The Economics of Uber


This video is sponsored by Skillshare. The first 200 people to use the link in the
description get their first two months free. Uber is the highest-valued private company
in the world, More than Airbnb, SpaceX, and Lyft combined. Every day, 15 million rides are taken across
600 cities in 78 countries – Everywhere from the Southern Tip of Africa
to the tiny town of Gridley, California – home of the Red Suspenders Festival, I’m sure
you’re familiar. Uber is so successful because it’s so convenient. Open the app and choose a ride – standard,
or luxury, or, in India, rickshaw. Soon, even flying taxi. Afterwards, you rate the driver, and they
rate you. 1 through 4 stars being the worst experience
of your life. And five stars, anywhere from Mostly Tolerable
to Absolutely amazing. I’m only slightly kidding: a 4.6 average
can get a driver deactivated. Still better than Netflix’s thumbs up or
down, which is 80% sure I’ll like The Emoji Movie, To which, I say: Finally, Uber calculates the price, it’s
really very simple: Start with the regular base fare, add the
per minute rate multiplied by time spent in car, plus distance times the per mile rate,
all of which depend on the city. A $40 ride in Tokyo costs $1.62 in Cairo. Then add the booking fee, and possibly airport,
toll, cancellation, cleaning, and lost item fees. UNLESS there are too many riders and not enough
drivers, in which case multiply by a surge price, 2, 3, or, on New Years Eve Two-Thousand-Eleven,
seven times the normal price. And as YoutUBERs have shown, algorithms can
be manipulated: If drivers log out at the same time, they
create a shortage and trigger a surge. Oh, it also uses machine learning to predict
how much you’re willing to pay based on route, so maybe don’t call an Uber from the Burj
Khalifa to The Bellagio, besides the fact that you… can’t. Even despite this, Uber is almost always cheaper,
faster, and easier. It took the most outdated, inefficient industry, sprinkled in something called “Technology” and completely reinvented the wheel. Oh, come on, you should know by now, there’s
always a twist… In the 1930’s, The Great Depression… happened. It wasn’t great, but it was depressing. Every fourth American was unemployed and desperate
for work. Especially low-skill, low barrier-to-entry
jobs, But, YouTube hadn’t been invented, so, they
drove taxis – lots and lots of taxis. Meanwhile, fewer people could afford a ride. And, as I was taught by a monopoly educating
me about the danger of monopolies, When this line goes up, and this ones goes down, prices
fall and drivers get angry. Like, violent protests in the street angry. So New York City wrote the Haas Act. Now, to legally operate a taxi, you’d need
one of 17,000 licenses called medallions. But 81 years later, with a million more people,
it’s only 13,000. You can see the problem. The number of medallions issued is more political
than it is practical. Before, extreme competition made prices unsustainably
low. Good for riders, bad for drivers. And then, the pendulum reversed – too little
competition made taxis expensive and inefficient – bad for riders, good for drivers. One medallion, the right to operate a single
taxi, was once worth over a million dollars. But advice like this hasn’t aged so well. Because: Uber happened. Its drivers flood the market by not requiring
medallions, draining their value. High competition, low prices, and angry calls
for regulation – Sound familiar? This time, we aren’t in an economic depression,
but many households are, which means lots of drivers. For you and I, Uber is revolutionary – the
low prices of last century plus the magic of these things. And for drivers, well, yes and no… If you ask Uber what the average driver makes
an hour, they point you to this study: $19.19. Another says 21. Not too bad – unless, you look under the hood. What they don’t include are the car, its
depreciation, maintenance, gas, and some of the insurance. Adjust for these and things aren’t so rosy
– This study estimates the median hourly profit
is eight fifty five before taxes, less than minimum wage for 54% of drivers. 8% actually lose money. You might say: But Uber is supplementary – a
