Layoffs and massive losses loom.
Uber, which has lost $3 billion last year and has gotten itself into a thicket of intractable issues and scandals that cost founder and CEO Travis Kalanick his job, is now facing a subprime auto-leasing crisis.
Two years ago when these folks launched the subprime auto leasing program to put their badly paid drivers into new vehicles they couldn’t otherwise afford, they apparently didn’t do the math.
In July 2015, when the “Xchange Leasing” program was announced, the company gushed: “We’re excited about how these new solutions meet drivers’ unique needs, and offer more and better choices and greater flexibility than ever before.”
The leasing program would be “administered by an Uber subsidiary and designed to fit with the flexibility that drivers value most,” it said. This is how it would work:
Unlike most multi-year leases that have high fees for early termination, drivers who participate in Xchange for at least 30 days will be able to return the car with only two weeks notice, and limited additional costs. The program allows for unlimited mileage and the option to lease a used car, with routine maintenance also included.
It wasn’t supposed to be a money maker – nothing at Uber is. But hey. And the company invested $600 million in the business, “people familiar with the matter” told the Wall Street Journal.
This type of lease was offered to drivers with subprime credit ratings or no credit ratings who barely earned enough money to get by and make the payments, if they stuck around long enough. It allowed drivers to drive new cars. When it didn’t work out for them, they could return the cars after 30 days with two weeks’ notice. The only penalty for the early return is that Uber keeps the $250 deposit. And these leases came with “unlimited miles.”
No one in the car business would ever conceive of such a thing.
But Uber is different. It defies the laws of economics. Or so it thought at the time.
Now, the 14-member executive committee that is running the show looked at the math and was horrified. “According to people familiar with the matter,” cited by The Journal, executives had briefed the committee in July:
The Xchange Leasing division had been estimating modest losses of around $500 per auto on average, these people said. But managers recently informed Uber executives that the losses were actually about $9,000 per car — about half the sticker price of a typical leased vehicle.
The “unlimited miles” allowed drivers to work long days and return vehicles with way too many miles, which kills the resale value. Also, if drivers got frustrated with their pay and quit their gig and returned the vehicle, the car might be 7 months old and have 20,000 miles on it, and be worth only a fraction of Uber’s depreciated book value of the car.
In the overall subprime auto loan segment, defaults are soaring. And Uber wasn’t spared. So costly repossessions hammered the program, these people told The Journal.
Due to the breath-taking losses from this subprime leasing enterprise — $9,000 per car on average! — the executives agreed to shut it down.
The numbers are big. Uber has titles to nearly 40,000 vehicles through Xchange Leasing. It now has to get the cars back from its drivers and sell them in the wholesale market. It wants to do most of this by year-end. If Uber loses $9,000 per car on average on these 40,000 cars, it will add another $360 million in losses on top of the losses it has already booked.
If it sells the subprime leasing business, which is another option, it will likely pick up a similar loss because buyers of those assets will look at the same scenario.
And layoffs loom. Up to 500 employees could be affected by the shutdown of Xchange Leasing, or about 3% of the 15,000 Uber employees. Some people might be transferred to other departments, such as customer service, the people said.
To fund these leases, Uber obtained a credit facility of $1 billion last year from a consortium of banks including Goldman Sachs, J.P. Morgan Chase, Citigroup, and Morgan Stanley.
Despite the crazy terms, these leases aren’t cheap for drivers. Uber figured they’d drive a lot, and they’d have to pay more than they would have for a standard lease. The Journal:
A 2014 Toyota Corolla was recently being offered for a term of 130 weeks at $122 a week, totaling roughly $500 a month, according to marketing materials distributed by Uber.
By contrast, leases for Corollas are advertised all over the internet for as low as $159 a month, for 24 months and 24,000 miles. But read the small print, including the $1,499 down at inception and other upfront charges. And subprime buyers might not qualify.
This type of lease allows 1,000 miles a month of driving. That’s barely enough for a working stiff to commute to work. But it’s not enough for an Uber driver, working 14-hour shifts to pay for the lease and have some money left over for rent.
Uber also found that dealers, according to The Journal, “were pushing drivers into more expensive vehicles, lowering their likelihood of turning a profit.” Duh. That’s what dealers do. It’s called “upselling.” Didn’t anyone tell the Uber wunderkinder? So Uber hired a bunch of people, set up showrooms, and did the leasing in-house to get a better handle on it. With stellar results.
When a company undercuts competition – such as by massively if unknowingly subsidizing the cost of vehicles – and investors don’t care that their money is getting burned at lightning speed, executives have no reason to change course. For them, all that matters is dominating the market no matter what the costs, and that’s happening at a stunning pace. Read… Uber, Lyft Mangle Rental Cars & Taxis. Other Sectors Next
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Is it the year 2000 back into the future?
The craziness of the dot-com has reincarnated into a different manifestation but the underlying irrational exuberance remains the same.
The only difference now is that with uber-connectivity of 2017 and the changes in the Millennials attitudes towards cars Uber may be here to stay.
It is in another words ‘Too big to fail.’ Saudi Arabia has already invested in Uber and SoftBank is also looking to invest into Uber or Lyft so I doubt that Uber will ever die.
Snapchat on the other hand is a different story though there are rumors that Google may buy it.
I suspect there are a lot of entities with systemic mal investment that will crash and burn. At some point they will, no matter how hard anyone tries to keep them afloat.
Yup. We mal-invested 10 years of real growth on bailing out “Stupid” in 2008. As a result “Stupid” came back stronger as “New & Improved, ‘Moar Growf(tm)’, Formula Stupid – Now with Disruption(tm) and ‘Web 2.0 Douche-Baggery(tm)’ Added”.
The next 2008, dare I say 2018, will be epic. The ghost of Charles Mackay will rise and haunt the earth, angered by missing the show.
Fidelity is now allowing “investors” to trade bitcoin in their accounts. Speculate to “infinity and beyond.”
fajensen – Hilarious!!!
I’m waiting for Uber to start paying its customers to ride…that’s about the only stupid trick these guys haven’t yet played.
Uber already heavily subsidizes riders. Heavy users of the system always get coupons for their next set of rides. Uber creates Boost zones where depending on the time and day of the week it pays drivers some multiple of the fare the riders pay. Boost zones can be as high as 2.0x in the El Lay area on Monday mornings, but have lately gone down to 1.5x.
“so I doubt that Uber will ever die.” Exactly.
