This is a thoughtful analysis into the whole Uber CEO opinion, but it is opinionated. Aggregation theory is one way to derive Uber's value, but you can make a compelling argument that supply drives demand.
The reason why I don't use taxis in Australia is partly because the experience is far better with Uber and the cost is cheaper, but also because Uber is the most reliable. Without drivers and such reliability, I can't use Uber even if I want to.
Does demand drive supply? Yes. But does supply drive demand? Yes too. With a two sided marketplace, you can't just focus on one.
It's very interesting in India where you have enormous supply of auto-rickshaws ('tuk tuks') available in most public spaces.
Often, when I'm in public, I'll choose an auto-rickshaw instead of an Uber because the rickshaw is right there. I don't have to wait for it, don't have to give it directions to find me.
The service is worse - I have to haggle about prices, endure bumpy rides and dangerous driving - but the easy availability makes me choose them.
While I didn't use Uber in India, Mexico City was the same experience for me. In fact our local office strongly encouraged us ONLY to use Uber over anything else. It was by far the quickest, and safest way to get around.
I think the point is that as a foreigner, you're more likely to have Uber already installed than even knowing about Ola/Didi/whatever happens to be popular in a given country
Ironically, in multiple parts of India, auto-rickshaw drivers are infamous for having rigged price meters, or flat out refuse to use the meter. Bangalore auto drivers have their unofficial motto as "One-and-half" which basically means you have to pay 1.5x what the government stipulated rate meter reads at the end of your trip.
Uber, in these cases, is a breath of fresh air. Upfront pricing, reasonably friendly drivers, decent customer service in case of issues etc. is very welcome, even if it involves waiting for 2-5 mins. I'd rather wait for a cab than have insults hurled at me for not wanting to get ripped off. :/
I'm from Chennai, where the auto-drivers are very very infamous. I usually don't mind waiting for the Uber if that means no interaction with auto drivers.
With "driving demand" you don't mean "creating demand" but "directing demand to my business instead of the competitors", right? Because it sounds a little like you want to say "creating demand", but your demand to go from A to B is already created before you choose between a Taxi and Uber. You don't decide to go to B because Uber exists.
> You don't decide to go to B because Uber exists.
Actually, I absolutely do. I've gone on many trips that I simply wouldn't have gone on pre-Uber. On a regular basis I'll decide to go somewhere (ex. a party in Brooklyn) which I wouldn't have bothered with if it meant a slow and unreliable taxi (or an even slower subway ride).
Just curious: What makes you call Uber fast and taxis unreliable in NYC? I would agree with you in almost any other market, but I find getting a taxi in NYC using Curb just as fast and reliable, yet cheaper.
Cabs in NYC are simply a terrible experience that needs to step up. Since they don't really care about you, I've had refusals to turn on AC, them blasting music or talking loudly on the phone, and even one guy pulling his emergency brake and telling me "my brakes aren't working you need to get out" because he didn't want to go from battery park to Williamsburg. I will go out of my way to not use a cab, I'll pay more, deal with more inconvenience because cabs are just a terrible experience that I don't want to deal with anymore.
In Manhattan below 110 street or so, taxis are reliable if your destination is also in Manhattan below 110 street or so. Also from the airports they're generally reliable.
However, if you go from Manhattan to Queens you'll find they sometimes suddenly "forget" how to get there despite 90% of them living in Queens because they won't reliably get a return fare. Same in the rest of the boroughs.
Also they often have "broken" credit card readers that magically get repaired after fighting with them.
The cars are not always in the best condition. The other day I rode in a cab that had no suspension it seemed. Every bump in the road would send you flying. It was a nauseating experience, let me tell you.
I still take taxis from time to time, especially when there's no real price difference or when I don't want to wait. A late night flight I might take an Uber to the airport and a taxi back if the wait time is too long.
With Uber and Lyft I generally get clean cars with suspensions and don't have to worry about paying them (Already handled!), refusing service, etc.
Although you get bad service from time to time in all transportation providers, Uber and Lyft tend to be much more consistent.
Also being cyclist in NYC these yellow cab drivers are your worst enemies. I have almost got ran over more than once. You can listen to them moan about cyclists if you have been in enough yellow cabs. Having biked around in city for a while I personally go out of my way to avoid them. I only use them if I am in manhattan and have absolutely no patience or sobriety to call uber.
I do feel like this applies to Uber/Lyft drivers also (at least in SF and bay area). The bonus structure built on X rides per day makes some drivers quite rash.
