Beautiful illusions: the economics of uberX
justin-singer.org
justin-singer.org
Incidentally, at 4 months, I've already put on 30k miles, although ~25% of that is personal and of the remainder, 50% are profitable, 50% are not.
I drive a honda insight (35 mpg while lyfting) and including maintenance, I estimate operational costs to be around $0.30/mi, my average income floats between $1 and $1.5/mi. I also get a $0.55/mi federal tax income deduction, which means that about a third to a quarter of my income will not be taxable... I consider that to be a reward for having the foresight to purchase a hybrid years ago.
The biggest challenge is that the hours when friends are likely to want to be social are also prime money earning hours, so I'm constantly assessing opportunity cost when choosing when to be social. And I've already taken one vacation, a week and a half, I thought making no money would be stressful, but it turned out to be less of a problem than not having my laptop (which got left behind in the TSA line). Like many things in life, it just takes careful planning and saving money beforehand.
I work from 11pm-3am
Isn't that still part time? If you doubled your hours, you'd be making closer to 90k.
http://www.nyc.gov/html/tlc/downloads/pdf/2014_taxicab_fact_...
Shortly, I'm going to be filming a web series called "sciencerides", where I take rides with and interview science and math folk. Although I fully intend to interview grad students, postdocs and undergrads in addition to "more well know scientists", I've already got a commitment from Frank Tangherlini, who is a noted physicist and inventor of the "Tangherlini transforms" which are a take on the Lorentz transformations but presuming the speed of light might be anisotropic. I think it is likely, I will be able to interview Hamilton Smith, the discoverer of restriction enzymes, and Clyde Hutchison, inventor of site-directed mutagenesis. I'm also going to try to interview Kristen Baldwin, who is the first scientist to clone mice from adult neurons, Floyd Romesburg, who made the first organism that replicated with nonstandard DNA bases, and Douglas Prasher, who is the unsung hero of flourescent proteins.
Actually to me the most important interview that I'm going to do, however, is one that I have for sure lined up, which is by a mathematics teacher who has had impressive success teaching underprivileged, at-risk middle school students and completely turned around their performance in mathematics.
Source, I'm one.
We don't need an uber to help us allocate car spaces efficiently - we need an app to help us allocate societies resources in sane ways.
You're being awfully judgemental about what you think is sane. In my 11 odd years of being a scientist I have seen completely insane and wasteful use of taxpayer money left and right. I'm fairly sure that the median scientist (note the difference between median and average here) is not contributing positively to society. I'm not even certain that what I have done cumulatively has been a net positive.
And as a lyft driver, I am helping keep drunk people off the streets, so my median day, in which I drive around 10-20 drunk people home from drinking, has done society a favor.
Meanwhile, the IRS is taking their sweet time and not 'sanely' allocating their resources in approving my nonprofit. I sent in paperwork last May and they still haven't gotten back to me (average unprocessed application was submitted back in August of 2013), so if you want to give them a ring on behalf of me that would be swell.
So "we" (not you) have contrived a situation where we look after pissed marketing execs in the short term but block the potential chance of life saving, cheap pharma.
Like I said nothing against you or your choices, just that I see our society advancing only on scientific progress - a progress that is slow and uncertain, and all we really know about it is that the more scientists we have working away at the mines the more likely we are to trip over the lucky penicillin discovery.
So if we spend a considerable amount training you to be capable of the biochemistry and organisational skills needed for your charity and then fail to capitalise on that investment it shows something wrong in our accounting methods as a society.
Would love to hear more about the drugs / science involved
I don't think it's a slight; and I agree with the poster. There's a social cost to having someone with the intellectual capacity to obtain a PhD and participate in post-doctoral studies driving a taxi. In some sense, it's bizarre. But it isn't your fault, it's the perverse way that society has arranged economic incentives. Why are we not rewarding you for work that fewer people have the ability to do?
This is normally called a government, but the US has a big problem with anti-government and anti-science politicians.
We have clashed on other threads PC but this comment is outstanding.
"The standard mileage rate cannot be used if the taxpayer: Uses the car for hire (such as a taxi)."
So you can deduct your actual (itemized) expenses, pro-rated for business use, but you can't take the "standard deduction" of $0.55.
I am not an accountant or anyone qualified to give any advice, but this seems pretty clear!
I also think it's a bad rule, because as a society we should be rewarding you for driving a fuel-efficient car, rather than effectively giving higher tax breaks per mile to those that drive less efficient cars.
He's trying to deduct both his actual costs and the standard cost, which is obviously double-deducting.