And they, the VC and investment banksters, will find a buyer for the simple reason that to let one of these unicorn companies go down, threatens the life of all the others…taints speculation. Try and find one of Wolf’s stories anywhere except may be Zerohedge…ain’t there and once you ask yourself why, the answer hits very hard.
I think you’d be surprised. I’ve seen Wolf’s articles at a few different sites I read, including the Climateer blog, which I think has a pretty good readership.
Ubers taking the taxi cab drivers down with them. I’m not a fan of taxis but do feel bad for these families whose livelihoods are being decimated. http://my.chicagotribune.com/#section/-1/article/p2p-94124854/
I’m not, taxi’s brought this shit on themselves. Making me wait over an hour for a cab and when the cab finally shows up the guys drive like a grandmother on the way to church.
I was in a cab once and this prick kept taping the brake and slowing down at green lights as other cars whizzed by. 4 mile cab ride once cost me $18 bucks. When I got out I told the cabbie he had no business driving a taxi….the point is to get your fare to their destination as fast as possible not as expensive as possible.
AND how did cab companies not figure this type of service out before Uber?
My take away from the whole Uber/Lift thing is in the US we did the wrong thing when regulating taxis. Taxis were regulated so that there weren’t too many so fares would be high enough that taxi drivers could make a decent living. What we should have done was subsidize taxi’s. So that a) Taxi drivers could make a living. b) There are enough taxis.
The hilarity! You can’t make this stuff up!
There’s a Toyota lease ad right on the side of the screen here, $149 a month, maintenance is free the first two years etc.
Now I know how an acquaintance, who has a long history of drunk driving, was last seen driving a very nice new Prius for Uber. Driving it drunk too.
That $149 a month for a Toyota lease needs some qualification. There has to be a down payment. It goes by another name, but you need to put down cash to buy down the monthly rate to $149. Also, you must add in the sales tax, registration, insurance, and property tax. This is paid monthly to the dealer and usually at least triples the monthly price advertised price of a lease.
roddy – I clicked on the ad, I think that helps Wolf financially anyway, but I was curious. Yep $3000-odd due at signing, but Toyota puts up some money so it’s about $1500-odd at signing. Also don’t go over the mileage, which as Wolf says is probably 10k miles a year.
It’s never a good idea to put any money down when leasing though. If you drive off the lot and total it, you just lost your whole down payment. When I moved back to the US with my wife, we both needed cars but we couldn’t afford new and used were still ridiculously overpriced, so we both got a lease. $238 a month for an Elantra and $208 for a Civic (I was better at negotiating on the 2nd go round) both were no money down 35 months, so first month was free. Both were turned in last year to contribute to carmageddon. 1k miles per month for 12k total for year. Wife went 1k over but 15 cents a mile isn’t bad.
So what happens to the 40K people driving these leased cars? Do they go back to driving people around in their ’97 Taurus?
The math is simple: with the amount of money Uber charges for rides, it cannot pay drivers enough to where they can buy new vehicles and drive them into the ground in just a few years. Drivers will either have to drive old beaters, or Uber will have to pay them more.
That’s why Uber is so focused on self-driving cars: it’ll remove the expense of the driver (though it still has the issue of using up cars very rapidly).
So, the motivation for self-driving cars is so human drivers won’t have to be paid? That’s a “technology” that puts the cart before the horse.
(what a pun!)
“So, the motivation for self-driving cars is so human drivers won’t have to be paid?”
Yes, that’s Uber’s motivation. They’ve publicly stated that their long-term survival is dependent on self-driving cars.
Uber is pretty cheap. I can get around Boston for half the price, sometimes less, than what it costs for a taxi, and the app does work well. But Uber is only cheap because they’re subsidizing rides.
That has been the motivation behind any automation for decades :-]
“That has been the motivation behind any automation for decades”
Yes of course. The joke is that some things are beyond automation.
I should add, the only thing I think of when I think of “robots of the future” is the Bugs Bunny episode where an airplane is crashing, and Bugs hits the automatic pilot button. A robot suddenly emerges from a compartment, grabs the last remaining parachute, and jumps out to save himself. It’s even funnier now.
So the meager pay of the drivers will be offset by the purchase, storage, insurance, and maintenance of their own fleet of self-driving cars? I don’t believe it. Their rates will have to increase 40% approaching the cost of taxi rides in order to stop the bleeding–with or without human drivers.
Uber doesn’t have to make money, ever. Don’t you know that’s the new paradigm?
Things are different this time.
That’s why Uber is so focused on self-driving cars: it’ll remove the expense of the driver (though it still has the issue of using up cars very rapidly).
It’s far easier to disrupt commercial and labour arrangements by throwing a monopolistic wave of capital against it, than transform an infrastructure (roads, lights, the caprices of nature).
Self repairing,designed and purposed, infrastructure is required (in Europe it’s called maintaining the social fabric) before uber’s phoney get out of a self driving fleet is even plausible.
Is travis still a multibillionare,like Elizabeth holmes before him, or just a delusionist with no house limit?
If the GPS system they propose putting into these Uber self driving cars is on par with the GPS Uber forces you to use when driving for them, this idea will not get off the ground. I’d say the navigation software averages 1 significant error per delivery I took, more for me in the highly crowded, hard to navigate area of the Las Vegas Strip. Well guess where the most deliveries were too? Overcrowded, pedestrian filled, barricaded and blocked areas. Uber apparently thought my car was a hovercraft, as the GPS would frequently tell me to turn on a street I had no access to due to a cement divider. One regular customer lived in a cul de sac backed up against the freeway: the GPS told me to to park on the interstate and scale a 30 foot wall to complete my delivery. There’s a McDonald’s pickup where the address is correct but the navigator leads me to a private house 2 miles away EVERY TIME don’t think they’ve fixed that yet. That’s not even getting into issues of hacking, interrupted servers or power supplies, or any of those types of technical issues. And usually the GPS was the worst when it needed to be the best: when there was an error and things needed to be recalculated. Got to the point I’d turn off the annoying voice and use paper maps. Can’t wait to see how improved it is after the next upgrade!
I had a similar experience with gps. I was driving on a road adjacent to a flyover freeway and it thought I was on the freeway. This was yesterday.
What’s to stop car hackers from calling an Uber self-driving car, covering its GPS antenna and driving it to a chop shop? Are they going to eliminate all driver controls on their self-driving cars?
Yeah, there are a few problems with the “internet of things,” which these self-driving cars will belong to. But Silicon Valley doesn’t really care about those problems… it only creates them.
Thanks for the idea! This should help fund my retirement!
