January 30, 2017 • 28 mins
More than 1.5 million people drive for Uber in cities all over the world. And yet, as the company finds new ways to make rides cheaper for customers, it's become harder for the app's contractors to make a decent living. This week, Brad visits one of Uber's very first drivers, and, together, they explore the complicated history between the ride-sharing app and its workers. Brad and Bloomberg Technology's startups reporter Eric Newcomer also discuss where that relationship is headed.
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Speaker 1 (00:00):
Don't let your legacy I T systems cost you money,
innovation and a place at the digital table of the future.
You can change your systems and the economics of it
with software from red Hat. See how at red hat
dot com. More than one point five million people drive
(00:23):
for the global ride sharing juggernaut Uber. They're always available
day and night, taking us where we want to go.
But it's driving for Uber a productive, profitable way to
make a living. Does Uber come through and its promises
to drivers. It provides much needed income for college students,
the recently retired, and the unemployed. But half the driving
gets done by people working more than thirty five hours
(00:45):
a week. These people often fight to make ends meet.
The hours are long and the returns can be meager.
Today we're exploring the sensitive relationship between Uber and its drivers.
Our story starts back in the fall of two thousand ten,
when Uber was just starting out in the Golden City
by the Bay, San Francisco. One of the first Uber
(01:07):
drivers was a soft spoken immigrant in his mid thirties
named Sophia and Uali, an Algerian former safety specialist in
the oil industry. Like many immigrants to the US, Sophia
found work in the taxi and limousine industry. A fleet
owner gave him a smartphone with the Uber app and
a pearl white two thousand three Lincoln town Car. It
(01:27):
gets people to like the car because it's white and
the whole system was black. At that time, all Uber's
cars were black. This car stood out. In fact, as
Sophia tells us, Uber initially wanted him to change the car.
Even Ubert got in touch with me to UH to
(01:48):
try to to convince me to to change the car.
And I was like, if if the car changes, I
am not here too. So because you had no other option, exactly,
I had no no other option, and I started to
to build some right there's esteem to that car. And
how I did that it was it was like tedding
(02:09):
my riders that this is the only single white car
in the whole branded the car exactly, branded the car exactly.
Pretty soon Uber's customers were tweeting about the car and
reviewing it on Yelp, hoping that they would call an
Uber and get Sophian's majestic white ride. There was something
magical about Sofian's car, and someone who it was exactly
(02:32):
it's lost to history decided to call it the Unicorn. Hi,
I'm Brad Stone and I'm Eric Newcomer. Welcome to this
week's episode of Decrypted. Now, Brad, come clean. The timing
of this podcast isn't totally coincidental, Okay right. My new book,
(02:53):
The Upstarts comes out this week on January one. It's
about the rise and rapid expansion of the global sharing economy, juggernauts,
Uber and Airbnb, and the nearly NonStop controversy and turmoil
that they have left in their week. Today's story of
Sophion in the Unicorn is drawn from Brad's book, and
through Sophia's experience, will dig into the skills at all entrepreneurs,
(03:15):
including Uber drivers, need to make it in a rapidly
changing business world. Will also looks specifically at what Uber
offers its drivers and ask whether one of Silicon Valley's
most celebrated successes is living up to its mission of
helping drivers generate self sustaining income. Sophion is one of
(03:42):
the world's most prolific Uber drivers. He's been there since
the beginning and says he's driven around thirty thousand rides. Now,
that's five thousand rides a year. More than four fifteen
rides a month, more than eighty three rides a week,
working six days a week. Not to be glib, but
that's a lot of sitting down. It is so it's
San Francisco in the fall of two thousand ten. Even
(04:04):
in Uber's early months, sophia On implicitly understood its potential.
Customers loved it. Drivers didn't waste as much time sitting
around waiting for fairs, and the app was easy to use,
so newcomers to the city could seamlessly find their way around.
