What is the turnover rate of ordinary taxi drivers? Without that info we don’t know whether Uber’s turnover is typical for shitty jobs with low barriers to entry, or is 10x worse.
I’d also suggest that Uber, Lyft, etc. have a different dynamic than conventional taxi services. They’d be perfectly happy if 95% of all car owners became Uber / Lyft drivers. Meanwhile, ABC Taxi with a fixed fleet of 300 medallions in City X has a need for only 600 drivers to cover all shifts 24/7. Conversely, I’d imagine lots of people try driving for Uber / Lyft. Regardless of whether their local area needs more drivers or not. Would-be drivers think “Nothing ventured; nothing gained. My marginal cost to start is $0 and it might work out OK.”
Uber / Lyft have the neat feature that it costs them nothing to over-supply versus the demand. All that happens is the excess drivers starve at no cost to the company, while simultaneously decreasing average wait times and so giving the customers extra prompt service. That’s Win for company, Win for consumer, Fail for driver.
In any given city I visualize supply & demand as both like a glass of freshly poured Guinness Stout. At the bottom you have a solid base of pure dense liquid. As you go up the column you see increasing bubbles mixed in and the local liquid density is less and less. Then there’s a fairly abrupt phase change and at the top you have a layer of foamy stuff that’s mostly air. Above the foam is a flux of tiny droplets individually fizzing up into the air and falling back or evaporating.
An ordinary business will try to service that demand from the bottom up until their marginal cost of production equals the marginal density of demand. That will leave some fraction of demand unserviced at the top. Conversely, a business that has essentially zero marginal cost of production will be happy to chase the topmost fizz above the foam.
The drivers that are in the right place at the right time to service the thick demand will do well enough to keep playing the game. The drivers who end up chasing the foam will not. But the public collectively are slow learners. Lots of people will give it a try, unaware that the liquid is fully serviced in their area and they’ll be chasing the foam.
I agree with others that 25% in 3 months doesn’t necessarily imply 100% in a year. I’m also not sure that this is unsustainable.
I bet getting new drivers is really cheap and easy. There’s an enormous pool of people that already have the requisite skills.
Years ago, when I took a part-time job at Sears as a teenager, there was like a week of training on how to use their antiquated POS systems to, like, process a layaway payment on a riding lawnmower that’s going to be delivered to another state. They had to pay me for that whole week (and I think I worked about 3 months).
What’s it take to learn to be an Uber driver? 30 minutes? That Uber doesn’t pay you for.
“Nothing” is a small exaggeration for brevity. The corporate marginal cost is non-zero, but it’s pennies per driver per month. To the degree they oversupply drivers (at no cost to themselves), they keep average wait times low and thereby incrementally stimulate demand.
To be sure, the supply of *rides actually taken *exactly equals the demand for rides consummated. But that’s a tautology in every market.
My point is Uber / Lyft are different than, say, McDonalds. It would cost McDs a lot of real money to put a store on every streetcorner. It doesn’t cost Uber/Lyft a lot of money to put a waiting car on every street corner.
If you have something else that’s not a quibble, please lay it on me in detail. Sometimes I’m dense that way.
Uber and Lyft are not companies who put much on the line as companies - what they do is extend “but they’re not employees” into the risk zone like economic cannon fodder.
So signing up a million drivers per city to “oversupply,” yes, “costs them nothing”… but it is not costless. Perhaps I misread you, but it seems you’re skimming over the major issue here that Uber has ridden to its power and glory and absurd valuation on the backs of workers it’s all but shitting on (and laughing all the way about it). Turning the battle for enough rides to make being a driver economically viable into a Darwinian catfight, when the company reaps its share no matter who wins down at the app level, is even more nakedly heartless than the nominal model.
Do not mistake me explaining how the economics work for me saying that’s a good thing socially. Their operation is “neat” only in the sense of what I describe being their empowering secret sauce.
I think Uber is utterly deplorable on almost every level and in almost every direction. About the only good thing one can say about them is that by so nakedly exploiting the zeitgeist of the modern economically disposable worker class they have held that zeitgeist up for examination and a growing chorus of voices are not liking what they see. With luck they’ll have thereby sown the seeds of their own destruction.
