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Comment by wonderwonder | Hacker News Reader

Very interesting process going on right now with Lyft & Uber both losing money and some of their drivers trying to stage protests and strikes. The drivers appear to rely on the company as their primary source of income and want more money yet at the same time the companies are operating at a loss. Were they to increase wages (as % of every ride) it stands to reason the losses would widen. If they get to wide the company goes out of business and the drivers lose their jobs. I understand that this same standard can be applied at any company but this is a gig / 'work only when you want' job so it is different.

The strikes were small so the effects on both companies were negligible. I would be curious to understand what changes the drivers (who work only when they want) expect and how they think a company running deep in the red could meet them. Not trying to pass judgement on the strikers just trying to understand.

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Drivers are independent agents who have every right to demand better conditions. It’s especially important to chisel every penny out of a company that will likely vanish in a short number of years.

Lyft has bled money from day 1, so justifying stiffing the workers on the basis of accelerating losses isn’t logical at all.

Now that the investors have cashed in, perhaps they can double down on patents on robo-cabs and stop bleeding money on tech that will probably arrive too late to save them.

How can you say that Lyft is "stiffing" the drivers when they lose money on every ride? Where is the extra money for the drivers supposed to come from? Every passenger has the opportunity to tip if they want: would you also say that restauranteurs are stiffing the waitstaff?

Well restaurants do stiff the waitstaff by paying them less than minimum wage, but that doesn’t really apply here. Only would apply to Instacart.

No. If they do that they are breaking the law.

Minimum wage is the floor. If tips don’t bring your cash wage up to minimum, the employee has to get paid.

Yes, but that is the point. The restaurant doesn’t pay minimum wage, instead using tips to make up the difference.

I thought Instacart was purportedly paying minimum wage and taking employee tips for themselves so long as the total paid was at least min wage.

It's possible to pay out an unfairly low wage with money you don't have. I'm not saying that's the case with Lyft, but just because you're operating at a loss doesn't mean you're paying people fairly for their work.

Define unfair. How can we objectively determine what would be a fair wage for that work?

Minimum wage after all expenses (including depreciation) are subtracted seems like the absolute lowest wage that could be considered "fair". Or maybe whatever McDonald's/Walmart are paying in your area, since that is sometimes higher than minimum wage in urban markets.

this is just punting on the question. how should minimum wage be determined?

If you work 40+ hours a week you should be payed enough to support yourself and a child and live in or very nearby the city in which you work.

This is not how the minimum wage works currently. This is not all Uber/Lyft's feet, it's a broader problem in the economy. I understand this is more complex than Uber flipping a "fair wages" switch.

If I hire a guy to paint my house for $100, and the paint costs $105, but the painter paid for it already, that’s objectively unfair.

How does this help me in this different context? What's the litmus test that we can apply across opportunities to earn a wage?

Why would the painter accept a job where they lose money?

He needs cash now.

If the painter bought a bunch of "vomit green" paint and it turns out no one wants it, offering $100 to get your house painted is a perfectly fair deal since the other option for the painter is to not sell it at all, which costs the full $105 as a writeoff.

> How can you say that Lyft is "stiffing" the drivers when they lose money on every ride?

That's Lyft's problem, not the drivers'. They could always find more money by charging higher fares and maintaining a fleet of identical cars for drivers to rent, but then they'd just be a taxi company, not a "tech platform." If they want to keep offering VC-subsidized rides, that's fine by me. And when they run out, they can decide whether they want to stiff their drivers even more, or raise their fares.

And yes, the American tipping system needs to die.

> They could always find more money by charging higher fares...

It's not clear that they'd actually end up with more money as a company or more money for drivers this way. I'd expect they could pay many fewer drivers somewhat more, but total payments to drivers would be much less.

Lyft (and Uber) are essentially borrowing money long term, and selling rides at a less than market price short term. Some of the drivers are getting stiffed - many of them, did they but know it, are getting an income where otherwise there wouldn´t be one with higher prices.

