Beautiful illusions: the economics of uberX(justin-singer.org)
justin-singer.org
Beautiful illusions: the economics of uberX
http://justin-singer.org/blog/2014/06/beautiful-illusions/
15 comments
In an additional benefit over being a postdoc, I set my own hours and don't wake up to an alarm, which I think has resulted in a marked improvement in mood and health. Although I work from 11pm-3am many nights out of the week, I get to sleep in every day.
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.
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.
Very tangential, but why did your laptop got left behind at the TSA line? Did you just forget it or was it something to do with the TSA itself. Since I have to travel to the US soon, this makes me a bit nervous.
I've been lyfting full time for 4 months now, I estimate my annualized income at around 45k, not 90k.
I work from 11pm-3am
Isn't that still part time? If you doubled your hours, you'd be making closer to 90k.
I work from 11pm-3am
Isn't that still part time? If you doubled your hours, you'd be making closer to 90k.
That presumes that they'd be able to get the same fare numbers during those additional 4 hours. I can see 11pm-3am being a fairly high-demand time. Not sure if there's an equivalent time slot with similar demand.
According to this NYC stats sheet (page 8), there's a sharp drop off after 12. 8 AM -> 11 PM is better most days. Although, who knows, maybe Lyft has some special pricing.
http://www.nyc.gov/html/tlc/downloads/pdf/2014_taxicab_fact_...
http://www.nyc.gov/html/tlc/downloads/pdf/2014_taxicab_fact_...
Rush hours maybe? Although there may be higher competition during those hours.
I work other hours too. On average 36-40 hours a week. Other hours are less lucrative.
Doesn't the lack of intellectual challenge in your work stress you? I don't think I could do such a mundane job and still feel fulfilled. (I mean that without an ounce of judgement—just remarking about the shift from academia / high education to "unskilled" labor)
during my free time I've been playing around with julia, entered (and failed) at a bioinformatics contest (I have zero bioinformatics background), doing a bit of toddling around with ML, algorithmic trading, and I'm doing a lot of behind the scenes stuff on my nonprofit.
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.
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.
The bottom 95% of lab work is pretty intellectually comparable to driving, navigating and possibly talking at the same time.
It sounds like being a postdoc stressed him.
Being a PostDoc has its highlights, but mostly, it sucks, especially in life sciences, due to pathetic pay, unstructured hours and the suckiness is generally impossible to convey to someone who has never been one. Just 'cause it's research don't mean it's rainbows and ponies.
Source, I'm one.
Source, I'm one.
This may seem off-point but what the fuck is the opportunity cost of a post doc dropping research and doing a job a high school diploma can cover?
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.
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.
Well, I'm doing this while the IRS is approving 501(c)(3) status for my research nonprofit (details in my profile). In the meantime, it's a good opportunity to improve "people skills" (although I was probably on the upper curve of that with respect to the pool of scientists to start off with). Finally, there are plenty of cross-promotional opportunities that I intend to explore (beyond just getting the fact that my nonprofit exists out there).
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.
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.
This was not intended as an attack on you - you seem by all definitions to be a rational actor. I was I guess raising my hands to the sky and declaiming why our society (IRS included) is arranging the economics of your choices such that instead of getting an opportunity to make anti-cancer drugs one step closer to reality and available to the worlds poorest (presumably a benefit of the IP free nature) we get people who are rich enough to afford a night out, a smartphone, a cab and a home to be taken to.
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
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
>You're being awfully judgemental about what you think is sane.
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?
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?
I thought you couldn't take the $0.55/mi expense if you're using your vehicle for hire?
I'd be surprised if that were the case. It's a legitimate business expense. The rules may be different if you don't own your own car, because the deduction is supposed to encompass both fuel costs and wear and tear on your car, which gets tricky if your employer owns the vehicle (as it would be for most taxi and livery services), but... I think THEY get to take the deduction.
Found it: http://www.irs.gov/uac/Car-and-Truck-Expense-Deduction-Remin...
"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!
"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!
Hm. Good to know. In any case, I've been keeping good records of both.
Sorry!
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.
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.
GP is being rewarded by saving on fuel-- his cost is only 30c/mile compared to the standard of 55c/mile.
He's trying to deduct both his actual costs and the standard cost, which is obviously double-deducting.
He's trying to deduct both his actual costs and the standard cost, which is obviously double-deducting.
