Uber Tests 30% Fee, Its Highest Yet | Hacker News Reader

Uber Tests 30% Fee, Its Highest Yet

on.wsj.com

56 pointsclaywm75 comments

The real meat of the story is tucked towards the end of the article. Both Uber and Lyft would like to lock drivers exclusively to one service and not have them constantly price compare. Right now, basically every driver has both apps open which makes the market almost perfectly competitive with no opportunity to extract monopoly rents.

However, Uber and Lyft are also deathly afraid of any move to classify workers as employees rather than contractors and one of the key tests is whether the worker is free to set their schedules and working relationships.

The 30% rate is largely illusory, they're not expecting a large chunk of their workforce to pay it. Rather, it's to get them committed to Uber over Lyft while trying to avoid more onerous regulation.

Only 2 major sellers does not make a market perfectly competitive by any stretch of the imagination, but I digress.

The classification point is interesting though. If there's forced lock-in to only Uber or Lyft, then I can't see there not being mass lawsuits about misclassification of workers. The status quo is already almost 50/50 in terms of the IRS classification checklist.

Perfect only exists in models.

Also, you might think of it as thousands of sellers but only two buyers. In any case, competitiveness has to do with more than the number of actors. Switching costs are pretty low and information is very available. That counts for a good amount. Two buyers/sellers can be still create a competitive market in the right circumstances, with collusion being the biggest danger.

Also, drivers still have the option of getting business in other ways.

Generally though I agree that the market needs more players, for the employee vs sole trader debate and for competitiveness reasons.

> Also, you might think of it as thousands of sellers but only two buyers.

The relevant terms are Oligopsony and Monopsony.

https://en.wikipedia.org/wiki/Oligopsony

I'm confused, why would a larger cut for Uber make drivers committed to Uber over Lyft?

FTA: "The rate is part of a tiered fee structure, which will reward drivers by lowering the commission when they complete a certain number of rides in a week"

Uber is mercilessly commoditizing drivers and squeezing every last drop of blood from their veins. As the average income falls towards, and then through the poverty line, the number of people who say that taking an Uber is a more pleasant experience than taking a taxi will dry up.

Clean, well-maintained cars and polite drivers that speak English well will become rarer and rarer. This would result in a collapse of Uber, except, of course, that the company is really betting on replacing its drivers with robots.

The trick is to destroy the taxi industry before that happens. Because if self-driving taxis appeared on the market tomorrow, the existing taxi companies could make a comeback.

> polite drivers that speak English

As a very infrequent taxi rider, as long as the driver can understand where I want to go and take me there safely, why do I care what language they speak? Am I missing something here?

> as long as the driver can understand where I want to go and take me there safely

If you read Uber's glowing reviews, people often praise the drivers for their ability to speak English well. I conclude that some people care, whether you or I think it's important or not.

I missed that mind and I'm glad you're back.

Regardless of your feelings, much of the initial buzz around Uber was that their drivers speak English.

When I travel abroad, I have to admit a strong preference for taxi drivers who speak passable English. In that case, it's a functional benefit (confidence that I've communicated my destination correctly, ability to ask where an ATM or late-night restaurant is, ability to sort out a credit card/payment issue, etc).

And of course, there is an element of subsurface tribalism (people like to be with people like them) that makes people prefer a hired driver who is like them, whether that's in language/accent, skin color, or any other dimension. It's not necessarily/fully racist per-se, but it's a tiny bit down that spectrum. I suspect this is at least part of Uber's appeal-you get a driver who is "more like me" and that's comforting to many (most?).

Living abroad, I take Uber over taxis for just this reason. It's not that Uber drivers speak English here, it's that I don't care if they do because we don't need to talk about where I'm going.

If you live abroad, couldn't you just learn enough of the local language to tell the taxi driver where you want to go? Usually, just being able to pronounce the name of the destination would be sufficient. I really don't get why a taxi driver's English would be an issue. You don't have to have a conversation with them.

You're not missing a thing. Inequity in opportunity and segregation live on through ignorance and a cultural lack of empathy. Pleasant white and native English-speaking staff in the front of the house, brown and struggling to get a foothold types washing dishes in the back, because that's what makes customers feel better. The privileged get more privilege, and the poor get poorer.