The trick is essentially that at the end, the loan (or the shares that replace it) goes into default(become worthless).

This is an old, old game, and one that can be run for a few short years, before it all ends in tears, and "whocoodanode" (to coin an americanism). Let´s just hope there isn´t too much pension fund money tied up in all this.

They aren't losing money on every ride. There is essentially no marginal cost for every new ride.

Overall, they are losing money as a company. And if you divide that out by the number of rides, you can make it seem like they are losing money.

So to think they couldn't be cheating drivers because of that is like saying we know Donald Trump never cheated anyone in business from 85-95 because he lost money for every year that decade.

Waitstaff are employees, and aren't providing the chairs and plates. A waiter gets his ass in the restaurant and does stuff. That's it. Totally different situation.

Drivers are subcontractors, and if they are looking at striking, that's a signal that their pay isn't sufficient. Ride sharing providers encourage their contractors to perform accept tasks in a way that resembles full-time employment, but the message they recruit with is that "you're making extra money with your car, which is "free"". It's a bad deal because they pay $0.85/mi, and operating the car costs around $0.58/mi (which is a lowball estimate for livery use, and $0.23 of that is depreciation). When you factor in additional wear and tear, brakes, etc, full time drivers probably have another $0.10 of expense.

It's inherently exploitive, as Lyft subcontractors are working for cashflow and operating at a loss.

Where the money comes from is Lyft's problem. They can cut operational overhead, raise prices, reduce R&D science projects, take measures to eliminate unprofitable routes, etc. The usual reply is "robot cars are coming and this goes away"! That's not really right either -- there are no sentient robots driving around looking to be exploited, so they will need to own or lease those assets, which will depreciate at something like $0.50-0.75/mi (your robot cab isn't going to be cheap), and they will need to manage, insure and maintain the assets, which isn't cheap either.

Congrats to the folks who cash out. As amazing as ridesharing is, it's a fucked business.

Whether compensation is appropriate depends on the individual and their circumstances and costs. The employees situation depends on the perceived value of services rendered not the employers profitability.

That would only be true if their unit profits were low or negative. On each ride they make a lot of money. They lose money because of their huge, ride-count-independent fixed costs, like legal defense and marketing. So it's not necessarily true that giving the riders a larger cut would widen the loss, if it came with a scale-back on all the marketing.

I have the understanding that they actually lose ~$1 per ride.

That figure comes from taking total losses and dividing by the number of rides. It's not the same as saying that the costs of providing the ride itself are $1 more than they charge for the ride. (The fixed vs variable distinction I was making above.)

Uber's costs of providing a specific ride are: Driver's cut, maps licensing, cloud charges, data transfer. That is rarely more than the cost of the ride. Remember, Lyft took flack for the outrageously high 14 cents a ride in cloud costs.

You’re forgetting the cost to develop the software itself. It’s like saying a gigabyte of data on a wireless carrier cost them pennies in electricity and bandwidth.

It's still not a per-ride cost.

>You’re forgetting the cost to develop the software itself

No, I'm (correctly) excluding it from the list of things they have to pay for to provide one more ride.

>It’s like saying a gigabyte of data on a wireless carrier cost them pennies in electricity and bandwidth.

It's more like:

Verizon is unprofitable.

People keep repeating the claim that, "lol, Verizon mobile actually loses money for every byte of data they transmit to you."

I reply that, "No, Verizon loses money in the aggregate. The cost of sending one more byte of data, on average, is less than they charge for it, but not by enough to cover their fixed costs."

I understand how "cost to provide one more ride works", I'm just saying that it's a bit of an accounting fiction and has little to do with whether they can or cannot be profitable. It also confuses people into thinking that running a telecom is just pure profit and that they're getting ripped off. That's why I used that example.

A lot of the marketing budget goes to driver incentives, so it wouldn’t help the drivers if they cut back on that to reduce the cut they take from the ride (which is only 25% btw, so diver comp can only go up 33%).

