The really interesting story here is that if drivers are so willing to switch networks for better opportunities, there isn't a compelling reason for Uber to have the valuation that they do.
The value of Uber isn't really in the tech or the app - it's in the networks of riders and drivers in each city. If each of those can be aggregated into some other kind of service, where Uber, Lyft, etc. are just providers of payment processing, and possibly some operations expertise, that middleman network will capture all of the value.
Basically while there are network effects in the sense that any provider (Uber, Lyft etc.) will need to have some critical mass before there are enough drivers and enough riders, both can subscribe to multiple providers and there is no long-term stickiness at the moment.
In other words, this is not a winner take all market with FB/LinkedIn/Twitter type network stickiness and the overall market is still fair game. The driver's rating is the only sticky data, and it is unclear in this context as to how valuable that is as riders are not going to wait an extra 30mins to get a 5-star driver vs. a 4-star driver.
This should not come as a surprise to anyone since right now most metros have multiple competing taxi service providers, so it makes sense that that may be replaced by a similar multiple mobile-app taxi providers.
Also, it is difficult to re-paint your taxi when you move from one traditional provider to another, in the Uber/Lyft/etc. world, that is no longer required, so provider switching or aligning with multiple providers is trivial which will imply that in future the providers' margins will be squeezed out and riders and drivers will keep the most benefit.
I don't see how there's any network effect to be had. Consider food delivery. I use both seamless and delivery.com. Seamless is a little better and has a wider network of restaurants. But I have 0 lockin and will frequently switch to delivery.com for any exclusive restaurants they have. I have an account on grubhub too although I use it rarely. There's nothing tying to me to any of them. No friend list, no thousands of photos. Just my recent orders which are of limited value. Taxi service is the same. The second that Lyft has lower rates or a close car, everyone will switch in a second. Or flock to option 3 the second it has any advantage.
How would you say self-driving vehicles fit into this? Supposedly they're rolling out in ~3-5 years, and with self-driving vehicles, you no longer need the middle man managing a fleet of contractors.
EDIT: I'm willing to me a Long Bet [1] with anyone regarding fully autonomous self driving vehicles in regular use in 6 years.
~3-5 years is way too soon. The technology might be ready but the governments (think regulations, traffic laws, car insurance companies, car manufacturers, etc etc etc ) in addition to the public (which is not ready either). Is going to take at least 10+ years for it to resemble something like you imagine it.
I agree that 3-5 years is a bit optimistic but I also bet that when it does happen it will transition far faster than we can imagine. You have a really nice set of aligned incentives here:
- As a 'driver' I get a car that let's me free up large chunks of my time
- As a company like Uber the driver 'input' to my model is now far more consistent, predictable, and inexpensive
- As an insurance company I can start undercutting my competition by charging less to insure this substantially safer means of transportation while still pocketing a nice margin
- As a car manufacturer I now have an extremely compelling reason to sell cars to people that would otherwise wait between 4-6 years in between car purchases
- As a government I can (if I'm smart) try and pass laws that will result in drastic reductions in accidents, deaths, etc... I'll also likely be bringing in a lot of business and money by being on the leading edge of this (less traffic and congestion, new opportunities for businesses that leverage these cars, etc...). Whatever revenue I lose in traffic tickets I can make up for in other ways (like a reduced need for traffic enforcement).
As soon as any of the above are able to make/save money this is going to snowball.
The lobbying power and influence of the teamsters and taxi unions is probably the single largest hurdle but if self driving cars are as safe and cheap as it appears they will be this will be a speed bump, not a roadblock.
I'm not so sure the future is as bright as you make it out for all those groups. At the very least this change is going to bring with it a mountain of uncertainty.
As a driver, you probably lose your job. Not with the 3-5 year out model, but the one that comes 10 years after that. Even with the 3-5 year model, suddenly the competition for your job becomes extremely tight and starts to focus on things like people skills and entertaining, since the automated car will be doing most of the "heavy lifting" most of the time in a way that is automated into a commodity.
As Uber, you save a lot of money but you also lose a lot of moat, it becomes much easier/cheaper for other companies to suddenly field a fleet of cars.
As a car insurance company things look really iffy for you, again not so much in the 3-5 year timeframe but a bit further out when the human is completely unnecessary since at that point the insurance will be more about insuring the companies making the cars and car software and less about personal insurance, which means there is still significant money to be made, but probably far less than now (if the safety of automated cars turns out to be as great as it should) and by far fewer players.
As a car manufacturer, you'll do well at the beginning but the eventual model of a networked driverless transportation system should require far fewer people to own fewer cars and still live as if they do own cars, which is a long term problem for you when you've built a business optimized to sell cars to broad market consumers on a 5-ish year cycle.
As a government you should, in an ideal world, be in pretty good shape for the reasons you outlined, but good luck dealing with the lobbyists from industries this may "disrupt".
I do think driverless cars are quite a bit closer than most people think, for a lot of reasons, I just think they are going to upset a lot of applecarts on the way in, which isn't necessarily a bad thing unless you're an applecart vendor.
The technology is not nearly ready. Not in a city. It's like flying drone delivery. Easy to demonstrate in a single controlled setting, but nearly impossible to actually implement in the real world.
Actually landing UAVs is far harder than automatically parking a car.
The driving vs flying after take off is what is easier. Landing and take off.. nope.
Note that drone could mean a car in this case. UAV being an unmanned aerial vehicule.
With a modest infrastructure of marked landing pads on roofs, I think UAV landings are easier than automated car parking. If you're expecting delivery UAVs to fly under the tree line along sidewalks and yards to land directly on a residential porch, then yes, that's extremely difficult. But I highly doubt that this is a remotely feasible plan within a decade or so.
It's hard for me to even imagine how a self-driving car could manage somewhere like large swaths of Manhattan where a certain amount of, umm, aggression is needed to make any forward progress. Though it will likely happen some day (probably multiple decades from now).
As it is, I'd even settle for voice control on my phone that could reliably understand me.
> a certain amount of, umm, aggression is needed to make any forward progress
They added a slight "aggression" back in 2011, if other cars aren't letting it out it starts pushing forwards a bit:
> Sometimes, however, the car has to be more "aggressive." When going through a four-way intersection, for example, it yields to other vehicles based on road rules; but if other cars don't reciprocate, it advances a bit to show to the other drivers its intention. Without programming that kind of behavior, Urmson said, it would be impossible for the robot car to drive in the real world.