Uber would then have to pay for gas and upkeep of said vehicles. I don’t believe they do that now. I am guessing insurance costs will be sky high until there is proof in the pudding that these cars are safe.
I can just see the insurance scams proliferating with no driver to be a witness. “I got my coat caught in the car door when it closed and the car dragged me for miles before I could get out of my coat.” Or, how about the old “5 guys got whiplash when their old beater was rear-ended.”
Suffice it to say the bet on self-driving cars is just a blind gamble. There are tons of unknowns. It may turn out just like their leasing business implosion but 1000 times more spectacular.
For self-driving cars to be feasible AT ALL, there will need to be some blanket protection from DC against the litigation industry – similar to what was done for the firearm industry.
As corrupt as the system is, and as big an influence as the likes of Goolag have, I would not bet against that. But it will be needed.
It would be interesting to see the Uber’s self-driving cars vandalized by ex-taxi drivers or ex uber’s own employees…
It would be fun to see 100’s of people in each city to take a baseball bat and break the headlights and taillights of these self-driving cars, maybe slash tires too…. a total revolt… if enough people do it at once it, cops won’t be able to do anything. If nobody bleeds no crime…I got my car vandalized in the fine city of San Jose, CA capital of silicon valley… and cops won’t investigate, because nobody got hurt, there’s no man power, and I should just report to insurance.
How are the police going to stop a self-driving car for a broken taillight or because it was in an accident not detected by the trip computer or because it ran over a pedestrian? The complications for the software developers are going to be gargantuan. I’m a retired Aerospace Engineer and there are great complications for aircraft software for flying through relatively deserted airspace. Just imagine the complexities of, say, Manhattan and other big city traffic. How does the car recognize pedestrian rights in cross walks not mention jay walkers and thousands of other variables.
Or that a ball rolling across the street means a 5 year old is going to be running after it very, very soon?
In India, taxi drivers buy cheap GPS blockers on the Internet and run them at the airports and other hot spots. This renders all the Uber cars in the area useless. Funny.
Roddy – There’s never been a better time to have Amazon Prime!
The entire Uber model (like the pizza delivery “industry”) is built on idiot drivers underestimating the full costs (including depreciation, maintenance, and insurance) of operating a vehicle. When they are forced to replace a vehicle they have run into the ground, they eventually wise up and realize they are working for nothing (just as Uber has now realized they wildly underestimated the true costs of their leasing program), but so far Uber has been able to recruit replacement suckers to take their place. The Uber model is a predatory model based on the stupidity of drivers, though perhaps not as venal as I originally thought given the stupidity of Uber executives who thought the leasing program made any economic sense.
” Uber has been able to recruit replacement suckers to take their place. ”
Not suckers…just people like you who are trying to feed their kids….
I gather that a lot of immigrants from India and Pakistan, and middle east are now driving Uber cars leased out to them. They will have no beat up Taurus to go back to. I am guessing there will be other sharks with onerous terms waiting with open arms for them. Driving other people’s cars as taxis or Uber is a common practice in Asia. Obviously, this is not very different from usury that has been around forever. Bonded labor, anybody?
No, they stop driving for Uber.
That means fewer drivers.
If the number of riders doesn’t decrease, that means greater surge.
And that means Uber drivers will finally start making some money.
I have an old beat up car, and have done UberEATS delivery during slow periods with my editing. It seems they have calculated very carefully exactly the bare minimum that some desperate person is willing to put up with to drive for them. At my best times I’m making $10 an hour BEFORE gas, wear and tear on the car, wear and tear on me, and the risks of traffic accidents, moving violations, injury etc. In short not worth it…but yet they give $100 per friend you refer to the service. Obviously cycling through people quickly as they do the math….
-This scheme first benefited carmakers and now when the “Chicken
s are coming home to roost” demand forcars will drop even more.
This is what happens when you let children into a boardroom…and let them play with Monopoly money.
Uber should just let the children go home and leave their “investors” the pain of their foolish investment.
There is a difference between investors and gamblers.
Uber probably has damn few investors.
Another difference: There are plenty of gamblers but NO investors.
What enterprise is stable for long enough these days to be invested in?
Uber has 15,000 employees?! Doing what?
Umm running theirs global operations, customer support ,brand building ,expanding in new cities , engineers who work on their main product and the new self-driving cars division . People who seem to ask this question must have absolutely no knowledge of how corporations work.
I have a pretty good idea how an unprofitable phoney SillyVallee creation like Uber and the rest of them work.
Well, I fully understand how profitable corporations work. But I guess you need 15,000 people if you want to lose $3 billion/year. They should hire another 5,000 brand builders and lose $4 billion!
Kent, don’t you work for the Florida State Gov? You should be an expert on organizations with lots of people getting paid to do very little. Hell, I’m an expert and I just live here…
Not the state, a big county in the middle of the state. But I think you’d be surprised how hard everyone here works. Especially after 20% were culled a few years back.
However, prior to this gig, I worked for Electronic Data Systems when it had 120,000 employees before it was bought and murdered by HP.
“They should hire another 5,000 brand builders and lose $4 billion!”
Hey! Wait a minute. Doesn’t that work out to something like $800,000 per year for each “Brand Builder”?
That sounds like slave wages for Silicon Valley or San Francisco! You might be ostracized for making such a mean and careless suggestion. Do you know how many snowflakes you may have just sent scurrying into their “safe places” with a box of crayons and a pile of Kleenex?
“Do you know how many snowflakes you may have just sent scurrying into their “safe places” with a box of crayons and a pile of Kleenex?”
Amazingly hilarious. Thanks.
My theory is this: In the original dot-com bubble, you could literally have a “company” that was just a post office box, and people’d throw money at you. Well, that crashed and gamblers/”investors” have wised up. Now they want to do a physical walk-around and see physical asses in seats. So scams, er, companies like Uber have to have large rooms with 100’s of “engineers” in them, to show the gamblers/investors that they’re more than a P.O. box.
Uber is losing 3 billion / 15,000 or $200,000 per employee?
This is capitalism?
Alex, thats called the Enron model. Even if its fake, you have to have an impressive facility with lots of flashy displays for eye candy. I’ve seen too many companies – and government entities – shell out for this garbage in order to have a good dog and pony show for their benefactors.
Since you know a thing or two about corporations, at what number would you suggest Kent can ask the question?
Per Wikipedia, they operate in 633 cities. That’s almost 24 employees per city.