I don't think this is an American only thing. You see the same in Europe with respect to Eastern european immigrants who don't speak the local language well.

You also presume people would be uncomfortable with either native English speakers of either Hispanic of African ancestry --which for the great majority of people would not be an issue. Also, not only white English speakers take uber.

Personally I think those commenters prefer not having to repeat or ask the the driver to repeat what they are trying to get across.

Imagine moving to China, you a polish speaker with little Chinese fluency, and try to make a living as a taxi driver. See how well you compete with people who speak Chinese natively.

I appreciate your reasonable and thoughtful counterpoint, unlike bill's malarky.

My presumption is not true for all people, but it is true for a great great many. I think you vastly underestimate the amount of prejudice that exists, from the overt "I don't like people of other colors, gender or sexual orientation" to the subtle but insidious "I am not prejudice, but I just feel more comfortable sitting next to a person of the same color on the bus." A Yale Law Journal study found that "Black taxi drivers' tips averaged 33 percent lower than those received by White drivers."[1]

In this day and age of GPS navigation (It's built into the driver's Uber app!), you don't need to be even close to a native speaker to exchange destination information. And if Uber the company cared enough, they could make it even easier by allowing riders to enter their destination into the app on their phone. Uber wouldn't have to reveal it to the driver until the driver accepts the trip.

A agree it's not just an American thing. In rare cases it works in reverse. I lived in Taiwan for about 5 years. There and in China, an American taxi driver would be such a novelty or even celebrity they would be in great demand.

All I'm saying is that for the world to get better, we need to actively work against the Matthew effect[2].

[1] Blindspot: Hidden Biases of Good People, by Mahzarin R. Banaji, Anthony G. Greenwald. (2013)

[2] http://en.wikipedia.org/wiki/Matthew_effect. The Matthew effect is pervasive, even among scientists: http://www.garfield.library.upenn.edu/merton/matthew1.pdf

Not to detract from your points but being an object of curiosity, a kind of clown for a show, is not what I'd call a desirable state. That's almost like a fetish. I mean, if us uber "fares" started to see the drivers as objects of curiosity, I think people would feel upset at that, probably rightly so.

Is this satire? You don't think the ability to communicate well is important in customer facing roles?

>Pleasant white and native English-speaking staff in the front of the house, brown and struggling to get a foothold types washing dishes in the back

Pray tell, where did the parent comment mention race or even suggest it was a factor? Believe it or not, America is a melting pot where those of all races speak a common language.

It's already rare in San Francisco. The only difference now between taking a taxi vs uber is convenience and price. Those are admittedly huge factors, but without the clean vehicles and personable drivers they started out with, my brand loyalty for uber is gone.

Lyft seems to have good intentions in this regard so I've been using them exclusively for the last few months. We'll see if they can keep it up.

I take uber/lyft/whatever other startup is popping up, over a taxi in SF because I've had so many bad experiences in "traditional" taxis here I can honestly no longer give them a chance anymore. Lying about not accepting cards, refusing me because of where I'm going, threatening me when I ask to use a card, threatening me for a tip, taking 2-3 hours to arrive (if even that). At least the alternative actually gets here, and doesn't attempt to drive circles to run up mileage.

I'm not white and I don't care about English, I just want something that isn't trying to scam me: with the startups, I can dispute the charges if any, I have some form of trail in case of problems, and as it's emailed to me they can't just destroy their copy and say nothing happened. None of that exists with a traditional taxi.

What sold me on Uber/Lyft (back when Lyft was still in Houston) was the fact they'd reliably show up when called.

Sure, I live in a sketchy neighborhood that's gentrifying, sure I may need a ride at an ungodly hour to the airport (4-6am) but if you agree to come and then don't show...

I hacked taxi rides by having my wife drive me to the closest hotel and then making the driver take me home for my wife and our luggage. But yeah the second I could switch I did. They brought it on themselves.

Yeah, I'm in the same neighborhood situation and it's pretty much a random dice roll whether they'll actually come or not. Meanwhile, an alternative that consistently arrives? What great bare minimum standards-meeting!

I can't believe "arrives when called" is apparently a problem.

Especially for things like flights, there's really nothing like them saying they'll come and then not showing up, which makes meeting flight times extremely fun.