I really don't understand why people think small behavioural differences like that require decades of work. Things that humans find difficult and stressful are likely to be the things that are significantly easier when you have a reaction time measured in milliseconds and full 360 degree vision.
I hope you're right but the very uneven progress of AI generally--especially when it involves real world interfaces--makes me skeptical. As I wrote elsewhere, even voice recognition is very much still a mixed bag.
But voice recognition is something we take many years to learn, even when are brains are highly plastic. I find it hard to understand people when they speak often. We disambiguate heavily based on context and expectation, very complex issues.
Oh, I fully agree. The fact that it's been the subject of so much research and remains only very incompletely solved demonstrates just how difficult a problem it is. I'm just saying that navigating a potentially dangerous machine through a physical world populated with erratic human beings is also very complex and difficult--albeit probably far less so in some contexts (limited access highways in good weather) than others (Manhattan, Boston).
Self-driving vehicles are the final commoditization of the rides-for-hire business. Personally, I'd be very skeptical about the 3-5 year time frame, but clearly they're coming at some point. When they do, I can't see any rides-for-hire business having gross margins higher than 5% (though the size of the rides-for-hire market may well expand greatly). Barrier for entry is basically nonexistent.
Scale and perks will drive that 5% up, I imagine. Sure, Joe Average can buy a Tesla Model A (for automatic, obviously) and have it operate as a AI-Uber Driver, but Uber can buy a fleet of thousands, allowing them better pricing, better access to charging stations, better data about which rides are most valuable and where to position their cars. With a bit better margins comes things like bottled water in the cars. This differentiates them further, etc.
It's clearly Uber's plan to replace all their drivers with self-driving cars in the future - I think they've even said so themselves. But even six years is a long time for a VC-funded business.
And what does "regular use" mean? That seems like the critical component of a bet like this.
"Regular use" is defined as you being able to hail one to take you at least 30 miles for ~$50, from either a mobile or webapp.
If anyone can buy a self-driving vehicle, Uber and Lyft are aberrations, as anyone (even FedEx and UPS) could provide self-driving vehicle livery services. Its no longer a marketplace business; its a fleet management business (and both UPS and FedEx are extremely capable at managing capital expenditures, fleet operations, and system capacity).
I think we'll see at least two main car providers in major cities plus some niche operators, then one major network that allows you to buy your own car to be committed to a pool as an investment.
Do you think we'll see public transit orgs (for example, PACE/CTA in Chicago and its suburbs) purchase their own self-driving vehicles to provide transit services?
This isn't just a city issue, but a country issue too. Vulnerability to both economic sanctions and espionage should be real concerns. You can take a look at the companies operating in Israel for an example of a market this would be an immediate concern. Likewise for companies operating in Washington DC. There are politicians and lobbyists regularly using Uber. Would this DC audience want to use Yongche, Kuaidi, or another Chinese service?
Another interesting consideration is who is building and selling these automated vehicles. Hypothetically a future Google building vehicles could acquire Uber and now they own the entire value chain.
A company such as Google could earn a substantial piece of the rider's revenue from advertising which would make it hard for competitors much like Yahoo & Bing under earned Google on search inventory. At that point it becomes very hard for competitors. Does ad based earnings sound unreasonable? Consider that companies, such as Delta, already are bidding their organic listings down on Google. They rank #1 for their name yet still buy the inventory. You could jump in the car and say KFC -- and KFC pays Google for the ride. Or you say "fried chicken" and Google gets even more money to take you to the nearest KFC (or may be Popeyes in that case.)
Secondly, consider additional activities in the vehicle. A car build to drive itself is going to be configured differently than a manned vehicle. May be a Facebook car arrives and you strap on the complimentary Oculus headset.
I don't know what it is, but don't discount the ability of a self driving car service to substantially differentiate itself beyond competitors in the future.
Any of these options will make it extremely difficult for public transit to compete. Certainly cabs are done without gifted monopolies. (Also worth considering if a self-driving cab company can retain any political power without having a fleet of human drivers)
Whether or not Uber is overvalued, they are taking the money. Probably the better choice. The US stock market keeps hitting highs, at some point there will be a drop, or may be a crises with junk debt (very low yields just like 07) and it is going to be a lot more difficult to raise money over night.
Someone will still need to manage the fleet of self driving cars. Who is going to fill them with gas, do routine maintenance, clean them after some drunk dude puked all over the back seat, etc?
If they're electric vehicles, they'll charge on their own based on closest charging station and the cost of electricity at the time they need their charge. Also, the only maintenance you'd require would be tire rotations/changes every ~5K miles, and a new battery every 150K-200K miles (Tesla automated the battery pack swap, I'm sure they could automate pulling four wheels off and bolting four new ones back on).
I agree someone is going to need to clean them out though.
Reliable wireless inductive charging for cell phones doesn't even exist. I imagine an inductive charger for a car would function very well as a harddrive eraser as well, especially in 'inductive road' form.
There will be significant power losses (10-20%) and alignment issues.
One thing I really like about the whole inductive road concept is that it totally removes the need for a battery, one of the most expensive parts of an electric car.
You'd basically have a full-size slot car (if you remember those) track (but without sliding contacts).
While high-capacity electric vehicles like a Tesla wouldn't be able to wirelessly charge, it should be trivial to build a physical dock they can connect to with no human intervention (similar to how SpaceX designed the DragonEye mating connector for autonomous mating to the ISS).
I'm well aware. I was referring to public charging infrastructure using wireless charging. This is almost non-existent due to the lack of compatible vehicles today. I understand that some electric buses are already using wireless charging in major trials.
I think the 'self-driving' feature of the car will be more like an autopilot - you'd still need a human at the wheel to occasionally override the system.
Hence, I see the self-driving car to be more of a competition to short-term rentals like Zipcar. In situations where you don't want to drive (have to work/talk on phone; after a you've had a few drinks etc), you'd still need a driver.
I think we will see self driving cars in regular use that do not require an attentive driver on the freeway within 6 years. I think self driving cars will put Uber drivers out of business in 10 to 20 years.