I travel to Warsaw Poland every year on business and what I noticed this year was the bike lanes and all the uber eats guys delivering food to people on bikes They were everywhere and the free rental bikes were as well
Are you sure you weren’t in Indian?
Somebody has to push the piles of money out the back door.
One billion dollars in $1 bills weighs 2 million pounds (500 $1 bills to the pound); Uber has current expenses of about $5B, or 10 million pounds of $1 bills.
That’s what their employees do, when they aren’t harassing each other.
Lobbying, greasing palms. ;-)
Some of them are busy living an extravagent lifestyle burning up millions of dollars a week. In one instance, executives had a meeting in Fiji instead of a group chat on WeChat or Skype.
Who’d have thunk that financing manifestly non-creditworthy borrowers could ever end badly….
My friend needed a ride to the airport at 5AM. Did the Uber thing the night before, and at 5AM ON THE DOT, the Uber driver showed up. In a dirty old Mazda pickup truck which smelled of wet dog. The driver did try to speak English, by telling her how much she owed. People on the plane kept looking at her and she knew why.
She says the cab company from now on.
Guess this guy didn’t know about the lease program…..
“The driver did try to speak English, by telling her how much she owed.”
That’s not how Uber works, which leads me to question the veracity of your story.
Also, drivers who are rated poorly are kicked off the Uber network fairly quickly. And a poor condition car that smells bad is just as good a reason to give someone a low rating as any other. So I doubt a driver with a “dirty old Mazda pickup truck which smelled of wet dog” would actually last long at all… again, leading me to question the truthfulness of your anecdote.
you must SHRED people to the bone in person. i’d hate to be talking smack around you. that was funny.
i used to just think you were just mean and snarky but nah… you’re sayin’ something.
“Silicon Valley doesn’t really care about those problems… it only creates them.’ Wolf
Jehovah doesn’t really care about problems … he only creates them – The Deist
Well…they, UBER, have been here all of maybe 14 days. I would love to ask Laurie what exactly she meant by ( her text) saying the driver told her how much she owed in Cuban Spanish, maybe she wanted to buy the truck or the guy didn’t know he was out of order, but I can’t ask….she is in Panama. I will have to wait until she returns after the funeral and ask her, so I can tell you. I know you want to know this mystery answed.
Joyously or sadly, you have never been to Key West or you would know what a ‘Conch cruiser” is, or the laid back/so what attitude of 90% of the folks here.. And, yes, KW is a big dog city, they are even in the bars and restaurants, and many are even salt water wet
I concur with Smingles. I know of a Uber Leasing variant by Toyota, which leases out pre-owned Camrys and Priuses at a better deal – Longer-term with generous mileage.
Better to put those pre-owned units to work rather than letting them sit collecting dust on the Lot when every new customer is looking to lease new models.
Uber drivers rely on tips. ZipCar has a better future since cars mostly sit, depreciating, until their owner needs it for another 20-minutes.
Uber drivers do NOT rely on tips. Tipping capability is less than a month old in most areas. Uber riders have been previously and erroneously conditioned by Travis to believe that the tip was included in the fare (it NEVER was). Most riders use Uber frequently and will not tip unless maybe they are on a business trip and the driver has gone above and beyond.
http://www.reddit.com/r/uberdrivers is a good source of from-the-horses-mouth info on what it’s like to drive for Uber.
I got a few tips delivering for UberEATS. My guess is it averaged maybe 1 in every 4 or 5 deliveries, though…
The real story here is how financially illiterate most technical people are when it comes to money. I was a CS and Economics major and even in the financial world techies are almost totally ignorant about finances. They know the limit of a math function, but not the practical application of that limit in the real world.
Here is one example I was personally involved with, there are more:
My boss wanted to buy and old IBM type card sorter which was so old it cost multiple times its original price(I forget how much). The contract to service this machine was $100K a year, because we had to fly in a guy from Canada or France to do it. When I suggested he hire someone at minimum wage to hand sort the 200 or 300 cards a day that needed to be sorted, I was called a stupid bitch behind my back. The worker would have costs around $12K a year versus $100K and we could have used her/him to do other clerical work too. We didn’t need a 20+ year old machine. I designed the sorter out of the project, saved them at least $200K up front and earned the ire of my boss. These guys were willing to waste $200K+ and I couldn’t get a $3K raise.
BTW, I still think the CEO Travis Kalanick got himself fired on purpose to cash out.
you really did go to college in the bronx. in every way. i love it.
I’m positive that google tech bro that just got fired did the same thing.
Write something just inflammatory enough to get fired. But not enough that you can’t get a settlement for wrongful termination.
Yep, this guy went to Harvard and MIT and still did something that stupid. I hope it was on purpose because otherwise tech is dead.
Funny, I’m a CS major with econ minor from U of FL. Go Gators.
Your comments are spot on. I can’t tell you how many times techie type managers want to spend a ton of money on technology solutions to what are essentially business process/people issues.
Fortunately, after spending a couple of million bucks and doing a 2 year system implementation involving 50 or so people, folks have forgotten what the problem is you were trying to solve.
sheesh, you are threatening my job security ?.
This story is 7 years old; I had this friend who was working for Lockheed Martin, and she said they just hired 50 Java programmers and they were all sitting all day doing nothing. Of course, this happens only when you work on government project.
In private sector, given that we have the fortune of competing with people from India who wouldn’t mind working for $10,000/year, unless you are one of those guys who buys managers gifts on Christmas (wink, wink), they’ll kick you out within a week if you don’t get things done.
I was reflecting on that too. In the beginning, it seemed like the Uber secret was to avoid having to pay for cars (the independent contractors would do that.) Then they didn’t want the brand they were building to be sullied by grubby cars, so they reached into their pockets to help drivers buy nice cars. Then they found out how far they’d reached into their pockets, and they want to buy their own robot cars instead.
… OK … …
I hate to say it, but Uber could be god’s way of teaching nerds that everything in the taxi business was there for a reason.
“God’s way of teaching nerds that everything in the taxi business was there for a reason.”
You must mean it’s God’s way of teaching the investors, VC managers, bankers, financiers and speculators, right?
Funny how you people blame it on the nerds. The nerds simply present technical ideas to the table. That’s what they do. All those pros I mentioned are supposed to be the people in the know about money, the “financial world” and the “practical application in the real world”.
Granted. I just don’t expect money people to be that thoughtful. Nerds are supposed to know.
Shows in the “Real Value Added” measure of the economy, which is on its way down. (Gross Value Added-CPI).
Some SillyValley biz models have something to do with it, I think.