I cannot understand why Uber needs 22k employees.

I get it that WhatsApp and StackOverflow and Instagram have/had a lot less legal, financial, and marketing requirements. But Uber has almost 1000 times the amount of employees WhatsApp, Instagram, and StackOverflow had when they reached similar scale.

I get it that there's a lot more analytics and geospatial complexity in Uber. I get it that they have to manage tens (hundreds?) of thousands of drivers.

It just seems like there's a LOT of unnecessary fat that could be cut.

Facebook only had 4k employees when they IPOed. Google had only 1,900!

Uber has around 25 offices in the UK alone. Most are required for local regulation afaik. If this is scaled across the US and Europe that could easily run into hundreds of offices, inflating their employee count for relatively minor employees.

https://www.uber.com/en-GB/drive/resources/contact-us/

Uber has a huge community operations team that's in charge of making sure that its drivers stay productive and at least semi-at-peace with the way the system works (and evolves!) There's a lot more human-to-human work needed in this business than for a social-media site, or an automated online-ad service.

That's where a lot of the 22,000 employees are, and if Uber could thrive without them, it surely would have already done so. Among the tasks I see listed in a current Uber job ad:

--Walk driver-partners through the onboarding process and all of the tools they need to be successful on the Uber platform

-- Help existing driver-partners troubleshoot any issues they experience (i.e. a delayed payment)

-- Help brand the Uber name and get driver-partners excited to be on the road

-- Assist with events and promotions as needed (occasionally off-site, during off-hours or weekends)

>and if Uber could thrive without them, it surely would have already done so.

That's uber's position, that doesn't make it so.

----Help brand the Uber name and get driver-partners excited to be on the road

Why is this essential? It seems like a fluffy marketing position to me.

It is fluffy marketing. But bear in mind that when you're offering a B-minus experience to drivers in terms of pay, hours and quality of life, it takes a lot of fluffy marketing to minimize driver churn or corrosive behavior.

Classic HN lol.

Just get one of the engineers to write code to get driver-partners excited to be on the road. Seems like an easy weekend hack.

I can definitely understand 22k considering all the drivers to manage. And imagine how many employees you need to manage regulatory compliance in as many cities, counties, provinces, states, countries they have to deal with.

The more interesting figure to me would be how many of those 22k are developers.

This is what gets lost in all the negativity. Lyft/Uber can slash their R&D by 90% and they wouldn't have much trouble running normal operations as minimal app-based cab companies. At 2,000 minimally required head count for running operations, they would probably average $2B in annual expenses. However suddenly they would be gloriously profitable with huge scalable upside and small fixed costs.

Here are some calculations:

Currently per mile cost of car (fuel, vehicle, insurance) to driver is about $0.50. Uber/Lyft typically charge $2.00 per mile so $1.50 goes to driver. Subtracting cost of car, driver pockets about $1 per mile which translates to $30/hr in urban areas.

One issue however is upper limit on the business. There is probably demand for 100,000 cabs each hour in US. That translates to may be 2-3 million miles per hour. if Uber can capture 30% of this, then their US revenue would be at about $4B. The international revenue perhaps adds another 2X so we are looking at total revenue of about $12B @ 30% market share. There is room to grow by almost 100% here in terms of market share so with $24B revenue and $2B of minimally needed fixed cost for operations, this seems fairly sustainable and astoundingly profitable business to me.

This is a bad estimate for the cost per mile.

Average depreciation cost per mile driven is ~ $0.6 [0]. Commercial insurance is ~ $0.2 Cost of gas per mile (in CA at 20 mpg, since most cars are non-hybrid) ~ $0.2

So cost of driving per mile is ~$1 to the driver

So really driver makes ~$15/hour when it is busy, less most of the time

[0] - https://newsroom.aaa.com/tag/driving-cost-per-mile/

The cost of per mile was from AAA.