Even if the technology becomes publicly usable (stretching it), there are bigger obstacles - government regulation and fear mongering - that make me think it will not happen in this timeframe.
Google is closing in on over a million miles with no accidents, and have decided to focus on refining their intelligence for city driving. 6 years tops.
I'm super excited for self-driving cars - they're literally going to change the world in dramatic ways. It's sort of mind boggling once you start really thinking about the implications of it.
You may as well pose it as "what if we invented teleportation?" Many of the end results are going to be similar.
By which you mean they already exist today? My parents got a demo ride in one at a google event earlier this year. As long as the city involved is Mountain View, the vehicles already exist.
(Google's current effort relies on extremely detailed mapping of all the roads involved, but given the continued existence of the StreetView program that approach probably scales tolerably well.)
Mountain View doesn't really qualify as a "city" in the sense of city traffic. The roads are wide and not particularly densely packed. Not to downplay the accomplishment, but it's probably a long way from being able to handle San Francisco let alone New York or London.
Consequently, the cost of a ride will approach the level of direct costs like fuel and maintenance. There won't be much left for driver compensation or vehicle depreciation, much less a durable surplus for the network operator.
Paradoxically for the disruptors, the way out of this trap is for Uber and Lyft to lobby for greater regulation, stringent requirements for insurance and liability, background checks, safety inspections and government licenses. They need higher barriers to entry.
They need to carve out a space safe from competition, or it will rapidly devolve into a lowest-common-denominator market.
Companies like Uber and Lyft operating without as stringent regulation as regular taxi companies is their main competitive advantage (AirBnB is in the same group).
Taxi drivers have lobbied for years to build up the kind of economic protections they have from disappearing margins in a competitive marketplace, and consequently being a taxi driver meant you could make a middle class living without tortuous hours.
Uber comes along and operates without the limitations of those protections and drivers earn less. Ultimately without intervention it puts a whole industry of people on a trajectory towards poverty, and this is before we even get to self driving cars.
What are we going to do with everyone who gets forced out of their middle class jobs?
I would argue that it has been a long time in the USA since a taxi driver could earn a middle class income driving. Medallion fees basically make them indentured servants.
Taxi drivers are usually contractors, so it's easier to get a job (sometimes as a sub) and its easy to avoid taxes. Think of it as a waiter job without the need to communicate well. Also, because of the off/hours nature, it's a good second job.
Because you have networks of contractors, you can lever social ties to get a job... This is especially important for immigrant communities.
Surely they want to take the money now and use that to fund being first to market with the self-driving vehicles. Then they retain the customers but drop the drivers and build a new lake in which to swim in their money.
They can ride the transition period then at least before any serious challenger can take the market.
In theory .. I don't see them lasting long enough to meet the new tech before they implode.
You know what would be interesting is that municipalities should see this as an opportunity. What if the city were to start their own modern municipal taxi services, and compete directly with Lyft/Uber....
I'm not optimistic about municipalities running anything efficiently. However, this would provide great opportunities to get rid of public transit as we know it. Private sector rides could simply be subsidized for low income users. How much more convenient would this be vs taking the bus?
A municipality can't write a check every year to a white label service that sits between its citizens and the self-driving vehicles, maintenance facilities, and charging stations built to provide automated mobility?
My city provides roads, fire, police, and other services in a pretty efficient manner. If yours doesn't, I suggest you campaign for more transparency.
That's not inefficiency. That's precautionary, and SOP in most first-responder units. Rarely do first-responders know the extent of what the situation on the scene is going to be before they get there. Diesel and miles on the truck are cheap, and peoples' time is a sunk cost.
Don't take my word for it though, the Mayor of Provo answered the question much better:
"I’m often asked why we send a fire truck on every medical call. Does it really require an ambulance and a fire truck for many of the minor injuries? It seems a waste to drive a very fuel-inefficient fire engine to something where the additional personnel are not needed.
While there are some calls for emergency medical assistance that can easily be handled with just the two personnel on the ambulance, there are many that require additional help. Nearly every EMS system sends a unit to “back” the ambulance for a number of reasons. First, nearly every life threatening emergency incident is best handled with at least two paramedics in addition to the driver. Second, there is not always enough reliable information on the patient condition to determine if additional help is needed. Valuable time may be lost if additional personnel are not dispatched until the ambulance arrives and makes an assessment. Finally, even so called “routine” medical calls often require the patient to be lifted into the back of the ambulance. Even if the patient is not obese, it is safer for the patient and for the backs of the medics to have additional help to lift.
When the fire truck is not needed on an incident, it is released to go back into service as soon as possible. The cost of the fuel to have the extra help immediately available when it is needed is a small cost when compared to the loss of precious minutes when a life is on the line."
That explains 2 of the vehicles. It still does not explain the ladder truck or the fire engine.
> Diesel and miles on the truck are cheap, and peoples' time is a sunk cost.
Is a fair point. That ladder truck exists just in case an earthquake breaks the water lines and sprinklers stop working. I still do not see my city (or many others) as shining examples of efficiency. This does not mean I want to privatize things like fire departments and police as that would has its own issues, but neither do I think cities are so efficient that we should have them handle more things.
I too lived in Chicago for most of my life (recent transplant to Tampa). Not all cities are inefficient, and those that are require more citizen activism and transparency.
I'm not sure a middleman service is even really necessary. There's plenty of drivers right now driving for multiple services. The more services there are, the more competition there is for drivers' time, which means drivers have more leverage.
One could read Uber's insistence on canning drivers who turn down too many rides as an attempt to reduce this leverage, since the only way drivers can exercise it is to turn down Uber rides in order to drive for somebody else. Requiring them to accept a certain volume of Uber rides effectively ties them to Uber.
> There's plenty of drivers right now driving for multiple services. The more services there are, the more competition there is for drivers' time, which means drivers have more leverage.
We're gonna need an Uber for Ubers.
But of course a middleman is necessary - who's going to match customers and available drivers? But if drivers have the leverage, it could resemble more of an agent relationship.
Why haven't Uber/Lyft demanded exclusivity with drivers?
The services match customers and drivers; they just don't do so authoritatively. Instead, you have a sort of pseudo-auction going on for chunks of drivers' time. Each match from a service is essentially a bid. If there's only one bid, the driver takes it; if there's multiple bids, she chooses the one that best fits her circumstances and turns down the others.
