Drinking the Uber Kool Aid in Buenos Aires

So Uber has hit Buenos Aires, and in a big way, as those with even a small understanding of how things work in Argentina would not be surprised to hear. Taxi driver protests, taxi unions up in arms, government officials implementing court orders to ban the app, Uber drivers being fined and their vehicles impounded… the list goes on.

I don’t know about you, but I LOVE cheaper stuff! Two for one happy hours, department store post-Christmas discounts, travelling in foreign countries where the allmighty dollar can buy so much more than it can back home… this list goes on too.

But my love for “cheap stuff” comes with a proviso: I don’t want to pay less if it’s at the expense of another person’s well being. So those t-shirts I saw in a store in London last summer for £2? How on earth can a t-shirt in London cost that little, and not come at the expense of someone somewhere being paid lower than a living wage? Not possible.

And I would have loved the dolar blue to have lasted forever in Argentina, keeping my living expenses here 30-40% lower than they are now. But someone is paying for that, someone with a longer history and in all likelihood a longer future here than I, so I certainly couldn’t begrudge the government’s decision to deregulate the exchange rate, and bring the pesos more in line with its true value against the dollar so Argentina could begin it’s slow return to something approaching economic stability. Some things are more important than what might save me a few dollars, right?

Are Uber cheaper?

Uber claims they are cheaper than taxis. Oh I know there’s a bunch of other stuff that people claim make Uber better, such as cleaner cars, it’s safer, yada yada. But when it comes down to it, it’s Uber’s prices that people care about most. This is proven by the fact that across all the cities they operate in, when prices go up, demand drops off dramatically.

A friend of mine took an Uber ride on their first day of operation in Buenos Aires, on a route they have travelled before so are aware of the equivalent taxi price, which is 120 pesos (~ US$8). The Uber rate: 100 pesos. So they saved 20 pesos (~ US$1.30) on Uber’s first day of operation, a time when surely Uber are doing all they can to provide a price as low as possible in order to attract new customers.

So what happens after the initial “honeymoon” period? Well if we go on what’s happened in every other city they operate in, prices start to rise with the increasing demand, which reaches a certain maximum price level before demand plateaus as prices reach or sometimes exceed taxi prices. So what do Uber do then?

Over the summer, Uber lowered fares by 20 percent in a bid to make its service “cheaper than a New York City taxi.” Drivers, they said, would benefit from increased demand, lower pickup times, and more trips per hour—factors that would more than offset a drop in prices. “They’ll be making more than ever!” the company wrote on its blog. In late September, Uber announced that the experiment had been a success and that it was keeping the lower prices in place. Josh Mohrer, the general manager of Uber in New York City, tweeted on Wednesday that the average Uber driver in the city is netting $25 an hour after commission and sales tax. [Source]

Sounds great for customers looking for a cheaper ride! But what of the drivers…?

The way drivers see it, ride volume can only increase so much in response to lower prices. Garay says that on average, a ride takes him 20 minutes from start to finish: five minutes to reach the pickup location, five to wait for the customer, and 10 to drive to the destination. For a trip of that length, Garay says he’ll make $10 or $11. “So if you’re busy, you’re going to make three rides in an hour,” he explains. “That’s $30 an hour. That’s before commission, taxes, the Black Car Fund, before you take off your gas…”

For a driver like Garay, all those deductions mean an initial $30 in fares leaves him with about $21 for the hour. According to statements Garay provided Slate, he made $1,163.30 in fares for 40 hours of work in the week ending Oct. 13. From that, he took home just under $850. In any given week, Garay expects to lose a bit more than $350 to gas, car cleanings, insurance, maintenance, and parking costs. That leaves him with about $480 before income taxes. Effectively, he’s making $12 an hour [before tax]. [Source]

And from London:

“Drivers are paid so little so they cut corners by sharing their cars phone with unapproved, non-licensed, non-insured drivers, putting customers at grave risk.” [Source]

So as I alluded to at the start of this post, it would seem that someone is paying for your cheaper ride. Does that bother you at all? If it doesn’t, it should.

Are Uber drivers happy?

Why don’t we let some Uber drivers from San Francisco speak for themselves:

Protests like the above are happening all across the US and internationally. Drivers are finding out that once Uber has gained a sufficient number of drivers so that it can guarantee a certain level of service to its paying customers, they are then more concerned with lowering prices as much as possible in order to keep their prices lower than taxis, no matter the cost to their drivers.

Uber operate on what’s known as the “churn model“, a very common business model where the rate of new individuals is high enough that the rate of lost individuals is irrelevant. Most commonly this refers to an organisation’s customer base. In Uber’s case it is how they are treating their drivers.

A couple of people have responded along the lines of, “Oh, but if they’re not happy they can just leave and get work somewhere else!”.

Is that how it works in Bangladesh, or other Asian cities where various companies have been caught out using “sweat shops” to manufacture items? Of course not, in these cities and many others places around the world, there are no other “options” if you don’t “like” the job you have, hence you don’t have the options we in the west take for granted. Time to look outside this bubble many of us live in.

Uber’s response to increasing driver disatisfaction? In California, they attempted to force drivers to sign  an updated and complex new labour agreement, that would have barred them from resolving any disputes against them in a court of law. This attempt by Uber was blocked by a federal judge. [Source]

Uber’s current contract already features the following line:

“Company retains the right to deactivate or otherwise restrict you from accessing or using the Driver App or the Uber Services in the event of your disparagement of Company or any of its Affiliates.” [Source]

So all those drivers protesting in the video above? Uber can dismiss all of them if they decide to, simply for exercising their democratic right to peaceful protest.