> 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.
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.
I roll with the punches. Thanks for the info.
So you're actually making less than that because you don't mention amortizing the purchase price of the car, right?
Well, I've owned the car for 3 years before lyfting, and it had 60k miles when I bought it; 90k miles when I started lyfting. The payments don't stop when you don't have a job, so THAT cost is a sunk cost, and with the miles already on the car I consider it to be basically valueless. Should I also subtract the rent that I pay for where I live? I would have moved in with my parents, temporarily anyways, (which is embarassing at my age) if not for lyft.
The cost is probably pretty low, but you still have to replace the car at some point.
Out of curiosity, have you considered also becoming an UberX driver?
I actually already am, but talking about that skews all sorts of reasonable estimates since they gave me a $1000 signing bonus and for a month are ensuring me $40/hr for certain working hours.
Can I ask if this is NYC?
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]
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]
No, it's not NYC. It's in California, where TNCs have their own regulatory category. Moreover, a large part of the cost of medallions is having jurisdiction-approved-and-calibrated taximeters to ensure that the passenger isn't being stiffed. That's really not an issue with rideshares, since everything is tracked by GPS and there is a pretty straightforward way of challenging an unfair charge. Moreover, as Uber and Lyft increase their marketshare and revenues, their ability to exercise political leverage on bigger jurisdictions, anyways, will increase.
Have you had any problems with damage to the vehicle? When picking up drunks, my concern would be that they vomit in your car.
I keep vomit bags and a hawkeye over my passengers for that situation. Two vomiters have vomited out of my car; one has vomited in my car, but i succesfully intercepted that one. On monday, I got sick in my own car (I think food poisoning) and managed to vomit into a bag I had handy, instead of all over my own car, so there have been some residual benefits.
I've been riding Uber since October 2010, and I've chatted with plenty of drivers. Many of them used to be taxi drivers and have told me about how much they prefer driving for Uber. They also tend to be very happy with their income. I remember in particular one recent driver's big grin as he raved about Uber and praised Travis the entire ride for letting him, his wife, and his two kids live such a great lifestyle. His wife would even take the car out and do some Uber driving once in a while while he spent time with the kids.
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.
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.
You're arguing strawman points the article doesn't make. The primary claims I see are
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).
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, "I talked to somebody currently working for this company while they're at their job, and they told me it was great" is not exactly a very reliable way to get data.
No, having them voluntarily start gushing about how great it is is better.
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.
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.
> Also, who is the boss/supervisor who would fire or penalise the driver for saying it's not great?
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.
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.
If I talk to a hundred drivers and pretty much every one is happy, then I'm going to be skeptical of a rough spreadsheet that's supposed to say they're getting financially shafted and are going to quit.
1. This may be true, but the article doesn't offer a strong rebuttal, nor does it stop there before throwing around a bunch of other arguments against Uber as a business.
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.
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.
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.
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.
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.
Your point about the calculations being based on only a couple of Uber-supplied data points is spot on. There is an awful lot of assuming going on in that analysis.
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.
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.
Primarily because a lot of them are actually picking up airport fares illegally.
Why is that even a thing?
Fine, the ride from the airport to off airport grounds is free, and the meter can start there.
Uber's revenues were leaked earlier this year(http://techcrunch.com/2013/12/04/leaked-uber-numbers-which-w...), they're earning buckets of money and would thrive without VC investment, assuming they can continue to shirk regulation.
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.
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.
This guy gets his supposedly objective information about taxicab deregulation from a handful of studies of the taxi deregulation done in the 1960's and 1970's. In particular, he quotes from a paper [1] by Paul Dempsey from 1996 to come to the conclusion that taxi deregulation yields poor results across a variety of metrics.
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
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
> I should point out that the insurance costs here are surely low — although Uber encourages its uberX drivers to find “standard vehicle insurance” as opposed to livery insurance, the coverages required are nearly impossible to find, especially for someone with poor or no credit working 70 hours a week as a cab driver. Meanwhile, taxi insurance in NYC can run $7,000 – 10,000 per year...
Also, while those coverages might be difficult-to-find-but-available now, that could change in a hurry. Once most insurance companies catch on to the fact that people are paying for regular insurance and then operating essentially a taxi service, they'll add clauses to their contracts specifically forbidding it, and charge something more in line with commercial taxi insurance. It's a lot like what we see with AirBnB, where as it caught on more and more, landlords started fighting back against tenants who were using it.