Technies suggest technical solutions. Finance people evaluate if they are financial sound. Isn’t that how it works?
Yes. But. The evaluation process kinda break when the risk-free interests rate is at or below Zero.
No, because the financial guys don’t know if the techs are lying when they say they need the $1M machine instead of the $50K machine. Mine is bigger than yours goes on in tech all the time for no good reason.
Well, the finance people are supposed to do due diligence and ask the right questions. You said the techies are financially illiterate but it goes both ways: the executives, MBAs and accountants should not be completely tech illiterate. Techies will choose the 1M dollar machine just like a General will choose the $200M tank over the $20M one, just like the MBAs would rather have their cocktails in a 5-star hotel than in a Holiday Inn.
Petunia, re: your comment, “The real story here is how financially illiterate most technical people are when it comes to money.” Agreed. There’s a whole generation of people growing up now and going into adulthood that don’t know that wealth has to be created–they don’t have a clue as to what that means or implies. Sometimes I wonder what the real reason is behind all this fiat wealth.
Many of those growing up in the new generation are lacking in communication skills IMO. Texting away back and forth versus speaking to customers/clients in a professional manner is not a recipe for success.
Many of my customers prefer to text me instead of calling, and a quick call answers questions much faster.
Petunia, re: your comment “…prefer to text me instead of calling”, OMG, don’t get me started on that one–un-f’ing-believable!
Do you really think technical people run these companies?!
It is the finance guys and the MBAs who can’t figure out the costs of the technical solutions. Funny to read someone blame it on the techies.
Also, once a techie does not necessarily stays a techie, in fact they rarely do. I’m sure the latter applies to your boss.
The guy I was referring to was a hardware guy for the company. His solution to everything was more hardware.
The root of the issue is not that the techies are clueless about finance. The root of the issue is that in modern corporate world, there is compartmentalization of responsibilities. Your hardware guy probably just feels it is not his responsibility to worry about being cost effective, just like the accountants don’t feel they need to worry about the long term maintainability or scalability costs of a technical solution.
Petunia, before I retired, I was a Business Analyst and saw many such situations. However, I disagree that they were stupidity. A number of the ones I saw were rooted in office politics and represented a favor to someone or a quid pro quo for a favor. In one case, a fairly large purchase of pcs was a device to justify a managers job. I bucked it and was told in no uncertain terms to shear off.
So, if in your example you were successful in saving the company money, you made an enemy of the manager involved.
As much as I hate to say anything positive about working on Wall St., those guys would never waste $200K. If I could save them any money they would say do it. All the savings went into their bonus pool.
Most likely explication is that your boss was to receive a nice “backhander” [kickback].
This need not have been in the passe form of a fat fakellaki [Greek for little envelope], but may have been the payment of a gambling debt, ala Tony Soprano, using company money by the gross over-payment for an obsolete machine. or simply a favor to an old friend (using company money).
Petunia the Large POS Terminal Company I worked for long ago had a project, generally termed “The ATE”, not the “ayte” but the Ay-Tee-Ee. It meant Automated Test Equipment and they threw at least a million 1980s dollars into it.
The idea was, it was going to be some sort of jig you’d put a circuit board on and the machine would diagnose the problem.
The ATE ate up plenty of money for a few years, meanwhile I approximately doubled the output of the repair department by being there.
Here’s how that works: I’m white, and grew up in Hawaii where whites occupy the same social role as blacks do on the mainland US. A very few rich ones, mostly poor and born to do the work too Dirty, Dangerous, or Demeaning for anyone else to do. I’d managed to buck the trend by studying electronics and amazingly, got one of the very few electronics jobs, paying a whole $5 an hour, in Hawaii. It was pretty much a miracle, and what made it possible was being into ham radio, and there being white ham radio operators around. Some other things worked into this miracle too, like being an IEEE student member and just plain being good at working any possible angle as you have to if you are white in Hawaii. So I was hired there as a student intern, $5 with no raises of course (the other, nonwhite, interns were almost certainly getting more but I was very lucky to even be there). Since I’d had to work like hell at any job I was lucky enough to get, instead of lazing around like the other interns, I took my work very seriously and became rather good at repair, building prototypes, all sorts of stuff. So, when the repair facility, on the mainland, developed a backlog, they wanted someone they could throw in there and make the backlog go down.
So I felt extremely fortunate, I was able to leave Hawaii without waiting around to get my degree, and moved to the Mainland. And the average tech was fixing 7 units a day there so I fixed 8-9. They went up to 8-9 and I went up to 10. And so on … they finally couldn’t catch me at a level of 14 or 15 a day.
I didn’t do this for pay, and in fact, due to being white (I was told so in so many words) I was paid the least of the shop of 20 repair techs. I did this out of fear. I was the only white tech. I knew they’d love to fire me and put in another Vietnamese or Cambodian tech, and the only thing that kept me employed there was my productivity, and that my being so productive kept the others working harder too. I was literally worth something like a dozen techs!
Meanwhile the ATE project kept chugging along, eating money.
I considered building an “expert system” that any tech could access on the computer (we had a VAX mainframe and in-company email) so any tech would, at least in theory, be as quick at diagnosis as I was. I’d have done that effectively for free, as I could write code at home and just work on it in random bits of free time at work. I also thought an IR imaging system would be very handy because a lot of my diagnosis methods came down to, “what’s hot?” That may have cost a few thousand dollars. But then I realized, thinking about it, it was really barely worth the money to even have us repairing units. It would actually be cheaper to just swap out new boards. And here they were putting a million or more into their silly automatic test idea.
I swear companies are run by 12-year-olds
Since relocating to “sunny” Sweden, one has learned that Corruption looks quite a lot like Incompetence from a distance.
Your boss / these guys probably had tentacles in the vendor or service contact. Of course you don’t get a reward for causing a loss to them.
This project was a response to an RFP and cost was a big consideration. I was helping them come in lower, but my idiot boss wasn’t considering the cost at all.
Pardon me while I enjoy a large slice of schadenfreude with my coffee on this cool sunny Colorado morning .
Why? Uber’s share price will probably double after this.
The whole business model of Uber just sounds like it doesn’t work financially.
As ‘Truth Always’ put above is has the stench of dot-com all over it.
Over at nakedcapitalism.com (where Wolf’s articles are frequently reprinted) they had a transportation expert write a set of 9 posts describing exactly why Uber can never be profitable.
The basic problem is that Uber isn’t bringing anything to the table that makes its service less expensive or better than regular taxi service. So it has to spend investor money to subsidize drivers and fares to make it appear like it is “disruptive”.
