I don't get it. Taxicabs such as in NYC are famously expensive to buy into, and yet drivers somehow afford it and make livings on them. So if they are clearly not losing money, why is it that a company that's supposed to be vastly more efficient due to use of computers can't make a profit? Are the tech overheads really that high?
Taxicabs such as in NYC are (were) monopolies. The price you paid was far above what the market rate should have been, which is why drivers were able to make livings on them. Uber/Lyft are simply forcing prices back down to the market rate which is where the prices should be in a free market. Driving isn't really something that should be a career.
> "Why is it that a company that's supposed to be vastly more efficient due to use of computers can't make a profit?"
Well Uber/Lyft are probably focused on growth now. They will make plenty of profit once they dominante every city with driver-less cars.
If the GP is correct and the companies are losing money and subsidized by venture capital... Then no, they aren't fixing the process down to market rate. They are artificially delaying the market rate with venture capital.
> The price you paid was far above what the market rate should have been, which is why drivers were able to make livings on them.
This sentence makes no sense to me. How can something's "market rate" be non-profitable for the producer? If you have market forces acting on something the balance of forces will necessarily push the price higher than the price of production.
If something doesn't make sense to sell because it's too cheap, the market actors will not produce it, lowering the supply and decreasing the offer, thus increasing the price. eventually, you have to reach a price balance somewhere higher than the initial cost of production, for at least a subset of the producers.
> How can something's "market rate" be non-profitable for the producer?
You are confusing 'making a living' with making something. Even if a driver only nets $3.37/hour, that is still 'profit'. Just not enough to feed/house/etc yourself if it's your primary source of income.
Yeah, but the taxi driver had to finance both his/her medallion and the car, which in most cases would not double as a personal car for everyday errands (as somebody else would drive it during their shift). Those costs have been driven down as well.
In my country (Poland), cabs are not regulated very heavily, which leads to a flood of drivers, and low prices. In result, in many towns even by driving 10 hours a day (most of which is spent waiting for customers) you're making not much above the minimum wage. As a result, driving a cab has become in large part an extra source of income for retired cops or other people who retire early (say in their fourties).
I don't see nothing wrong with that - it's a job that requires no qualifications, has no boss, flexible hours, is not demanding physically or intellectually. In short - a dream job for many people. It only makes sense for it to pay less than say a grueling job at a factory.
I don't see why you couldn't drive a taxi for a living (though I don't know if that is all that was meant by "career"), but taking for granted that you will be paid well seems off.
Only middle class professionals have "a career" and therefore deserve to have enough money to live on, don't you know.
It's the primary reason we don't need a minimum wage - working in the service industry or any other relatively unskilled work isn't "a career" so it doesn't matter if it only pays 2 bucks an hour, so goes the reasoning because nobody should be expecting to do it for long or make a life out of it.
If teachers can’t be expected to support their family off their income, why should someone doing something that can be crowd sourced as a side gig? Just because I can make $15 tying peoples shoes doesn’t mean that I’m entitled to support a family off of it.
Because it is in your(society) interest that people can support themselves and their families with just one job. Otherwise you end up spending more on benefits and support not to mention on all the problems that come with chronic unemployment.
In a way, monopolies are good like elevator limits are good. It's not the support of the elevator that's the problem but the discomfort of people being crammed into the same space.
When the same market can suddenly be open to anyone you get people cramming into elevators and buses so that everyone is uncomfortable.
The entire US revolves around gates and monopoly like jobs. The greatest gate being the immigration gate. Technology empowers everyone and moves everyone towards the mean. Which is bad for groups that are above the mean.
My theory is they are attempting to put the competition out of business by running at a loss then adjust the rates to where they can make money which, coincidentally, will be be almost exactly the amounts the "evil" taxi companies were charging.
I could be totally wrong but if I were a betting man...
That's still a win for consumers, because they certainly raised the bar for customer experience. They run leaner than old-fashioned cab companies and can keep prices lower at the end too.
Is it a win for society, though? If they ended up being a stronger and more global monopoly than cab companies, the savings from being "leaner" would just end up in the pockets of the few and everyone else would not be better off.
Uber is probably profitable in NYC (and if it isn’t, it could be by raising prices and cutting costs). The question is everywhere else.
And NYC taxis relied on mostly immigrants driving 12 hours a day; in cheap fleet cars.
The medallions (for a long time) were an appreciating asset. So only the interest on the loans were an actual expense. 5% interest on a million dollar loan is only 50k a year. And they’d offer split it amongst drivers (two or three split a car).
Because they're spending it on other stuff. Lots of those thousands and thousands of engineers are working on developing other products not the least of which is self-driving cars.
As I understand, it tends to be profitable in cities where it has operated for longer time, but it operates at a loss in cities where they've entered more recently due to costs related to marketing for driver acquisition, customer support, fraud, etc while ramping up the fleet size and establishing a stable physical presence.
As for drivers, my anecdata is that many claim to make "good money" (in their words). I've had a guy say Uber doesn't make him money, but then he followed up by saying he's a retired guy just doing it to keep active and that he owns two convenience stores...
