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Comment by mdorazio | Hacker News Reader

A lot of Uber and Lyft proponents don’t really consider this. If both of them leave the market, the demand will still be there and will be served by other entrants that have more viable business models (including adherence to laws). This is exactly what happened in other markets where Uber and Lyft left for various reasons. Granted, the experience might be a bit worse for riders (Ex. waiting longer), but I’m 100% ok with that.

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Posted it in an other thread [0] but do we really want to go back to the medallion system?

Pre-Uber, either the driver rented the car to a middleman who rented the medallion from a rich owner, or said owner was selling and financing (most banks won't touch these medallions!) a medallion at a ridiculous interest rate to a driver that planned to use it as his retirement savings (an extremely volatile asset and not very liquid).

The more I spoke to cab drivers the more it seemed their industry was a pyramid schemed aimed at helping established rent-seeker take advantage of often poor new immigrants. Uber brought a breeze of fresh air: Someone could simply buy a car, calculate the depreciation and it's value on the market (since unlike medallions cars are relatively liquid assets!) do rideshare and calculate their profits or loss. They can get out of the game at anytime, and they know exactly how much they are going to get for the car they have should they sell it.

Also, the argument on Uber/Lyft drivers not being contractors since they can't set their own rates and decide which ride they take strikes me as weird since medallion drivers were contractors, had to charge the price set by the city and could only pick-up customers in the (arbitrary) zones covered by their medallions.

[0] https://news.ycombinator.com/item?id=24225648

> Posted it in an other thread [0] but do we really want to go back to the medallion system?

No, but that doesn't preclude us from stopping Uber and Lyft. We can have a different system where there are no medallions, the number of cars aren't artificially constrained, but the companies running them need to obey existing laws.

> the companies running them need to obey existing laws

Well let's not act like "existing laws" are the most important factor. The laws were changed here, after all!

I'd like to see a system where drivers have a lot of control over when they work, and can be in both apps at once, but also have healthcare and the ability to access unemployment insurance. Even though as far as I'm aware it's not feasible under existing law.

They weren’t, though! Uber and Lyft are being told that they should have been classifying drivers as employees all along because they’re treating them like employees. This has been plainly obvious from day one.

They were not legally required too; or at-least never lost a law suite to the degree that they were required too. Only once AB 5 pass did it really become a true legal requirement.

Employees are told when to work. Uber and Lyft drivers choose their own hours.

In most places, the existing laws are the medallions.

Which laws? Do they exist now?

Well, TFA is about how Uber and Lyft are leaving California because AB5 makes them pay drivers minimum wage, so I would hope they are leaving California because of a real, existing threat.

> We can have a different system where there are no medallions, the number of cars aren't artificially constrained, but the companies running them need to obey existing laws.

The only reason why the laws changed at all was because of Uber and Lyft.

Nobody would have changed the system if they didn't come in.

> that doesn't preclude us from stopping Uber and Lyft.

I really really hope that you fail. Thanks to Uber, my wife can enjoy safe and reliable transportation. But some whiteknighting woke people cannot tolerate that, I guess they hate women? Oh wait, my wife is an evil capitalist who's exploiting poor User drivers, right? How ironic

It could be interesting to artificially constrain the number of cars and auction the slots on a rolling 12 Month basis so that the tax payers get the full value of the licenses rather than speculators

> artificially constrain the number of cars

Why?

Also, if we're doing this, let's also artificially constrain something else, maybe the amount of meat produced, and auction the right to sell meat to few highest bidders? After all, meat production has a lot externalities like methane emissions, etc etc., so why not constrain it?

Then, we must prevent exploitation of poor underpaid workers in Bangladesh, so let's restrict clothes supply, to reduce harmful externalities. Two pairs of basic jeans and 3 shirts should be enough for everyone, right?

welcome to the medallion system

It should not be just cabs, it should be all cars

But make them non-transferable.

Hmm this makes it sound too easy to be so easy.

I agree with disrupting the medallion system but the cost of rides fell dramatically and by most accounts I can find if drivers actually did their taxes correctly, they would be making less than minimum wage[0]

[0]https://www.usatoday.com/story/news/nation-now/2018/03/02/ub...

That sounds like an oversupply problem.

Why keep driving if the wages are so low? Also, in the medallion days it wasn't uncommon for drivers to end up in the red after a bad day, when factoring the costs of renting the medallion in the first place.

