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Comment by UncleEntity | Hacker News Reader

> “The companies are losing money. The businesses are being subsidized by [venture capital] money … And the drivers are essentially subsidizing it by working for very low wages.”

Last time I pointed that out I was downvoted for some unknown reason.

My neighbor was talking about buying a new car to drive for lyft/uber and I was like "the trick is to tear up somebody else's car." We'll see if he heeds my advice though I kind of doubt it since he has an MBA and I'm just the resident slacker who happens to know the business.

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I don't get it. Taxicabs such as in NYC are famously expensive to buy into, and yet drivers somehow afford it and make livings on them. So if they are clearly not losing money, why is it that a company that's supposed to be vastly more efficient due to use of computers can't make a profit? Are the tech overheads really that high?

Taxicabs such as in NYC are (were) monopolies. The price you paid was far above what the market rate should have been, which is why drivers were able to make livings on them. Uber/Lyft are simply forcing prices back down to the market rate which is where the prices should be in a free market. Driving isn't really something that should be a career.

> "Why is it that a company that's supposed to be vastly more efficient due to use of computers can't make a profit?"

Well Uber/Lyft are probably focused on growth now. They will make plenty of profit once they dominante every city with driver-less cars.

If the GP is correct and the companies are losing money and subsidized by venture capital... Then no, they aren't fixing the process down to market rate. They are artificially delaying the market rate with venture capital.

Yep, and ruining life of lots of people in the process.

But hey, all for big money!

I do not see how subsidizing work is "ruining life of people".

I, for one, receive competitive salary from market and would love my work be additionally subsidized by VC. Ruin me all you can.

Subsidizing poorly paid work. Work that on the median, if the research is correct, does not even make 50% of minimum wage.

> The price you paid was far above what the market rate should have been, which is why drivers were able to make livings on them.

This sentence makes no sense to me. How can something's "market rate" be non-profitable for the producer? If you have market forces acting on something the balance of forces will necessarily push the price higher than the price of production.

If something doesn't make sense to sell because it's too cheap, the market actors will not produce it, lowering the supply and decreasing the offer, thus increasing the price. eventually, you have to reach a price balance somewhere higher than the initial cost of production, for at least a subset of the producers.

> How can something's "market rate" be non-profitable for the producer?

You are confusing 'making a living' with making something. Even if a driver only nets $3.37/hour, that is still 'profit'. Just not enough to feed/house/etc yourself if it's your primary source of income.

Yeah, but the taxi driver had to finance both his/her medallion and the car, which in most cases would not double as a personal car for everyday errands (as somebody else would drive it during their shift). Those costs have been driven down as well.

> "Driving isn't really something that should be a career."

Why not?

In my country (Poland), cabs are not regulated very heavily, which leads to a flood of drivers, and low prices. In result, in many towns even by driving 10 hours a day (most of which is spent waiting for customers) you're making not much above the minimum wage. As a result, driving a cab has become in large part an extra source of income for retired cops or other people who retire early (say in their fourties).

I don't see nothing wrong with that - it's a job that requires no qualifications, has no boss, flexible hours, is not demanding physically or intellectually. In short - a dream job for many people. It only makes sense for it to pay less than say a grueling job at a factory.

This question would have made sense 10-20 years ago.

No, I'm still confused. What is the problem with being a taxi driver for life and expecting a good wage?

> and expecting a good wage

Wait, you added that part just now.

I don't see why you couldn't drive a taxi for a living (though I don't know if that is all that was meant by "career"), but taking for granted that you will be paid well seems off.

Low barrier to entry.

Only middle class professionals have "a career" and therefore deserve to have enough money to live on, don't you know.

It's the primary reason we don't need a minimum wage - working in the service industry or any other relatively unskilled work isn't "a career" so it doesn't matter if it only pays 2 bucks an hour, so goes the reasoning because nobody should be expecting to do it for long or make a life out of it.

It's myopic.