AAA cites 59¢/mile for an average sedan [1], further they cite the costs for average private insurance, which is inappropriate for running a commercial operation with uber/lyft.

Additionally the average occupancy for an uber/lyft is much higher than typical privately used cars. Adding hundreds of pounds of passenger weight for a shared ride will yield below average MPG on a typical car, making expenses above average.

[1] https://newsroom.aaa.com/tag/driving-cost-per-mile/

Right now, Uber keeps 22 cents on each dollar paid by passengers, as its fee for creating the app, keeping it working, etc. That's cheap relative to the iTunes store, which keeps 30%. It's preposterous compared to the 3% that real-estate agents get for buying or selling a home.

We really don't know what the "fair" rate is for running a ride-hailing business. We know what's been collected to date in a venture-funded duopoly with limited public disclosure.

But my guess is that 22% is not the long-term equilibrium. Lots of outside pressures (regulators; new competitors) could drive Uber's share down. It's hard to see any forces that would cause it to expand.

Autonomous cars and owning their fleet or leasing from large fleet companies is probably the end goal for increasing the share. I don't see this going any other way. These have always been a play on getting market share at a loss while the tech is being built and converting to a profitable position when there are no contractors to pay.

I don't understand this autonomy angle for several reasons. One is of course that legally (and technically) full autonomy is a long, long time away so we'll still have drivers in cars that want to be paid, but more importantly, Uber doesn't even own autonomous cars.

Are they really, in addition to all their other costs, going to stock up on millions of expensive autonomous vehicles? That's unrealistic. And if they don't, what stops for example peer-to-peer solutions to emerge that let's people rent out their cars directly? It's very possible we don't need a middleman here when autonomy is ready.

I'm usually sceptical of all the decentralised, smart-contract stuff, but renting your car to some agreed upon destination or for some time through a open-source free application sounds actually doable.

There's also the small problem of car manufacturers saying "Oh yeah, that's a great business model. Yoink."

People talk about being "a Ford family". "This is a Chevy household". They cheer on their favourite brand in races.

I don't hear much in the way of "we bleed Uber blood".

Yes, that's a good point. Car companies could gobble up a tech startup or even social networks could try to leverage their userbase to connect people. A company like Uber really only has a better relationship to the drivers, which is precisely who they're trying to get rid off.

Where is the comparison to real estate agents coming from?

I'm sampling the world of commission-based connectors in a deliberately wide-ranging way. We could also include Hollywood agents (often 10%; sometimes 15% or even 20%). Or Eventbrite, where the base formula of 3.5% +$1.79 translates into an overall 14%. (I'm using an average ticket price of $17, which was correct in 2014.)

No comparison to other businesses is exact, but the basic point is that if we make the rounds of commissions charged throughout the economy, not many fields have settled out at the above-20% level that Uber is currently defending.

The idea makes sense but I think you need to exclude rare big ticket transfers like real estate.

The Eventbrite comparison honestly makes 22% sound reasonable. Uber does a lot that Eventbrite doesn't do:

- Make the market (you don't go to Eventbrite to find an event to go to, you find an event you want to go to and get routed through Eventbrite)

- Provide a form of ID verification on both buyer and seller

- Resolve disputes (Eventbrite probably does something like this at much lower volume).

- Navigate the regulatory environment.

- Provide real time assistance throughout the transaction (ie navigation for both buyer and seller)

Not to mention, event at that 14% Eventbrite stock is down nearly 50% on the year.

RE agents get a lot more than that.

My dad is a real estate agent (primarily for residential properties), and at least when I was growing up, it was 3% each for the buyer and seller's agent.

22% is really high for what's effectively a dispatch fee.

If you factor in the way Uber can dictate price, you may actually be "paying" a higher fee versus what you could've made on your own. If they force you to accept a 40% discount that's got to be factored in, too.

Apple takes 30% but they don't tell you what price you can charge.

