Uber: The Good, The Bad, and The Ugly

UPDATED Nov. 25, 2014
Cheryl and I had our first Uber experience yesterday and thought I'd report on it. The experience itself was first-rate. Things went just as widely reported -- but better. I wanted a ride from my home to the tobacco shop that I frequent, about seven miles away. I launched the app on my phone, which immediately located me via GPS. I entered the destination, and in a split second I was informed that a car was three minutes away and that the estimated fare would be $18-$22. Two points about the fare: 1) I'm told this is what the regulated monopoly taxicab company would have charged; 2) I knew that the ride would be free because Uber is giving away its service until it gets clearance from the city government. (That's another story.)



When I tapped "request a ride," a window popped up with a picture of the driver, his first name, the make and model of his car, and the license-tag number. Then a map appeared with an automobile icon, enabling me to see the driver's progress toward my home. Another tap gave me the option of calling or texting the driver. I could also cancel the ride.

In minutes the car turned the corner and stopped outside my door.

I entered a perfectly clean automobile. The driver had placed a bottle of water and some candy in the backseat console. He was friendly and happy to engage in conversation at my prompting. I discussed Uber with him (he said he is quite pleased with his situation), and I was pleasantly surprised by his knowledge of basic economics and political economy, especially regarding how the local government was looking for ways to regulate Uber.

Cheryl and I arrived at our destination in about 10 minutes thoroughly satisfied with the experience. As I expected, the app asked me to rate the driver. (I know he was asked to rate me.) I gave him the maximum five stars. (If a driver's average falls below a 4.2, Uber "deactivates" him.")

The return trip was similarly pleasant. (However, the two-door Volkswagen GTI was not as comfortable as the earlier four-door Volkswagen Jetta, and there was no water.) Again, the driver was able to talk about Uber in terms of economics and monopolistic rent-seeking by the taxi monopoly. I was impressed. I gave him the highest rating also.

Now to some concerns.

I've been vaguely aware of leftist complaints about Uber, but had not looked into them closely. I regret not having done so. My friend and left-libertarian colleague Kevin Carson has voiced some of these grievances, and I should have known better than not to have paid closer attention.

Anyway, the clue that I had something to look into was a small signed hanging from the mirror of my second driver. The sign, with Uber logo, stated:

While tips are not required, they are appreciated.

I was surprised by this. I had understood -- exactly why, I'm not sure --  that tipping was taken care of. The app says nothing about it; there is no option to add X% for the driver. I also understood (or thought I did) that the Uber ride was to be a cashless and cardless experience. A rider does not pay the driver directly, either by credit card or cash. The app takes care of that. My drivers didn't even realize that I would not be charged for my rides. They had no reason to know this because I would not have paid them directly in any case. (Uber, so I understand, pays the drivers their 80 percent of the fare even when the ride is free to the customer. Uber, then, is forgoing the 20 percent it would have made.)

I decided not to ask the driver if the sign raising the issue of tipping is an official Uber sign. I suspect it is not. How could it be when the company's website says:

Being Uber means there is no need to tip drivers with any of our services.

I also saw an email apparently from Uber to drivers saying that they should not ask for or accept tips.

In other words, the sign is an indication that at least some Uber drivers are trying to communicate with riders against the wishes of the company. Is this part of the driver resistance I've been reading about?

Further investigation informed me that tipping is quite a controversy surrounding Uber. Company statements tell riders that there is no need to tip because the tip is included in the fare. But some drivers, commenting at various forums, and others contend that this can't be true. Drivers say that their company pay statements do not indicate that part of the fare is a tip. My receipts indicate no tip. Moreover, if the tip is really included in the fare, that would mean the company skims 20 percent off drivers' tips. That's not how tips work.

