Now I understand that the title might be a little “click-bait,” I would like to share a view that has not been shared recently: the takeover by Uber of the transportation sector is very worrisome.
To my limited understanding, transportation has been a public good. After the streetcar fiasco in the 1930s (where transportation was more private), the past 80 or so years, the majority of roadways have been free. You could get in your car, and, for an extremely large part of the population, drive without being charged. What a beautiful thing! No wonder families packed up in the cars for the annual obligatory summer road trip. Enter Clark Griswold.
Look kids. Big ben. Parliament.
However, since the advent of technology, the subsidy reversal of vehicular travel, and the increasingly allure of air travel, the age of the automobile is coming to an end. Yes, it is coming to an end. While I love driving, and the dream of driving a Ferrari on a windy open road, it is coming to an end. Costs are increasing. Sub-prime auto loans are at $1 trillion total. Those smartphone-focused millenials worried more about their tweets than getting a car.
So in bucking this trend, my fiance and I elected to not drive. Recently, we were patrons of a rodent-sponsored large institution. My fiance and I met some friends at their hotel, which was about five minutes away from the park. After realizing we could not rent a small greyhound bus to take our group in the same vehicle, we decided to split up and take separate Uber rides. We paraded around, rode some rides, and ate some overpriced processed food. Afterwards, we had a decision: take an Uber or a taxi. I elected for the latter.
My fiance told me, “What the hell are you doing? Why aren’t we taking an Uber? It is so much cheaper.”
“But,” I replied, “The taxis are right here. We don’t have to wait.”
“So, it is also much more expensive. You are so impatient.”
And yes, she is right. I was impatient. It was more expensive (in fact, it was over 2x what I paid getting into the park). Happy wife, happy life…words of wisdom I did not head. However, here are my reservations:
TNC drivers, while courteous, are not professional drivers
Let’s be clear. The car-sharing firms Uber, Lyft, etc. do not employ professional drivers. They employ most any old Dick or Jacvne who has a nice enough car. Now, every driver I have had has been very pleasant. They are usually more pleasant than any taxi driver. However, they are not a professional which is a key sticking point. I’ll explain why.
I don’t want to navigate to the airport, a convention center, or any other major landmark. I expect that someone who I am paying knows these things. An extra bonus if they know the lay of the land.
What I really do not want to do is navigate for the driver. This has happened more than once. A few times I had to actually navigate for them, using their phone!
So what incentive do they have to be a competent driver? They may be rated poorly and suspended from driving after what – a few drives?
The loss of Uber income is not a major deterrent for drivers. This is a side-job for most drivers. Now I know some people do this full-time. Okay, they may be a professional driver. However, they do not have as much on the line as taxi drivers.
If a taxi cab driver gets in an accident, or gets many complaints, their only source of income and sometimes their retirement plan (as is the case with the medallion system) are out the window. Kaput. They are gone. All that they worked for and all their hopes and dreams are gone. So, they have a huge incentive to actually do well
Uber’s revenue model is completely bonkers (and is going to drastically change)
Uber’s rides are not market priced, let’s be real. They have used their massive war chest at $9B. Judging from my experience at “The Kingdom,” this was a 6 mile trip. Using the IRS’ $0.55/mile cost, it should have cost me $3.30; however, I paid $8.34, a $5 premium for the driver’s time and use of the technology. $5 for getting out of bed, waiting for a call, receiving the call, driving over and then waiting for another call. While this was a short trip, that seems like pennies.
This didn’t seem right to me. Yes it is attractive, but it is just not right. $5? In today’s age? That seems awfully low. Since this is a highly subsidized marketplace, I worry about what will happen when the subsidies run out.
Well, what happens when a firm underbids the marketplace to force more expensive firms out? We can point to many examples of predatory pricing (Amazon, Wal-Mart) or even monopolistic pricing (epipens). I full expect Uber, with their culture, to raise prices substantially once they are the only game in town, barring any sort of regulation.
What else causes Uber to be competitive with Taxis? Employment (nay, “contracting”) of drivers. Since Uber has to provide payment to their drivers (around 80% of the total fare), reaping this cost and removing the issues of these liabilities (lawsuits, insurance, payment, and the fear of regulation) is in their best interest. There are many articles and discussions on this that I won’t get into it, but autonomous vehicles are the next logical step for this company.
Uber’s culture is worrisome
I remember reading when I first heard about Uber that they had run data to showcase “rides of shame” for young women. What they had done was look at trips that started in popular nightlife districts (bars, clubs, etc.), and then determine if the ride was to a location different than a subsequent ride in the morning. This way, they could infer that the first ride was to a hook-up’s house, and the second was their ride of shame back home. They only did this to females:
Uber’s 10 Worst Actions—Threats, Lies, Sexism & Shady Business Deals
Where does this leave me?
Well, I am not completely against the TNCs, but I do not believe them to be the panacea that the industry makes them out to be. They do not employ quality, professional drivers, their finances and pricing is unrealistic, their incentive to undercut and provide predatory pricing is too high, and they are driven by a misogynistic culture.
I will still take them, but I do so with caution. I think we should all be a little cautious of a company that wants to be the sole-source provider over our freedom of movement.
 From Zero to Seventy (Billion). The Economist. 3 Sept 2016, p. 17.
What surprises me to no end is how Taxi cab companies have failed to address the issue of the smartphone market. I am convinced that folks out there would take more cabs if they could call them to their location in the same way that you do with TNC’s.
However, It is my belief that Uber will eventually be curbed (to some extent) by the market. For example, in my opinion Lyft is great option to Uber. It is a company where the culture is ride-sharing or people oriented. Having worked with them as a contractor I can say that my experience was somewhat different than those who I knew who worked with Uber. Moreover, I’m not sure the taxi industry will ever truly disappear for the reason who highlighted above. Often times, cabs are ready to go exactly where you are: that is a major convenience and in our society there will always be people willing to pay more for convenience… well, at least until we have fully autonomous self driving cars…
Interesting thought. While I did focus on Uber, I do agree that I am a little more favorable of Lyft. In fact, it is what I typically do given that they give more to their drivers and I can tip in app.
I have started to see Taxi companies band together and make their own apps. RideYellow was one I saw while in Anaheim.
Your last point is very good: the benefit of hailing is solely on taxis. I saw a report in where East coast cities (those not built around the automobile) saw that the taxi industries were less impacted due to the fact that people could hail a cab on the spot. Cities like LA which were built around the automobile saw taxis plummet. Uber, Lyft and other TNCs, can’t do this.