quick way to make extra cash between jobs. And, that’s mostly true, about 60% have
another primary income. Plus, unlike taxis, who are even legally required
to wear black socks in LA, with Uber, you have some freedom. But the reason people don’t drive more might
only be they can’t. Because Uber considers its drivers not employees,
but independent contractors. Employees are entitled to minimum wage, gas
reimbursement, overtime, breaks, collective bargaining, paid leave, and health insurance, Which would cost the company about 4 billion
dollars a year. So they’re extremely careful to call drivers
“partners”, and itself, not a transportation company, but a “platform” – Simply connecting riders to drivers, who decide
when to work, what to wear, and so on. But, Uber controls the prices. And that’s the catch – if drivers are just
independent businesses, Uber setting their fares could be considered price fixing. So, which are they? That depends on who you ask and when, and
the answer will shape the future of the industry. But something doesn’t add up, The golden
age for drivers came from regulating competition, the same regulation Uber spends millions of
dollars fighting. Going back to the days of high competition
and low prices. But …why? If Uber takes a cut from drivers, their interests
should be the same. Regulation, of course, slows its growth, but
there’s also another reason: Drivers compete – but Uber makes the same
commission regardless of who picks you up. Uber makes more money with more drivers. But drivers want the opposite – less competition. They look like other platform-vendor relationships
– Amazon and its sellers, Apple and app developers, Both of which need their vendors – if YouTube
leaves the app store, Apple can’t replace it. But drivers are drivers – Uber needs them
– but no one in particular; they’re disposable. Something like 96% stop driving for the company
in their first year. The two seem economically intertwined, but
as long as Uber can find more drivers, they can keep fares unsustainably competitive with
rivals. The real winners of the Haas Act weren’t
cabdrivers, who couldn’t afford million dollar medallions, but their owners. Instead of drivers giving away their first
$100 a day to rent a medallion, now it’s 25% all day. For many drivers, it’s still a very welcome
and useful opportunity, but it isn’t quite the groundbreaking revolution promised. And it may not last… On paper, Uber has the perfect business model: Its huge network of drivers dominate the globe, but it need not buy a single car or gallon
of fuel. All perk, and no work. Something thousands of startups desperately
try to emulate. Most of which belong on Flopstarter, with
products like the TIMELESS watch, which… doesn’t tell the time. So how did Uber lose four and a half billion
dollars last year? That’s 12 million dollars a day! Many startups sacrifice profit for growth,
But Uber is nine years old. Facebook made money after two. The company’s biggest problem may not be
its legality, or controversy although there’s plenty of that, but basic holes in its business
model. The magic of so many companies is the network
effect. Every new customer makes it that much easier
to get another. You join Facebook because Steve is on it,
Kim joins Facebook because you are, and so on. For Uber though, this is only regional. More drivers in New York does nothing for
Beijing. In fact, it failed in all of China. Every city is a new chicken-and-egg problem: Drivers need riders before they’ll drive,
and riders need drivers before they’ll ride, I do not like them, Sam-I-Am. I do not like green eggs and – oh. This helps keep prices low, and profits, nonexistent. It’s inescapable and leaves only one path
for Uber: self-driving cars. Remove the driver, remove the money-eating
machine. But it means competing with the technology
of Google and the auto-expertise of GM. Either it’ll transform into one of the biggest
transportation companies in the world, or, it’ll be the end of the road. It plans to go public next year. which’ll be fascinating to watch, doubly
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100 thoughts on “The Economics of Uber”

