The Secret to the Uber Economy Is Wealth Inequality
qz.com
qz.com
There's a definite relevance that the current inequality leaves people with less other choices for work; I'm sure a lot of Uber-drivers would not be Uber-drivers if they had other, better paying work, but similarly, a lot of Supermarket checkout staff, or bartenders, or waiters, or other low-paying jobs, would not be doing those jobs if other jobs were available.
In the current age, driving is unskilled labour, and so the supply pool of workers is very large. It is not surprising that driver wages are low.
The bigger issue with Uber is one of monopoly effects and competition. The interesting part of Uber - the middle-man part run by Silicon Valley technologists - is the ride allocation part, which by virtue of network effects probably tends towards monopoly. If Uber gains too strong a market share, which it looks like it might be doing, that is when the real problems begin.
In a way, the best thing might be if the cities themselves licensed and ran the ride-ordering technology, as a public good.
Isn't the inevitable problems therewith, as exemplified by NYC's taxi regulation system, exactly what led to the rise of Uber?
Municipalities everywhere are notoriously inefficient at running anything sensible that isn't burdened by politicking, group-pandering, graft and ultimately riddled with short-sighted reactive decision-making.
Perhaps we should ask why our governmental - local or federal - bodies are prone to these kind of malaises.
Could it be that our best minds are increasingly not wanting to serve in the public sector? [1]
[1] 'Pro-Government' Millennials Take Government Jobs, Discover They Suck, Move to the Private Sector
http://reason.com/blog/2014/12/17/millennials-take-governmen...
Distrust in government is a self-fulfilling prophecy. "Trust but verify" seems like a better strategy.
Moreover, in order to wield money as a form of power you have to be willing to give it away. This is not necessarily true of the other types of power.
There are many situations where corporations can take your money without permission. A monopoly in a sector you can't do without or a company willing to work the government are obvious examples. Far more insidious are companies who own media, as shown by Berlusconi, Greek oligarchs, Fox News et. al.
I suspect the cashiers' attitude is partly influenced by how they're treated by others. It's hard to stay motivated if others subtly signal that your job makes you a lesser form of life. I've often wondered how the world might be different if everyone treated everyone else with more respect.
Uber could dominate their market the way that Google dominates search, but for both companies (and unlike, say, Facebook), the switching cost for users is essentially zero.
Drivers would lose their built-up reputation by switching, and would have to spend the time to be vetted by their new agency, but these are somewhat low switching costs.
Maybe I'm wrong, but I'm just not seeing network-effect-driven monopoly power here. I can see advantages coming from a strong brand driven by nationwide (and international) reputation, and from battle hardened business practices and from economies of scale...
Google can reasonably claim not to have a forcing monopoly because they and their competitors are directly providing all of the relevant value, so a competitor (Microsoft, Yahoo) could provide exactly the same service even while Google continues to exist. Uber and co. don't directly provide anything, and only work with the existence of a driver/consumer network.
If they paid drivers directly for their time and not just on commission, it would be different, but then it wouldn't be Uber.
I don't want to argue that there is no network effect at all, but it's not clear to me that the lock-in is strong.
hmmm. i thought the main thesis was basically : uber etc aren't doing anything new; what is new is the inequality that allows it to occur at scale in places it couldn't have before
Bureaucracy, politics, pensions, liability, what could go wrong?
Poorly paid market-driven unskilled labor is the foundation of many positions.
Aside: Waiters and bartenders can do really well for themselves. I know people who've gone from part time waiting to full time call center at 15$/hr and have less take home now. In my city, wait/bar staff are entitled and insanely compensated for their labour in comparison to their peers.
There's a corollary to this, which is that if the economy starts growing again (for regular people, not just programmers) people now doing 1099 piecework employment are going to find better options, and these services are going to have to increase their prices to attract workers. The cheapness of Uber has been subsidized by investors and made possible by desperation.
Only one problem with the narrative: India (Gini 33.9) has considerably less inequality than the US (Gini 48).
https://en.wikipedia.org/wiki/List_of_countries_by_income_eq...
Oops!
