Sunday, February 12, 2017

Dislike Uber For The Right Reasons

I've never been much of a fan of Uber or any of the other companies spearheading the "sharing economy". While there are certainly some positives to them, I see them primarily as a cynical way to skirt around regulations, laws, insurance and other consumer protections that mean traditional services cost more, but that consumers and employees are generally better off. Like environmental agency regulations, or drug testing requirements, these things are frequently demonized by people on the right in particular as stifling innovation and job creation, and completely ignoring the criminal actions and negligence that typically proceeds the creation of any regulation in the first place. Companies usually do the wrong thing and cause the government to create regulations to protect consumers and employees; the government doesn't generally do this sort of thing just for the fun of it.

Of course, government regulations can be stifling at times, and they can be poorly policed and enforced, creating work for businesses while not actually providing any benefits to society. And in cases like Uber, taxi services exploited monopolies in cities and didn't respond to consumer demands, making an opening for an alternative to pop up. So this can help to justify the need for a disruptive company like Uber, though it's also very likely (given the rise of all kinds of other "sharing" businesses) that they would have popped up anyway, since they now operate in cities all around the world that have quite reasonable taxi services already, and thus no obvious need for disruption with dubious legality.

Given all of that, I find it quite galling that I'm here now defending Uber, at least in a certain way. Specifically, the recent #DeleteUber social media trend that resulted from what I can only see as a completely misguided belief that Uber is supporting the Trump administration and needs to be punished. Now, separate from the question of whether it makes sense or is reasonable to punish the entire workforce of a company because of political opinions or actions of its CEO, what stuns me more is how people convinced themselves of this "fact" in the first place.

Service Pricing 101

Let's try a hypothetical.

Say you're Uber and there is some KKK rally going on somewhere. You don't want to support it, but let's say that for whatever reason, you don't want to straight out ban your drivers from doing any pick ups or drop offs near the area of the rally. How would you go about it?

Anyone who understands the Uber business model knows that when there is high demand at a particular time and place, they can't just make more people work there like a traditional taxi service could, since the drivers are all voluntary. So instead they increase the rate for rides in that area. This encourages more Uber drivers to get out and service that area, in order to make more money. The flip side of this is that when there are areas currently running at a higher rate, this is going to discourage servicing of areas with a lower rate. Quite straightforward.

So to discourage attendance of the hypothetical KKK rally, you would make sure the rate is lower in that area than in other areas, which would reduce the drivers servicing it, making waits longer. What you definitely wouldn't do is increase the rates in that area, which would increase service to it. It's possible that if you went to the extreme and raised rates to an exorbitant amount that would also reduce service in the area since drivers would show up but no customers would want to pay it.

Basically, to reduce services you either raise rates super high or make them super low.

This fact can seem counter intuitive to people who have only thought about the Uber pricing equation from the customer side, and not the driver side. So counter intuitive, in fact, that Uber has been criticized for raising its rates during times of crisis, disasters, etc, because people think that they are doing it to profit from tragedy, rather than understanding that it's how they manage supply and demand with an effectively volunteer workforce.

And as a result, Uber has had to respond by not raising their rates during times when people would see them as profiteering unfairly from other people's misfortune. The massive irony being that under those circumstances, by not raising prices they actually make it harder for people in these situations to get a car and get away!


So, we have a situation where protesters are at the JFK international airport protesting an immigration ban, and taxi drivers announce that they are going to stop servicing there for an hour in support of the protest. Uber announces, after the strike, that it will turn off its surge pricing in the area, which will result in longer waits. And this is seen by many as being a strikebreaking move, and so they decide to boycott the company.

There are so many things wrong with this situation that I feel like I'm stating the obvious in pointing them out. But here we go:

  • If Uber actually wanted to strikebreak the taxi service, the right move would have been to increase surge pricing to get more Uber drivers to the airport area. What they did was in fact the strongest supporting move they could have done short of banning drivers from going there altogether.
  • Uber was acting in order to avoid criticism for price gouging people stuck at the airport, costing themselves and their drivers profits as a result. They were putting their money where their mouths are.
  • Uber annouced the stopping of surge pricing after the strike had taken place, not during it.
  • People were at the airport protesting the stopping of people from being able to enter the country, yet completely missed the irony of forcing people to get stranded at the airport by supporting taxis halting services and boycotting a company trying to provide people with a way to, you know, actually get further into the country than the airport food court.
  • People have long been applauding Uber in cities like New York for providing an alternative to taxis and screwing up their monopoly. Yet here they selective now want Uber to support the taxi industry? If you see Uber as a welcome disruptor of the taxi monopoly then you can hardly complain if you think they are doing something that goes against the taxi industry's interests in that area. It wasn't actually the case, but people should expect Uber to act against the taxi industry, since their business model is basically trying to put them out of business!


A final point. I believe that a lot of the support for boycotting Uber was due to an already existing unhappiness with the fact that their CEO is in the Trump economic advisory group (though he's since left due to all the negative pressure). So I think people were looking for an excuse to punish the company, and so were far too willing to interpret what happened at the airport as bad behavior by Uber, even after explicit clarification by the company as to their reasoning.

And yet, even here, it seems that people are so eager to lash out at the Trump administration that they're actually acting in ways that are going to be horribly counterproductive in the long run. This same advisory group also has Tesla CEO Elon Musk, and the CEOs of General Motors, IBM, GE, and even Disney. Unless people are actively arguing for a boycott of all of those companies too, and think that someone like Elon Musk is a Trump administration lackey, then they're really just being completely inconsistent and randomly punitive.

People complain when the Trump administration gets horribly unqualified people to advise him or appointed to various positions, but then they complain and boycott when reasonable people are put in those positions. Don't you want people like Elon Musk advising the president, rather than some uneducated, ignorant person? How is it helpful to the long term prosperity of the US to punish people who are actually trying to provide the administration with good advice so that they will hopefully make better decisions?

There has to come a time when US citizens realize that, like it or not, they actually need the Trump administration to succeed, because the government can't fail while somehow all of the "right thinking" citizens prosper. You can hate your leaders all you want, and many people do in many countries, but trying to make them fail horribly is as sensible as trying to make your employer fail while somehow thinking that you can retain your job!