So why is the company discouraging tipping by telling riders the tip is already included in the fare? What's the motive? On a moral level, it's not right for Uber to mislead riders, with the effect of depriving drivers of tips they would have collected. Uber says drivers make a good living (some dispute this) without tips, but that's irrelevant. Falsely telling riders that explicit tipping is redundant or unnecessary is wrong and harmful to the drivers.

When I reported my favorable experience on Twitter, someone identifying himself as an Uber driver responded:

we strive to provide the very best level of service to our riders! Glad you had a pleasant experience:)

But when I asked about the tipping controversy, he said:

there is no need to tip! We never want are [sic] riders to feel obligated to do so. We do appreciate tips tho:D

 Then he followed up:

the fuss is because Uber lied to the riders saying the tip was included when it wasn't.Now they just say it's not required.

Lied to the riders. This is wrong, yes, even from a libertarian standpoint. I still wonder what the motive is.

I hope driver and customer pressure will push Uber to change the policy and change the app so that riders can add a tip that would go entirely to the drivers. I've read that the app offered by Lyft, a competing service, permits this. (Lyft has not come to my area yet.)

But I will add this: there is no right answer to whether a firm or industry should create the expectation of explicit tipping, as opposed to some other system, such as bonuses for high ratings. After all, tipping is not inscribed in the natural law. This is an issue for the competitive market process to determine through the free actions of consumers and producers. The key here is to truly free the market. No privileges. No regulations.

Controversy has also swirled around Uber's abrupt fare-cutting, which of course reduces drivers' incomes, regardless of how much it pleases riders. The company assured drivers that the increased volume of business would make up for the lower per-ride return, but some say that this has not happened.

Uber has the right to set its fares, of course, but the issue raises the question of whether drivers would be better off in some kind of peer-to-peer arrangement rather than essentially being wage-laborers for Uber. I know that they are independent contractors, but their status is not very different from that of a staff employee. They have no say, for example, in the fare structure or other matters. True, drivers don't have to work for Uber, but that doesn't mean they have no right to use peaceful pressure -- and to organize -- to change the company's policies. Calling drivers "micro-entrepreneurs" does not make up for the company's treatment. (I realize there are other labor controversies, but I'll have to get to them another time.)

Let's hope the grievances against and publicity about Uber accomplish two things: 1) pressure the company to make the changes suggested here, and 2) more fundamentally, stimulate the search for an alternative arrangement in which drivers truly work for themselves while being part of a self-governed network that exploits the wonderful technology that makes such fantastic services available to consumers.

PS: I am increasingly annoyed by an attitude of some libertarians with respect to Uber and other firms that amounts to this:

Thou shalt not speak ill of any business. If you dislike something a company does, patronize a competitor or do without the service or good. But otherwise shut up.

What are the grounds for believing libertarianism forbids criticism of the labor or other practices of particular firms? Rights violations are not the only offenses against persons worth talking about. (Must we re-litigate this issue?) Even if we lived in a freed market, criticism and badmouth publicity would be a perfectly proper part of the market process. But it's especially proper in the corporate state.

I say all this qua libertarian. I am promarket, not probusiness, dammit.

UPDATE:

From Reason.com editor Nick Gillespie:

In September, though, the company hired former Barack Obama adviser David Plouffe specifically to work with local governments. “Uber should be regulated,” says Plouffe, who hails the legislation he hammered out in Washington, D.C. as “groundbreaking legislation [that] provides a model going forward.” 

That model is one that gives clear advantages to Uber, which has more market share and political clout than its rivals such as Lyft and Sidecar. What the legislation does is establish “burdensome new ridesharing regulations” dictating minimum ages of drivers and other requirements that will make it more difficult for competitors to catch up to Uber or enter new markets in the first place....

Uber’s latest strategy may make sense from a business point of view—Plouffe even calls it “Uber-mentum”—but if you believe in free markets, it’s just as dispiriting as most of the other things that have ginned up anti-Uber fervor. And to the extent that new regulations make it that much harder for the next great disruptive business to come along, it’s worse still.

Capitalists will be capitalists.