"Uber is mercilessly commoditizing drivers and squeezing every last drop of blood from their veins." Hyperbole much? Reading the article it's pretty obvious that Uber is trying to solve for a particular problem: Drivers who sign up and only work a few and the best hours to maximize their income. Uber is indicating they want to reward loyal longer hour drivers over the Friday and Saturday night 4 hour prime time put $200 in their pocket driver.

I don't think we have any basis for disagreement. I say Uber wants to commoditize its drivers. You quote the article saying that Uber doesn't want its drivers maximizing their income per hour of driving.

I think the key here is that Uber is no longer treating all drivers equally. It's differentiating based on your loyalty and hours spent as a driver. In the long run they will adopt self driving cars. So will FedEx and the Post Office though and we're not demonizing them.

I've personally noticed a significant drop in Uber quality in NYC. I recall a year or so ago Uber blew taxis out of the water in overall service quality. Now most of the time the driver relies heavily on their GPS which doesn't work that well in NYC so you end up taking noticeably longer to get to your destination than a professional driver that really knows the city. In addition, the quality of drivers has plummeted. Half the time it seems like I'm being driven around by someone who just got their license, which can be nerve racking in the mid-west let alone NYC. Pretty much the only thing Uber still has going for them is it "feels" safer to take Uber than a random taxi according to my girlfriend.

I've noticed the same in Dallas as well. The cars, although technically newer than '06 or '07 as Uber requires, have gotten shittier and the drivers have gotten shadier.

Make year requirement is one of those things that are supposed to make you feel safe, warm and and fuzzy, but are meaningless.

Everybody else in the industry and consumer space uses mileage for a good reason - a 2007 vehicle with 450,000 miles on it is hardly new or safe.

While this mileage is atypical of average consumer car, any vehicle retired from police or taxi service is likely to be in that range.

The argument that Slate and Pando led against Uber, and which the company denies, is that there's a high churn among drivers. The initial numbers quoted in the ads look good, so people sign up, but after calculating their total income 6-9 months down the road, and incorporating maintenance, gas, wear & tear of the vehicles as well as downtime, the numbers don't look as appealing.

Those same numbers are pretty hard to predict beforehand, since you don't know what kind of mileage you'll be putting on the car (and a car nearing 25k requires different maintenance work than a car nearing 100k or 200k miles) as well as the quantity and quality of trips (e.g. a drop-off to a remote suburban neighborhood, where you have a zero chance of finding another customer vs quick-and-easy airport runs).

Insurance is also pesky if your mileage is suddenly 3x-4x compared to the same period last year - sometimes they won't even mention "commercial transportation", but raise the rate exorbitantly to gently push you to a competitor.

I disagree withe the "merciless" assessment of the Uber situation. With some hands on experience in the NYC taxi industry and son of a life long cabbie, I'd argue Uber/Lyft has made things better for both drivers and customers.

The standard cut for traditional car service in NYC has been 33%. Not to mention any promotional coupons were also deducted from drivers sub-total. This was standard before Green Taxi, Uber and Lyft etc. This is on top of soul killing idle hours for car service drivers because they had to stay in the city to be eligible for the next job.

A NYC yellow cab driver pays in $700+ gas weekly thanks to mafia like tactics of cab medallion owning ventures. That's a whole set of debate that I won't divulge.

> The trick is to destroy the taxi industry before that happens. Because if self-driving taxis appeared on the market tomorrow, the existing taxi companies could make a comeback.

That's evil enough to make sense and be close to the truth

Uber is only greatly cheaper during this initial period of VC-funded expansion in order to gain market share. There should be no expectation that it will remain this way after it has beaten soundly its competition and established itself.

Its argument of lower fares bringing in more customers thus raising revenues for the drivers might play out in major markets (NY, SF, LA, DC), but doesn't seem to apply to smaller markets http://ridesharedashboard.com/2015/03/19/uber-for-the-first-...

Here in Bangkok UberBlack is about 150% the cost of a local taxi. UberX is about 95% the cost of a local. Besides price, you'd never know the difference between an UberBlack and an UberX - both are hands down much better in every measure of quality over local taxis.

I was in Budapest the other day Ubers there were about 50% the cost of local taxis, but the quality varied wildly. Some days I got a BMW driven by a guy in a suit, other days a beat up Lada with a grumpy old man who smelled. Local taxis were brand new with sharply dressed, English speaking drivers.

