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Comment by discardorama | Hacker News Reader

> So where's all this cash going? Is the driver side being subsidized to a ridiculous degree still (this is, actually, my guess)?

I was in India recently. The driver said that when Uber started out, they'd give each driver Rs. 60K/mo (about $1000/mo) just to sign in for 10 hours/day, even if they did not give a single ride. Now, Uber pays by the number of rides and not a portion of the actual fares. So, for example, he said that Uber pays them Rs. 3500 for 17 rides. Most of my rides were about Rs 100 each; so Uber was taking a loss on each ride. But their system of paying by the ride is a genius idea: it removes the incentive for the driver to dick around and do a TSP around the city to drive up the fare. Now its in their interest to get the ride over with as quickly as possible, so they take the most direct route.

Edit: Sorry, "Rs" is the Indian currency, Rupee. There's about 65 Rupees to the USD.

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Surely the length of the ride must also be a factor? Otherwise, the drivers would lose incentive to take on long rides.

There isn't any incentive sadly. Uber drivers absolutely hate taking long trips for this reason. Considering the extreme traffic issues, it typically takes 13-14 hours of driving to complete 15 rides. If a single user wants to go to the airport (50km away from city centre in Bangalore), it becomes difficult to hit that quota no matter how hard they try. They can't cancel a trip to the airport either, because if they cancel more than one trip in a day they lose the 15-ride incentive. So if they get an airport ride and they're short on time to hit the incentive, they request the user to cancel.

The strategy I've seen in response to this incentive scheme is to work 4 14-hour days, ensuring that they hit the incentive no matter what. The money made off the actual ride is peanuts ($1/ride, maybe) so they absolutely need to finish 15 rides to get $75. Working 4 days a week, 16 days a month nets the driver $1200/month. Which is an incredible income by Indian standards considering most graduates from good colleges make a lot less.

> it removes the incentive for the driver to dick around and do a TSP around the city to drive up the fare

With GPS, drivers can't do this.

Time for a "taxi driver" firmware for Garmin devices? They're pretty open iirc.

They can and they do. The onus is on the passenger to report issues such as indirect routes.

Ask the customer, "you want the shortest route, right?" and wait for yes. Now you have explicit permission to drive anything that's arguably the shortest route. So you pick one that passes the largest number of traffic lights and watch the meter tick as you wait in front of each traffic light.

Padding by 300% is a challenge, but a bit isn't.

If Uber, at first anyway, pay drivers regardless of rides made, then aren't such tactics philosophically similar to the medallion racket in America? To subsidize some part of the equation strikes me as underhanded, as opposed to purely being innovatively disruptive.

Eh, what about insurance companies? They "subsidize" those who have emergencies, using money from people who aren't having emergencies. The innovation there comes from evening out the cost of emergencies over time -- always pay a (relatively) flat fee.

If Uber's incentives for drivers result in a better experience for riders (shorter rides), isn't that a good thing?

No it's called priming a two sided market. Do you think supply and demand grow in harmonious lockstep?

They do if you don't mind waiting 30 years, but the Valley wants billions tomorrow.

I doubt it would take 30 years. More like 3-5. But when your competitor has the cash infusion, you better have it too.

In addition to this you have the problem of dissatisfied customers using the app for the first time and then never coming back.

They have to ensure supply while they bring on new customers (has associated acquisition cost) if they acquire a customer and that customer isn't able to purchase anything from them due to lack of supply (or in the case of uber the price is too high because of surge kicking in) then that customer will churn forever, and potentially share their negative experience with their friends.

So basically, nail supply, grow customers, don't run out of cash before the whole thing is working.

philosophically similar to the medallion racket

This comparison strikes me as bizarre. The medallion racket is lobbying politicians to use the force of the law to prevent competitors from doing business. What discordorama describes is paying people money to install and sign into your app. This is... either a poorly designed incentive system that was then fixed, or a clever campaign that gets a lot of future drivers through the earliest hoops and puts them in a position where it's easy to incentivize them to start driving. (Clever to the extent that that works.)

I can't see why you think there's a similarity, other than that you think they're both underhanded, and that they're both done by companies providing taxi-like services.

My sense of Uber has been a company using technology innovatively to provide a much better user experience, while using currently existing but idle resources (the cars and drivers that serve customers on Uber but otherwise don't for various reasons, reasons Uber has rendered irrelevant, hence the resistance they've seen). But if they need to subsidize their drivers or customers, what does that say about their value proposition? To me, it makes them just another company using mundane, old school tactics to outdo their competition. Medallions and subsidies are old school tactics. One keeps new players out. The other throws old players out. Neither has anything to do with the value you bring to the table.

Winner, winner, chicken dinner. You are correct.

What happens when there is a surge? There is also Pay by Cash option for Uber now to in India. Who gets the money at these times.

Uber also offers bonuses if they complete a set amount of rides per day. There was a problem recently due to this when a driver fall asleep and the passenger had to drive the car. [0]

I have also experienced Uber drivers asking for a new ride to somewhere nearby using the Cash option after I completed a ride just so that they can increase the number of completed trips.

[0] http://thelogicalindian.com/story-feed/awareness/watchread-u...

Surge is a multiplier. It pays out a multiplied fare to the driver and to Uber. Incentives like the one described are usually applied after the fare is calculated.

Paying with cash has the same distribution of money (more or less), it's just handled differently.

Grab is doing the same here in Malaysia.

What does "Rs." mean?

Rupees, the Indian Rupee. Currency.

Rupees, Indian currency. BTW, that is a lot of money.

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