  1. Tesla just threw its hat into this ring. LMAO, they already HAVE self driving cars. What's the point of Uber? It's just an App, doesn't make, build, or produce a single thing.

  2. You said its a chicken and egg problem in every place they start.True.But they are earning commissions on every ride,then how are they losing money?

  3. This is reality but nothing happens to the new car in 2 or 3 years, doesn't have even in 5 years…..

    I will amend 54 cents per mile to 24 cents per mile…….
    It became 30 cents out of 90 cents and this is reality as I already done 12000 trips with uber, so I know…

  4. I watch video on Amazon, get Amazon ad.
    Now I just clicked this video on uber, get an uber ad of course.

  5. If you want to get a thought out look on the IPO of Uber, watch my video because I will show you how I'm investing in that stock…. See you!

  6. The problem is that the drivers earn little and Uber is losing money. No future on that.
    This is a global ruin.

  7. Ubers are not cheaper than taxis any more, at least not in my home town. And taxis are lot safer—a lot of weirdos are driving ubers.

  8. 🤖 RoboTaxi 🚕 $TESLA (playlist) :
    📺 https://www.youtube.com/playlist?list=PL3onQc9V5YLEt2Q6Fa4XIgMfyWW0ImM9A

  9. And then the European union banned uber from their countries and so the company has even more problems

  10. 😂😂😂😂😂😂😂😂😂
    They are not losing money…..its all lies because they just called out for why the have over 90 BILLION in bans in the Caribbean WHEN IN FACT THEY DO A TINY…TINY….TINY…..TINY….fraction of their bussiness comes from there… .SO…..clearly the banks are there JUST to stash the money from AMERICAN banks so AMERICA does not TAX the money !!! You know….the TAXES that make AMERICA GREAT AGAIN !!!! APPLE AND MICROSOFT ALSO STASH THEIR MONEY IN THEM BANKS IN THE CARIBBEAN!!!!
    When all companies got questioned why they set up a TINY office BUUUUT….the tiny office is HOARDING MORE THAN 100 BILLION ….alllllllll 3 companies said …..ASK THE IRS ….WHAT WE ARE DOING IS LEGAL….ITS IRS FAULT THEY ALL CLAIMED….AND I SEE THEIR POINT…..BUT STARTING THE COMPANY IN CARIBBEAN JUUUUUST FOR TGE PURPOSE OF NOOOOOT PAYING AMERICA TAXES !!!! THAT IS SOME TREASON, GREEEEEEEDY ,FUQ BOY SHIT !!!!!
    WEEEEEEE THE PEOPLE WORK OUR [email protected]@@@@ off for what 25,000 per year JUST so the FEW at the TOP can be BILLIONAIRES…..HEY….AND THATS FINE ……BUUUUT NOOOOW COME TO FIND OUT ALLLLLLL THESE YEARS THEY BEEN HIDING THE MONEY IN CARIBBEAN AND WE LOSE TAXES TO IMPROVE THE AMERICAN SOCIETY !!!!
    BOYCOTT ANY COMPANY THAT TREATS US LIKE THIS !!!!!
    BOYCOTT THE THIEFS !!!! THEY WILL GO BANKRUPT AND LEAVE.
    ALSO….IF YOU GUYS WANT TO SCARE UBER AND LYFT …..
    Just join somebodys YOUTUBE channel that will be the VOICE…..
    ATLEAT 1,000 DRIVERS FROM ALL 50 STATES JOIN THE YOUTUBE CHANNEL…..1,000 DRIVERS × 50 STATES = 50,000 DRIVERS
    SO NOW 50,000 × 1,000 DOLLAR INVESTMENT EACH = 50 MILLION 😂😂😂😂😂🤑🤑🤑🤑
    we HAVE OUR OWN RIDESHARE CREATED AND MANAGED …..OUR NEW CEO AND VP AND OTHERS ALLLLLLL CAPPED AT 1 MILLION PER YEAR EARNINGS…..
    WITH COMPANY I TALK ABOUT STARTING DRIVERS WOULD KEEP 90% PER TRIP….THE OTHER 10% PER TRIP GOES INTO THE COMPANY POT SO IT CAN OPERATE…PAY TAXES AND INSURANCE……
    THINK THIS WAY…AVERAGE RIDE IS 10 DOLLARS ….DRIVER KEEP 9 DOLLARS AND OUR NEW COMPANY GETS 1 DOLLAR….SOOOOOO DRIVERS AVERAGE 10 TRIPS PER DAY…… SO EVERYTIME THE 50,000 DRIVERS DO JUUUUUSSSSSSST 1 TRIP WORTH THE AVERAGE 10 DOLLARS THAT MEANS WE KEEP 1 DOLLAR RIGHT …….SINCE 50,000 DRIVERS × 1 DOLLAR = 50,000 DOLLARS CASH …THATS EVERYTIME WE ALL DO A TRIP….SINCE WE ALL DO AVERAGE 10 TRIPS PER DAY…
    50,000 × 10= 500,000 per day 🤑🤑🤑🤑😂😂😂😂😂😂
    That is PURE money to run the company !!!! The drivers forever KEEP 90% PER TRIP !!!!!
    THINK HOW RICH ALL DRIVERS IN AMERICA WILL BE IF WE ALL KEPT 90% PER TRIP !!!!
    THIS IS HOW WE MAKE AMERICA GREAT AGAIN !!!!
    ALLLLLL DRIVERS IN AMERICA MAKING OVER 75,000 PER YEAR….SPENDING THE MONEY HERE IN AMERICA !!!!! NOT US WORKING TO MAKE 50 PEOPLE BILLIONAIRES !!!
    LETS UNITE !!!

