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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.