You absolutely correct that Uber/Lyft are different both than McDonalds and than traditional taxi companies. Uber/Lyft are marketplace companies that focused on the marketplace of transportation. Marketplaces don’t supply goods, they supply connections for buyers and sellers.
Some parallels:
Etsy has the neat feature that it costs them nothing to over-supply versus the demand. All that happens is the excess sellers starve at no cost to the company, while simultaneously decreasing average prices for sold goods and so giving the customers a better deal. That’s Win for company, Win for consumer, Fail for seller.
Youtube has the neat feature that it costs them nothing to over-supply versus the demand. All that happens is the excess videomakers starve at no cost to the company, while simultaneously increasing selection and so giving the customers more entertainment options. That’s Win for company, Win for consumer, Fail for content creator.
The parallels continue: Very few people make a living on Etsy/Youtube. But many find that it’s still valuable to participate.
I think where the parallel really breaks down is that you can become an excellent craft or video maker in ways that you can’t really become an excellent cab driver (anymore). Once upon a time, a cab driver could attain excellence after long study by having an encyclopedic knowledge of locations and routes. But due to technology, all drivers are equally good at routing. And, in a few more years, all drivers will be equally bad at driving, since the cars won’t let you do it anyway.
So, if Uber is evil (and Youtube/Etsy/whetver are not), is it because of that latter difference, that it’s possible to excel on the other platforms, but not on Uber? Or is it something else? Can we really blame Uber for the fact that routing algorithms got better than people? (We certainly can blame Uber for lots of things, but I’m not convinced that’s among their sins.)
I agree that it is not a good thing socially. I don’t care for Uber’s model being called “the gig economy,” for one thing. Let’s call it what it really is: “piece work.” Uber might as well be sending unfinished garments to their associates to have buttons sewed on at $X for each finished item. This was not a good economic model for social advancement in the nineteenth century and it is not good now. Uber controls who gets how much work and can (basically) decide what will be paid. The skill levels of the workers are so low that there is a constant threat of underpricing. (“You’re paying 25 cents for each button? My kids and family will do them for 15 cents a button.”)
The only thing that Uber brings is the basic idea and an app to coordinate the work. Garment manufacturers did pretty much the same when they farmed out their piece work to poor families who had no other way to earn money. Garment manufacturers learned very quickly that there was no stability for them or for their “contractors” in this arrangement.
Contrast this to a true “gig economy” where independent individuals and companies with reasonable skill sets (coding, painting, appliance repair, etc.) compete using price, ability, and reputation to bid for jobs. There’s a world of difference.
Is Uber ever going to make any money (i.e., operate in the black)? I don’t think so. Too many other competitors laying in wait to use similar, but improved, models and platforms.
To the degree there’s a difference it’s in the distribution of revenue.
If Uber / YouTube / Etsy charged 1% of what the customer pays and 99% went to the driver / videographer / crafter we’d have a socially and economically valuable market maker. If Uber / YouTube / Etsy charged 99% of what the consumer pays while passing but 1% to the driver / videographer / crafter we’ve got a *rentier *sitting astride what would otherwise be an economically beneficial market.
Each of these real operators is somewhere in the arguable middle. IMO they’re all pretty far into *rentier *land, with Uber well, … uber alles in that regard. Which as economists of several stripes over the last 200 years have said, is *always *a bad thing for everyone other than the rentier himself.
What one would hope is that network effects amongst market makers are not strong and so competitive markets quickly and comprehensively spring up. e.g a driver simultaneously driving for Lyft, Uber, and 4 more equivalents pretty well ensures they’re not all ripping him off.
Unless they’re colluding at a high level. Which supposedly is what FTC is for. As Teddy Roosevelt said: “malefactors of great wealth …”
I think the more important thing is how monopolistic these markets are. At this point, in the US, it’s a duopoly between Lyft and Uber. Usually that’s bad, but in this case that situation is being maintained by Lyft and Uber losing enormous amounts of money.