The entire premise is to run everyone else out of business so that it can eventually be a monopoly and raise prices. Problem is, it doesn’t have anything proprietary to keep competition at bay when it does raise prices.
Hence their desperation for self-driving cars. But again, they better own the IP, or everyone else gets in with them.
Of course Uber’s better than regular taxi service. Regular taxi drivers refuse to take you if you’re going too far, or they “don’t go that direction”, or if the trip is too short, etc. Then, Uber’s surge pricing is a lot better than the archaic medallion system to determine the optimal quantity of cars available at a given spot.
Indeed! This has the stench of a mongrel and degenerate form of syndicatalism, where the low level employees are still exploited, even though they are “independent contractors” and are nominally working for themselves.
When you are kicking tires at a dealer and you hear the usually comforting words ‘ex lease’ it sounds like you should make sure it wasn’t an Uber lease.
Since I’ve never leased, I don’t even know how the leasing outfit assures routine maintenance is done. I know with a new purchase how or rather why it gets done: no maintenance, no warranty.
Most of the time the late model ‘ex lease car’ commands a premium used price. This Uber set up with its very low exit fee to driver seems to put that assumption to the test.
It also blurs whatever distinction there is between leasing and renting.
One ray of comfort: since more and more people can’t drive a standard transmission, and probably (hopefully) none of these are standards, the danger of a lousy or careless driver damaging the clutch and/or transmission is reduced.
If you buy a used car off lease, make sure it has low miles with factory warranty remaining, and went through the factory certified inspection by the dealer.
Fortunately, Travis is out, so he can always say that he had a plan to put Uber on track for profitability and those idiots who kicked him out ruined everything.
I don’t understand why the taxis have been given such a bad rap, allowing for ride-sharing to appear as a superior customer experience.
I’ve taken a ton of taxis in my time and have rarely had a negative experience. If anything, the experienced cabbies know some of the best routes while the Uber drivers just rely on Nav and often have a deer-in-the-headlights look.
Yes, the taxi car might look a little less kept and more commercial inside. But it’s not like I’ve felt like I’m in a Lincoln Towncar when I’ve been an Uber.
For anyone interested, here’s a great 10 or 11 part series (it keeps growing) about how and why Uber’s model isn’t anymore viable than the taxi industry. I’m going to assume that Wolf won’t mind the link to Naked Capitalism since they link to him all the time:
I don’t know, man. Maybe some of it is geographic.
I live in Boston. The taxis here are horrible. Really, really bad. They’re very unreliable in scheduling pickups (if you have to get to the airport early, you’re definitely taking a risk scheduling a cab ride in advance). The city is confusing, and if you don’t know where you’re going, it’s really easy for them to run up your rate by taking poor routes; that’s one huge advantage Uber and other car sharing services have, a locked in price. There’s no incentive for those drivers to do anything but get you where you’re going as quickly as possible.
As far as general customer service, I’d also disagree. There’s no incentive for cabbies to treat you well. There are no repercussions for a bad cab driver, apart from a bad tip. What are you going to do, call the cab company? How many people have actually ever done that? I’m guessing maybe a hair above 0%.
On Uber, and I assume other services such as Lyft, you can rate your driver. These ratings are actually a very big deal; if an Uber driver’s ratings fall below a certain threshold (say, 4.5/5), they’re at risk of being kicked off the platform.
NakedCapitalism is a great site, and Uber’s business model isn’t viable as is, but it doesn’t change the fact that ride sharing in general has upended the taxi industry and probably forced it to think long and hard about why people are so happy with Uber et. al versus a traditional cab.
“The city is confusing, and if you don’t know where you’re going, it’s really easy for them to run up your rate by taking poor routes;”
Don’t most of todays smart phones have something similar to a GPS application that you can fire up to verify your route being taken by a cabbie? I don’t know for sure – as a caveman I only have a Samsung Rugby I flip phone.
As a minimum, I guess that you could also look up a Google Map of your route. It seems strange to me that people just blindly hop into a vehicle and assume that they are going to end up where they wanted. I trust no one.
But what would you do then when you find out the cabbie is taking you for a ride in a city you hardly know. Do you start arguing, and then may be the cabbie ends the gate at a bad neighborhood. I am sure you could complain after, but how many people would do that.
Cabs do need to be upended, but Uber might not be the best solution. Autonomous driving is the eventual way to go. A car company is going to be the best company to support a shift financially.
Boston is unique. It is called “The Hub” for the layout of its streets, designed long before cars. It’s a set of concentric circles overlaid on a set of radiating spokes like a wagon wheel. No matter where you want to go, it’s the wrong way. Add construction and gridlock traffic and you have a nightmare. Walking is often much faster.
Every GPS mapping system has errors that need to be updated, but I imagine that it’s a constant problem in Boston.
1) There’s no incentive for cabbies to treat you well? Um, tips, as you mentioned? Then you point out Uber’s rating system as a better alternative because you rate the driver. But then aren’t you assuming that Uber/Lyft actually do something about the bad reviews as opposed to taxi companies to whom you can also complain to about a driver? What makes you so certain Uber does anything about bad-ratings drivers? We know for a fact that they lie about how many cars are in your area.
Also, good taxi drivers will turn off the meter when they screw up.
2) Yes, ride sharing has indeed upended the taxi industry. But it still can’t provide auto transportation for any less money than taxis. The actually goods/services element is the same, a ride in a car. It’s not groundbreaking like going from an old flip phone to a smart phone that actually has internet and apps.
It’ll be interesting to see how well any of the taxi companies adapt. My understanding is that they all have apps now too for your nearest driver. That isn’t so hard.
3) People are so happy with Uber because it costs less, period. But its ownership is losing millions constantly to make it so. Take this element away for the consumer and I doubt people will feel so enthused about Uber anymore. Taxis will feel comparable.
“1) There’s no incentive for cabbies to treat you well? Um, tips, as you mentioned?”
At least a portion of this can be recouped by them taking you on bad routes (either mileage-wise or traffic-wise), and unless you know you’re being taken for a ride (no pun intended), you’re probably still going to give them a tip anyways.
“Also, good taxi drivers will turn off the meter when they screw up.”
Agreed, but my personal experience is that happens very rarely– and most of the time only once a full fee (or more) has already been extracted. So they’re not charging you extra for them screwing up, apart from your time.
“2) Yes, ride sharing has indeed upended the taxi industry. But it still can’t provide auto transportation for any less money than taxis.”