> Why haven't Uber/Lyft demanded exclusivity with drivers?
That was my point above, it sounds like that is what Uber, at least, is trying to do. They want their drivers to be Uber drivers first and foremost, so they punish drivers who turn down too many Uber-proposed rides.
Of course, if that's the relationship they want to have with their drivers, it sort of calls into question how "independent" those independent-contractor drivers really are. If Uber wants drivers to only drive for Uber, they could always just hire them as full-time employees. That would cost them money, though, so instead they prefer to keep their drivers as contractors and just force them to behave like employees instead.
Best guess: Uber/Lyft can't demand exclusivity from their drivers without crossing a line clearly delineated by the IRS. Doing so would be considered an "inappropriate degree of control" and the drivers would no longer be considered independent contractors, but instead employees. Neither Uber nor Lyft would want that. Penalizing drivers that don't accept a high percentage of rides offered them is Uber's attempt to demand exclusivity without demanding it.
It's state-by-state/region-by-region. IIRC, California specifically disallows non-compete clauses in general [citation needed]. Seattle outlaws driving for more than one service.
I'm pretty sure it's state-by-state as well as federal. That is, you need to follow both federal (IRS) rules and state rules to ensure your workers are independent contractors and not employees.
I think Uber realizes this, thus their strategy is to eliminate Lyft and any future competitors from entering the market as soon as possible. AFAIK, Lyft currently makes no money on its operations while Uber does (by virtue of their greater scale).
I'm afraid of a world in which Lyft is forced to quite (as you only so long sustain on VC money), and Uber then abusing it's monopoly power.
The difference to the existing cab market is the extraordinary scale and growth Uber posses. They can simply afford to undercut everyone's prices for the short term with their billion of dollars in VC money.
Probably so. Reading up on Homejoy for another thread, and wondering about their valuation, I noticed that after getting $38m in series A funding 8 months ago they have used some of it to buy out a competitor: http://getmaid.com/
But in a future where a large percent of rides are shared by 3 passengers on average, or maybe even more via SUV(for cost savings of course), being the dominant provider is tied directly achieving optimal routes and average share ratios.
In such a future , the network effects over riders is much stronger , and it's probably a "winner takes most" market.
That's true, IF passengers are interested in sharing a ride with two other passengers (and if they're interested in trading cost savings for the delays involved in that).
I kind of doubt that there will ever be a day when rides have an average of 3 passengers. Figure that if your base fare is $20, the first person you share with saves you $10 (or maybe $9 or something if you have to shore up the profits of the hailing app). Second person you share with saves you... $3. Third person saves you $2.
The returns to the passengers for additional passengers falls off fast, and the costs to the passengers (in terms of time, of discomfort, etc.) are linear or even more than linear. So probably not three passengers.
But two passengers is possible and would make for a real network effect... if ultimately there's enough demand for shared rides at all. There might be! Hard to say.
I was refering to three passengers sharing. Versus two passengers sharing it's a cost decrease of 33%. Maybe over one time trip it doesn't matter much, but if you're doing it alot ,for many 33% of their total transportation budget starts to matter.
But the end goal is to replace a large part of private transportation. And with car occupancy of 3 passenger and a drivers ,maybe cars start to get special road rights(as a tool to decrease traffic - it's part of some future roads in israel).
At that point, with UBER running a large part of the traffic and being able to create optimal routes, together with special road right , the difference in delay might not be that big versus driving , and you don't need to drive.
Yes, there are many if's here, as in all visions. but it might come to pass.
I recently was in a Lyft where the driver was also an Uber driver. I don't know how rapidly he switched contexts (ride to ride, day to day, or something like surges). Does either company do anything to prevent this?
No, if they did, they would not be able to claim that drivers are contractors. People driving on Lyft/Uber are allowed to perform trips at will, and can go on/offline as they please.
Something that would cause problems is if a driver was simultaneously accepting requests on one service while performing trips on another. I've had this happen as a user, and you just see the driver going the opposite direction for ten minutes while claiming to be 'on the way'.
Another problem might be cancellation rates; if a driver were online in multiple apps and got simultaneous requests, they would have to accept one and cancel the other. Acceptance rates are part of a driver's performance records on Lyft/Uber/etc. and declining lots of rides could get a driver's account deactivated.
> if drivers are so willing to switch networks for better opportunities, there isn't a compelling reason for Uber to have the valuation that they do.
There are two sides to the story: If customers are so enamored with Uber that they wouldn't consider Lyft or the other services, Uber will still be in control.
EDIT TO CLARIFY: Did not mean to suggest that customers are indeed enamored with Uber. Only wanted to point out that driver promiscuity does not necessarily threaten Uber so long as customers flock to them.
There is absolutely a large chunk of the rides-for-hire passenger population that is entirely mercenary in its affections. Some people are loyal Uber passengers or loyal Lyft passengers or whatever, but a lot of people are happy to go where the bargains are.
This, exactly. And more critically, because of the non-mediated nature of the interaction (that is, Uber is an absent middleman for the actual customer experience), drivers themselves can push passengers to other services. For example, a new arrival to the space could offer drivers a promotion for each new passenger-customer they recruit with a code. Driver is driving for Uber, hands passenger a card with the new service info and a $20-off code so they try it. No stickiness at all.
I think you're right that isn't out of loyalty that people use one or the other service. But it's de facto loyalty - also known as (extreme) laziness. Most people are using Lyft and Uber for the convenience. Thus if both are about the same level of convenience they will probably not shop around for a new app even if the competitor has a lower rate. They will go to the Lyft or the Uber app if it is already on their phone. More advanced users will probably have both - but that is a minority of users. So it's critical for one of these two apps to be the first installed on the phone.
I work for Flywheel, a (much smaller) competitor in the same space.
Customers like you describe certainly exist, and may be the majority, but mercenary customers who switch services are a large subset of the total. For example, we don't surge, and a substantial number of our customers report that they only use us when Uber and Lyft are surging.
There's also a time-frame issue here. The number of users who check different services with every ride is low. The number of users who check different services when their primary service is surging is higher. The number of users who are open to occasionally checking out other services if they hear good things is higher yet.