More than that, it seems a lot of SF Uber/Lyft come from far away to work in San Francisco and don't know their way around and have their eye's glued to their phone's GPS. I ride a bike in SF and I've nearly been hit by a Uber/Lyft driver at least 10 times this year(once the same driver cut me off 3 times on 2nd street). I keep a eye peeled for those Uber/Lyft logos when I see them pulled over, when pull out into traffic they almost never look for bikers and usually screwing with their phones.
Yes. I rode in the car of a person that lives in Fresno, but drives 5 days in SF. He and a bunch of others sleep in their cars at night. He knows the city well enough now, but pointed out 10+ drivers in a 30min drive with cellphones in their hand.
The only time I felt unsafe inside the car was when my driver drove with his elbows, with the Uber app in one hand and his wife on a different phone in the other hand. He just honked and cut across 3 lanes of traffic on El Camino on Mountain View. He told me later that he used to drive a taxi for years. I chalked it down as a cool story to tell people.later.
If there were fairness, police would have had a field day (except it'd have taken months) ticketing yellow cabs if they applied the same strict rigor of law as they did ~5 years ago with cyclists. And that's accounting for some really absurd laws NYC enforced just on cyclists (if there's a bike lane, and you're a bike, you must be in the bike lane).
In markets with unreliable, inconvenient, or overpriced taxi service your options before Uber were to drive yourself, have a friend drive you, use public transportation, rough it in a taxi that may or may not show up and do so 30 minutes late, or simply not go.
Since low quality was previously a barrier to using any taxi service at all, it absolutely creates demand.
It seems that what you're describing is "simply" meeting existing unfulfilled demand, not creating new demand. Creating new demand would be when you move to a part of town with poor public transport because you can now Uber.
> your demand to go from A to B is already created before you choose between a Taxi and Uber
In the Bay Area and New York City, for me, this is untrue. Distances feel smaller when you can cross them with the press of a button. That, in turn, makes peripatetic schedules realistic.
Case in point: I took a Lyft Line from Berkeley to Mountain View yesterday. If that wasn't an option, I would have (a) taken the train or (b) not gone that far.
Many comments say it as yours. After reading them I have to agree. I spend most of my time in areas with highly developed public transport. I assumed in the US at least taxis would offer a similar level of flexibility, but apparently not.
In Seattle the taxis usually gather at designated pickup spots, in fact I think there's a law about them only being able to pick up from there or if they are called vs hailing from the street.
In the past I've helped tourists by directing them to these locations which aren't noted anywhere. So it can be really confusing plus inconvenient.
That's one of the reasons I like Uber and the like: I don't have to know what to do.
your demand to go from A to B is already created before you choose between a Taxi and Uber.
If getting from A to B is time consuming and expensive then I might not bother unless it's really important. By lowering the costs of getting from A to B I might do it more often than I would otherwise.
Conceivably, I could decide to make three trips (to B, C, and D) instead of just two trips (to B and C) because Uber is cheaper/nicer/better/etc than other forms of travel.
My demand for travel is somewhat elastic, not completely set before I know the cost of travel.
Demand is absolutely elastic (to a certain point) on a number of dimensions: price, time, comfort, hassle. There's an upper limit. The trip from A to B usually has some negative utility relative to being at B but the closer to zero you can make it, the more likely you are to make the trip.
Personally, I just don't have many situations where I would make a trip but my available alternatives are just a bit too costly/inconvenient--while Uber wouldn't be. But I understand they exist.
> the company offers a compelling service for riders, an economically attractive one for drivers (who drive by choice), and makes the cities within which it operates better.
Incredibly opinionated. It's a pretty disputed claim that more single passenger traffic improves a city.
Especially since there is data from NYC that shows that Uber is making traffic congestion worse.
In general major cities are trying to reduce automobile traffic and are giving more space to pedestrians and cyclists.
In the future as cities consider mobility pricing to control congestion and further limit car use, it's quite likely that ride hailing services like Uber will have caps placed on them much like how taxis do now.
I'm curious, is there data to show if parking demand is dropping with Uber making congestion worse? I mean in my head it makes sense that more people driving would lead to less parking but I don't know if that's true or not.
While congestion is not optimal I wonder if parking drops if space can be reclaimed to make other improvements.
A lot of people use uber because parking is horrible at their destination and public transit doesn't work. If uber doesn't exist then they would of drove. How many cars is that one uber car replacing in that case?