If teachers can’t be expected to support their family off their income, why should someone doing something that can be crowd sourced as a side gig? Just because I can make $15 tying peoples shoes doesn’t mean that I’m entitled to support a family off of it.

Because it is in your(society) interest that people can support themselves and their families with just one job. Otherwise you end up spending more on benefits and support not to mention on all the problems that come with chronic unemployment.

>> If teachers can’t be expected to support their family off their income,

Why the f*ck should teachers not be paid enough to support themselves and have a life? Wow.

> No, I'm still confused. What is the problem with being a taxi driver for life and expecting a good wage?

No, I'm still confused. What is the problem with being an elevator operator for life and expecting a good wage?

It makes perfect sense now.

> 'Driving isn't really something that should be a career'

I haven't read more ambiguous and ludicrous statement on here ever.

Please evaluate your point, because if you are right then a huge number of workers across the globe should not have a career in driving.

In a way, monopolies are good like elevator limits are good. It's not the support of the elevator that's the problem but the discomfort of people being crammed into the same space.

When the same market can suddenly be open to anyone you get people cramming into elevators and buses so that everyone is uncomfortable.

The entire US revolves around gates and monopoly like jobs. The greatest gate being the immigration gate. Technology empowers everyone and moves everyone towards the mean. Which is bad for groups that are above the mean.

My theory is they are attempting to put the competition out of business by running at a loss then adjust the rates to where they can make money which, coincidentally, will be be almost exactly the amounts the "evil" taxi companies were charging.

I could be totally wrong but if I were a betting man...

By the way this behavior is illegal in many countries: https://en.wikipedia.org/wiki/Predatory_pricing#Legal_aspect...

That's still a win for consumers, because they certainly raised the bar for customer experience. They run leaner than old-fashioned cab companies and can keep prices lower at the end too.

That's still a win for consumers

No it isn’t, because externalities. With Uber dodging all its taxes who is paying for the infrastructure and services it relies on?

If you are an Uber driver in London neither you nor Uber is paying any NI but you’d still expect the NHS to treat you...

Is it a win for society, though? If they ended up being a stronger and more global monopoly than cab companies, the savings from being "leaner" would just end up in the pockets of the few and everyone else would not be better off.

Uber is probably profitable in NYC (and if it isn’t, it could be by raising prices and cutting costs). The question is everywhere else.

And NYC taxis relied on mostly immigrants driving 12 hours a day; in cheap fleet cars.

The medallions (for a long time) were an appreciating asset. So only the interest on the loans were an actual expense. 5% interest on a million dollar loan is only 50k a year. And they’d offer split it amongst drivers (two or three split a car).

Because they're spending it on other stuff. Lots of those thousands and thousands of engineers are working on developing other products not the least of which is self-driving cars.

As I understand, it tends to be profitable in cities where it has operated for longer time, but it operates at a loss in cities where they've entered more recently due to costs related to marketing for driver acquisition, customer support, fraud, etc while ramping up the fleet size and establishing a stable physical presence.

As for drivers, my anecdata is that many claim to make "good money" (in their words). I've had a guy say Uber doesn't make him money, but then he followed up by saying he's a retired guy just doing it to keep active and that he owns two convenience stores...

I did the math on working for SkipTheDishes last year (Uber doesn't operate in my city). I really wanted it to be a good idea, but once I calculated gas, insurance and wear and tear on the car, it was an incredibly poor deal. That's with a paid off, cheap, car, too. Not for me.

Yeah. Do you think that depreciation shouldn't be 39 cents a mile for an old bucket? Or do they have requirements for the age of your car?

If you have like a 2000 camry (which runs forever) depreciation seems to be virtually 0, especially if you buy the car used and only pay like 1 grand.

Also, I can imagine if you're just shuttling food around instead of passengers, you can get away with a worse car. Nobody wants to hop in a bucket and go somewhere, but food delivery doesn't matter.