"Once most insurance companies catch on to the fact that people are paying for regular insurance and then operating essentially a taxi service, they'll add clauses to their contracts specifically forbidding it..."
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.
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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"Let’s go out on a limb and assume that the median full-time uberX driver doesn’t have fantastic credit and would rather forego the credit check."
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%.
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%.
He was using this to point out the discrepancy between the lease rate from Uber's pre-selected finance company (15%) and the best possible rate one could get - 3%.
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.
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.
This is a really great post.
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.
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.
A pedantic clarification: drivers are the only productive asset for Uber.
As usual, the truth is probably somewhere in the middle. Uber's numbers actually seem a lot more believable. The author didn't even appear to be trying to be "reasonable" or "fair".
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.
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 (1), how do you think it applies? The situation analyzed is taken from Uber's numbers, and is for an "average" driver that works 70 hours per week. If you're working 70 hours, you're not gaining a huge advantage from surge pricing.
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.
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.
We don't know that they drive 70 hours per week. That was made up by the author. The author is fixated on the 10 mph in Manhattan when we know that Uber drivers have more flexibility on time and geography (they do drive outside of Manhattan, of course).
The car still provides for 100% of the owners personal driving needs so completely inappropriate to allocate all costs to "business".
The car still provides for 100% of the owners personal driving needs so completely inappropriate to allocate all costs to "business".
To me all his assumptions seem pretty reasonable. Since Uber isn't providing a detailed breakdown, all we can do is estimate. And if we're willing to accept the basic assumption that people respond to economic incentives, remember that Uber's incentivized to be as misleading as possible in their favour. Even if it turns out they're completely lying, there's a reasonable chance that the economic benefits from building network by doing so are significantly greater than potential future costs if someone found out they'd lied. Given that context, I think the author was actually being overly generous and deferent to Uber's stated numbers.
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.
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.
Are you joking? I've been refused service several times in NYC because I wasn't going to the airport (ie outside manhattan). Town car business is even heavier to airports.
the average speeds they are posting are only calculated during the day. uber does WAY more trips at night, when there is less traffic, so the cars can go much faster.
source: used to work at uber.
source: used to work at uber.
How can surge pricing not give a huge advantage? When you have prices that can get as high as 6.25x normal pricing a driver can make an entire days salary in an 1.28 hours. Even on cases where it's not that high, getting double or triple the amount of money for your ride isn't that bad. If you're a smart driver and choice to work during big events you can easily drop the number of hours you're working otherwise.
I think it's safe to assume that drivers working 70 hours a week are already working during the surge times, and so the benefits are already accounted for in the average.
Fair points. I just disagree with
>>> 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.
>>> 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.
But owner has use of car for 100% of personal needs. Only incremental devaluation/expenses should be included, imo (if we're trying to be fair and reasonable, or course).
How is that any different from a cab driver who owns his taxi?
My n=3 sample from conversations with taxi owner/operators in SF is that they find it more profitable to rent out their taxi to other drivers when they themselves aren't driving it. This way, an owner can drive the taxi 8 hours per day and rent it to two other people for the remaining 16 hours.
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.
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.
Why is no one discussing the downward pressure on price if more and more drivers get involved? That's part of why cities cap medallions after all right?
> Market equilibrium in a wholly deregulated taxi industry comes only when the desperate have driven out the good.
And that's kind of my whole "can't quite express what is wrong here" issue in a nutshell.
And that's kind of my whole "can't quite express what is wrong here" issue in a nutshell.
I've only had one 'bad' experience with Uber (driver didn't speak English properly and went to the wrong address and couldn't issue me a refund). I left a low rating and Uber contacted me out of nowhere and proactively offered me an apology and a refund. I also heard they're pretty ruthless about firing drivers with low ratings.
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.
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.
That argument could be made for any service industry. Do all service industries require regulation? Aren't there some services we can just trust the consumer to choose?
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.
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.
I think most service industries where the customer may be subject to any sort of personal harm are regulated to some extent.
I think the author is wrong about the possibilities for UBER raising prices. One such option combining trips of 2 passengers(or more) who seek a trip from similar starting locations to similar destinations.
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.
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.
I'm not sure if ride-sharing (in the actual, non-bullshit notion of the word) would count as raising prices though.