Because drivers, generally speaking, are not well-informed of their costs. Generally speaking when considering their wages they don't count the costs of the maintenance and depreciation on their vehicles, because this is not something that a normal driver has to think about very hard, and they all used to be just normal drivers. But it's not very hard to hit 100k miles on a car when rideshare becomes your new profession.

> Because drivers, generally speaking, are not well-informed of their costs.

I dunno, going through some forum threads on UberPeople shows exact opposite - drivers meticulously track their take, expenses, etc. - there is even a cottage industry of tools giving them all sorts of data analytics in exchange for the ride data.

Anecdotally, I’ve seen one driver keep a spreadsheet of various gasoline brands and his mpg (my destination was near Costco and I casually suggested he use it to refuel, and got an earful on how Costco was in his top 5, but not the best options to refuel).

I'd assume active participants on an Uber driver's forum are going to be better informed than the average driver, but may not be representative. Maybe Uber relies on churning through less informed people to "fill the gaps" and provide service in less profitable (for drivers) locations or timeslots.

What about the hypothesis that Uber drivers are not the idiots techies think they are and are totally capable of accounting for all these things?

There are still good reasons to drive below minimum wage.

All I can think is that you saw "less informed" and read "idiot", but that's not what I wrote. Not everyone makes it a hobby to optimize their finances down to the last detail - in fact most people don't.

I'm probably leaving money on the table with my retirement savings - perhaps there are lower cost funds or tax-loss harvesting I could be doing if I spent hours each week reading personal finance blogs. That doesn't mean I'm an idiot, and it's the same with drivers who don't necessarily calculate wear and depreciation for every last mile.

So to save the “less informed” CA politicians passed a hideous, law written for the legislature by unions and ended up taking out a bunch of industries besides just Uber and Lyft.

My favorite group are all the liberal tech writers, the majority of which fell under AB5 and are now freaking out too.

Unintended consequences are often far more damaging than just letting markets sort things out.

And who says making less than minimum wage is always a bad thing? A lot of people drive for these services as supplemental income. It’s NOT their primary income, yet all your arguments are coming solely from that perspective.

How presumptive of you.

Most people in general are less informed about finances. Just because you discovered https://www.bogleheads.org/forum/index.php isn't evidence otherwise.

I don't think most Uber/Lyft drivers look at this as a career; at least, none of the ones I've met do. It's a way of making a few bucks without a lot of commitment while they prepare to do something else.

You want to help these people out? Get rid of most occupational licensing.

The only reason the cost of rides fell dramatically is that Uber has been losing billions of dollars yearly[1]. Any other business would have folded and declared bankruptcy.

[1] https://investor.uber.com/news-events/news/press-release-det...

Then the medallion system needs to be improved. But the medallion system served a purpose of limiting the number of cars. Traffic in big cities has become much worse precisely because of Uber and Lyft. The cost of that to everybody is orders of magnitudes higher than the slightly higher cab fares people were paying.

I want to believe this is possible, but experience also says it's not worth it.

This happened in Austin, TX. When Uber and Lyft left Austin due to a driver fingerprint ordinance, RideAustin, a local non-profit with the backing of an Austin tech mogul, sprung up. Ride Austin paid drivers better, had a round-up option to support local charities, and though there were some early kinks with the app most of those went away after a couple months. I was a big fan and supported them as much as I could.

The second Uber and Lyft came back (state legislature overrode Austin's ordinance), Ride Austin's ridership plummeted. I tried to still take them whenever I could, but over time it became harder and harder (fewer riders meant fewer quality drivers). After 3 bad pickup experiences at the airport I said forget it. Covid was the final nail in the RideAustin coffin and it closed in June.

Of course California is a much bigger market so any competitors may have better luck, but I still think a lot will be wary if it's just a matter of time before the big boys come back in one form or another.

RideAustin did not work unless you had a US-registered credit card which cut off a huge group of people from being able to use it (not to mention they only published it in US app stores). I rented cars instead.

I highly doubt the international market would have made a lick of difference for a service only accessible in a city in the middle of Texas. Not saying there weren't some international visitors who may have used it, but in the grand scheme of things that's a drop in the bucket.

Ok then - not sure I agree during SXSW, ACL, the many downtown conventions etc, but fine, let’s go with that.

It was during SXSW 2017 that RideAustin failed for 5 hours one night, and the alternatives (Fasten etc) also did not work. How many qualified customers never even opened the app again after being burned by that?

