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Thread: Uber Drivers Learn To Game Its Antisocial System

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    Uber Drivers Learn To Game Its Antisocial System

    Uber Drivers Learn To Game Its Antisocial System

    Uber and other ride-hailing companies use surge pricing, also known as “dynamic pricing” or “demand-based pricing.” They increase the ride fare if the demand for rides is greater than the available capacity. In moments of heavy demand, they increase their fare up to three times the normal price.

    A 2015 Uber and University of Chicago, Booth School of Business, study claims that such surge pricing is beneficial for both sides, the drivers and for those that use the service:

    Uber operates in a market with large fluctuations in demand and a variable supply of driver-partners. Driver-partners are free to work whenever they want and must be incentivized to provide services. Under these conditions, economic theory tells us that using prices to signal to riders that rides are scarce and inducing driver-partners to forgo other activities will close the gap between supply and demand and lead to improved outcomes for both riders (as a whole) and driver-partners.

    Reality disagrees with what the economic theory tells us. In the U.S. Uber drivers are seen as independent contractors. The drivers say that the standard fare is too low, or Uber's 35-40% share of it too high, to make a living. They therefore looked for and found ways to game the system:

    Every night, several times a night, Uber and Lyft drivers at Reagan National Airport simultaneously turn off their ride share apps for a minute or two to trick the app into thinking there are no drivers available---creating a price surge. When the fare goes high enough, the drivers turn their apps back on and lock into the higher fare.

    “All the airplanes we know when they land. So five minutes before, we turn all our apps off all of us at the same time. All of us we turn our apps off. They surge, $10, $12, sometimes $19. Then we turn our app on. Everyone will get the surge,” one driver says.

    It is wonderful to see such worker solidarity:

    "And does everyone oblige? Does everyone do it?, Sweeney asks.“Yes 100 percent. Everyone do it. Everyone knows it’s not worth it. They know if they take a ride from here without surge, without pumping the surge up, it’s not worth it.”
    In less than a minute, about 50 drivers are locked into the surge.
    “It’s like we work as a family, like a team together. Like as a team. We do it. Every night. We do it again. We drop off, come back again, it’s a routine. We do it to 12 o' clock."

    The business idea on which Uber is based is not profitable. From its beginning it grew by breaking the law:

    Uber developed an aggressive expansion technique called “principled confrontation” in which Uber simply began operating in a city or region until being told that it didn’t have permission to do so. At that point the firm would mobilize public support for its service, using an array of lobbyists, followed by a political campaign to change the local regulations. It’s a method that worked in large and small communities, but not everywhere – even in the USA and Canada.

    That strategy made it impossible to build its business in Europe and elsewhere.

    Even while it exploited its drivers the company never made money. In the 4th quarter of 2018 it lost $800 million. The company was immensely hyped with an estimated value of $120 billion before it was recently taken public. But the initial public offering was a total flop. The opening stock price was $42 and fell to $36 within the first two days. The underwriting banks had to step in to prop up the price to $41.85 today, which sums up to a total evaluation of some $70 billion. That is still way too high.
    The private investors who bet on Uber during the last years lost money:

    From May 2015 on, Uber sold convertible preferred stock to venture investors on the private market at prices of $40 or higher, including 15 transactions with experienced investors at $48.77 each, totaling about $6 billion.All those investors are underwater today on their Uber shares.

    Uber says it will make profits when self driving cars become available, allowing it to eliminate those pesky drivers. But while driver assistance systems are more and more common, it is highly doubtful that truly autonomous cars will evolve within the next decade. When they do they will be easy to sabotage.

    Unicorns like Uber, Tesla for example, will also have strong competition from genuine car manufacturers with very deep pockets.

    Uber and the like also create high external costs, that the public only now starts to see. They increase the total amount of traffic while hurting public transport and other valuable businesses. The too low worker compensation for its 'contractors' means that the public will, in the end, have to pay for their well being. The company lost $12 billion during the last four years. Its price dumping, financed by its investors, destroyed decent paying jobs in the taxi industry. Over time these costs will create more resistance to such companies and demand for regulating them will increase.

    The so called smart investors, who early on bought into Uber and allowed for its failing strategy, will hopefully learn from its upcoming crash and their own high losses.
    For the society as a whole such anti-social companies have no value and should not exist.

    Posted by b on May 21, 2019 at 01:51 PM | Permalin

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    I never heard of such a thing until I read this.

    We have to be in a "que" at the airport meaning we wait our turn. If there are 90 drivers in que, that means I have to wait for 90 riders to be picked up and I will get the 91st rider.

    One plane can hold 90 riders and at Tampa (TPA), When there is 250 departures per day, 90 drivers in que is a drop in the bucket.

    We did receive some kind of notice that some weird practice will not be tolerated. I wonder if this was what they were talking about? I bet it was.
    Last edited by Rickity Plumber; 05-24-2019 at 05:41 AM.

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    The so called smart investors, who early on bought into Uber and allowed for its failing strategy, will hopefully learn from its upcoming crash and their own high losses.

    For the society as a whole such anti-social companies have no value and should not exist.

    Will hopefully learn from it's upcoming crash.....No they won't. A lot of companies go public when they aren't making money & a lot of people will always invest in them. The idea is that sooner or later they will make big money & their stock price will zoom. I look at it that if it was easy to make money doing what they are doing they would be making money from the start. Yes there are exceptions but why jump in early in the hopes that the company you picked is the exception? Way to much risk for me.

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    Uber driving is not really worth it. Taking into account the cost of time and fuel, just the wear and tear on a normal car, with all the maintenance requirements, accident risk, and additional auto expenses from more time on the road, is not worth it.

    At the very least you'd have to have an older car that was already not in the best of condition, but not in such bad condition that you couldn't pick up customers.

    Uber probably wouldn't even be a phenomena if it were not for the crappy job market.

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    I hate to say it - since Uber was good to me - but it's going away.

    They, that is, corporate Uber and Lyft...can't make money. God knows they've tried; but they keep on losing huge amounts.

    WHILE this is going on, DRIVERS make, mostly, not much money. I know that while the money I made was there when I needed it, there wasn't much of it. I can't say it wasn't worth the wear on the car (which did blow out the transmission) because in the year I drove, I made 2.5 times the price of the car. So, it was needed money - but not much and often times, in many cities, not worth the danger and hassle.

    So...the only thing I can see happening here, is that Uber and Lyft merge; and then raise rates to where they, in the front offices, can show a profit. That will price rides out of reach of many - cabs will be cheaper. Some will continue to use these programs, because many Uber drivers do keep their cars clean (and you can rate drivers, something you cannot do with a cab) - but the market is going to shrink. Drastically.

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