, with destination discretion.

If none are lit, they're not working at all.


If he's pulls over and asks you where you're going, then he's not actually off-duty. If he refuses to take you (either because you don't answer or because he doesn't like your answer) then you should report him.


Authentically off-duty cab drivers will do exactly what you say. They ask you where you are going and don't unlock unless they like your answer. I'm not saying that abuse never happens, but this scenario is perfectly valid for cab drivers on their way home.

Source: http://nycitycab.com/NYC%20Taxi%20Guide.aspx#offduty


Charities achieve the same effect with their donation tiers -- people very often donate the minimum for a particular tier. Looking at the FreeBSD Foundation donors page, they've received $148,968 so far this year, and adding up the "minimum donation to be listed in this tier" numbers gets you up to about $144,000.

For that matter, I did the same thing -- Tarsnap was towards the top of the 1000-4999 $ range from its December 2011 donation (which due to accounting and postal delays counted as a 2012 donation) and yesterday I said "screw this, let's hit the magic number" and wrote them a check for the remaining amount I needed to be in the $5k+ tier instead.

I've seen multiple charitable organizations engage in lengthy debates about whether they should add an $X tier and hope that people below that level will bump up their donations or whether they'd lose too much from people who were currently donating more than $X instead reducing their donation down to $X.


The lesson here is that default settings are very important and you should spend some thought on them.


Why the increase? Thoughts:

1) Easier and quicker to push options (20/30/40%) than key in lower amount.

2) Pre set options may lead to mistakes.

3) Customer doesn't want to embarrass themselves by entering an anoint so just pushes a button.

4) The average fare and average cash in hand leads to per tips versus card payment. Eg Avg fare $9 and most payments with a $10 note.

5) Customers willing to tip higher due to preference towards card payments.

6) Peak in typing due to early adopters using technology.


I wonder if they've ever AB tested, somehow doubt it.

Would tips go up if the buttons were changed from 20/25/30 to 25/30/35, or would people type in their own amount more, or pay no tip more? What about if there was only one suggested tip rate, 25%? Or a slider you could drag from X to Y? Or...


Or maybe skip the fancy UIs and recommend paying cash for tips?

As someone who's worked service jobs in my youth, I'd really like to stress the importance of cash over CC tips.

Pay is usually abysmal and CC tips don't always make it into the pockets of the people who deserve it, not to mention the delay.

Also, cash is easier to split when necessary. For example, between the wait staff and the kitchen staff.

So please always tip in cash.


I was under the impression that generally (maybe this is a UK thing?) credit card tips get pooled and shared out between staff, whereas cash tips, although they sometimes get pooled, are more likely to go straight to the person you give it to.

Either way, it's not really relevant to this story..


I worked in a kitchen for almost a year (in the UK). CC card tips appeared on my weekly payslip. Cash tips never got split with kitchen staff.


That's a real shame.

The client's impression of the wait staff is greatly influenced by the kitchen staff. That's why we would split our tips.


In Germany, tips using EC-cards or CCs get taxed. Tips in cash don't.


I think the case is that cash tips should be declared on tax forms, but rarely are (at least that's how it is in the UK)


IIRC, in Austria, cash tips are tax-exempt, but exactly what constitutes a tip (and who can receive them) is defined by tight rules. I suspect it might be similar in Germany.


No, I'm not going to support your tax evasion.


As long as we are forcing people to pay a surprise tip at the end of the trip and celebrating how much cash we are raking in, why not make the tip amounts 5000%, 10000% and 100000%, with jail time for those who don't pay the minimum tip? Fits in with the rest of the horrific police state that the thugs in control of New York government have implemented there. Saves the cost of a trip to North Korea, with all of the authoritarianism!


You need to go read up on what a tip is if you think it is "forced", or indeed a "surprise". And the buttons for quick tip-giving are nothing to do with the government, either.


If you're forced to pay a minimum 20% "tip", it's not a tip.


You’re not forced. You can enter any amount you wish. It's merely a convenience.


Technically, three buttons.


Technically correct -- the best kind of correct.


This number is revenue, but don't forget about cost. Cab drivers only started incurring credit card fees when the city made them start taking cards. I tip more when I use my card than when I pay by cash to help the driver offset the few-dollar fees. It's not a very high-margin business.


There shouldn't be any "few-dollar fees". If they are paying more than 3% (i.e., much less than the change in tips) for the card transaction, then they are being robbed blind by the bank and/or corrupt officials.


You can also enter your tip manually - which I do often - so the 20%/25%/30% buttons themselves necessarily don't account for all of the change in tipping patterns.




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