On the consumer side, it is. I’ve been using Uber for six years now. I estimate I’ve saved over $1000 vs. using traditional taxis in that time frame. Plus time and convenience. It’s of course not sustainable in the long run in its current iteration, but that $1000 isn’t any less real. And if Uber were to raise their rates to be roughly equivalent with taxis, I would still opt for an Uber over a taxi because of the convenience factor.
“It’ll be interesting to see how well any of the taxi companies adapt. My understanding is that they all have apps now too for your nearest driver. That isn’t so hard.”
There’s… 8 taxi associations in the City of Boston, I believe. That doesn’t include the dozen + cab companies from Somerville and Cambridge, and probably a dozen more from Brookline, Newton, and other towns which make up Greater Boston. There’s also laws restricting taxis from towns outside Boston picking up inside Boston, and vice-versa. Unless these all aggregate into one app, it’s pointless.
“3) People are so happy with Uber because it costs less, period. But its ownership is losing millions constantly to make it so. Take this element away for the consumer and I doubt people will feel so enthused about Uber anymore. Taxis will feel comparable.”
It costs less and it’s far more convenient. Even if you take away the price advantage, Uber and other ride sharing services will still dominate taxis, in my opinion, until taxis can eliminate the tech advantage and actually provide decent service. I don’t see that happening any time soon. The taxi companies in Boston are HORRIBLE. Like I said, maybe it’s geographic. I’m sure this doesn’t apply in places like Manhattan, as Petunia pointed out, where cabs are everywhere already.
I’ll leave it on this note. The vast majority of cab drivers in Boston are immigrants (I believe this rings true for most large cities). I’m not pointing this out to be xenophobic– read on. They are often overworked, underpaid, and taken advantage of by their companies and customers alike. The medallion system is utterly broken. A handful of people own the vast majority. They’re totally unaffordable for 99% of their drivers. It’s a borderline criminal enterprise. It is not an environment where customer service is considered paramount. It can be almost impossible to find a taxi at certain times (e.g. when the bars get out at 2 AM, there are virtually no taxis around), and public transportation in Boston stops at 12 AM. The taxi dispatches are horrible, and you never know if your taxi is actually coming or not– and don’t be surprised to get a call and be bitched out by a dispatcher for not being there for a cab who showed up 30 minutes late, and you left already.
Here, there is no good reason to take a cab vs. ride sharing services. Price, service, convenience… they’re not even close.
The problem with medallion taxis, in a place like NYC, is that you can’t find them anywhere except in Manhattan. They are fine when you can get one, it’s when you can’t that Uber becomes attractive. Most of the residents of the city live in the outer boroughs and they have to use car service anyway to get a taxi, except the car services only exist or go to the nice areas. The rise of Uber in places like NYC is a backlash against all the decades of neglect by the medallions in the outer boroughs. The Manhattanites like Uber because they can play “I have a driver.”
Guess you have never taken a taxi in Melbourne. Just like our train service here: c r a p.
Can’t beat the taxis in Japan. IMO best in the world.
Been using Lyft here in LA and Lyft is great, better public image too.
One driver told me he used to use his own car but now he is driving a Ford Escape, fronted by Ford to Hertz, and from Hertz to him. After a certain number of trips he’ll own the car. Hell of a deal.
Lyft financials are probably the only crappier financials than Uber that you can find on planet earth (well, excluding states of California & Illinois).
Uber spends $1.33 for every $1 it earns (net, not gross ride fee).
Lyft (much smaller and more secretive about financials) seems to be losing $2.20 for every net $1 it earns.
This is weapons-grade stupid.
Where do you see Uber’s annual report or any other financial reporting of theirs?
Uber’s present business model (Lyft’s too) is to get their drivers to provide the capital, maintenance, insurance, and fuel for the necessary rolling stock to make their business go.
The Xchange program looks to me like the drivers weren’t able to come up with the capital (the moolah to buy decent cars), so Uber attempted to subsidize them. But the subsidy cost too much.
About switching Uber to driverless cars? I don’t get the plan. It looks like a plan to get rid of the people who provide the capital, maintenance, insurance, and fuel.
We’ll see. Maybe they can deliver me a new cat toy from pets.com.
Don’t worry, they are much further from being practical than the hype suggests.
Apart from self drivers, there have been several tragedies and thousands of people temporarily lost because they believed the GPS.
This self driving bit will begin with baby steps: e.g. a shuttle from ferry to airport that always takes the same route. Note that these baby steps have barely begun.
Spot on. Uber needs the stupid drivers who underestimate the real costs of operating vehicles. Without them, Uber burns through “investors” cash even faster.
Uber vaporizes $ billions in “free” money at least partly because its not publicly traded. The market would’ve sniffed out this goofing leasing scheme as soon as it was implemented, and incorporated it in the public price of the shares.
“Uber vaporizes $ billions in “free” money at least partly because its not publicly traded. The market would’ve sniffed out this goofing leasing scheme as soon as it was implemented, and incorporated it in the public price of the shares.”
Not necessarily – look at the price of Tesla shares.
lyft is doing great in a lot of cities. uber is suffering from bad press because it,s banned from a lot of cities and countries.A lot of taxis are suffering a lot because of uber they lost a lot of income in poor countries it,s hard for them to stay in business.uber valuation should be much less then analyst gives them.uber should have there own self driving car Brand and start the own car business like tesla did.snaps is worth less then 10 dollars it going to needs billions from investors to make the company profitable publicity on the app is not enough they are going to need popular augmented reality videos games and a much better interface.the next big valuations are going to be bike sharing companies mobike and ofo it,s ecological
All the Uber Doomers are missing out on the future symbiotic relationship with Amazon. I have read that Amazon is moving to contract out package delivery for small zones to the lowest bidder. It is only natural that Uber drivers will also try and make money delivering packages for Amazon while also carrying passengers. The truly efficient Uber drivers will do this simultaneously , so in the future customers will ride around in worn out Corollas with sacks of Coffee and Cat Litter strapped to the roof and boxes of Salad Shooters filling the extra passenger seat.
That would be like hitching a ride with the local village carrier in the old days.
Parcels and people.
Maybe a goat or two as well, or some hens in a basket:
‘Would you mind holding these, please? ‘
How could these simple concepts lose so much money?!
People with their own vehicles act as a taxi service and I get a cut of every transaction. There must be servers and computer software to keep it all running smoothly but after that-wheres the overhead? I don’t get it
You are not getting it. “People with their own vehicles” you say? Well how about people with NO vehicle who want to be Uber drivers and have SUBPRIME credit?
