{"id":277084,"date":"2021-06-17T16:34:18","date_gmt":"2021-06-17T13:34:18","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/ubers-disastrous-cocktail-manipulating-supply-and-demand\/"},"modified":"2021-06-17T16:34:18","modified_gmt":"2021-06-17T13:34:18","slug":"ubers-disastrous-cocktail-manipulating-supply-and-demand","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/ubers-disastrous-cocktail-manipulating-supply-and-demand\/","title":{"rendered":"#Uber&#8217;s disastrous cocktail: Manipulating supply and demand"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a5026bba5fc1\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a5026bba5fc1\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/ubers-disastrous-cocktail-manipulating-supply-and-demand\/#A_double-edged_sword\" >A double-edged sword<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/ubers-disastrous-cocktail-manipulating-supply-and-demand\/#Things_will_end_not_with_a_bang_but_a_whimper\" >Things will end not with a bang, but a whimper<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#Uber&#8217;s disastrous cocktail: Manipulating supply and demand<\/strong>&#8221;<br \/>\n<img decoding=\"async\" src=\"https:\/\/img-cdn.tnwcdn.com\/image?fit=796%2C417&amp;url=https%3A%2F%2Fcdn0.tnwcdn.com%2Fwp-content%2Fblogs.dir%2F1%2Ffiles%2F2021%2F06%2Fuber.jpg&amp;signature=b43405b12354e613e236af30170f2d02\" \/><\/p>\n<div>Back in March, I wrote about how Uber\u2019s ride-hailing business was having an absolute downer. One that had been spurred on by a drop in rider numbers thanks to COVID-19, and legislative rulings over how it classifies its drivers.<\/p>\n<p>It was shaping up to be a fight between David (the drivers and lawmakers) and Goliath (Uber). At the time, I professed that David was yet to find his projectile, but now, I\u2019m questioning whether he\u2019ll need one at all to force Uber to change how it treats its drivers.<\/p>\n<p>Since writing that article, I had a number of Uber drivers contact me directly to describe the torrid time they\u2019re having.<\/p>\n<p>One driver described how they made about half the minimum wage for their state, despite putting in a 6-hour shift.<\/p>\n<p>They went on to describe how their earnings have tanked over the past few years. Going from up to $400 per day to less than half that. This unexpected drop in earnings has led them to default on loans, and put them in a challenging financial situation that they didn\u2019t see coming.<\/p>\n<p>Another driver, whose partner works for Uber Eats part-time, compared what it\u2019s like being a ride-hailing driver to delivering food for Uber\u2019s sister service.<\/p>\n<p>They told me that their partner was getting kick backs and incentives from Uber Eats making the gig financially worthwhile. However, they, along with other drivers they\u2019ve spoken to who have been faithful to the platform, are not being prioritized for those bonuses.<\/p>\n<p>Instead, there is an influx of new and returning drivers, incentivized by those bonuses, soaking up the stimulus money that was allocated to increasing driver supply post-corona.<\/p>\n<p>As rider numbers dropped during the pandemic, many drivers left the platform as there wasn\u2019t the demand to make it financially viable. Most found other jobs, or have moved on.<\/p>\n<p>Uber is playing with the economics of its own market, and it doesn\u2019t seem to be working. It adjusts prices to encourage drivers to join and pick up rides, and it increases prices to exploit the market when demand is high. Unfortunately, this leads to a bad experience for both riders and drivers at some point.<\/p>\n<p>Add that to the fact that drivers are struggling to make as much as they once did, are treated poorly, and aren\u2019t returning to the platform inline with rider demand, and we have a cocktail for disaster.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"A_double-edged_sword\"><\/span>A double-edged sword<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If Uber employed its drivers, rather than holding them in constant contractor limbo, perhaps it wouldn\u2019t have had to incentivize them so hard to return. What\u2019s worse, those that stayed and showed some loyalty, didn\u2019t see any reward.<\/p>\n<p>Those incentives won\u2019t last, either. Uber\u2019s strategy of entering a new country, offering good prices to lure in drivers, and then cutting tariffs to increase ridership have proven fruitless in achieving the long-term impact it desires.<\/p>\n<p>Perhaps improving working conditions, benefits, and long-term average earnings would be a more rewarding strategy.<\/p>\n<p>Despite these bonuses, drivers still are refusing to pick up rides. According to The Rideshare Dude on <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">Twitter<\/a>, due to the lack of drivers, rides are costing far more than they did before.<\/p>\n<p>Unfortunately, drivers are only getting a fraction of that inflated price, so it seems Uber is more keen on capitalizing on the situation, rather than paying drivers a decent enough cut to make them want to do the work.<\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"500\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">Right now Uber is charging an extra $80 for a ride from the airport to my house. Of that $80 the driver only gets $15 and that is why so many passengers are sitting at the airport waiting for a ride.<\/p>\n<p>\u2014 The Rideshare Dude (@1RideshareDude) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/1RideshareDude\/status\/1404865160393678850?ref_src=twsrc%5Etfw\">June 15, 2021<\/a><\/p>\n<\/blockquote>\n<p>Of course, these are just anecdotes, seedlings teased from the dandelion narrative floating into the face of Uber\u2019s gigantic leaf blower.<\/p>\n<p>However, over the past few weeks, many other outlets have been <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.bizjournals.com\/sanjose\/news\/2021\/05\/31\/prepare-to-pay-more-for-uber-and-lyft-rides.html\">reporting similar situations<\/a>, and claim that Uber rides are <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.curbed.com\/2021\/06\/uber-lyft-expensive-new-york-city.html\">not going to get any cheaper<\/a> any time soon.