I think there's a lot of interest from cities in reclaiming parking, but it would be giving more space for pedestrians and cyclists. The amount of space for cars would remain the same.
Cheap, reliable on-demand trips make it easier to avoid owning a car at all and use public transport 99% of the time, whereas if you have to buy one anyway, you're more likely to use it even if you could have taken the metro instead, since after sinking the fixed costs, the cost per trip is not that different.
That isn't how traffic works in theory or practice.
Driving, or taking car trips has a high price elasticity. Lowering the cost of a car trip even a litte increases demand a lot. So Uber's subsidy of trips should increase demand a lot, which it does. Additionally the convenience of the app, and not having to find parking, or maintain a car also increase demand. If all of that outweighs the individuals cost of sitting in increased traffic, demand will continue to rise.
Because the costs are socialized, they affect people who don't drive or take car trips, i.e. bus trips take longer, transportation spending gets soaked up by road repairs due to extra maintenance costs incurred by increased traffic, etc.
Right, but Uber is not cheaper than owning and using one's own car, so they haven't actually lowered the cost of a car trip, only of a taxi trip. Own cars are not only still much cheaper, as the cost per trip actually goes down as you use it more, making Uber even less attractive as the number of trips increases.
It's exactly for people who take very few car trips, like me, since they use mostly public transport, that Uber is actually more attractive than car ownership, since it avoids the fixed costs.
As for road repair costs, that's usually paid off from gas taxes, which Uber pays linearly according to their used miles, so it's not "socialized" in any meaningful way.
You're missing my point, I'm not talking about Uber vs owning a car. My point is that for people like you who might take public transit, walk, bike, or otherwise not take a taxi Uber lowers the total cost of a car trip, thereby increasing your demand for car trips. Also, while taking 2+ trips per day will eventually cost more, it's cheaper in the short run where people actually make decisions.
Furthermore, Ubers like cabs drive around waiting for fares so they create traffic while not providing rides. Similarly with recent cases of Uber driver brigading to drive up surge prices, they also create surges of traffic.
Gas taxes only pay for up to 40% of road maintenance and that's in states with the highest gas taxes. The rest of the cost is made up from general funds and transportation budgets. There was a high profile case recently in Maryland where the governor redirected light rail funds to highway maintenance and construction. In fact gas taxes have never fully covered road construction and maintenance costs anywhere in the US, ever.
My point is that for people like you who might take public transit, walk, bike, or otherwise not take a taxi Uber lowers the total cost of a car trip, thereby increasing your demand for car trips
No, because, like I said at the beginning, if I didn't have Uber I'd get my own car, and so my marginal cost per car trip would be much lower, and so I'd use it more than the couple of quarterly rides I take nowadays.
Furthermore, Ubers like cabs drive around waiting for fares so they create traffic while not providing rides.
On the other hand, if I need to go some place after work, I'd need to take my car to work during the morning commute, creating extra traffic. Also, there's driving around looking for parking. Finally, there's UberPOOL.
Gas taxes only pay for up to 40% of road maintenance and that's in states with the highest gas taxes.
Fair enough. Sounds like states need to raise their gas taxes. But at least here Uber also pays 23% VAT. Don't they pay sales tax over there?
Yeah, they pay sales tax here. And we do need to raise our gas tax, but its sadly politically infeasible.
What I'm getting at is there are costs other than just gas, car payments, maintenance when taking car trips. Things like needing to be alert to drive, parking, and navigating that Uber lowers and creates demand for trips where people otherwise wouldn't drive/take a car and may have foregone altogether.
Uber at least always shows you both Pool and X trip times and prices at the same time when ordering. This at least gives every X passenger the opportunity to consider a Pool trip first.
Despite having a dim view of Uber and Lyft generally, I've had good experiences in Pools. I find that they're a great way to get recommendations for bars/restaurants/events in the area, and you have either a source or destination in common. People are usually either friendly or silent.
Not only that, but Pool encourages better transport resource utilization.
I don't think the author makes any claims that this is anything other than a positive feedback loop. He's mainly saying that it makes sense for Uber to prioritize the user experience over anything else in order to further accelerate growth.
The reason why I don't use taxis in Australia is partly because the experience is far better with Uber and the cost is cheaper, but also because Uber is the most reliable. Without drivers and such reliability, I can't use Uber even if I want to.
Does demand drive supply? Yes. But does supply drive demand? Yes too. With a two sided marketplace, you can't just focus on one.