Yep, this is an interesting pattern in a libertarian (essentially, they are ignoring laws for now) society. They will provide good service and rates until they have a monopoly and can maintain it. Then, they'll abuse the customer until a viable alternative pops up.

And this is why antitrust law exists.

You assume they can get to 'monopoly'(how do you define monopoly? 80% 90% 100%?). In an actual free market that will rarely, if ever happens. When has that actually occurred? (government backed cartels don't count)

That's a very good point.

Libertarian here. I love Uber and have had nothing but good experiences with it. I also am a fan of their business model -- once a few remaining bugs are worked out.

Having said that? Crap, what a freaking mess Uber is making of things. I have talked to more than one person who had an Uber driver tell them that the company continues to push very hard to control them. I guess Uber could make the case that this was in the best interest of the users.

Now that they're jacking their cut? With their actions they are creating the argument that folks will make for completely destroying the open market: major players squeezing poor drivers dry, quasi-legal and highly questionable policies that try to prevent drivers from going anywhere they'd like, using the commercial momentum of a large company to dictate to all other players in the space about how things should be. And that's not even getting into the problems with personnel. Look, I'm a fan. But this trajectory is not good.

Come on, guys. You can do better than this. If you continue kn this fashion, you're going to lose a lot of public support and goodwill.

It is interesting how Uber/Lyft et al are interested in the taxi market, or seem interested in it.

China also has Uber/Lyft equivalents, but they just sell a smartphone service to taxi drivers (inexpensive) and unlicenced taxis (also available, but only after unlicensed taxis in the local area have not responded for a considerable amount of time).

What China's Uber/Lyft/etc are after is micro-payments. A micro wallet to pay for services such as taxis, and them other things too. Why reclaim receipts when it is through and authorized payment channel?

Is this not on the Uber et. al. game plan, or are the markets too different?

Many businesses try to espouse "a rising tide lifts all boats" with their employees. A growing business helps not just the investors, but all employees see upside and are motivated.

Uber seems to have taken the opposite tact, where a rising tide just allows them to scrape more off the top.

Services like Airbnb and Uber will be become commodities. There will be some service like Kayak or Expedia to find you the lowest fare in the future. These companies will have to offer an API or be undercut by competitive services. Uber and these other services better grab as much money as they can right now.

Any predominantly Silicon-based (digital) business tends to commoditize over time and Uber or any other service is no exception.

Yes. Nothing last forever.

How do you explain Apple?

The existence of Apple doesn't preclude the ongoing commoditization of the PC, smartphone, and tablet markets. Apple has already stopped producing servers, which are effective commodity items now.

Contrary to popular belief and urban myths, the market in which Apple operates is ripe for commoditization and iPod and most recently iPad sales are the best proofs now for my assertion.

Forward looking, I'd be really very surprised to see Apple staying relevant in tech in the next decade as the smartphone revolution fades away and the novelty factor they enjoy or make up as well as market dominance will follow suit.

The iPod and iPad markets have not commoditized.

Yes, it's a work in progress

No it isn't. Neither market has been overtaken by commodity products at all. Your argument about Apple products being commoditized is totally without merit. The Mac and iPhone continue to gain share in markets that have commodity alternatives. The iPad sales have slowed but they haven't slowed as much as the commodity alternatives. iPod sales have slowed not because people are buying commodity MP3 players instead, but because people are no longer buying standalone MP3 players.

The tablet market and more importantly its poster boy the iPad (the notebook killer lol) have been swallowed by two beasts simultaneously, from the bottom up, larger size smartphones, and from the top down, hybrid notebooks like the Surface/Yoga that integrated the touch based interface and generally speaking more capable devices not toys.

The MP3 player market and iPods in particular have been swallowed and cannibalized to Apple's discontent by their smartphones and their peers again.

So, it doesn't look rosy for Apple as it's becoming more and more a one trick pony with one single dominant product while the rest are suffering or in steadfast decline and when you take into account that the saturation point for smartphones is approaching, you'll realize that they will need to bring up REALLY something new or face the fate every tech company finds itself sailing the ship through the stagnation storm just to get alive.

I agree that larger smartphones attract buyers who otherwise might have bought a tablet, but there is zero evidence that hybrid notebooks have affected the iPad.