You point out the problem with measuring inequality using the Gini co-efficient.
A country where everyone is equally poor has a lower (better) Gini co-efficient than a country where few are poor and few are very rich.
How is "equally poor" bad from the point of view of inequality enabling services like Uber though? In the extreme case, if everyone in India was "equally poor" as you put it, no one should be able to do jobs as cheaply as the author mentions.
https://www.quora.com/How-much-money-does-an-average-Uber-or...
(Not unlike freelance programming marketplaces.)
A car is something almost everyone needs. He's going to end up factoring it into his hourly wage and then getting a car for free.
b. the amount you drive even with a lengthy commute is nowhere close to what a person driving 8 hours a day 5+ days a week does. the amount you spend on gas alone is huge never mind maintenance and having the right insurance for driving that many miles (many drivers don't and can get totally screwed over if anything happens and the insurance company finds out they don't have the right coverage).
Let's rephrase the thesis in this way, based on my personal experience. My secret of ridesharing is that I was once part of an exploitative, hierarchical, socialist organization (academic science) that kept me in a cycle of poverty[0] intended to depress my wages, limiting my growth opportunities and discouraging out-of-the-box thinking.
I then quit my job, and began working for 'ridesharing'. First, lyft, then uber - and gave myself an immediate runway to launch a nonprofit science organization to cure cancer. Not only did it afford me the independence to pursue this, but I also gave myself a pay raise and began investments. Then, I moved from San Diego (which has an economic climate that makes ridesharing difficult in the 'equilibrium' condition, which had been reached) to San Francisco (where drivers are in high demand and low supply) and gave myself even more of a pay raise (almost 2x) affording me even more of a safety net and more free time to work on the science.
Hell, I even have investments.
[0] spam the populace by telling them they ought to get degrees in STEM, create an oversupply of PhDs, which lets you pay them 30k to work 80 hours in a lab, and then restrict their ability to be promoted to professor so they're constantly struggling.
On the other hand, it's not only the rich that use Uber (and certainly not Lyft), so the OP's argument is a bit hyperbolic. There is this very interesting effect that DUIs have a disproportionately negative consequence the poorer you are; and the price point for both services is low enough that it makes using those services very attractive for people outside the top income bracket.
You've made some good moves by going where the market values your skills. The system that enables efficient/cheap access to your labor is facilitating, but not causing your increase in wealth.
In many other locations, it would not.
Likewise whats the middleman solution to "Oh thanks for the ride, I'll pay uber $10 and you say they pay you $5... well how about you come by my house exactly a week later and I'll drop you personally $7 cash tax free and heres my phone number to coordinate and ..." The middleman cannot be avoided in top 40 pop music 99 cent song downloads, but it seems pretty easy to work around for taxi-like service.
Submitted this article a whole day ago, here:
The part about middlemen is interesting. IMO uber is a better/smaller middleman than the previous one with taxi medallions. The technology that uber provides is connectivity at large scale due to low cost. The article is correct in that if there is nothing to connect, the business doesn't work. It's still comparatively better though, and that's how improvements are made, step by step as people want better and better.
http://india.blogs.nytimes.com/2012/10/16/as-india-responds-...
I'm starting to think that technological growth's self-limiting dynamic might be the generation of cheap labor. Ultimately, technical progress isn't needed if labor is cheap. You're not going to find much audience for modern agriculture in countries where farm laborers can be paid $5 per day. Sure, there are things that the very rich might theoretically want (just as Henry VIII would have had a better life with antibiotics) but since they tend to measure prosperity and status in relative terms, they don't have the imagination to push anything forward. Instead, elites retrench and block progress. It's only when labor is expensive (or in a war, which will make labor expensive if it carries on for long enough, due to depopulation) that anyone in power is willing to fund technology. Of course, those with the resources would rather find cheap labor overseas if that's an option; excluding a small set of celebrity visionaries who are less than 1% of the elite, they only invest in technical growth as a last resort.