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.
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.
I think what he's trying to say is that Uber could raise prices "per-trip", split the cost of those trips with 2+ passengers, and actually decrease the cost "per-user" of each trip. If the decrease in price increased demand enough, overall revenue could go up while the consumer feels like they're getting a price decrease (albeit, they now have to share most of their rides, which may feel like a service decrease).
I get that - I just don't think it'll happen. Instead you'll have 2 people who had a price ceiling of $10 each being transported for $16.
Great for the driver, great for the two passengers, bad for Uber.
Great for the driver, great for the two passengers, bad for Uber.
On a $10 fare , UBER gets $2(or $4 for 2 trips) , the driver gets $8
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.
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.
>>> combining trips of 2 passengers(or more) who seek a trip from similar starting locations to similar destinations.
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 :)
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 :)
It happens in the US (where I live in New Jersey, anyway) as well. And its one of the numerous reasons I refuse to take cabs, as long as Uber or an alternative is available.
Share splitting already exists (at least in SF) http://www.takehitch.com/
AFAIK, not at scale, which makes all that difference in that kind of business.
It's amusing to see how much skepticism Uber seems to generate. Apparently it's super-hard to understand how a tech company could possibly do something better than the decades old taxi industry, and that the resulting business could have major network effects.
It's actually a centuries old industry: taxis were already regulated in 1636[1]. I think the point is, though, not whether they can do it better (they are certainly a driver for innovation in the space), but how successful that particular company is going to be.
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...
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...
I've ordered taxies by phone, and I've used Uber, and I can tell you that I have no doubt as to which is the future.
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)
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)
Everything you say is true, but none of it predicts tremendous success for Uber. It may well be that there's little advantage to being the first mover brokering commodities. We might soon see meta-Uber apps, or Uber aggregators, that optimize the selection of car across several providers. Uber will probably just be a big, successful, taxi company, but not one that is worth billions.
It kind of is hard to see much value in Uber outside of SF which has abominably bad taxi service. I'm not sure about network effects, but adding the lyft app to your phone costs $0. And for similar price and convenience most customers probably are willing to use competitors, so I'm not sure uber isn't a commodity or how it gets pricing power.
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?
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?
Yellow cabs aren't hard to get in midtown/downtown Manhattan, during rush hour, when you're not going anywhere outside of midtown/downtown. If you tell the taxi driver you want to go to Brooklyn, there's a good chance they'll not take you, regulations forbidding this notwithstanding (how's that for the people who whine that uber isn't "playing by the rules"?) to say nothing if you're starting somewhere like Washington Heights, or out in Queens, or, God forbid, the Bronx.
FWIW I live in Hamilton Heights (aka. lower Washington Heights) and I am bombarded by yellow and green cabs at all hours of the day or night. And it's really easy to hail them because nobody else is interested.
do you live in nyc? rush hour is when it's hard to get a cab in manhattan. and while the effectiveness can vary, calling 311 in the backseat if the driver refuses to deliver was effective in my one experience
So the author provides a defensible breakdown of the unit economics and goes into detail... and all you have is "super-hard to understand how a tech company..."
Technology companies are revolutionary in terms of leverage, but really, tech didn't invent the concept of leveraging.
Technology companies are revolutionary in terms of leverage, but really, tech didn't invent the concept of leveraging.
I think Uber reminds people of AirBnB, and if you haven't been living under a rock for the past year you should be familiar with some of the reasons opinions on AirBnB have shifted.
I am not. What are they?
To sum it up, making money by:
- 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...
- 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...
I think it is nearly criminal and probably legally actionable for Uber to advise people they only need "regular" car insurance, when regular car insurance very definitely does not cover carrying passengers for money.
Well, it's not like they're a public company with obligations to report financials. We're at the mercy of their great media handling, PR, and tech-media darling status.
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> that means our hypothetical driver is covering 40,000 miles in 2,000 hours, for an average speed of 20 mph. Meanwhile, the average speed of Manhattan traffic is barely 10 mph
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.
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.
I'm wondering how do Uber investors think Uber will do in a, not too distant, future where driver-less cars are readily available. Or even as public transportation improves.
It looks like this Uber vs. traditional cabs is a battle with an expiration date.
It looks like this Uber vs. traditional cabs is a battle with an expiration date.
It is so much fun to reverse engineer financials.
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.