What? How do you get double deducting out of this? I only see a desire to deduct 55c/mile. If the actual costs are only 30c, that's not double deducting, that's just having a deduction that's larger than raw costs. Deductions that are larger than raw costs exist all over the place. The concept isn't strange even if this particular rule disallows it.
> GP is being rewarded by saving on fuel-- his cost is only 30c/mile compared to the standard of 55c/mile.
Except he paid higher up front for that fuel saving. And he pays higher taxes without that deduction.
Can you explain how uber pays better?
If it is, and you throw in the cost of a medallion and the per trip fees, as I suspect Uber or Lyft will one day need to pay...that'd probably wipe out 100% of that income. [$2500/month + $.50/trip]
The calculations in the article seem to be based on just a couple numbers -- such as the 40,000 miles per year that Uber gave for the purpose of cost of ownership calculation, which is used to try to calculate the hours drivers work and the fare they earn per hour. Some real numbers about fares earned would help here. The conclusion is not clearly stated in the "Conclusion" section, but here's my interpretation: If you make certain assumptions about an uberX driver, you find they make about as much as a typical taxi driver. This suggests that driving uberX instead of a taxi does not automatically put you in a completely different income bracket, but I think the devil is in the details. Obviously the spread between different drivers is much, much larger than the spread between taxis and uberXs. If we made a histogram of income for each and superimposed them, they would be two humps with a lot of overlap. It would be more interesting to know, for example, how the jobs of top-earning uberX drivers and top taxi drivers compare.
Then there are implications that Uber is another Groupon, and its financial success is dependent on a steady stream of investment dollars. Well, Uber is making plenty of money. They write software and do operations and the money just pours in. Every user is a paying customer, and the vast majority of users come away satisfied and happy to have a better way to get from point A to point B. The drivers make money and are thrilled. Some people take Uber literally every day. Seems like a pretty good business to me.
1. Uber drivers don't make as much as Uber PR claims (based on data Uber provided).
2. Uber the business doesn't seem to be wildly profitable, or at least not in a defendable way (based partly on data Uber provided).
3. The large amount of capital being injected into Uber are not indicators of growing real value, but instead indicators of a weaker-than-acknowledged business.
It's possible for all of the above to be true but for drivers and riders to both be very happy with the service. Especially since UberX seems to be offering rides for below market prices but the drivers are getting switching bonuses and per-hour guarantees (see elsewhere in this thread).
Also, who is the boss/supervisor who would fire or penalise the driver for saying it's not great? More importantly, since there no strenuous and expensive licencing going on, it's simple to just stop being an Uber driver if it doesn't suit you.
From the view of the driver it could be you: It's not that uncommon for corporations to test employees like that using HR people disguised as customers. I have no idea whether Uber does that, though.
2. Uber is extremely profitable and growing a ton. The only argument here is about whether its profitability or growth is not sustainable because drivers are getting a bum deal, or merely a run-of-the-mill deal, while all appearances are to the contrary. It's pretty easy to tell when people are happy. Groupon was generally hated by small businesses, while Uber is loved by operators of limos and taxis. People aren't idiots; they know when a service is good for their bottom line and when it isn't.
3. Raising a big round doesn't in itself mean a company is a strong or weak business, though it will increase debate about it.
This is a common way for investors to get screwed, but in this case it may reflect their belief that Uber is well-placed to capitalize on the impending self-driving-car phenomenon. They could be wrong about that, of course, for any number of reasons, but at least it's not Groupon.
FWIW, I've also talked with a handful of uber drivers in SF and LA, and they have all said they are making more money now than they did driving cabs. The biggest difference was indeed utilization - the example given a couple of times was that as taxi drivers, they would drive someone to the airport and have to drive home empty, since they didn't have the necessary licenses to work inside the airport and it wasn't cost effective to hang around hoping for fares on city steets outside their own territory. On the other hand, with Uber they often would drop someone off at the airport and immediately pick up another fare back to their own area.
Long term if cities allow services like Uber and Lyft to exist the margins will likely decrease since drivers can switch to the company that pays the best, and consumers will use the service with the best rates.
Well, I actually read the Dempsey paper after reading this blog post, and I have come to the conclusion that the poster is deliberately misrepresenting the contents of that paper. Nearly every negative effect mentioned does not apply to Uber/Lyft.
For example, an increase in rates is mentioned in this blog post as being an effect of deregulation. In the Dempsey paper, this is attributed to new small time cabbies taking fares at cabstands, hotels, etc. These drivers, in an attempt to overcome the increased competition due to deregulation, would raise their rates. Riders had no easy way to compare rates or get an alternate ride. This simply doesn't apply to Uber/Lyft, as you can see the price right away even before the car shows up.