In the beginning, sophia says it just paid the bills,
(04:25):
but after a while the money started pouring in. Sophion
was like a lot of early Uber drivers. He saw
the company as a platform on which he could build
a business. Uber encouraged this. Travis Kalinnik, Uber CEO, boasted
about drivers who were building fleets of cars on the
Uber system. After seven months, Sophion left the fleet and
(04:47):
took over the Unicorns lease from the owner. Then he
started taking loans out, leasing new town cars and hiring
new drivers. His company was called Global Way Limousine because
he had aspirations to expand a around the world, and
business was good. He told you he was making seven
hundred or eight hundred dollars a day, right, he was
(05:07):
doing that by taking commissions from his drivers who were
driving his cars for Uber. Meanwhile, Sophie and kept driving
the Unicorn, which was getting famous in the city. And
at the same that You've got this car and it's
kind of a local celebrity, right, the exact unicorn. Did
you find that people wanted the Unicorn, that they were
trying to hail it? Oh? Yes, definitely. I mean a
lot of people who I get every day, they all
(05:31):
the ones who love it. They all say, how how
could we How can we get you every day as
our driver? But unfortunately the Uber system doesn't allow allow
people to have that option. Well, that might have been
some of the magic of the Unicorn, that I could
only show up like a real unicorn. It can only
(05:52):
it can only show up through a circumstance. Exactly, luck, Exactly,
that's what I say when when I find people who
doesn't like that. And then the ground shifted under his feet.
In the fall of two thousand thirteen, following rivals like
Lift and Sidecar, Uber introduced a ride sharing service called
uber x that let anybody with the driver's license pick
(06:13):
up a passenger with their own vehicle as long as
they met certain criteria. And with the rollout of uber X,
Uber started lowering prices and it kept on lowering them. Travis,
the CEO of Uber, raised a fortune and venture capital.
He was using price as a weapon to grow quickly
and outpaced rivals with less money. There was also a
bigger mission. He said that Uber would replace car ownership
(06:37):
right but Travis is, above all else a competitor. He
wanted to make sure Uber, not Lift or anyone else,
dominated the market for ride sharing. It took a while
for Sophie On to feel the effects of these changes.
Writers slowly migrated from Uber Black to the cheaper alternatives
Uber Black rates fell each ride became less profitable. But
(06:57):
worst of all, Sofian's drivers eventually gured out that they
shouldn't be giving them a commission at all, but driving
their own cars directly for Uber. So when uber x
rolled down, I I was thinking to find other ways
how to how to balance up my my business with
the changes. So so the business kept being good up
(07:23):
up to to the first I would say, to the
first quarter of of the thousand and fourteen, and then
it started we started to uh to fill the effect
of uber X, you know, so prices started to drop down,
and maybe the demand was the same, but prices started
(07:43):
to drop down because of the the Uber x launch.
So from there I I felt that it was a
turning point for the Uber system. Not necessarily on the
bad way, I would say. I would say, knowing the
business from the beginning, I had to take some some
(08:06):
action to to not lose money. What about your drivers,
did they start to leave and go out on their
own because there was this opportunity to use their own cars? Well,
definitely you have. You have you have this pressure from
your drivers to to go away from you because there
is that that opportunity to end and honestly you don't
(08:29):
have any choice. Then of course encouraging the drivers just
being nice with them and make as much as business
they can with you, and then encourage them to go,
you know so, because because it's open for them. By
two fourteen, Sophie had to shut down his business Global
Wey Limousine. But it's remarkable that he really understands why
(08:51):
Uber made these changes and it is a piece with it.
There was a huge, huge demand from from customer customer
site and the huge demand from Uber to encourage people
to to have fleets at the beginning. But when the
business started to change and policies change and prices started
(09:11):
to go down a little bit, they had this idea,
which is a brilliant idea and I totally understand it.
Drivers are more happy being their their own to be
to be our own boss, you know. So I think
(09:33):
that that what makes Uber change change their their policies
to not encourage people to have to have fleets anymore,
because the drivers are more happy, happier when they have
their own car and their own business. And to be honest,
(09:54):
it's a good decision. It's a good decision from them
because the companies health here this way then he used
to be. Because some of the partners who had fleets
and a lot of drivers, I can't tell you my
drivers they were happy, but not all drivers who were
(10:17):
driving for someone they were happy. So because they were
sharing their income exactly, they were sharing their income and
sometimes without any any good business criterias, you know, so
they are sharing it. Ah, there was a lot of
injustice in there, you know. So I saw things from
(10:38):
from partners who had fleets. That's that's sometimes you hire.
They hire drivers and they give them like a very
very low, the lowest portion from from the business they had.
