Note that although I used the original title of the article, I do feel it is a little sensationalist.
The UX is a little misleading but I could see this being an effort by Uber to pre-commit drivers as a means of reducing surge pricing.
What makes this potentially unethical (in my mind) is where the price is set. If it's set at a point where Uber's models predict the average benefit to a driver is $0 then this is essentially shifting the risk to their employees.
You should work for any sort of delivery or courier service. This 'worst possible light' is daily business for companies like Papa Johns and others that claim their drivers are merely 'contractors.'
This is also quite illegal - you can not pay to work. It's literal extortion - you have to pay us in order to receive this amount of wage. No, the courts frown upon this.
You do know the offer is optional right? If a driver doesn't want to pay $115 for the 33% rate increase then they don't have to. Did you read that part? Also, many drivers could benefit from this especially if they drive full time in popular areas.
You do know that such an offer is illegal, right? It is literally "If you pay us, we'll pay you more later on." It's the actual beginning of a Ponzi Scheme.
Which law does it violate?
> It's the actual beginning of a Ponzi Scheme.
Your argument is of the form "Romans build roads, therefore people who build roads are Romans."
Ponzi schemes don't have actual customers, which inherently leaves the people at the bottom of the pyramid holding the bag.
Uber pays drivers from fares. There is no pyramid.
Ponzi Schemes don't have customers? There have been plenty of "multi-level marketing' businesses selling things like perfumes, knives, even candle wax, and have been ruled as Ponzi/Pyramid Schemes. It's the exact same behavior - pay us to make money.
So do a million other startups. That doesn't mean the drivers don't get their money.
> Ponzi Schemes don't have customers?
The majority of the scam's revenue comes from payments from workers rather than sales to customers.
> It's the exact same behavior - pay us to make money.
Pyramid schemes have pyramids.
Almost every business has a pyramid structure - that's literally basic business management for all but the most n00b of startups. It's the behavior that defines a Pyramid Scheme and this behavior matches it almost 100% to the definition.
In fact there's a nice database of plenty of other companies acting EXACTLY like this and subsequently getting their butts handed to them in court - http://www.mlmlegal.com/legal-cases/Illinois_v_Unimax.php is one of my favorite cases to read because it very clearly demonstrates what Uber is doing here is illegal - just because you aren't required to do it or buy into it doesn't mean it isn't illegal in the first place.
So do Egyptian Pyramids but that isn't the relevant structure.
Do you really not understand how a multi-level marketing scam works? You pay to sign up, then you get paid for signing people up. The obvious problem is that this is recursive and exponential, which quickly exhausts the available supply of suckers so that the people at the bottom lose money because there is no one for them to sign up.
That dynamic is not at play here. There is no recursion. You don't pay to sign up and then get paid for signing people up, you pay to sign up and then get paid for driving people around. The people who get driven around don't have to sign people up.
There are lots of professions where you have to pay to work. Many trades require the tradesman to buy their own tools. A proprietor who wants to work in a booth at a fair has to pay for the booth. That doesn't make them Ponzi schemes.
There are dozens more MLM scams than the one you describe, and in fact they're more prolific.
"That dynamic is not at play here. There is no recursion."
'Give us money and we'll give you a chance at making more money.' That's quite recursive, and in some states, it's in fact a form of illegal gambling.
"There are lots of professions where you have to pay to work"
No, you don't. If you want to use ANOTHER BUSINESS and their facilities to do your work, then yes. Cosmetologists can work right out of their own home as long as they have the relevant license. They don't have to rent a spot at a barber shop. Strippers don't have to work at a strip club - they can advertise on Craigslist and do private parties instead.
"Many trades require the tradesman to buy their own tools."
Some states require that if you require a specific tool or item for an employee or user of your services for the purposes of conducting business, you the employer or service provider are required to provide it. Here in CA, where Uber is HQ'd, we have that codified in law.
"You pay to sign up, then you get paid for signing people up" is basically the definition of a multi-level marketing scam.
> 'Give us money and we'll give you a chance at making more money.'
You have just described investing, lending at a variable interest rate, all forms of commodity and currency speculation, universities, craft fairs, conference booths, commercial real estate, manufacturers paying retailers for shelf space, salesmen buying leads, the entire marketing industry, etc. etc.
> That's quite recursive, and in some states, it's in fact a form of illegal gambling.
The fact that you can do something more than once in a row doesn't make it recursive. The problem with multi-level marketing is that A has to sign up B in order to make money, but that requires B to sign up C and so on recursively, which necessarily means there is someone at the end who pays but doesn't get paid.
> If you want to use ANOTHER BUSINESS and their facilities to do your work, then yes.
A landlord who hires a plumber to fix a burst pipe will claim they're a contractor. So will Uber. So will the perpetrators of the MLM scam. You can't use something to distinguish cases when it's the same in all of them.
> Cosmetologists can work right out of their own home as long as they have the relevant license. They don't have to rent a spot at a barber shop.
Their house doesn't come from the house fairy. The fact that they also live in it doesn't mean they didn't pay for it. Moreover, finding one person who got a house from the house fairy wouldn't get rid of all the other people paying money for space.
