Bill Could Destroy Uber's Unsustainable Business Model
vice.com
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(Pardon my ignorance if these are dumb questions...)
> And why shouldn’t we consider investors part of the market?
We can, but there are rules of "fair play" to the market that are supposed to be followed. What Uber is doing with SV money is, in saner sectors, called dumping, and generally considered illegal. Somehow it isn't, and even if it was, it probably wouldn't do much, as Uber's whole "rideshare" operation is illegal almost everywhere they run it.
They keep undercutting Uber, should Uber ignore that? Besides, Uber doesn't set prices significantly below the competitors, it relies on being a superior service with lower wait times and higher vehicle utilization. If you open Uber and Lyft you will typically see very similar prices, with the main difference that Uber can be lower because they are a more efficient service, but Lyft will make up for this by subsidizing rides even more than Uber (something you can see very clearly in their S-1 and quarterly earnings reports).
I won’t address the rest except to say that’s more a factor of them expanding into other markets or maintaining category position than efficiency.
>The market says Uber should be going out of business
The market isn't saying Uber should go out of business or it would have gone out of business. The market is saying Uber should be aggressive about pricing until Uber's competitors stop subsidizing their rides. Investors are part of the market too.
They kinda do, by not accepting rides under a certain price and forcing a raise, like it has been reported.
> Furthermore, prices are driven down artificially by investors who are willing to take a loss until other "markets" are forced out of business, at which point Uber will presumably raise its prices to actual taxi market rates.
This will never happen. Anyone can start a ride-sharing service with a tiny investment. There's no way bankrupting current companies will give Uber an unassailable market.
Yes, kinda. My understanding is that once they're "on the clock", they get penalized for declining too many rides.
> This will never happen. Anyone can start a ride-sharing service with a tiny investment. There's no way bankrupting current companies will give Uber an unassailable market.
Except any startup will be forced to either price their rides above the cost of service, or find investors willing to take a loss in order to undercut the former.
Uber may not ever have an unassailable market, but they will have to eventually raise their prices or lower the cost of providing rides.
Also "markets" doesn't necessary mean ride-sharing markets, they can also destroy public transport and other new ways of transportation that doesn't fit well to Uber model.
Explainer of the Supreme Court ruling: https://www.forbes.com/sites/tonymarks/2018/05/29/the-califo...
> Under the newly adopted ‘ABC test,’ a worker is an independent contractor to whom a wage order does not apply only if the hiring entity establishes all of the following:
(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and
(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.
A is debatable at best, given that make and model of car is heavily restricted, particularly for the 'UberBlack' service. https://www.uber.com/drive/new-york/get-started/eligible-veh...
If your contractor gets to dictate how you present yourself and how you do your job rather than just being happy with the end product, that looks a lot less like contracting as understood by laypeople.
> (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
For example, under the current UberBlack rules for NYC, you couldn't drive a BMW 6 series, any Porsche, a Toyota Sequoia, a Nissan Armada, any Dodge, and this is just comparing cars listed on Blue Book with similar ratings and starting prices: https://www.kbb.com/car-finder/5/?pricerange=65000-max&inten...
If you need a whitelist because some of these cars under arbitrary rules won't meet your criteria even though they're comparable, that's less "contracting for the job" and more "specifying the terms of how you work."
When you ask for a plumber, you ask that they show up with tools, you don't tell them only Black&Decker, Craftsman, etc. are acceptable and any deviation from the list won't do. (I know nothing about tool brands and quality, this is just a hypothetical example.)
Uber drivers absolutely have a boss to report too. Can they drive for other services? (I know that in Brazil they can, but Uber only started to allow it after a court ruled that exclusivity implies in employment.) Does Uber require a stable relationship? (Even the ranking system may imply in stability.)
Seems weak. Are restaurants employed by Yelp? Ranking systems abound nowadays, they imply little.
...might be a fun foss project to make a distributed alternative so people could be real contractors. GNUber or something
I'm not sure what the free market textbook says about this but as a consumer it's a huge win.
I came across it while talking with a bar fly at my neighborhood pub who owns and operates a freight brokerage, he's been getting sales calls from such companies and is about to make a switch to some platform that has fewer features than the one he uses now, but apparently has exactly the ones he needs (or as he put it "I can get by") and for cheaper.
The job was in SF but they operated all over the US.
They’d def lose riders. But not close to 50% of rides. Not even half that. For myself, I’d ride a bit less. Probably not do 1 in 4 rides I’d normally do. But when I need a ride back from the train station or I’m late to something and public transit will take too long. I’m not gonna take a cab. I’m going to still use them.
They could also both increase or add loyalty programs. Uber’s currently is pretty crappy as a casual rider. Im guessing doubling the loyalty program payouts wouldn’t cut into the 50% increase too much but could stop some of the ridership decrease bleeding.
And there's the rub. They're playing investor-bonfire chicken.
More strictly: it's prisoner's dilemma. Defection is the dominant strategy.
That said, it would be interesting to see what their respective price charts look like over time. A typical strategy for signalling not-technically-a-cartel price rises is to announce price raise well in advance. If the others don't match, you quietly drop it.
My last experience consisted of a driver who seemed jacked on coke or speed or maybe just nuts driving very badly and then (as usual for cabs) pretending the card system didn't work to pressure me into going out of my way to get cash.
Prior to that there was a cab that smelled bad with a broken door that caused the door ajar indicator to beep for the entire trip. This driver also pretended the card system didn't work.
City is Los Angeles but I have had similarly bad experiences in SF and Dallas in recent years. In Dallas I had one whose driver smelled like sasquatch and was obviously taking me the long way. In SF my driver helpfully introduced me to QAnon.
I've had marginal Ubers and Lyfts but none have been as bad as the average licensed taxi.
Same with hotels and airbnb
A better change in the law would be the opposite. Give the benefits of being a contractor to all folks currently forced to be categorized as employees. And fix healthcare so it’s not tied to your job.
I’m sorry to hear it, that’s a really sad situation.
Article nails it, Uber is an investor funded welfare program. Certainly Uber's tech employees are benefiting from this welfare a lot more than drivers, but does asking a massively unprofitable company to be even more unprofitable aid drivers' long-term interests?
Doing anything to restrict any business will reduce profitability and make their balance sheets redder, but as a society we can define the minimum standards that a company is expected to meet; otherwise they'll just feel free to dump the externalities of treating their workers poorly onto society and the general taxpayer will have to pay for it.
Not the main topic of the article but I'm surprised at how concentrated Uber and Lyft's revenue is the state of California. I can imagine smaller / newer companies getting started in one location and being lop sided in their sales, but those two are huge and have been around for years. That's some serious concentration of regulatory risk!
That said, I find myself using one of the classic defences of a confident prognosticator: I am right / I will be right, except about the timing[0]. But to make more verifiable predictions I would need to start assigning probabilities to particular dates.
[0] Tetlock's Expert Political Judgment: How Good Is It? How Can We Know? is still a brilliant and amusing empirical study of opinionated forecasting: https://www.amazon.com/Expert-Political-Judgment-Good-Know/d...