Thanks this website
Thanks this website

The best thing I read this weekend was this article: “I was an undercover Uber driver“. It’s quite a long piece, but so interesting.

What the drivers are essentially complaining about:

  1. When Uber first arrives in a city, it is cheaper than standard taxi services but doesn’t have the same overhead – so drivers can earn relatively well.
  2. Then Lyft arrives.
  3. Then Uber cuts rates to compete.
  4. And suddenly, Uber drivers are earning less, despite Uber declaring that the increased demand offsets the decreased rates.

Here is one of my favourite conversation extracts:

Screen Shot 2015-05-11 at 7.43.01 AM

Which is basically saying: if you get charged a flat fee (the safety ride fee) when your income is a percentage of revenue – then a drop in the income causes a disproportionate increase in your costs. So for all Uber’s “decreasing rates will increase demand – so the drivers will benefit!” – well that’s mathematically false.

Some could see the whole thing as a giant bait & switch. Get the drivers to come on board with the promise of $90,000 per year – and then once you’ve destroyed the competition, keep cutting rates to earn more off your drivers (because if they do one trip per hour, you get $1 in safety ride fees – but if they do three trips per hour, you get $3 in safety ride fees).

I just thought it was interesting. And good reason to invest in Uber if you can (unless you’re troubled by scruples).

In the interim, here is an infographic – which has some questionable comparative driver-earnings data:

Thanks this website
Thanks this website

Interesting that New York figure is nowhere close to the $90,000 per year figure that Uber kept presenting.

Conclusion: don’t give up your day job. Also, check out that article.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.