Uber isn't at fault for the abundance of cheap labor that has made "the Uber Economy" possible, but poorly managed technological progress is. If technological progress slows in the 21st century (I don't expect it to halt or regress, but it could slow to an uninspiring crawl and give us a disappointing "lost century") it will be due to the demotivation of investment encouraged by an abundance of cheap labor. For all the complaint about "talent shortage" by Silicon Valley executives, the fact is that no such thing exists; there are plenty of unemployed or underemployed PhDs out there. If there were a real talent shortage, the classism and sexism and ageism that characterize the contemporary VC-funded culture wouldn't be affordable, and you'd see all sorts of people (currently below a ceiling) getting coveted opportunities.
In an ideal world, we'd stop this from happening by training people up, out of the jobs no longer needed, in order to be ready for the new jobs created by technology. In practice, this doesn't seem to be what's happening. Laid-off factory workers in Detroit (and Ferguson, MO) aren't being sent to school and trained for the new jobs; they've just been abandoned.
Uber seems to capture the next phase of the Silicon Valley society. There's no basic research or fundamental innovation, but we're seeing new ideas around what to do with the abundance of dislocated and unemployed or underemployed people. Zynga's another one: capitalizing on middle-class ennui. Ultimately, this might explain, in part, the increasing dislike of Silicon Valley that we've seen in the past five years. Silicon Valley isn't singularly or even mainly responsible for deindustrialization and cultural decay, but the modern incarnation seems to be most strongly oriented toward profiting from it.
This is really interesting. I'm concerned that this wont happen in a "freelance world". When im constantly asked to outsource to freelancers/contractors the implication is they're already experienced and have exactly the skills i need now. ....well where does the on the job training and mentorship come from for junior people?
The problem is that unemployed or underemployed PhDs usually have all of the technical skills, but none of the tradecraft. Things like how to work with a version control system, working knowledge of one or two commercially used development frameworks, security basics, etc.
Silicon Valley has a talent shortage, but I would argue it's self-inflicted. Companies in the valley expect their developers to be rockstar coders who know a lot of languages and tools (Scala, Docker, nodejs, etc) that have very little commercial adoption outside of startup culture. At the same time, few startups have the time to let you learn on the job, so they'll overpay someone who does have the skills. And if you think it's difficult to find a good Ruby or Scala developer in the valley, you should try finding one somewhere else. They either don't exist or aren't looking for work.
The reality is that, globally, your average developer probably isn't a comp sci genius. They probably know Java pretty well, along with a few commercial frameworks, but you wouldn't expect them to have the architecture skills that many developers in the valley are expected to have. There are plenty of those guys. But yeah, there's a talent shortage when you limit your pool of applicants as much as a lot of companies in the valley do.
Those skills can be learned. Incidentally, I'm not especially impressed by most PhDs... but I do think they've shown enough intellectual mettle to learn how to use Github.
Companies in the valley expect their developers to be rockstar coders who know a lot of languages and tools (Scala, Docker, nodejs, etc) that have very little commercial adoption outside of startup culture. At the same time, few startups have the time to let you learn on the job
That suggests that talent has a very weak bargaining position. If talent had leverage, being able to learn on the job would be part of the deal they struck. There may be a strong bargaining position inured to one with the luck of a 100% match between one's technical experience and the trendy technologies du jour, but banking on always having a 100% match to the trends isn't a sustainable career strategy.
Companies demand purple unicorns because they believe they can get them, and that people will work 80 hour weeks or steal time from their employers (risking job loss before they get the next gig) in order to meet their pre-existing knowledge requirements, and that's probably because people do. This indicates a low bargaining position for software talent (not some startup exigency that is largely fictional). Everyone else gets to learn on the job. We don't, because even though what we do is important, we suck at organizing for our own interests.
so they'll overpay someone who does have the skills.
Overpaid software engineers are very rare. Most of the good ones are underpaid relative to what they can do. A good engineer is easily worth $250,000 per year (and, I'd argue, several times that) and very few get even close to that number.
They probably know Java pretty well, along with a few commercial frameworks, but you wouldn't expect them to have the architecture skills that many developers in the valley are expected to have.
Whatever the expectation may be of them, I actually find the average Valley developer to be pretty unimpressive. The Valley may have more of the Jeff Deans, but the 90th-percentile Silicon Valley programmer isn't any better than the 90th-percentile programmer in the general population.