  11. Uber’s IPO tanked. The biggest problem Uber has is 3.6 million unhappy drivers getting exploited by the man and an algorithm

  12. Great video, I was explaining something similar to my brother and in a video i made on my channel last week(shameless plug

  13. Haha I'm watching this right after Uber went public and it was the biggest flop in history

  14. Uber will boost the economy so that drivers can buy electric cars and not pay high gas prices any more. They can reap the wages Uber has been offering all along

  15. Uber started the Reward program that offers Gold rewards with discounts up to 5% cash back on gas and complimentary dent repairs. Also incentives to pay higher payouts for partners. Uber is dotting all their i's and crossing all their Ts

  16. this video is accidentally communist it explain the internal contradictions of capitalism with the working class (drivers) and the capitalist class (uber)

  17. depends on how you look at it. the hours worked are really less than being on the clock. hours waiting for customers isn't really working; at least that's the way they see it. the fucked up part is they claim to take no more than 25% which is complete bullshit. In my opinion though it still beats back breaking labor or a sweatshop.

  18. Here lies the problem – 15,000,000 rides daily divided by 3 million drivers equals to just 5 customers per driver.

  19. The vast majority of their drivers are foreigners from third world countries. After all, that is all the vast majority of their drivers are capable of doing, is going into the transportation business where they have taken jobs from American citizens. The irony of it all is that these people would have never been allowed into America before 1965. The Immigration Act of 1965 is turning America is turning America into a third world country. When you import from the third world you become the third world. For every action there is a reaction. They have also taken over the taxi and limousine business as well. Gotta Love That Diversity. We must remember that Diversity Is Our Strength. Yeah Right.

  20. Take a look at any Uber and Lyft staging area at any major city in America. I'am referring to the city's airport staging areas. You will feel like you are in a third world country. After all, that is where the vast majority of their drivers are from. The vast majority of these people would have never been allowed into America before 1965. The Immigration Act of 1965 is turning America into a third world country. Thank You Ted Kennedy. Uber and Lyft both are aware of the fact that they have an endless supply of poor, unskilled foreigners coming into America every year from the third world. They have certainly taken advantage of the situation. Gotta Love That Diversity. We must remember that Diversity Is Our Strength. Yeah Right.

  21. Self-driving cars it's never going to happen how many people have to die before you realize it won't work

  22. A well thought-out analysis of the what-ifs faced by Uber and its drivers. My only quibble would be the conclusion, which the writer feels will be self-driving cars. IMO this technology is still many years away.

  23. Uber is great for the consumer, Uber, and thats it! The Driver does all of the leg work to earn the money, then Uber takes 49.8%! The Drivers mean nothing to these scumbags!

  24. mehn your ad transitions should be banned they are so good it doesnt annoy me, i dont like not being annoyed by ads

  25. With self-driving cars, Uber will be required to buy and maintain the cars. Something not required of Uber in its current business model. Self-driving cars will require Uber to increased fares significantly.

  26. I didn't know you talking about mate. I did work for Uber for 3 years. Now I seting at home because I’m bankrupt. My second year incoming inUber was minus £7000 after my expenses witch is car, insurance, fuel, parking, roomrental and food! My last third year incoming was minus £11000 plus Uber rider damaging my car it cost me with fitting cost between £1500-£2000. I 3 times group up my Credit to be living. On today I have. £50000 dept damaged car no future in my Live. My famaly after 7 in London emigrated from UK. Uber ignored Me all the time. Welcoe guys in Uber.