I use Mr Money Mustache's figuring that each mile costs $1.55, then convert it to Canadian. $1.19 per km. Even a 2000 Camry will depreciate if you put enough mileage on it - if I was shopping for one I'd pay $5000 for under 120,000km, but not even a thousand for over 280,000km. But yes, you can get away with a bucket for food delivery. I'd say the best way to do it is on a scooter, but then you're really putting your life on the line every night.

Those old Japanese sedans are good for far more than 280000 km if you keep up on maintenance yourself.

Yes, anecotes are not evidence, but this article is interesting. https://jalopnik.com/5885287/how-i-put-750000-miles-on-my-ho...

And besides, you can buy a car for 4k with a lot of miles. At that point it's like a dishrag. You use it to do your job until you need a new one. Blows up by the side of the road? Tell your customer that happened, buy AAA, and depending on how bad it is, you can fix it yourself after it gets towed home, or junk it and buy another.

Or am I missing something?

They are, I agree, but if you're buying one that's 18 years old than you haven't done the maintenance yourself, and it's hard to be sure all the previous owners have done all the maintenance items. If I bought one brand new I have no doubt I could keep it running for 500,000km, but that's not the case in this hypothetical.

I don't know where you live, but when I looked at for Colorado back in 2010, the state's Public Utility Commission regulations require cars to be 7 years old or less.

Apparently times have changed.

http://aircarecolorado.com/index.php/consumer-information/20...

If I'm reading this right, this just means if your car is older you have to get it inspected.

I somehow doubt that classic cars (Mustang, Camaro, Corvette, 510) are banned anywhere in the country - they might have to meet more stringent tests.

LOL, I'm feel pretty much trained to see a top-voted "Thanks again to all the VCs for subsidizing my taxi rides!"-type comment every time I click to the HN discussion on stories about Lyft/Uber valuations and investments.

I didn't know MBA's were that squeezed that they need second jobs.

MBAs are different from engineering degrees in that while a MBA from a top school is super valuable, a MBA from a so-so school is, as far as I can tell, worth very little. Keep in mind that one-year MBAs from disreputable schools are often advertised to working people.

I mean, you do learn things; my understanding is that it's sort of a 'survey degree' that gives you a shallow treatment of a lot of different business disciplines. If they would have let me take the MBA without an undergrad, even at a so-so school, I would have done it a few years into my own adventure running a business, and I think it would have helped me. If you have management experience and skills, a MBA even from a not so great school can help. But I think the difference between a MBA from a meh school and a MBA from a top school is overall far greater than the difference between an engineering degree at a meh school and an engineering degree at a top school.

The entire point of the MBA is the networking opportunities and joining the alumni club. The content can be got for a fraction of the cost, or even free. The success of the top MBAs is therefore self-perpetuating. And there is literally no point in doing one outside of the top maybe 20 schools, because there is no one there or in the alumni network who can give you a foothold.

I think you are being too absolute.

There is some value to the content, even though I totally agree that the contacts are dramatically more valuable than the content if you go to a good school.

Personally, I find that finding management and business content on my own is actually harder than finding Engineering content on my own; management and business training is full of tony robins style confidence men, and it's difficult, for me at least, to sort out what is actually worthwhile. For that matter, just an overview of what sort of professional to hire in what situation would be nice. (For instance, if you are just looking for tax help and don't plan on selling the company, an 'Enrolled Agent' is actually better than a 'CPA' though the two certifications are of similar difficulty; the EA focuses on dealing with the IRS, while the CPA has more of a focus on the accounting you would need if you are selling your company or something.)

I think he is having a hard time getting a job that doesn't pay peanuts, kind of suspect it has to do with his English skills (he's from the Ukraine or something) but it could just be the market is saturated with newly minted MBAs.

An MBA does not guarantee a good job.

A MBA below a certain level is worse than not having a MBA at all, people just assume you couldn't get a job.

> Last time I pointed that out I was downvoted for some unknown reason.

Hard to believe but the number of votes something gets != the quality or accuracy of the statement.

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