I’m not going to wade into this fully, but just a few notes from someone who has done both Uber and Lyft off and on for three years.
The idea that the average driver makes $3 an hour before cutting expenses is laughable. I don’t doubt that some driver somewhere did that sometime, especially if he was putting in full time hours in in some market that doesn’t have the traffic to support it (e.g. working weekday overnights in Boise). I am in a major metro area, work mostly weekends, and on average earn $20+/hr gross, $15-17 after everything. That’s probably higher than most, but I’d bet a more typical rate would be somewhere in the $15 gross, $12 net area. It would widely vary. There is a learning curve about where to drive and when, so yeah, some newbie who just turned it on at noon on Tuesday in front of his house in the burbs might only $9 in three hours before quitting.
As others have noted, a lot of the turnover is people signing up, working one night and then never doing it again. Many people use it as a temp job. Others just join up because they got offered a sign up bonus – often $200-500 – and they just do it for a few weeks until they qualify for the bonus, then quit.
IMO, the vast majority of drivers are NOT looking to be treated as employees. This is a side gig, a temp gig, a summer gig, and most people aren’t looking to it for health insurance and a retirement plan and employee benefits. That isn’t to say nobody is and I’m glad that Lyft does offer those options for people that want them, but that’s not a concern of most drivers.
In addition to sign up bonuses, both Uber and Lyft offer various incentive schemes. e.g. give a certain # of rides in a certain area during a certain time with other metrics as well, and you get an extra $25, 50, 100, 200 bucks a week. This IMO is one of the ways they are indeed subsidizing the fares.
I always get annoyed at people ripping on Uber for not submitting to Taxi regulations. You know who else doesn’t submit to those regulations? Limos, airport shuttle vans and other cars for hire. Taxis are highly regulated because they can accept street hails. An Uber cannot. An Uber also cannot work the taxi stands or enjoy other advantages a Taxi has.
Having said that, IMO, Uber specifically has a dim future. They’ve done nothing to cultivate brand loyalty, which is something they should have done as the first entrant in the rideshare business. Lyft is vastly more honest and transparent, and if/when someone else enters the arena that will be an asset. People will not hesitate to quit Uber if/when the option arises.
Except that not everyone has “reasonable skill sets” and these sort of low level jobs are better than nothing. As furt pointed out, often they are used as supplemental income.
I mean when was driving a cab or livery car ever considered a “good job”?
You’re right. I was simply trying to point out that there were more commonalities between Uber and “piece work” than with “gigs” (as I’m used to using the term). I used to drive a cab myself when I was a graduate student and I would in no way consider it to be a good job, but it was a job and paid a lot of bills.
Impossible and meaningless to calculate. Some weeks I work 60 hours, lots of weeks zero.
AAA says my car costs ~$0.35 per mile to operate, but I put it at more like 0.37. In my city that leaves me earning .65 per mile with someone in the car, plus $.17 per minute, plus $1.15 flat fee per ride, plus typically between $0.50 and $5 per ride in tips/bonuses.
It’s a very complex calculation, and I doubt most drivers do it competently; on the other hand, you’d have to be an idiot to be earning $3 and unable to figure out why.
I think I get what you’re saying. Really it’s more “transactional” work. Which can cover anything from being an Uber driver to a high priced consultant. But I think the distinction is that while many jobs (like a graphic designer) consist of short term “gigs”, many companies seem to be hiring contractors and consultants for years in roles that are essentially ongoing operations so they don’t have to pay them benefits.
BUMP
Been listening to an informed discussion in which ‘sub auto prime’ was the phrase - somewhat amusingly - used to describe what Goldman Sachs and the other parasites are now doing in this market.
Pretty cool when things start to link up like you know they will …
Has it occurred to anyone else that basically outlawing the practice of “making money from money” would clear up a hell of a lot of social and economic problems?
Not necessary banking and interest and “usury” - but all forms of corporate/investment looting and breakage and deeply dis-incentivizing management practices that gut or drain a company in a short time.