Cost-insensitive users who have Uber brand loyalty may be a large rump population for Uber -- they were the original adopters of the service. But their growth has been in cost-conscious people, and they've been in deep competition for those people, in a price war. Those passengers are a large enough share of their user base that they can't do without them.
Off-topic, but Do you have a timeline for getting into the Boston market, or a suggestion of an app out here? Taxi dispatch is terrible in this city. I was a consistent flywheel customer in SF and loved it.
Sorry, I can't comment on our expansion plans. I don't have any personal experience with the Boston scene, and the value of different apps is often very location dependent, so I'm not sure how the experience will be, but:
Hailo operates in Boston. They use real taxis and are well-established in other cities, probably worth a try if you are looking to replace taxi dispatch.
Thanks for the kind words, and I hope we get to Boston soon and you can give us a try.
The value of Uber isn't really in the tech or the app - it's in the networks of riders and drivers in each city.
One thing to keep in mind, is that a "spontaneous pick-up of a new rider" workflow is very similar to a "switch rider to a new network" workflow. If the apps are designed to be rapidly downloaded over cellular/LTE then this could often be accomplished in the space of a single ride, facilitated by coinciding GPS information.
Yes. I think a good comparison is airlines. They generate enormous value, but because there's a lot of competition, they don't generate much in the way of profits. Another useful analogy is real estate: because it's so easy to become a real estate agent (you need business cards, people skills, and modest arithmetic skills), it's a relatively hard business to me in. I wouldn't buy into Uber right now.
This is an oft-repeated meme but I don't see it ever substantiated.
Disregarding the fact that the "driver in a car" model is never going to be the most efficient means of transporting things (as opposed to people), we're ignoring the fact that the "Uber for X" formula already has many players.
Instacart, Seamless, GrubHub, Google Shopping Express, Postmates, every product category already has an "Uber". In fact every product category already has several "Ubers".
Uber won't have a first-mover advantage in any of them, and a lot of them thrive on having logistics options that aren't "dude in a sedan/SUV", and have built substantial hard-to-clone infrastructure on that front.
Uber has a lot of momentum, and a lot of hard-to-clone systems built around freelancer drivers, but IMO others are ahead in applying logistics to other things. This is like saying "Toyota can leverage their engineering expertise and totally own aerospace!" ... without acknowledging the existence of Boeing and Airbus.
You might be right but to me there is a big difference.
Uber seems to be collecting much more interesting data accross greater distances than those you mention which I why I think about them as a logistics company.
But again I think they are grossly overvalued and I think they will find themselves having to change to something else as competition will heat up and pushes prices down.
http://fortune.com/2014/09/11/uber-vs-lyft-the-credit-cards-... I don't know. The numbers appear to disagree. That just shows a sample of their growth in the US, but according to reports the bulk of their growth is internationally. They are likely orders of magnitude larger than their closest competition and growing rapidly. Real money is going through that system. If they can find a way to leverage that user base and become a full-on logistics company they're probably undervalued.
Or maybe the strike is closer to what happened last year in SF, where a bunch of drivers who were banned from the uber system because of low quality scores protested for other reasons. Something doesn't add up with the strike anyway (the threat to leave Uber because some trips might be on uberx, but to go to lyft where all their trips would be at that level and they'd make less doesn't make sense). The fact that the strike is still going forward makes it pretty clear it's not about having to make more money per hour by doing uberx trips.
Or maybe now that a large group of drivers have an impact on Uber, they want to continue to build muscle. If it was something other than accepting UberX fares, Uber wouldn't have caved (they're too smart for that). No this points in at the very least a small shift in negotiating power between Uber and its drivers. The fact that Uber caved makes it pretty clear Uber knows it was in the wrong and they are starting to fear a unified group of drivers.
Its bound to happen as long as there is a viable competitor within the market. Until then Uber really doesn't have a choice, they cannot lock in drivers.
What would it take for somebody to just build a free, open-source matchmaking service for drivers and riders? It doesn't seem like what Lyft or Uber offer is very technically demanding (perhaps doing it at scale is), and presumably you could attract a lot more drivers by offering them the chance to keep ~99% of the fare.
The existence of Lyft demonstrates that Uber's first-mover advantage isn't insurmountable, so who's to say the third-mover shouldn't be a free utility that provides matchmaking at cost?
The value is in the network of riders and drivers not in the software. The big value for the drivers comes when you can minimize the time gaps between rides, and for riders to be able to get pickups down.
Lyft was actually the first mover on the the UberX product category, Uber was only doing premium service when Lyft started growing.
Ultimately this market is a race to the smallest commissions possible. There are costs involved like credit card processing, insurance, operations, etc. I could see commissions going down to 5%.
Who would provide customer service, sales, marketing, user research and the other non-technical elements of the business? It's true of many companies that what they do is not very technically demanding (Amazon, Facebook, eBay, etc) but that very often means that you _can't_ replicate them by just replicating the technology - these successful companies are much more than just their software.
And anyway, I bet there is a surprising level of sophistication to eg: Uber's software
> Who would provide customer service, sales, marketing, user research and the other non-technical elements of the business?
Do you need any of those things? How much does Craigslist spend on marketing and sales?
Operate as a non-profit, compete only on price, and let drivers spread the word themselves. Imagine if at the end of the ride, your Uber driver told you, "Hey, next time call me with the CheapRides app and it'll cost you 20% less, and I'll make more."
There's no incentive to build and run a free Uber/Lyft competitor the traditional way.
If someone were to build a Stellar-like decentralized market that matched drivers with riders who pay with the market's internal currency, the incentive to build and improve upon the service would be the appreciation of the currency. People who thought it could succeed would buy some of the currency cheaply, build applications that make the market easy to use, and profit from the gains their improvements cause.
Interesting consequence of the lower cost of technical resources. I'm guessing the higher cost would be in marketing the service to get initial critical mass.
Just managing disputes between rider and driver would cost more than that. Since you're the one running the credit cards, you're going to be on the hook for all chargebacks and fraud.
And are you going to vet drivers at all? Check that they have a license and insurance?
Taxi rides are basically futures contracts. Not exactly fungible due to location but you might be able to price that in, somehow. Bring on a generic taxi ride commodities exchange.
This is a much more specific issue than most of the comments here are making it. People are talking about capitalism, competition, etc...