I mean, if anything you are exactly making my point. RideAustin was a local nonprofit, run on essentially a shoestring budget, that failed during a surge that was probably many times the load they normally get in any single night, and your response is "How many qualified customers never even opened the app again after being burned by that?"

I'm not disagreeing with you, I'm just saying why would some small startup that really could only address a single, relatively small market (CA is big but pales in comparison to the world at large) be able to attract the capital necessary to eventually compete against Uber and Lyft? The service levels you've come to expect from Uber and Lyft don't come cheap, and they've already had years to scale their operations.

It's a weird dichotomy I sometimes see on HN: "Why aren't there more competitors in this space?" and "Why doesn't this other startup provide the same levels of service and low low prices as this other enterprise that got billions in VC funding?"

I feel like network effects are at play here. For locals, Ride Austin becomes the default. But for Austin, there's also many events that bring in regional and international travelers; it's not hard for them to find out who the local ride service is, download the app, and set up the service, but if Uber and Lyft are available, they're the lower friction option and are going to be the default choice of travelers, regardless of moral fringe benefits like paying drivers better or supporting charities.

Wouldn't something like Ride Austin also face the same problems as Uber, which is to say, they need to hire every driver as an employee which they do not at this time

I guess if Uber and Lyft had to compete fairly, RideAustin might have stuck around.

I'm not actually sure. I lived in Austin during the time, and it was nice, but it also meant I needed to have 2-3 Austin-specific rideshare apps, Uber and Lyft, and then Juno for when I was in NYC. It was just cumbersome.

I wasn't using any of them regularly, mostly just on trips/to and from the airport, so a lot of the time when I tried to open any of them, they'd need me to re-enter my payment info. It's just not a good UX to have 5 different apps that all do the same thing, because you can't be sure exactly which ones will work when you need them.

What do you mean "compete fairly". I don't see how they competed unfairly when they came back. There is no way a small, single-locale-focused ride share company can provide the levels of service and quality people have come to expect from Uber and Lyft.

They mean Uber and Lyft use investor money to subsidize ride costs, so they are able to beat the local alternatives on price.

It’s the classic, big company opens a store in a small town and sells at a loss until the local mom and pops are driven out of business, then raises the prices once they are the last man standing.

That and not drive costs lower by shifting risk onto "contractors"

This would likely have been the case.

This is trivial. Ban the new thing, and a variant of the old thing will re-emerge. This is akin to observing that if you ban Wikipedia, the market for print encyclopedias will grow.

That has no bearing on whether such a ban is a good idea.

To counter your example, I doubt people would go back to print encyclopedia once wikipedia were to be banned. Wikipedia has fundamentally changed the way one looks up reliable information online, with simple computer-enabled features such as searching, cross-referencing,fact-checking, etc. We would likely see people getting dumber (due to the lesser and scattered number of sources) or relying on less reliable internet sources for information. Or outright piracy, which is of zero utility to the publishers.

Ride sharing has fundamentally changed the way I travel in developing countries. It's much easier to rely on an app's set price rather than haggle with taxi drivers on offers far higher than Uber's. On the other hand, I have found less utility in developed countries where it's much easier (and cheaper in general) to rent/buy your own car, or rely on a cab meter. Likewise I don't really see people moving back to the old ways - on the contrary, a number of taxi companies and cities are already exploring/already begun app-based services.

Maybe a few years from now, we might see Star Alliance type industry groups within the taxi industry.

> we might see Star Alliance type industry groups within the taxi industry

... so we get legroom reduced every year, mandatory fuel surcharges, ticket printing fees, etc? No, thank you

Leg room, fuel surcharges, fees etc are more an airline thing. Not a Star Alliance feature.

In the consumer space in particular it's the service that offers the best combination of service and price that's going to win out. I understand you are willing to have a lower quality service with higher prices, but the market likely says otherwise.

It's also not something I'd want to start a business on. Even assuming you think you can make the economics of it work out under the new regulation, you're gambling that CA doesn't change the law again later - either rolling back this restriction, or adding some new one because they decide that you too are being abusive. I'm not sure I'd want to invest in any company trying to get into this niche.

I don't think we can actually say what "the market" says since the market hasn't seen what a long-term cost basis and experience is for ridesharing that's both profitable and adheres to local regulations. Of course people want artificially cheap things, but that's not really a good start for determining what the market is actually willing to bear.

>> This is exactly what happened in other markets where Uber and Lyft left for various reasons.