> Strippers don't have to work at a strip club - they can advertise on Craigslist and do private parties instead.
Drivers don't have to pay to get extra money, they can just take the normal rate.
> Some states require that if you require a specific tool or item for an employee or user of your services for the purposes of conducting business, you the employer or service provider are required to provide it. Here in CA, where Uber is HQ'd, we have that codified in law.
Even in that case, you will still have people working on commission who buy items themselves which aren't "required" but increase their effectiveness and therefore their commissions.
Also, my employer requires me to wear pants at work, but they have never provided any. Are they in violation of California law?
"Also, my employer requires me to wear pants at work, but they have never provided any. Are they in violation of California law?"
Apparently you don't read the law - the answer is yes they do if there is a specific company-identifying uniform that must be worn (like in the case of fast food restaurants) and they are not legally allowed to charge you for it - they must provide it free of charge.
Go read the law. Everything you've asked me is answered in it.
Its a scam because their is a finite pool of potential idiots and when you run out the bottom of your pyramid collapses taking subsequent layers with it eventually.
If a multi level marketing company actually provides enough wealth for the bottom level to function then it isn't a ponzi scheme.
I don't see this as a bright-line case.
In the taxi (and Uber) case, I believe most of those are contractor relationships, not employee relationships.
As far as medallions go, that is just the result of government regulation. Plenty of industries wind up being populated with nothing more than a bunch of rent seekers. The government sets up an artificial scarcity where there is none to control negative externalities. The fix is easy: require the license holder to be the one that actually uses it. No leasing to others. As far as I know, no one has done that for commercial licensing. Ironically for private licenses (fishing license, etc.) this is already the case.
That happens with Uber consistently. The cab companies hate them with a white hot fire and there are plenty of media outlets who are happy to take a story from a PR flack, especially when it generates page views.
When people complain about surge pricing and then complain about things that mitigate surge pricing, that is pretty good evidence that they just want to complain about something.
> What makes this potentially unethical (in my mind) is where the price is set. If it's set at a point where Uber's models predict the average benefit to a driver is $0 then this is essentially shifting the risk to their employees.
But in that case why would anyone take the deal?
If they did that then the drivers would pay $115 to make back $116 (or $110) and then never do it again because it's not worth the risk.
> When people complain about surge pricing and then complain about things that mitigate surge pricing, that is pretty good evidence that they just want to complain about something.
That's an ad-hominem. If you're going to claim people are complaining just to complain then you need to support your case that this sleazy pay-to-play scheme isn't a sleazy pay-to-play scheme.
Just because Uber is trying to fix something bad (surge pricing) doesn't mean their solution (this ridiculous scheme) isn't also bad.
> > What makes this potentially unethical (in my mind) is where the price is set. If it's set at a point where Uber's models predict the average benefit to a driver is $0 then this is essentially shifting the risk to their employees.
> But in that case why would anyone take the deal?
The first problem is that drivers have no way to know that until they've lost money on the deal. Uber has a team of accountants to figure out their expected returns while the average driver does not.
Also, as others have pointed out, there's a conflict of interest for Uber because they control who gets called up, so they can avoid sending rides to drivers who are about to cross the threshold for a payout from this scheme.
> If they did that then the drivers would pay $115 to make back $116 (or $110) and then never do it again because it's not worth the risk.
It's not that simple, though. Since Uber controls who gets rides, they can make sure that some portion of drivers come out ahead using this scheme. When other drivers claim they lost money or just broke even, the "winning" drivers can chime in that the scheme worked great for them. The end result is confusion and uncertainty, so that nobody outside of Uber itself really knows one way or the other how it will turn out.
With as many drivers as Uber has, they can probably fake it for quite a while.
Its an explanation of their motives.
> If you're going to claim people are complaining just to complain then you need to support your case that this sleazy pay-to-play scheme isn't a sleazy pay-to-play scheme.
It has an obvious benefit in increasing available supply. Once a driver has paid the fee they have 35% more incentive to provide service.
> Just because Uber is trying to fix something bad (surge pricing) doesn't mean their solution (this ridiculous scheme) isn't also bad.
Neither of them is actually bad.
Bad is the inability to get a ride during high demand because nobody is doing either of those things.
> The first problem is that drivers have no way to know that until they've lost money on the deal.
That only works the first time. After that the driver has their own experience to draw on.
> Since Uber controls who gets rides, they can make sure that some portion of drivers come out ahead using this scheme.
In which case only those drivers will sign up next time and the pool of drivers willing to sign up shrinks every time.
> When other drivers claim they lost money or just broke even, the "winning" drivers can chime in that the scheme worked great for them.
Nobody cares what other people say when their own personal experience says something else.
It's easy to trick anyone once, but then they won't trust you anymore. People not trusting you forevermore is an expensive price to pay for a one time payout.
And people say lottery players are bad at math!
Because lottery tickets are entertainment. People with crappy jobs get to imagine telling off their stupid boss and moving to their own private island. The fact that it never happens doesn't mean people won't pay $1 to imagine it. Or for the feeling they get when the numbers are being read and the first two or three actually match once in a while.
There is nothing equivalently exciting about temporarily getting paid 35% more at work.