  27. Executive Mobility-July
    * Lyft Launches Ride Share App; Announces IPO
    https://www.amazon.com/dp/B07SS4MQ9T
    E

  28. Being 9 years into the market and looking picture perfect and making every other start up envy them with their extraordinary business plan, Uber isn't so perfect itself. They made a loss of 4.5 billion dollars in 2018. They are a mediator platform, between the user and the driver (a contractor, not an employee), their employees are their brain power who are developing the changes in their platform and coming up with new ideas everyday.
    They want the smartest people in the market to work as their brainchild and execute breakthrough technologies and to get the best, they are willing to pay hefty amounts. But the profit which comes through the commission they take from their contractors/drivers isn't enough to compensate for all the other costs. Retaining the users, and the drivers, and trying to expand into new markets, and implementing changes based on all locations, and fighting several legal battles, i can be sure the chief commitee of Uber have their hands full balancing it all.

  29. Plenty of people make less than $19 an hour as an employee but we don't say "wait, you have to subtract their car, depreciation and insurance!"

  30. The economics of uber is to fill the pockets of the people at the top and just say fuck all other employees. Just like every other tech company.

  31. HAHAHHAHA HOW FUNNY ARE YOU it wasn't great but it was depressive XD XD I'm trying to prep for my interview here !

  32. I don't get uber. Here in my country we use cash payments. So all riders 99% pay through cash.
    So a trip costed rider 300 bucks
    It shows on drivers app to charge the rider 300 bucks. Rider gives cash to rider and departs.
    How the F Uber is making money through that. The cash from rider is given to driver… No?
    I guess im missing something but… Can anyone correct me

  33. I thought Uber started out as a ride share thing, where if someone was going somewhere and someone else needed a ride they could use Uber to match up and the driver could simply earn some money for going somewhere they were already headed. But then people realized that they could just drive around like a taxi. But then once everyone started doing it it just doesn't seem like a good way to make money. It kind of reminds me of those people who get newspaper delivery routes in the country and go on about how much money they're going to make and how easy it is and it only takes a few hours. But then they quickly realize they end up losing money on gas, maintenance, etc.

  34. regarding the rating system, that's how it is in most companies, if you get anything other than a 90% or better on a survey, they hot tar your ass and make you feel like crap. Working at AAA it was a nightmare to keep your scores up, especially because a client could be surveyed up to 2 weeks after their conversation with you, meaning they may have even forgotten wtf you said and did and will just make something up. That was back in 2013, hopefully its different now.

  35. If you hire certain law firms, Uber is now settling with drivers for $0.25/mile for each mile you had a passenger in the vehicle. So for 10,000 miles that’s a settlement of $2,500. However, there are some trade offs you have to make:
    1) You have to give 40% of that settlement amount to the attorneys.
    2) You can never tell anyone you got the money. If if you violate the NDA, Uber can sue you for 10% (e.g. $250) each time you violate the NDA PLUS their attorney fees.
    3) You have to agree you were never an employee, just an independent contractor.
    4) You can never work for Uber again in ANY capacity (either employee or independent contractor)
    5) Uber can defame you.
    6) You cannot disparage Uber in any way. Uber will consider that a breach with 10% penalties and legal fees described above.

  36. Driving for Uber is definitely a dead-end job. It’s kind of hilarious how drivers are banding together to advocate for “higher wages.” Of course, it’s great when you need a ride, but to think of it as any kind of real job is ludicrous. It’s also a great way to end up getting killed in a collision. The more miles you log, the greater your chances of getting killed just like spinning the chambers in a game of Russian Roulette. Your number will come up eventually.

  37. ah the gig economy. screwing the working class for the benefit of the rich. don't over-complicate a simple issue.

  38. fast forward one year. UBER IPO happened and was a disaster. Also, they moved out of CHINA because they were offering 100$ worth of trips to people , but they were not able to distinguish properly two persons with Chinese names. Actually, many people registered several times under various similar Chinese names… end of UBER in CHINA, lost one billion there.

  39. DiDi is better but in China taxis are awsome cheap unlike western countries and everywhere unlike western countries

  40. There are objective measures for employees vs contractors. Uber drivers are contractors by any measure. Its not something uber gets to decide.

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