This is exactly the opposite of what happened in Austin.

Well, they did get more alternatives, but a worse UX and more fragmented driver base that was smaller due to the added regulation meant that I just ended up driving more places myself. It became too expensive to take to go out drinking, so I just didn't go out as often. It became cheaper to park at the airport, and I didn't have to schedule a ride hours ahead, so I started doing that instead,

It turns out price/availability is pretty important, and adding regulation that hurts both often makes it hard to run the business at all.

It's like if a city demanded that all restaurants only served organic foods. It might be better in the abstract, but it's likely going to put a lot of places out of business and raise the costs of what's left over. Maybe that's ok, but it's not without cost.

I mean you could say this about any regulation and any sector. I'm sure a lot of businesses went out when we banned child labor, introduced weekends, the 40-hour week, etc.

We've always set a bar for a minimum societal contribution that companies need to be making. There's no indication that the current bar is anywhere close to perfect.

Sure, and this is a balance that happens in every sector. I'm just pointing out that there's obviously a balancing act between what you can demand from companies in regulation, and what will push them far enough to make them nonviable.

Increasing cost doesn't necessarily mean that people will choose to pay it, or that it won't cause uncomfortable disruptions to lifestyle/planning. On the other side, there's plenty of services we want to exist that we regulate, but also subsidize because we think the value of them existing is high enough even if they're not financially viable at the cost we'd need them to be at.

> There's no indication that the current bar is anywhere close to perfect.

There's no indication current bar isn't too high, tho

Given that the US performs middling to poorly on most statistics of welfare and simultaneously has the longest working hours in the OECD I think it's safe to say we could set the bar higher.

Given that per-capita GDP is higher in US than in most those countries (actually all of them except oil-propelled Norway), you can argue that the bar could be even lower

What use is per-capita GDP if it's not getting to workers through real wage growth?

Uber and Lyft aren’t profitable—their prices aren’t sustainable in the long run.

Uber Rides business is profitable (EBITDA=$742 million).

https://investor.uber.com/news-events/news/press-release-det...

No they are not. Uber deliberately plays games with Non-GAAP reporting ("look how profitable we are if you ignore pesky things like interest, depreciation, and stock compensation") and shuffles losses away from Rides (to Tech) to show a net profit when there is none. Any standard accounting look at their balance sheet shows them losing money.

That’s “adjusted” non GAAP EBITDA, or invented bullshit that they can manipulate nearly any way they like. It’s like wework’s “community EBITDA”.

And more expensive

That's what happens when you cannot rely on spending other people's money to prop up your business.

It's honestly so destructive for these anti competitive business practices to pour VC money into a market.

Uber and Lyft aren’t unprofitable at the margins in developed markets. They instead spend money expanding.

Back in 2016 Uber says it was profitable in places like California. Why would VC spend billions to permanently give free rides to Californians? It just doesn’t make any sense.

https://fortune.com/2016/06/16/uber-profitable-markets/

That’s not what Forbes has been saying about Uber since 2017. Look up more recent Uber article by them.

One accuses Uber of creative accounting to attempt to make the rideshare business look profitable.

I looked. The articles aren’t actually saying that the rides have a negative profit. Only that margins are low (which is quite plausible)

The article is consistent with both of our beliefs, i.e. it’s vague as to whether losses are intrinsic to rides, or whether margins are low + there are expansion costs.

https://www.forbes.com/sites/lensherman/2019/08/22/ubers-dub...

It should be tbh. It’s a car service. It’s a luxury expense.

It may have started that way but not anymore. You can viably replace car ownership with ride-share and spend _less_ money each month than being a car owner. Many people do this, it not just luxury.

I think that is only viable in places where car ownership is prohibitively expensive already. A short trip is easily $10, and then you still have to get back. Do that every day and you’re spending ~$600/month. If you live in an area that isn’t parking constrained (most of America!) owning a car can be much more affordable than that.

Uber and Lyft both have commuter arrangements that cost more on the order of $2.50-3.50 a trip. Mainly focused on the GGP claim that these services are strictly luxury.

I’ve never seen prices that low when browsing for a pool trip.

We had that before with taxis. It wasn't good. Dirty cars, long wait times (if they come at all), "broken" credit card machines.

Granted for the most part that was with medallions, and maybe with more open competition things will be better. But with employees only I don't see how you can get the elasticity of supply.

Uber : Taxis :: cloud/hyperscaling : bare metal

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