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For the past week, Naked Capitalism has run a series of articles by transportation industry expert Hubert Horan on the economic shenanigans of Uber, which cooks the numbers it shows investors, drivers and the press to make it seem like something other than a black box that uses arrogance and lawlessness to make a bet on establishing a monopoly on transport in the world’s major cities.
Horan started with four articles on Uber’s economics: Understanding Uber’s Bleak Operating Economics; Understanding Uber’s Uncompetitive Costs;Understanding False Claims About Uber’s Innovation and Competitive Advantages and Understanding That Unregulated Monopoly Was Always Uber’s Central Objective – today, he finishes (?) up with a fascinating Q&Awith the commentators who’ve followed the series.
https://boingboing.net/2016/12/07/excellent-deep-series-on-uber.html
I really can’t recommend these articles enough, this is a fantastic series of articles on Uber’s economic model and the dangers it poses. A quick synopsis: Uber is the world’s most valuable private company, valued at $69bn. However, it has yet to make any money - in fact, it’s lost $4bn over its 4 year history history, and lost $1.2bn this year. The reason for its losses is that its taxi rides are kept artificially cheap along with large subsidies paid to drivers to attract them from other taxi firms. The price of an Uber covers only 41% of the cost of a ride. For all the guff, Uber’s economic model is not particularly innovative and probably would never be profitable without these investor subsidies. I recommend reading the 4th part the most, as it reveals why sillicon valley investors are pouring cash into a business model that would never be profitable in a competitive market. The goal is to use these subsidies from sillicon valley’s deep pockets to drive local taxi services out of business and turn established, well regulated market into an unregulated monopoly in the hands of big capital. Once this monopoly is established, Uber can cut the subsidies, determine prices at will without the constraints of existing legislation, and generate a lot of value for the original investors. Rather than the future sharing economy, Uber instead represents a new wave of accumulation by dispossession.
fuck uber
#fuck uber
Again, in bold:
The goal is to use these subsidies from sillicon valley’s deep pockets to drive local taxi services out of business and turn established, well regulated market into an unregulated monopoly in the hands of big capital. Once this monopoly is established, Uber can cut the subsidies, determine prices at will without the constraints of existing legislation, and generate a lot of value for the original investors. Rather than the future sharing economy, Uber instead represents a new wave of accumulation by dispossession.
Don’t use Uber.
I didn’t have time to comment when I queued this, so here it is again.
I’ve used Uber three times - once in NYC as part of a large friends group being ferried around, once in London for several reasons (including figuring that I should at least test use the app myself), and once last week, when I was caught out with only $15 so someone else called one for me. I’d intentionally resisted using it, but not because I considered it rigorously. As an adult city dweller who has never owned a car and remembers the rigmarole being peddled during the first dot-comm boom, it just seemed like an obviously bullshit business proposition. I thought it was a ploy to circumvent regulation and shift both risk and cost to employees and consumers (historically, surge pricing was one of the major pitfalls regulation was designed to prevent! bc timing of taxi demand is inelastic!!! you don’t need an algorithm to make surge pricing happen bc w/o regulation on both pricing and geographical coverage it will happen naturally as a result of market forces!!!!).
Anyway, I did remember that not everyone has taken business/econ classes, but. The app is good and I’m sure it was impressive in 2014 but now the big trad dispatches in Montreal all have similar smartphone functions. I would guess it’s similar in other cities, because adapt or die.
Companies always try to circumvent regulation and pass off risk/cost if they can, but these articles are good because they really shake out every predictable impact to the system. And all of it is entirely predictable.
More importantly, Uber’s surge pricing reduces overall economic welfare because the sociological distribution of urban taxi demand is bipolar; 43% is from people earning less than $20,000 (and 55% from people earning less than $40,000), most of whom do not have cars while 35% is from people with incomes greater than $100,000.[10] Studies show most of the lower-income demand is driven by jobs and services that cannot easily be reached by public transit, or trips at hours when public transit does not operate. Surge pricing reduces wait times for wealthier people returning home from restaurants and nightclubs by eliminating all service for lower income people working late night shifts that have no transit options. A pro-Uber paper by a major libertarian think tank simply dismissed these as “people who do not really need a ride.”
It’s a glorified dispatcher service that screws over drivers because unlike traditional dispatchers, uber doesn’t have to take any liability, insurance, pay roll, or other care (such as it is) of their drivers or the vehicles.
I’ve gotten into fights with people about Uber before because I refuse to use it. I’ve always suspected that they were intentionally moving to drive legitimate competition out of business.
But mostly I won’t use them because frankly I think it’s fucking dangerous. I don’t climb into cars of strangers. Drivers that work for taxi companies are hired. They are bonded and licenced and carefully tracked. Not many people I know have had bad experiences with a taxi driver other than one being annoying or a little weird. I had a friend take an Uber with a guy who started driving her way off course to her home and only started to actually take her home when she got on the phone with her mother and had her talk her the entire way back.
For me, taking an Uber is like fucking hitchhiking. Most people who drive you aren’t going to hurt you but all it fucking takes is getting into the wrong car.
Everything about Uber skeeves me out from the concept to their economics.
I told friends here that I don’t do Uber; all of the above is why. I’d also much rather support the legit taxi drivers here, who are bonded and licensed (and maybe unionized? I’ll have to look into that). I trust them, both with my money and with my home address. I don’t trust Uber with that information.
There’s also that friends of mine who have service dogs have been repeatedly stranded by Uber, Lyft, etc.
If you want to see the alternative to Uber in action, here is an article about how unionised taxi drivers in Austin drove Uber and Lyft out of the city and replaced them with a worker-owned co-op (the third largest in the US). As this article argues, given that most of the capital used to run Uber comes from the workers themselves, it would be very easy to generalise this model and turn Uber into a worker controlled enterprise, and use tech which is currently being used to undermine both wages and security for the benefit of both workers and passengers.