The problem is simply that a couple weeks ago Uber started sending UberX fares to Uber black car drivers. Which was a dumb move, because they are unprofitable and undercut the value of the premium car service. They've now reversed that dumb move.
Exactly. This was a protest over a very specific issue, and Uber ended up listening.
The article surprisingly doesn't really spin this into generalized pontificating and really talks about this specific grievance at length. HN commenters however are responding as if this was a general piece on Uber's failings as a whole... Strange.
It's great to see how easy it is for drivers to switch networks if they are unhappy, but drivers have to understand that prices are going down and they'll likely earn less money over time on all networks.
When articles are posted about Uber drivers earning $90k/yr, I'm sure many folks quit their $40k office job and hit the road. The thing is, driving taxi is pretty low skilled so the growing supply of drivers will really push down their income. There's an efficiency problem when an Uber driver "can earn" more than 75% of Americans, and existing drivers have been reaping the benefits of those inefficiencies.
Even if $90K a year is sustainable, driving a taxi is a very high-expense business. You'll drive your car into the ground far quicker than you did before, insurance is going to be insanely expensive (an UberX driver I talked to once told me his insurance is $7K a year), and gasoline isn't free (and getting less and less free every day).
The take-home from $90K driving taxis is very different than the take-home from $90K sitting at a desk.
This is how capitalism works, survival of the fittest. If someone comes along that allows the drivers to make more money, prudent drivers will likely switch to that service.
> This is how capitalism works, survival of the fittest*
* Unless you have enough money to change regulations in your favor, skirt regulations, and so on, in which case it's survival of the financially-backed.
Access to capital and the political world are part of "fitness" in this environment. Generally, the companies that are seen as most likely to survive have easier access to funding than companies that are seen as riskier. The same can be said of companies that are likely to succeed v.s. simply survive.
Don't forget that even if you have a stellar implementation and great service, you may not be able to secure financing for marketing/lawyers/etc. or other "gate-keepers" that would enable financing ... thus there's the "who you know / who you can influence" aspect. I guess that's kind of my issue when I see people talk about how great a free-market is, when the reality is that our "free"-market has numerous levels and types of gatekeepers which prevent those "genetically"-strong startups/companies from disrupting. Hmm, my explanation on that was absurdly bad, I apologize, but hopefully you kinda get what I'm saying, hehe.
But the best part of this is that as a consumer of taxi services and digital ones like Uber (I've not used Lyft but love Uber), we get cheaper and ultimately better service by them competing. I say bring on the competition!
Lyft drivers are creeped out by Uber. "Operation: Shave the Stache" [1] is one of the most manipulative business practices I've heard of. Lyft chooses to invest its money on improving the experience inside the car, and hiring socially intelligent people, who they then treat like human beings. Uber could learn a lot from them.
The drivers, who are mostly comprised of SUV and black car drivers, have planned a protest outside of the Long Island City Uber Office
I wonder how much good the office protest will do versus just emailing Uber saying "Adios Uber! I'm headed to Lyft because of..."
The on site picketing made sense for blue collar industrial and government workers because the switching cost of quitting your job and (hoping) to get hired at another plant would have been very high. For hire drivers working for Uber and Lyft essentially have close to zero switching costs. A demonstration of that would seem more effective than picketing.
The media attention that drivers get through this action help signal to consumers that they are moving to a competitor. This might make me (a rider) more likely to fire up the Lyft app instead of Uber next time I need a ride.
True, media attention is important but I wonder if the protest will make it onto more mainstream channels and not just the tech news/blogosphere.
Local papers in Dallas have been doing quite a bit of coverage as Uber and Lyft taken on the politically connected taxi industry here. I don't know if intra-service fighting would get as much attention.
Maybe some HNers in the Long Island area will chime in.
Long Island City is right across the river from Manhattan. It's technically on the Island, but for most people Long Island = Suffolk and Nassau, not Brooklyn and Queens.
This is how free market capitalism is supposed to work - where mobility (switching services) is low to non-existent and so then users can migrate en mass to the ecosystem that is governed better or more in their favour.
That's awesome I cancelled my account last month due to the issue of "we are lowering prices for summer" me thinking naively that this meant eventually prices would go up after a month or two. However after receiving not only notification that the prices would not go up further (Houston drivers at a minimum) but also I would now be required to pay 10 dollars a week to maintain service. Prior to Uber I was thinking the sharing ecnonomy was an embodiment of a change in corporate attitudes. F me right?
The current incarnation of ride shating is fatally flawed. I imagine a superior model in which there is no direct reward for picking somebody up, rather a network of normal people, who can submit and receive requests to pick up. The only compensation would be that in a splitting of gas, which could potentially be done automatically.
The main difficulty in getting a network like this to succeed is the fact that there is no incentive for new drivers to join.
Until then, they are just a taxi company with lax employment protocol.
I can think of two possible sources of driver lock-in: insurance (on the clock but between rides) and car financing. Anyone heard of uber or lyft working on this?
There is another reason: employment status and the resulting side-effects.
If you lock in a driver, you start to look like an employer with employees. This creates enormous payroll tax responsibility, workers comp insurance and other headaches for Uber/Lyft.
I would bet that Uber/Lyft have burned a metric crapton of lawyer and accountant brains in an effort to be on the "safe" side of the independent contractor vs employee fight. They're not going to screw that up.
If the drivers create the value/provide the service and Uber is facilitating that by taking a share, it has to make sense for the value-creator/service provider to continue the relationship. If Uber erodes that margin, the drivers will leave.
Eventually Uber has to change to benefit their service providers and act a little more ethically. The drivers know of their underhanded ways with dealing with Lyft and eventually the public will.
I am an immigrant, I drove a black car in NYC(many years ago), my cousin drives one now. He is none too happy with the UberX situation right now.
Uber should consider the plight of the drivers and not their 100X VC overlords. Nobody ever got rich driving a cab, why victimize the drivers?
"Because we can?"
"We are making the market more efficient"
"Frictionless"
It is just at the expense of the drivers. That's your friction point.
Hard working people just want a fair shot, not to be exploited.
Instead of a billion-dollar pay day, why not just a little human decency.
I'm going to go ahead and assume there's an app that aggregates Uber/Lyft/whatever and just gets you the closest driver regardless of network. Uber's service goes from being a premium product to a replaceable commodity in a blink.