Another example: the paper also mentions increased congestion and pollution due to the increased number of taxis on the road. In the 1960's and 1970's this made sense as taxis would cruise the streets looking for people to pick up or possibly wait with their engines on at taxi stands. Again, modern ridesharing services don't have this problem.
The Dempsey paper also mentions many negative effects from new entrants into the taxi business during deregulation not being radio dispatched due to its high startup cost. But every ridesharing service is "radio dispatched".
I could go on like this, but in general ridesharing services increase the amount of information that consumers have, thus allowing the market to work in a way that it couldn't 50 years ago. This blogger completely ignores that, and just skips to the conclusions.
[1] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2241306
My car insurance policy has prohibited using the car for commercial purposes for as long as I can remember. There are also probably state laws requiring commercial drivers to carry commercial insurance, just as it requires them to have a different class of drivers license.
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If you get a liability claim from an Uber user to your adjuster... they should be able to deny your claim.
A lie on your insurance application is an easy denial path for the carrier. Oh, and they'll accept your premium during that time. It's playing with fire.
edit: I just checked my geico policy information. They're already on it, as of my may 2014 policy renewal:
14. Personal vehicle sharing program means a business, organization, network
or group facilitating the sharing of private passenger vehicles for use by
individuals or businesses.
[...]
18. There is no coverage under this Section for any person or organization
while any motor vehicle is operated, maintained or used as part of personal
vehicle sharing facilitated by a personal vehicle sharing program.So, they could deny coverage based on the details of your policy and the facts of the situation. Read carefully. Interpret broadly. When investigating the claims, they will inquire about the affiliations of the riders in the vehicle. I can imagine an Uber driver, with their riders holding their necks, running around saying, "When you talk to my insurance adjuster about this, I need you to lie or we all get nothing."
That would then be insurance fraud at a whole other level.
Insurance companies have been at policy fraud and claim denial for as long as auto insurance has been available.
Given odd situations with large payouts at stake, we'll be reading about subpoenas for user info from Uber or telecoms at some point. The meta-data of your fare(s) could be pretty damning.
Uber seems that it is not being responsible to its drivers or customers in this regard. Uber will feasibly need to not only buy a fleet of their own cars, they'll have to backstop claims for their drivers. They'll be a regular OLD taxi company with an app.
Oh wait... they are already doing this: http://blog.uber.com/uberXridesharinginsurance
Their spin on this is interesting. I'd like to see feedback from a couple carriers.
Oh, we have that too... http://blogs.kqed.org/newsfix/2013/11/14/who-pays-when-ride-...
[quote]In a filing with the California Public Utilities Commission in 2012, the Personal Insurance Federation of California, an industry group made up of State Farm, Farmers, Progressive, Allstate, Liberty Mutual, Mercury and Nationwide, said it asked its members to determine how they would treat liability claims in ride-service accidents.
In response to the Commission’s inquiries, we surveyed our members regarding coverage issues in the above described situations. It appears that the industry standard for personal auto insurance policy contracts is to exempt from insurance coverage claims involving vehicles used for transporting passengers for a charge. Thus, in situations where a vehicle is insured as a private vehicle and is used to transport passengers for a fee, no insurance coverage would exist…
and now grand entry of a police doing traffic stop on a UberX/Lyft car with a fare - no coverage at that moment , i.e. driving without insurance....
what does, on a mac, is
pbpaste | fold -s -w 77 | sed "s/^/ /" | pbcopy
A paragraph later:
"Meanwhile, a trip to bankrate.com will reveal that today’s market rate for a 48-month loan is under 3%"
Not that it invalidates the piece, but this bit of handwaving bugs the heck outta me.
The under 3% loans are available to people with "excellent credit", which it was just assumed didn't describe UberX drivers. myfico.com indicates, for instance, that people with a FICO score under 620 are looking at a rate more like 10-15%.
It's just to illustrate the range of finances, and note that the finance company is literally charging 5x!
In terms of credit, yes, better credit helps, but also since it's a secured loan, it's not like a credit card.
We are talking a lot about regulations, consumers but it's the first time I see a post about the drivers themselves. As it is correctly identified by the OP, it's the main and only asset for Uber.
That being said, I would love to read an AMA with a Uber driver.
The two biggest problems I see are 1) author doesn't acknowledge that Uber behavior is probably very different from regular yellow cab behavior (ie, has the author even heard of the airport or surge pricing?) and 2) I don't think it's appropriate to allocate all of an auto's expenses as "business" since it's almost always a personal car.
