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:
- 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.
- Then Lyft arrives.
- Then Uber cuts rates to compete.
- 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:
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:
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.