The bottom line is: If you're easily replaceable, you will feel the squeeze sooner or later.
Been in those kind of jobs myself and the only way out is to upskill until your value as a worker is high enough that ruthless managers that couldn't care less about the impact of their decisions on individuals won't get away with it.
http://fortune.com/2014/09/11/uber-vs-lyft-the-credit-cards-... It doesn't look like a lot of competition honestly. That probably paints Lyft in the best possible light too because it just takes into account US only trips (100% of Lyft's business and only a fraction of Uber's). But even then, that's only competition for the uberx market. These drivers are black car drivers, where uber has no competition at all.
Wait, strike? First off...IANAUD. If you become an Uber Driver are you under any sort of contract? Are you now an employee (W-2) of Uber or free agent contractor (1099). If drivers think they can get better fares elsewhere... go nuts and do it. Yay economics!
This. Although I don't understand the argument from the driver's side. They're upset about sometimes getting trips from uberx (and apparently making more doing so), so they're going to a place that pays less per trip and per hour? Something doesn't add up there.
If there was a factual claim here, I have to believe that they'd be sharing their numbers. It would be trivial for them to show a decrease in earnings (they can easily calculate gas and wear-and-tear) in the before-and-after earnings. The fact that that isn't happening makes me believe this is similar to the protests last year in SF. From the reports back then, it ended up being mostly drivers who had been banned from the uber platform who were trying to be reinstated (although that's not what they claimed).
> They're upset about sometimes getting trips from uberx (and apparently making more doing so), so they're going to a place that pays less per trip and per hour?
They're trying to convince Uber to stop doing what they don't want (according to them, they do not make more by accepting UberX fares, no matter what the company says) by denying them labour. In the meantime, they're doing work elsewhere, although are hoping not to permanently work there; they're hoping that Uber will cave in.
Denial of labour ("striking") is a tried-and-tested approach to persuading companies to do what the labourers want. They can't operate without labour, so labourers organise to deny them that until they get better working conditions/better pay/etc.
Assuming enough labourers agree to deny labour, this will work unless (a) what the labourers want, the company literally cannot provide without going bust, or (b) there are enough people looking for jobs and willing to put up with the bad terms that the company can hire them to replace the striking labourers.
This is a relatively simple idea, and has been a thing since the Industrial Revolution; I'm not really sure what you're not getting.
Heh they get banned if they accept/deny or plain deny more than 50% of the requests it says in the article.. that seems legit to me as a customer ;)
dont really want drivers (of uber or any similar company) to accept/refuse my rides.
Followed this Uber thing for a little, Read a few articles from the neo liberal tech press, specially interesting when Uber was banned in germany.
Initial Reaction to this: haha
Statists, take notice of how improvements in work conditions come from competition and not from regulation. They're better off now than through the monopoly of taxi medallions.
And anti-statists should take notice of how many improvements in working condition did require regulation, and how the Uber/Lyft market has special features (particularly, the fact that the primary service being provided to the end customer is provided entirely by one worker using their own capital and that the fact that what Uber/Lyft provide is essentially a matchmaking service where there is very low friction for a driver to switch services and for the other service to absorb new drivers -- which is not true in many other industries regardless of how competitive they may be on the consumer end.
Even in a competitive market for autos, the capital dependence of the industry -- and potentially geographical separation between plants -- means that if the workers in Alan's factory are upset with their working conditions, they very likely can't just walk over to Bob's factory en-masse and sign up to work there. The ability to do that with certain services that are 1:1 and where the middleman is just providing matchmaking gives the individual service providers more power to set working conditions with the middleman in a market where there are competing middlemen then would be the case in many industries.
What's happening right now to Uber and Lyft is a metaphor for how the free market works. You've touched on a few interesting points yourself:
"provided entirely by one worker" : this is like admitting that the problem comes from injecting hierarchy into the system, which in a free market can only happen voluntarily if both parties benefit from it, but in a statist society is imposed or restricted by the economy planners through regulation.
"essentially a matchmaking service where there is very low [switching] friction" : every market is a matchmaking service between the seller and the buyer, and the way to sustain low friction is to have as little regulation as possible (you will see the Uber/Lyft_fuelled prosperity (e.g. happy workers) disappear if the government steps in, and it will decrease wages to the point that it will be equal to the taxi market which is heavily regulated)
"which is not true in many other industries" : how can we know? "many other industries" are mostly regulated, and heavily so.You're saying deregulation doesn't work in other industries because they're already regulated.
The problem of workers and factories, as far as I know, is solved by unions. However, historically governments have regulated unions as well. Cf. Bangladeshi garment workers, their poor working conditions and their torturing of labor organizers.
> every market is a matchmaking service between the seller and the buyer
No, markets are not matchmaking services. Markets are places where people make matches, matchmaking services are a service that is sold in the market. Notably, its the core of the service Uber and Lyft provide, and its low friction to switch, as a user or supplier, between them. This is a special characteristic of the kind of service Uber and Lyft are selling.
> "which is not true in many other industries" : how can we know?
Because we can readily observe that what many other industries are selling is not matchmaking services between single-worker-provided services and purchasers of those services with low switching friction for workers because local competition exists which can readily absorb additional workers because there is little capital dependency for the service being provided that isn't carried with the worker and there is low friction for consumers to switch between service providers.
> You're saying deregulation doesn't work in other industries because they're already regulated.
No, I'm not saying either that deregulation doesn't work in other industries, or that to the extent it doesn't its because they're already regulated. I'm saying the specific features of the market in which Uber and Lyft are operating which provide significant leverage to their drivers to improve their labor conditions by leveraging competition among potential employers does not exist in most other markets, and so is not simply generalizable into "improvement in working conditions come through competition not regulation" (and that, additionally, history provides plenty of examples of improvement in working conditions that came through regulation.)
It certainly illustrates how workers can, in certain market conditions, leverage competition between services through which their labor is marketed to improve labor conditions, and its certainly worth understanding for that value.
I tried to respond on the other sub-thread about getting downmodded, but I think this is probably more concise than mine. I think the key here is that workers are always going to be better off when they have more bargaining leverage with their employer / are competed for more rabidly, and competition is fierce for drivers between Uber and Lyft more because of their business model than any regulatory influence (or lack thereof).
