How Uber Profits Even While Its Drivers Aren’t Earning Money

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Today, RSG contributor John Ince takes a look at the data Uber is extracting from drivers even when they’re not on rides.  Data and privacy aren’t things to be taken lightly, so I think it’s important to stay on top of these types of stories.  We also explore some safety concerns with Uber drivers logging too many hours, and share an article from the Financial Samurai who is finally calling it quits with Uber.

How Uber Profits Even While Its Drivers Aren't Earning Money

How Uber Profits Even While Its Drivers Aren’t Earning Money

Sum and Substance: “If I’m doing something useful for the company, I should be paid for that time,” Mark says to me as he drives me over the Brooklyn Bridge. “That’s what work is, right?” 

It seems like a simple enough principle. And yet when it comes to the nature of work in the digital platform economy, getting paid for that time is anything but a simple proposition. Mark has a special appreciation for what constitutes value to a corporation. In a city where most Uber and taxi drivers are recent immigrants, he’s an anomaly, a former Wall Street banker who was laid off in the recession and has turned to Uber for part-time work. (Mark and other Uber drivers I spoke to for this story, both in person and online, have requested that their real names not be used out of fear of reprisal from Uber or other employers.) 

The usefulness Mark refers to is the data he generates for Uber—not when he has a fare, but when he is waiting to be summoned and isn’t making any money. Uber drivers call that time without fares “dead miles.” Drivers may spend that time roaming around waiting for their next request from the Uber app. Or they may drive from a low-density area where they dropped off their last passenger back to a high-density area where they are more likely to find a new passenger. 

While those dead miles are unpaid, the data Mark generates during that time is immensely valuable to Uber. Interviews and research conducted last year by my colleague, Alex Rosenblat at Data & Society Research Institute and Luke Stark of New York University, illustrated how Uber collects data from drivers even during their unpaid time.

My Take:    This is the first article I’ve seen that shows just how Uber profits from data collection in ways that we don’t often consider as drivers.  To win points with regulatory bodies, Uber usually tries to make the case that they’re a technology company not a transportation or taxi company.

Of course, data collection is endemic to the modern tech world.  Google or Facebook’s data about our search patterns or postings makes their targeted ads much more valuable to those who want to reach specific groups.  Perhaps this is one aspect of Uber’s business model that hasn’t been adequately understood – or, more likely, it’s just part of the hype that Uber execs peddle to their investors.

Call to restrict Uber drivers’ hours over safety concerns

Sum and Substance: Cab and transit-safety advocates on Monday demanded that the city’s Taxi and Limousine Commission restrict Uber drivers’ hours as it does with hacks, arguing that it’s not only fair, but potentially lifesaving. 

As The Post exclusively reported Monday, some Uber drivers said they are staying behind the wheel up to 19 hours daily to make ends meet. Uber imposes a weekly 100-hour limit on its drivers but not a daily restriction. Meanwhile, the TLC limits yellow cabbies to 12 hours a shift.

“There is a reason why taxi shifts are capped at 12 hours — anything longer creates an imminent safety hazard for drivers, passengers and pedestrians,” David Beier, president of the pro-cabby Committee for Taxi Safety, wrote to TLC Commissioner Meera Joshi on Monday. “When drivers become too tired to safely operate a motor vehicle, they need to be off the road,” Beier said. The transit-safety group Transportation Alternatives also argued for stricter regulations on the city’s Uber drivers. “There is nothing more important than safety when it comes to for-hire vehicles,” said the group’s executive director, Paul Steely White. “It’s up to the TLC to make sure that these vehicles are safe.”

TLC officials said they are considering making a blanket driving-time limit that would apply to all of the different kinds of cars in the industry, but that they first have to figure out a way to track when Uber and Lyft drivers while working. At the moment, they don’t have the technology to track the drivers’ hours, the officials said.

My Take:   In light of the recent fare cuts, these safety concerns with Uber drivers raise a timely issue that deserves greater scrutiny. Many drivers have no choice financially, but to drive longer hours to make what they need to pay the rent and other bills brings up safety concerns with Uber drivers.

But in so doing, are they still alert? I know there have been times at 2 AM when I’m feeling bleary eyed and I get one more request at a surge and I swear this will be my last one … then there’s another … and another.  I learned a hard lesson on this when I got a red light camera ticket  which cost me $490, even though I wasn’t guilty.  I was so tired I tapped the app to accept while entering the intersection on green – and I stopped in the intersection to check for navigation.  When I started up again, the light was red and the camera flashed.  That was just a ticket.  What if driver fatigue leads to an accident?

A $640 Uber ride is one expensive financial lesson

Sum and Substance:  I read with interest the story about Bonnie Lieb, a Virginia woman who was shocked — shocked — to learn too late that her 30-minute Uber ride to Reagan National Airport from her home during the recent blizzard cost $640.94. “I nearly passed out,” Lieb told The Washington Post’s Katherine Shaver. But it was clear to me what went wrong. Here are the money mistakes she made and what you can learn from her experience:

Mistake No. 1: Lieb said she had heard from neighbors that the ride to the airport could cost between $50 and $70. Never rely on what people think something costs. Confirm for yourself. It took me less than 30 seconds online to get an estimate from Uber on how much a ride from my home to Reagan National Airport would cost. In Lieb’s case, it turns out the base price for the SUV service she ordered was $144.76, Shaver reported. Apparently she hadn’t noticed the cost of the base fare.