And the alternatives for Uber drivers to voice their concerns?

“We have no say,” Seattle Uber driver Don Creery told CBC News on a recent visit to the city. “We can email the company about issues, but they just get ignored. It seems the company has an agenda to push the prices as low as they can.” [Source]

If this is how they are operating in places where there is some recognised expectation of workers’ rights, can you imagine how they operate in places where there are none, or very minimal?

Still no concerns about how Uber are doing business?

Corporate colonialism

The thing that concerns me most about the way Uber is doing business is the way they are simply “jack booting” into foreign countries with an attitude that screams, “Do what we say because we know what’s best for you”. This white man’s attitude towards less developed non-white societies has been around for centuries. Sure, with Uber there’s no indication this is a race-based attitude, but it certainly is a colonial-type economic-business attitude that pervades all that they do. Whichever way you look at it, Uber are attempting through brute force to insert their personal way of doing business into foreign countries with little to no regard of the laws or culture in these countries.

Some would like to compare Uber to Airbnb, a technology company that utilised a similar “disruptive innovation” model to create a new market segment for themselves. I love Airbnb, I’ve used it numerous of times across a number of countries, and have not had a negative experience yet. But I’m not ignorant of the issues it also faces, just as with Uber.

Do you have a fire extinguisher in your apartment? How about fire alarms? A fire escape map? I certainly don’t. I know I should do, but I do not. And I am fairly certain the majority of Airbnb landlords do not either. It’s one thing to leave myself open to possible danger by not having these safety tools in place, quite another to endanger someone else’s life.

It’s easy to mock or criticise a foreign country’s or city’s laws and regulations that apply to things such as transport and hotels. Some of them may indeed be outdated, but it’s worth remembering that these laws and regulations were enacted for a reason, usually as a result of multiple deaths or serious injuries.

Taxi regulations came from a similar safety background:

“US cities began regulating cabs in the 1920s in response to a perceived free-for-all: markets were flooded with taxis, which led to declining fares, long hours for drivers, dangerous cars, and inadequate compensation for accident victims.” [Source]

I don’t think many in Buenos Aires would debate the fact that the taxi industry here is over regulated, with “mafia-like” unions ensuring their drivers are protected from anything they deem as a negative, some of which would likely improve things such as the road-worthiness of many vehicles, improving the behaviour of some drivers, and passenger safety. So a technology solution of some description is probably long overdue.

Not a knight in shining armour

But is Uber the service, or indeed the company, to bring about this change in the right way? They certainly are not the “knight in shining armour” that some would like to paint them as. They are only interested in the bottom line, the above examples show they have no interest in anything else.

And for those who would trust a private corporation to instigate change in the right way:

“Ashley Madison is another example; it created thousands of fake accounts to make it seem like men were meeting women on their site. And in hindsight, companies like WorldCom and Enron were just early examples of a common practice. Simply put, there are huge rewards for companies that can fake it until they make it, and bankruptcy for those who air their dirty laundry honestly. And tech start-ups are the biggest fakers of all.” [Source]

We already know that Uber are happy to conduct themselves in any way they seem fit to “win” the share riding war against other similar services such as Lyft, with little interest in drivers that are losing income as a result of their behaviour:

Ridesharing service Lyft claims that 177 Uber employees have ordered and cancelled about 5,560 rides since October last year, thereafter cutting into profits and driver availability. One perpetrator allegedly went as far as to create 14 different accounts in order to perform 680 cancellations. [Source]

Bogus requests decrease Lyft drivers’ availability, which could send users to Uber instead. But it’s not just the company that suffers. Canceled rides jeopardize income that Lyft drivers depend on – plus they spend time and gas money en route to passengers who have no intention of taking a ride. [Source]

And this:

A senior executive at Uber suggested that the company should consider hiring a team of opposition researchers to dig up dirt on its critics in the media — and specifically to spread details of the personal life of a female journalist who has criticized the company. [Source]

And this:

I still can’t believe that an office of Uber – a company valued at $18 billion and held up as a bastion of modern entrepreneurship – posted an ad that encouraged, played on, and celebrated treating women who may choose to drive cars to make extra money like hookers. [Source]

So let’s not fool ourselves, these tech startups have no interest in anything other than money, they don’t care about their drivers, nor do they care about their passengers beyond the income they bring in. And history shows that relying on “market forces” to ensure they operate in an ethical way and in the interests of all is ignorant at best. Or an outright lie from those with vested interests in the matter.

Hence I have my concerns, and will watch with interest (and a great deal of trepidation) as this plays out in Buenos Aires. And for the moment, I’ll be sticking to taxis.

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This is worth a watch if you have 10 minutes:

5 comments

  1. Great article! Thanks for publishing it.

    One thing I didn’t see mentioned above is that in the U.S. taxi companies have to have insurance that covers the passenger. This is a gray area when it comes to Uber, Lyft et al.

    If you were involved in an accident riding Uber/Lyft here in the states, depending on the state you’re riding the service and driver’s insurance policy, your expenses may or may not be covered. You may not be able to sue the large corporation since the drivers are not their employees, etc.

    I’m not an expert on this topic but here’s a good article that explains it.
    https://wallethub.com/edu/ridesharing-insurance/13884/

    • Very true, so many areas of concern the above didn’t even touch on. It’s why I really wonder about those that simply “love Uber” without any concerns, surely there’s a more objective level where you can use Uber but with some concerns about it?

  2. “Colonialism” is spot on. I don’t see any difference to those countries that invaded less developed nations with their belief that “they know what’s best for you” than Uber claiming basically the same thing, irrespective of what the local laws actually are. The arrogance is unbelievable!

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