I would argue that a significant portion of that compensation is essentially a gamble that the company is going to blow up and become huge. Companies with momentum or a founder with previous success have a lot easier time hiring good people at the same salaries because there is this expectation of explosive growth. That's the area where people do have leverage, because startups are cash flow constrained and can't afford huge salaries - but that doesn't mean you won't get rich (that's the line they sell us, anyway).
> Overpaid software engineers are very rare. Most of the good ones are underpaid relative to what they can do. A good engineer is easily worth $250,000 per year (and, I'd argue, several times that) and very few get even close to that number.
They're not that rare - there simply aren't enough founders to support the astronomical housing prices in the valley otherwise.
Sure, because many engineers don't ask "the tough questions" about what their equity actually means, or even how many shares there are. They gamble poorly, taking a $40,000 pay cut, and working long hours, for equity less than 0.1% of the company.
My attitude toward equity is that, unless you're a founder, you shouldn't let it change what salary you accept, how hard you work, or how you prioritize your career goals. If you want to work 70-hour weeks because it's helping your career, go ahead. But don't make sacrifices unless you're a founder. Otherwise, it's not going to be worth it. These days, founders and VCs don't offer equity at a level that would justify any attitude other than free agency.
That's the area where people do have leverage, because startups are cash flow constrained and can't afford huge salaries - but that doesn't mean you won't get rich (that's the line they sell us, anyway).
Of course, there are people who get rich on startup equity. It happens often enough to keep the myth alive. However, there are much better and surer ways to get rich. Valley engineers take it as an extremely fortunate windfall. VCs take it for granted. And honestly, I don't think there's much to recommend the VC-funded founder career over being a VC if you've got the connections for the latter. A founder is a mid-level product manager in what is the first postmodern corporate organization; but VCs are executives.
Silicon Valley is a fine place to spend your 20s while you figure out what you want to do with your life, but if you want to stay in that world for the rest of your career, the best way is to become a VC and be a real first-class citizen.
They're not that rare - there simply aren't enough founders to support the astronomical housing prices in the valley otherwise.
Software engineers aren't buying those houses. That's a mix of VCs, career executives in the startup world (who don't program and don't found, but get paradropped in, by their buddies in VC and private equity, to companies with executives) and house-rich natives and corrupt overseas officials.
Sure, there are a lot of rich people (managers, founders, VCs) in Silicon Valley. There are also a lot of programmers in Silicon Valley. The intersection between the two groups is very small. From Game of Thrones: "there are old sellswords and bold sellswords, but no old bold sellswords."
The Valley is constrained by the extreme NIMBYism and that, combined with price inelasticity and low interest rates, is what makes house prices so high.
IPhones are affordable because of wealth inequality. Oil is cheap because of wealth inequality. Organic food is purchasable because of wealth inequality. Hipster clothes can be owned because of wealth inequality.
And yet, none of these goods are targeted because those who use them are susceptible to pro-union shilling.
Stop the painfully forced guilt complex from this out-of-touch middle class white perspective. I wish I could have easily sold my spare time for more money when I first moved here with P2P labor systems like Uber... but I had to wait for a central bank's liquidity push to eventually intice small business hiring, some union to not bump a new guy for someone's seniority, or some corporation wonk to figure out a new growth market. Oh, yes, I just felt so equal in that system of waiting for people "smarter" than me to justify needing me.
People should have access to the means to sell their time and labor where ever and when ever they want. Period.
"Change in median net worth 1983-2013"
Upper income families $321k
Middle income $2k
Low -$2k
Source: https://twitter.com/conradhackett/status/545260970256252929
I mean, fewer people starving is always awesome. But it is not the question being asked.
Redistributing wealth is hard. Much easier is to invent schemes like unions which enrich certain lower class people, while (silently) making other lower class people poorer.
As you point out, globalization and outsourcing has made Chinese and Indians much richer. But they are not very visible, so who cares about them? They should have waited their turn, and eventually Western unions would have granted them jobs with "fair" wages ;-)