Mistake No. 2: She didn’t take the time to do the math before agreeing to take a ride. Because there was a blizzard, Uber imposed a surge price of 4.4 times the base price to transport Lieb to the airport.

My Take:  This article details what has become a recurrent theme in anti-Uber passenger tirades – Surge Shock.  The article goes further to point out that a little due diligence on the passenger’s part could have prevented the shock.  The unfortunate side effect of Surge Shock is that often the driver bears the brunt of the passenger’s negligence even though we have no control over what the passenger is charged.

Fred Wilson: Uber’s Travis Kalanick Is ‘Wimping Out’ And Needs To ‘Take the G—— Company Public’

Sum and Substance: Venture capitalist Fred Wilson compares going public to taking medicine, and he has some strong words for tech companies that refuse to take their medicine. “It doesn’t taste good,” he said on stage at the Upfront Summit in Los Angeles on Thursday. “But it makes you better.” 

It’s the slowest tech IPOs have been in years, and Wilson has had enough with companies staying private to wait for better market conditions or to keep getting capital from private firms. “I agree with Bill Gurley on this. Man up! Woman up! F—— do it! Don’t be chicken!” Wilson ranted, referring to another outspoken VC. 

One company in Wilson’s crosshairs is Uber, the ride-hailing company valued at more than $62 billion in the private market. Its CEO, Travis Kalanick, does not appear to be in any hurry to take the company public. Kalanick sees an Uber IPO as being a few years off still, and has compared its situation to being like an eighth-grader while people are telling them to go to the prom. Wilson, who isn’t an investor in the company, doesn’t buy it.

My Take:  Fred Wilson, the guy who’s calling Uber CEO Travis Kalanick a wimp, is not an investor in Uber but he’s expressing something that other investors like Bill Gurley of Benchmark Capital have been saying.  Could it be that Uber’s investors are getting antsy with staggering losses in 2015? Are they getting worried when they see the trading value of several other “unicorns” plunge?

One of the submerged areas of this whole Uber phenomenon concerns the promises Uber has been making to investors through “liquidation preferences” and “ratchet” agreements.  These are special deals Uber cuts with investors that seek to mitigate the risks investors are taking by giving them certain priorities upon a liquidity event like an IPO.  I don’t pretend to know all the particulars of the deals that Uber is striking, but the fact that one very well known figure in the investment community is now taking Travis Kalanick to task in a very public way is not a good sign for Uber. 

Why I’m No Longer Willing To Drive For Uber

Sum and Substance: The following are my final takeaways from driving for Uber. It’s good to go through new experiences and then move on once your learnings are exhausted. I’ve got better things to do with my time now.

1) You learn to keep on going. I firmly believe at least half the reason why people are successful is because they never give up. In startup land, successful founders keep on pitching until someone says yes. In blogging, successful bloggers keep on writing even if they make no money for years. In tennis, winning players run down every single damn ball until their opponent’s spirits are broken. 

Driving for Uber has a funny way of making you excited about your next trip and depressed at the same time. There are still a lot of kinks in the app that make driving frustrating. For example, in the featured image above, notice how I’m in a dead zone where there is no demand, even though I’m in downtown San Francisco. Meanwhile, there is surge pricing everywhere else! How frustrating! But given you can see there is demand elsewhere, you keep on going out of sheer will.

2) You learn how to eat some good ol’ humble pie. Growing up in Asia for the first 14 years of my life taught me the importance of humility. Unfortunately, when I came to the U.S. for high school, I began to grow a pretty big ego to the point where I was probably perceived as a pompous jackass by a number of folks. Joining a prestigious private firm in Manhattan only served to inflate my ego further. It was only after 9/11 that I decided to make a conscious effort to start being more humble. I took up Stealth Wealth and pretended not to know a lot of things in order to not come across as a know-it-all. 

My Take:  This blogger, who goes by the name of Financial Samurai, has some of the most readable and insightful posts on rideshare driving out there.  This post is one of his best.  He lays out all the reasons why the Uber gig is now history for him. All of his points strike home with me.  I suspect that they’ll resonate with a lot of you too.

Drivers, what do you think about this week’s stories?

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-John @ RSG

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John Ince

John Ince is a former Fortune reporter and Wall Street banker. He has about 1,000 rides under his belt driving part time for Lyft and more recently Uber.  He’s writing a book about his experiences entitled:  Travels With Vanessa:  A Rideshare Driver Tries To Make Sense of It all - For a sneak peak visit: www.TravelsWithVanessa.com
  • Mark Simonds

    From The Financial Samurai’s informative article:

    “4) Consider only driving when you’re actually going somewhere relatively far. Uber has this good function now where you can enter the address of your destination so that you can pick up fares also heading in your direction. I’ve done this multiple times before as a great way to earn extra gas money. The longest detour I’ve had is about 10 minutes.”

    {MY REPLY originally posted on his own site linked to from the RSG blog]

    I’ve contacted the TNC’s (and some driver support groups taking surveys about what driver’s need to thrive) regarding needing this option myself. We need to be able to try and collect same-direction fares after a long trip from home-base or as we plan to head home for the last ride of the evening. Where do you [Financial Samurai] have this option? I guess it’s not in San Diego yet…

    – See more at: http://www.financialsamurai.com/why-im-no-longer-willing-to-driver-for-uber/comment-page-1/#comment-280510