Would be very interested to see the economics if drivers could set their own pricing.

I don’t think it would work. This works for AirBnB but for Uber you need ride flow in order to keep drivers on the road and riders bothering.

While I think real estate agents get too much when it come to higher dollar properties, it doesn't compare well to Ubers service. A lot of Ubers cost is fixed, there is almost no marginal cost for each ride.

A RE agent has to put in significant work for each commission they earn.

> A RE agent has to put in significant work for each commission they earn.

I paid a broker $8k to rent an apartment I found online on my own. The landlord paid them another pile of cash, probably comparable to that. I'm not sure that constitutes "putting in significant work"

Ever bought or sold a house?

The drivers want to make enough money so working for Lyft makes sense. It’s pretty simple.

Lyft doesn’t have the money to spare, so it sounds like they need to find a different job.

Makes one wonder how Grab compares, which is popular in Asia. I believe most Grab drivers in Thailand most likely earn an above average wage. For example a short drive from Chiang Mai central bus station to Chiang Mai airport cost me 208 Baht (~7 USD) while the average Thai daily wage is probably around 300 Baht. I also paid a tip (240 Baht total).

Of course Grab gets a share of the income, but I’d guess it’s less than or equal to 30%.

I few of those trips a day should be decent income to the average Thai.

Presuambly you have to buy and maintain a half decent car to enter that market, which is difficult if you have the financial resources of someone earning 300 baht a day. And with rather less capital outlay you can also earn 200 baht from short tuk tuk rides for tourists...

A lot of Grab’s drivers are working as motor bike taxis in Southeast Asia

What's common in Philippines is for higher middle class to buy a vehicle, and pay a driver to drive it for Grab. So the capital of buying the car is not done by the driver, and the drivers gets a lot less than what you pay.

Unless the airport run is significantly more expensive that normal (possible), this implies that Grab is only for the wealthy portion of the population (including presumably tourists). Lyft and Uber have positioned themselves as a more mainstream service, and that makes the similar economics fly out the window.

Can you explain why you think gig work is different?

Given the dynamic, I'd expect people to charge the company more for their time for gig work than for a stable job.

Or they can charge more.

What if the company raised rates on rides?

The effect of the strike on profitability must be offset somewhat by an increase in revenues due to surge pricing.

[Edit: Is that incorrect? Why would this be down-voted.]

I suppose one reason Uber is operating at a loss is that they are throwing a lot of money at making the drivers obsolete. No wonder these drivers are angry.

How would you feel if your boss took a part of your salary and spent it on new technology intended to eliminate your job?

The CEO is blaming the operational loss on the stock compensation of employees. My assumption is the generous compensation pretains primarily to the corporate Langoliers, but doesn't include people who, you know, work for a living. Your reasoning that compensating drivers fairly would be a significant overhead to the profitablity of the company has been refuted by the company's own statements. My suspicion is the company could likely compensate drivers fairly, cut executive bonuses, and operate in the black. But that isn't what the people who operate the company at the highest level want, they want nothing but to get theirs, screw what anybody else wants. Capitalist incentives, man. And it seems like you've got some kind of animosity towards fair compensation of the drivers because they work, "gigs". Call it what you want, while they're on the clock work is work and they are as entitled to fair compensation as anyone else.

> but this is a gig / 'work only when you want

This is not 'a work only when you want' job. People do it full time to feed their families and after doing it for years find it difficult to move to a different role for a variety of factors. I'm sure they would go get a better paying job elsewhere if it was easy.

It used to be a 40 hour job when they joined but Uber/Lyft have gradually reduced earnings. Now it's 60-70 hour a week job. That's the problem. The gig work/contractor aspect of Uber/Lyft is a smokescreen to avoid paying minimum wage. The drivers are doing it because they have to but the work conditions are pretty bad. Hence the strike.

What you're describing is that people want to work 60-70 hours/week.

Obviously not. They're striking.

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