There are a couple of market preconditions that are glossed over here. For this competition to have actually worked in an effective way, switching costs for both the labor as well as the customer have to be low. Transactions also need to be fairly short and repeated to complete to keep feedback loops responsive.
There were also missteps with insurance that companies like Uber and Airbnb made, which were corrected, but, I suspect, wouldn't have been addressed as quickly without a legal/regulatory framework for liability. They're essentially hidden risks/costs to the consumer and employees.
So aspects of this market need more than a simplistic "Yay competition, boo regulation..." And, I think in general we need to move public & political discussion beyond that point an get a better understanding of where competitive markets work, and where they fail.
I don't yet have down vote privilege, but I have to imagine The GP (your original comment) got nuked because it is both needlessly inflammatory and also lacks a substantive argument. As for your response to dragonwriter, you appear to be talking past one another; of course markets are matchmaking services for buyers and sellers by definition, but what you've done here is mistake this specific case of relatively frictionless movement between employers increasing the surplus of the employees for an indictment of regulation in general.
This particular case seems to realize said friction (and consequently, the surplus/benefit for the drivers) precisely because the service itself being offered by Lyft/Uber is market like, and the end-consumer product is in fact offered by the drivers themselves. It is not clear to me (or the others disagreeing with you here evidently) that regulation has any bearing on this conversation -- in a world where both Lyft and Uber's respective operations are regulated by the state, the power is still in the drivers' hands because Lyft and Uber are competing to offer the drivers' services.
This is not exactly the common formula for most employee-employer relationships, although it may become more common as this business model takes off. What dragonwriter seems to be saying IMO is that there are certainly cases that don't fit this mold that are good arguments for state intervention; among them are cases where there is greater friction for the employees themselves due to the nature of the business; lack of information about compensation, working hours, or other metrics to evaluate the given positions; or, as dragonwriter said, physical proximity to the workplace itself.
If you would be so kind, please elucidate how you feel this particular seemingly unique scenario is generalizable to regulation in general.
PS: Apologies if this is wordy and difficult to follow, I have a hard time writing coherently into this tiny box.
Thank you for the thoughtful response. I agree with your points, including your elucidation of dragonwriter's reply.
I'll try to clarify my point: before Uber/Lyft, we had taxis. Just taxis. Then, the argument went: "Well yes, for taxis we need state intervention because if the government doesn't regulate cabs then anyone can charge fare and conditions will deteriorate and it will be inherently less safe and..."
Then Uber/Lyft comes around and all of a sudden the taxi market is "relatively frictionless" and has other "unique characteristics" that make it so beneficial to employees.
I'm trying to point out that there is nothing special about taxis. It is not a special market. I can't deny that one to one business relationships allow for faster change in the market, as the employee can simply up and leave at any point.
The taxi market was the furthest thing from frictionless until competition started. The power will always be in the employees' hands so long as anyone is free to start competition. We see this with this selfsame example - before Uber, taxi drivers were basically employees to medallion owners (and taxis were supposed to be a regulated system for the free enterprise of starting a one-man cab company, not for the rich to buy all medallions and rent them). This is an example of failed regulation that allowed the current exploitation of taxi drivers. Competition is now allowing better conditions for those same drivers, even though there's no pretense that Lyft drivers own their business. It's an above-board operation and more moral than before, and not surprising that it works better for both parties engaged in this.
So what I'm arguing is that whenever we say "but it doesn't apply to roads/this/that", it's usually because of the blind spots we have from looking at the system the way it is and being unable to imagine how else it could be. The roads example is a classic one.
Because you're making a brazen libertarian point in a thread on a tech discussion board where it's not all that warranted. If this were a discussion of public policy it could be different. I chimed in with that stuff when Net Neutrality came up, for instance. Otherwise it just gets overbearing. That said, I also got voted down there, I think libertarians are losing ground on HN.
The philosophical connection between the hacker culture/ethics and anarchism was much clearer to me and many others maybe a decade ago, but now I see this losing ground.
There's a fear in people when someone calls for decentralization of power. Most other types of decentralization are obviously good in the eyes of programmers, but not this one anymore.
> The philosophical connection between the hacker culture/ethics and anarchism was much clearer to me and many others maybe a decade ago, but now I see this losing ground.
It is not even that so much in this case as the language used.
The HN community works hard to encourage polite conversation. Even a commonly agreed upon opinion will be down voted if not stated in a polite and clear fashion.
If you had instead stated "This is an excellent example of free market competition allowing more freedom for workers than are exhibited in a government regulated market" then your comment would likely have been better received. :)
My ugly questions on this are: What about liability for when an Uber or Lyft driver kills someone in an accident driving unsafely? Or just murders someone because they're having a bad day? Or get carjacked? I mean, I guess it's just one spree away from people doing dangerous things?
The only reason to phrase your question the way you did is to increase the FUD surrounding car services like Uber and Lyft. The same question could be asked of any person in any profession.
Regardless, the answer to your question is the first result when you search Google for "Uber liability coverage":
> Uber holds a commercial insurance policy with $1 million of coverage per incident. Drivers’ liability to third parties is covered from the moment a driver accepts a trip to its conclusion. This policy is expressly primary to any personal auto coverage (However it will not take precedence over any commercial auto insurance for the vehicle). We have provided a $1 million liability policy since commencing ridesharing in early 2013.
It's a legitimate question because Uber and Lyft are a "new thing" and they're international brand names, something that's not true of regular cab services.
If a cab driver in New York City rapes and kills a passenger, it wouldn't make people distrust all cabs in NYC, much less cabs in other cities; there's no brand name to be damaged by news coverage, and as a news story it probably wouldn't even be covered by media outside of the NYC area.
But if an Uber driver rapes and kills a passenger, it will be covered by media everywhere, because Uber is a newsworthy company and because Uber has a global presence, and the Uber brand will be damaged worldwide, not just locally. Because Uber is a "new thing" there will be lots of people/media asking questions about the safety of Uber (in many cases stupid questions, but still).
The value of Uber isn't really in the tech or the app - it's in the networks of riders and drivers in each city. If each of those can be aggregated into some other kind of service, where Uber, Lyft, etc. are just providers of payment processing, and possibly some operations expertise, that middleman network will capture all of the value.