For (2), again, this is a vehicle being used 70 hours per week, 40,000 miles per year. If you were looking at the case of a part-time driver it might not be appropriate to allocate all the expenses as business expenses, but in this case I think it is.
The car still provides for 100% of the owners personal driving needs so completely inappropriate to allocate all costs to "business".
My father-in-law's an NYC taxi driver, and before that (in the 90s) worked for a black car service. So I can tell you from inside experience that you make more money in Manhattan than anywhere else, period. The fact that Uber drivers have the freedom to go to New Jersey or Far Rockaway or wherever doesn't mean that they actually get any benefit from doing so.
source: used to work at uber.
>>> I don't think it's appropriate to allocate all of an auto's expenses as "business" since it's almost always a personal car.
While it is a personal car, a full-time uberx driver is driving it for business purposes 75% of the time or so. Which makes it more like a business investment.
The Camry Hybrid in the article is also a clear favorite due to the perceived high fuel efficiency, cheap and infrequent maintenance, and 200-250k mile battery life.
And that's kind of my whole "can't quite express what is wrong here" issue in a nutshell.
Meanwhile I've had a regular cab driver double-swipe my credit card and one who did a u-turn from the right lane without checking his blind spot and nearly killed us both.
I'm not saying that the use of automobiles doesn't require some regulation (although it isn't clear that commercial use requires more than other use), but this particular argument for regulation is weak.
Such option could easily increase demand, be more cost efficient and higher margin and be highly dependent on market reach , which makes it very difficult to replicate.
And i'm sure UBER has some data to demonstrate this and other attractive options to investors[1], which make it much harder for us non-insiders to truly evaluate UBER.
[1]A similar example is the nest acquisition, which raised many eyebrows and guesses, but it appears they had a "secret" way to monetize their service - selling demand response services to utilities.
It would increase per-driver revenue, certainly, but probably decrease Uber revenue fairly significantly. Taxi services, whether in the old fashioned way our the glitzed-up smartphone way, are pretty commodity.
The success of budget competitors like Lyft and Sidecar is testament to this. The perpetual expansion of UberX too. It seems most people are more concerned about getting from A to B cheaply than any kind of premium lap-of-luxury service.
A ride-splitting service would be pretty great for consumers and maybe for drivers, but from Uber's side it would be a pretty substantial price cut.
Great for the driver, great for the two passengers, bad for Uber.
For the $16 trip, let's say UBER gives $10 for the driver(instead of ~$8), and takes $6. UBER still comes ahead. And don't forget the huge lockup it gets - which is valuable in and off itself, esp. in the long term as a basis for self driving cars service.
There's of course the issue of decreased traffic for drivers, but there's probably a strategy to make it work.
I think this is a totally different business modal. I am not sure if many customers would like sharing a cab with a stranger.
But it happens in Beijing, especially when the demand is super high (e.g. 2 hours queue in a rail station). Well at least it happened to me :)
Given that in most cities you could pick up a phone and get a taxi for over a century, or hit some buttons on your mobile phone and order one for the last 20 years, this becomes a question regarding two aspects of Uber: deregulation and brokerage, which are Uber's two differentiating factors. The author claims that deregulation has been tried numerous times -- and failed pretty much everywhere (although, maybe this time it's different) -- and that brokerage of a commodity is not too profitable[2].
[1]: http://en.wikipedia.org/wiki/Taxicabs_of_the_United_Kingdom#...
[2]: http://www.quora.com/Uber-1/How-big-of-a-deal-is-Uber/answer...
As for network effects, is it really that hard to see that a larger network of vehicles will have inherent advantages over a smaller network? (think about distance to the nearest available vehicle, especially as the network expands outside of dense urban areas)
Consider nyc; even if uber is the only competitor left standing, yellow cabs aren't hard to get. I'm sure they'll adopt similar ios/android hailing apps, so what then is the value of uber?
Technology companies are revolutionary in terms of leverage, but really, tech didn't invent the concept of leveraging.
- evading regulation through use of loopholes
- turning a blind eye to people who violate contracts to provide the service (For example, many AirBnB hosts don't actually have the legal right to lease the place they are listing)
- allowing their service providers to skip things like insurance (in other words AirBnB takes a cut of the host's profit, while foisting the risk on the unwitting host)
Running a service is cheap & "competitive" when you don't have insurance or even own the property! That comes at the price of risk, but AirBnB isn't the one who assumes that risk...
A lot seems to hinge on this, but I don't think it's a fair assumption that a NYC Uber never leaves Manhattan. A couple of trips to the boroughs (airports!) and 20 mph average on a regular 40 hour week seems perfectly plausible.
It looks like this Uber vs. traditional cabs is a battle with an expiration date.