Basically Uber fronts these people the money and is surprised when people with bad credit can’t pay.
Murica is basically now an insane nation. Houses, cars, perhaps tulip in the future … the keyword is subprime.
People like you are going to ruin this business (not Uber’s business, I mean the business of getting people to blindly “invest” in crap).
How could these simple concepts lose so much money?!
Individuals using their own cars can’t possibly compete with taxi companies that get massive fleet/fuel discounts and have mechanics on hand to make low cost repairs.
So the individuals have to be paid more because their costs are higher. It’s is not a business model. However, the business model is really fleecing investors.
Once upon a time, the interstate trucking business had its own version of taxi medallions. They were called Carrier Operating Rights and they appeared on a trucking company’s balance sheet as a valuable asset which the trucking company could pledge as collateral for a bank loan. Then deregulation came to the industry (around 1978) and anyone could enter the business as long as the newcomer could satisfy basic safety and capital requirements. All of a sudden the COR’s became worthless.
Companies like Uber are destroying the value of taxi medallions, another holdover from the Great Depression. Even if Uber doesn’t make it, other companies probably will and will build on Uber’s mistakes.
One of the first industries to be deregulated in the US was the stock brokerage business. Many firms that used to be in business at the start of the deregulation era are gone, including two of my former employers, EF Hutton and Bache. But I don’t mourn for their demise. Other firms have taken their place and I am quite happy to do business with them at substantially reduced cost.
The whole medallion thing is bizarre. How about one to open a coffee shop or a hair salon?
All the rich guys in Manhattan, SF etc. may take taxis by choice. In my city the vast majority of taxi use is by folks with limited income, or who are unable to drive.
The rent ‘earned’ by the medallion holder ( who is almost never the driver) comes out their hide.
PS: years ago I stopped driving for exactly 90 days after I gave it up for Lent or something. My transportation costs skyrocketed.
Uuber seems like the Bernis Madoff of transportation.
It used to be the case in London that one couldn’t get a taxi ‘south of the river’, a whole ‘wasteland’ inhabited by millions.
And so the taxis lost business to mini-cabs.
Served them right, they were arrogant and spoiled. A working-class ‘closed shop’ at its worst.
Uber is the greatest thing since sliced bread, lol, and of course bitcoin.
Man I can’t wait to experience paying for my self-driving Uber ride with bitcoins on my 3D virtual reality headset! The future is going to be amazing!
True story: about 10 ? years ago a guy paid a cabby’s bill about $50 in bitcoins.
Today he’s a millionaire.
PS: I am NOT a bitcoin fan. If its digital , on line etc. it can be hacked. There has already been one huge theft.
But it worked out well for cabby.
One interesting add on, Uber has some kind of program involving Chevy Bolts as well. Saw a guy at a charging station with Uber sticker on his Bolt, told me that this was actually an Uber car that he got on some kind of program for. Not sure if this involves any kind of lease though.
Given all of Uber’s efforts in self driving cars, if they survive that long. I actually wonder how many of those will be electrified versus standard gas guzzlers. Because operationally, the gas guzzlers would be far faster in terms of turn around, so higher utilization rate. No need to wait 30 minutes for a fast charge, and range will far exceed 200 miles. The only question is the economics of having to get gas vs electric in the long run.
It would depend on whether the car was ‘his’ and could be recharged during his unavoidable downtime (sleep) or whether like a plane, the car had to be available most of the time.
Uber isn’t too big to fail, it will fail and it’s competitors will take over it8 market share.
Correct. Local taxi service.
I once considered driving for Uber. A vehicle under 5 years old is required in my area. My vehicle is a little over that, and I’m not going into debt for them.
I Think this policy is partially to blame for this fiasco.
I wish you all would stop ruining the delusion.
I take it that if interest rates ever normalize above zero then Uber is toast?
Isn’t Uber a perfect example of a zombie company that exists and survives purely by borrowing at low interest rates?
And as we all know, zombies survive by eating the living!
Just heard this story on NPR. Seems like you’re just a bit ahead of the curve.
What uber should have done is spent a few billion on a sitcom – a reboot of taxi! Hollywood lost any originality decades ago so they’d bite and several generations could be introduced to Latka, that crazy guy (Jim?) and the evil boss, who could yet again be played by Danny Devito.
– Off topic: @ W. Richter: Currently when I look today at the 3 month T-bill rate then I think the FED will cut the FFR in their next meeting.
Yeah, when you establish a cause-and-effect relationship in the wrong direction, you get wrong results.
– LMAO !!!!!!!!
EVERY SINGLE uber driver is losing big time money on their cars. Uber’s little experiment proves it. You cannot do Uber prices, under-cutting Cabs, and expect drivers to remain ‘whole’. Its a hugely failed model, and the whole autonomous car thing will go right down the toilet with this Uber thing. Most ridiculous business model on the planet, right after Musk’s Tesla stunt. Every single one of the Tesla’s loses $30,000 per copy, and thats on their $100K versions. So people are dumb enough to believe Tesla will ‘make money’ on a $35k version ??? Uber and Tesla are going to be the equivalent of the dot.com companies that went belly up in 2000, when this market finally goes belly up, whether its 2017, 2018 or later. QE has extended this parabola of insanity way beyond its shelf life.
Re: the Tesla cars, wait until those owners get the price for replacing the batteries. Here in Canada, the batts for a Ford Fiesta “hybrid” are in the C$18,000 range. That’s for a half electric and half internal combustion engine type of powertrain.
My father drove for Yellow Cab in the 1950’s and 1960’s in San Francisco. The company owned and maintained vehicles and supplied all fuel. Drivers were full time employees paid an hourly wage, with vacation and pension benefits. Drivers were all members of the Teamsters Union. Yellow kept the meter, drivers kept tips and salary.
From people I knew diving cab in the city in the 1980’s, cab drivers were by then more akin to contractor sharecroppers who carry the costs by “leasing” from the cab company for their daily shift, and also paying their own fuel. They earned virtually no money until their daily “costs” were met/exceeded by the meter and tips. The exception was/is drivers who may own their own medallions and are thus owners.
It seems to me that today’s non owner taxi drivers are carrying the capital costs…not all that different than Uber or Lyft drivers. So far, the big losers are the people doing the actual work. Too bad deregulation and the long war on unions and worker rights has destroyed yet another decent working class job….
When you lease a taxi you fully understand the capital costs you are carrying (i.e. your true costs). Uber/Lyft drivers almost universally do not.