There isn't even evidence that the overall trend foe the iPad is lower growth - just that the upgrade cycle is slower.

As for a 'one-trick pony', that statement is certainly false, as Apple has multiple growing product lines.

Also, saturation for smartphones may be approaching in a few markets, but saturation for the iPhone is much much further off, so your prophecy of decline is empty as yet.

Android tablets exceed iPads in market share. 61.9% in 2013 according to a quick google search.

That's misleading because it includes a large number of android based video players in Asia, which are not competitors to the iPad as general purpose tablets.

Yeah, man, that "Asia" place, it like, doesn't count. And who's heard of this "Europe", anyway? It sounds made up. I guess the reality distortion field doesn't have the range to reach there.

It has nothing to do with 'Asia' or 'Europe'. It has to do with saying a 7" android based video player is a competitor to the iPad.

Just seemed to me like you're going around dismissing continents, redefining the product category when faced with opposing evidence. Perhaps in 2010 iPad was the only game in town but Android tablets have shot up since then. I've seen it with my own eyes and ears, but yes, when I googled for data I saw that I am not wrong.

Sorry, the data you quoted is absolutely wrong. It doesn't distinguish between low cost android video players and iPads. If you want to make a point about android being used widely, that's fine, but if you want to make a point about iPads being affected by commoditization, the data doesn't support that.

More like you don't like some of the brands and models because they come from a continent you don't like, and you are using this to dismiss the whole argument.

Nope. Stop trying to impute racism. The facts are that Android video players are hugely popular in Asia, but these aren't iPad competitors.

The exception that proves the rule.

Uber ditched the premium ("Apple") role with Uber-X

Apple surf on the edge. They've managed to maintain a margin by differentiating on quality, maintaining incompatibility at the hardware level, offering an integrated user experience and a vertically integrated cutting-edge manufacturing process.

This doesn't work in all markets - see Apple servers. Some of their products (desktops, Apple TV) are probably on the wane.

They are the only serious company in the home computing space that realised design and ergonomics was more important than processor frequency. Which is interesting given there are many industries, like audio equipment, where there have been many design-led companies, but it seems to be a rarity in computing.

The value is in the longevity and diversity of the ratings. You might have top-notch properties at bargain-bin prices for rent, but if it's all "0 reviews, 0 bookings", it's an uphill battle to earn customer trust.

Good example is Yelp - one can probably buy a ready-to-go software package off a random "scripts for sale" site, but quality reviewer acquisition and user acquisition through trust might get expensive.

http://thenewinquiry.com/essays/in-praise-of-fake-reviews/

http://tomslee.net/2013/09/some-obvious-things-about-interne...

Apple's quality at this point of time is SO overrated. Yeah, Apple products out of the factory gates are relatively quality products compared to the competition but they tend to break down over time real quick and show their true colors and Apple's modus operandi of charging people more and more over the lifetime of the devices (recurring income) in replacements and repairs like in the automotive industry.

I'm pretty sure Whittl does just that.

> These companies will have to offer an API

If they don't, they'll be scraped.

I agree with you. I suspect that this "sharing" economy idea that they're based around is going to evaporate; I think people will start to realize that Uber/Airbnb are taking a very healthy cut of the profits and carefully sticking their not-employees with all of the costs associated with running a business, costs that maybe aren't immediately apparent (costs of depreciation on a car, costs of insurance for these types of businesses, costs of paying taxes as an independent contractor). It's very lucrative for Airbnb and Uber because they can (try to) distance themselves from any rule breaking because it's not THEM breaking the rules, it's the independent contractors.

But I think fairly soon it'll start to evaporate a bit. Sure they might exist, but I'm very skeptical of both companies' $10B+ evaluations, and I think they'll end up becoming something like you mentioned.

> Uber and these other services better grab as much money as they can right now.

Actually, aren't they running at a loss right now in order to obtain marketshare? And doesn't this suggest that the people financing this loss disagree with you, and believe lock-in will happen?

I just downloaded lyft. What does that tell you?

About Uber? Absolutely nothing. About you? That you choose to use a different product.

Are you looking for some kind of congratulations on your grandstanding?

You can choose be be obtuse or you can see that people might use an alternative if they believe service is going to decline.

Reply on news.ycombinator.com