<\/p>\n<p><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.bizjournals.com\/sanjose\/news\/2021\/05\/31\/prepare-to-pay-more-for-uber-and-lyft-rides.html\">Research suggested<\/a> that rides in March cost 37% more than they did a year earlier. In April, costs were up 40%.<\/p>\n<p>The issue is that Uber\u2019s pricing model has to balance between big swings in demand from riders and the supply of drivers.<\/p>\n<p>In economics, this is known as \u201cprice elasticity.\u201d Historically, Uber\u2019s pricing has been relatively elastic. Incentives, like <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/time.com\/3633469\/uber-surge-pricing\/\">surge pricing<\/a>, can noticeably get more drivers on the roads at given times to meet supply and ensure prices stay reasonable for riders.<\/p>\n<p>The same thing h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ens when Uber offers incentives and bonuses to new and returning drivers. They return, for a while.<\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"500\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">Today my Uber ride from Midtown to JFK cost me as much as my flight from JFK to SFO\u2026. <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/t.co\/Fa3RjUOZ00\">pic.twitter.com\/Fa3RjUOZ00<\/a><\/p>\n<p>\u2014 sunny madra (@sundeep) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/sundeep\/status\/1397670005110546432?ref_src=twsrc%5Etfw\">May 26, 2021<\/a><\/p>\n<\/blockquote>\n<p>You see, elasticity has a problem: it is elastic. It can only stretch for so long, and inevitably at some point (usually when the incentives or bonuses are removed) things return to the way they were.<\/p>\n<p>In other words, when there are too many drivers, and not enough riders, prices are low, and it\u2019s hard for workers to make any money. But it\u2019s a great situation for riders.<\/p>\n<p>When there are too many riders and not enough drivers, prices go up. Good for drivers, bad for riders. It\u2019s an <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/open.spotify.com\/episode\/0XAdhHUSRh3ZgDfqeCloIj?si=uVNQ1UoITXitK7Nsj8Bc5Q&amp;dl_branch=1\">economist\u2019s dream<\/a> example of how a market can work.<\/p>\n<blockquote>\n<p><em>I\u2019d like to take this moment to point out a fallacy Uber often sells to its drivers: that they have the freedom to chose when and how they work.<\/em><\/p>\n<p><em>Ultimately, they don\u2019t. They work when the market requires them to, when they are incentivized to, and when there is demand. The notion that drivers have total control over when they work, is a misnomer.\u00a0 Free will doesn\u2019t exist.<br \/><\/em><\/p>\n<p><em>Back to the situation at hand\u2026<\/em><\/p>\n<\/blockquote>\n<p>The reality is that this economic perspective assumes that supply is infinite. That if drivers are incentivized, they will return to satisfy the increasing demand.<\/p>\n<p>Except, this doesn\u2019t consider the situation for drivers and whether they actually <em>want<\/em> to return. All things being equal, drivers would return. Though it seems not enough drivers are taking the bait.<\/p>\n<p>If the long-running cases over driver working conditions, pay, and classifications are anything to go by, there is a lot more friction (and hesitance) for drivers to return to the platform, than for riders.<\/p>\n<p>Although it grapples with the same economics the world over, at the moment, this issue is most prevalent in Uber\u2019s US market.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Things_will_end_not_with_a_bang_but_a_whimper\"><\/span>Things will end not with a bang, but a whimper<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If the only reason drivers come back to Uber is because of the incentives, they\u2019re unlikely to stay when the bonuses dry up.<\/p>\n<p>As the two drivers at the top of this article showed, average and typical earnings are way down on what they were a few years ago. Uber\u2019s conventional driver pay structure is waning. Those that quit the platform once are surely the most likely to leave as soon as the going gets tough again.<\/p>\n<p>What\u2019s more, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.cnbc.com\/2017\/04\/20\/only-4-percent-of-uber-drivers-remain-after-a-year-says-report.html\">most Uber drivers quit after 12 months<\/a> in a normal year. Given the profound stress and uncertainty surrounding coronavirus, it\u2019s understandable that they\u2019re in no hurry to return.<\/p>\n<p>I\u2019m starting to wonder how many humans that could possibly work for Uber remain in existence.<\/p>\n<p>Uber is well and truly between a hard rock, and an even harder place right now.<\/p>\n<hr\/>\n<p><i><span>Do EVs excite your electrons? Do ebikes get your wheels spinning? 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One that had been spurred on by a drop in rider numbers thanks to COVID-19, and legislative rulings over how it classifies its drivers. It was shaping up to be a fight between&#8230;<\/p>\n","protected":false},"author":1,"featured_media":277085,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/img-cdn.tnwcdn.com\/image\/shift?filter_last=1&fit=1280,640&url=https:\/\/cdn0.tnwcdn.com\/wp-content\/blogs.dir\/1\/files\/2021\/06\/uber.jpg&signature=38a7cbdd412422023b22a2e3e19c9290","fifu_image_alt":"","footnotes":""},"categories":[18],"tags":[],"class_list":["post-277084","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-technology"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/277084","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=277084"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/277084\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/277085"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=277084"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=277084"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=277084"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}