They they were doing it in percentages, and the percentage
they give them it's it's just fair low. So let's say,
(10:58):
let's say the part to know who hires ten drivers,
they give deals that that are not in the favor
of the driver. It's there is no badance to help
to help a driver. So they were given, let's say,
for an example, sevent thirty percent deal, So the owner
(11:19):
of the card takes seventy and the driver takes which
is not not right. So at this point Brad is
Sophia and still writing that white unicorn. Well Eric will
get to that, but yeah, Sophie and was now working
for himself, driving for Uber Black, trying to make it.
In Uber's new economic reality, the days of seven hundred
dollars a day earnings were a thing of the past.
(11:41):
How much are you making now per day? I would
say it's an average of three fifty three three fifty
three hundred, three hundred fifty dollars, which is still pretty
pretty good. Pretty good. Sounds like half of what you're
making in the heyday. Yes, but I would say, let
me tell you this. I would say, back in the day,
(12:02):
it wasn't normal. The prices were there was very little competitions, yes,
little competition, and it was to be honest, it was overpriced.
I mean for someone to take an Uber and Uber Black,
which is the only option on the system, take an
an Uber black from the financial district to the North
Beach for twenty five bucks, that's that's a lot of money.
(12:26):
That's a lot of money. It sounds like Sophian is
happy being his own boss, working for Uber Black, making
a decent living well. His story is a bit of
an aberration. There are many drivers who work for uber
x and other Uber services who struggle to make ends
meet and don't make much above minimum wage. Up Ahead
(12:46):
will zoom in on that struggle so many drivers are facing,
and we'll see what Uber is doing to make things
better for drivers. But first a word from our sponsor.
Inside the most successful organizations, I t has gone from
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(13:11):
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(13:31):
Learn more at red hat dot com. Okay, we're back.
Right before the break, we saw Sophion forced to dismantle
its dreams of running a global taxi fleet and deal
with a fifty pay cut after Uber started rolling out
(13:52):
cheaper services like uber x and Uberpool, chipping away at
drivers salaries. Eric you and olivia's Aleski recently wrote an
amazing story about one extreme Some drivers now go to
trying to make ends meet sleeping in their cars in
parking lots. Now, why would anybody possibly do this? You know,
we talked to one driver who lives in Sacramento, drives
(14:12):
into San Francisco, slept in a safe way. Now McDonald's
worked all week. It's a way to maximize his income
while keeping costs low. It's free to sleep in your car.
I can't imagine that they're smelling too good after a
couple of days. Well, some sneak off to a hostel
or find a gym and take a shower. So is
there anything Uper is doing to incentivize this or to
put another way, could they discourage it if they wanted to?
(14:34):
But sort of the ultimate Uber value here, right, flexibility.
The drivers are free to do whatever they want. Lift
restrict drivers to fourteen hours of working continuously. Uber drivers
set their own schedule. It makes me wonder if drivers
are kind of locking themselves into a career and the
lifestyle that's getting worse and worse and harder and harder
over time. Drivers say their pay has gone down over
(14:56):
time and they're not really building up the skills to
find another job. It feels to many of them like
their career as they've chosen is getting worse and worse.
But we should point out that some of the drivers
you guys spoke to were actually proud of the fact
that they were sleeping in in parking lots and in
camps at night. That they felt like they kind of
hacked the Uber system. Yeah, they're taking fars when they're
(15:16):
at their most lucrative, you know, late at night, early
in the morning, building their schedule around sort of the
commuter and the late night millennial going out to a bar.
So so you know they're they're going into this pretty
clear eyed. UH. To explore this further, I spoke with
one of our favorites, the ride share Guy Love the
ride chair Guy. He's one of the most prominent experts
when it comes to sort of thinking about the best
(15:38):
way to make a living as an Uber driver. My
name is Harry Campbell. I'm an Uber and Lift driver
and founder of the Ride Share Guy blog, podcast, and
YouTube channel. Harry has been driving for Uber and Lifts
since two thousand fourteen. I pretty quickly realized that it's
not the most difficult job in the world, but it's
definitely a little bit more complex than it seems, And
(15:58):
so I started a blog about my experience as a driver,
what it was like getting signed up, what it was
really like working for the services, and now we try
to really highlight the good and the bad about being
an Uber and Left driver. When Harry started driving for Uber,
drivers could make thirty to forty dollars an hour on
weekend nights, and Uber was advertising drivers could make ninety
(16:18):
thousand dollars a year right. Although they recently settled the
lawsuit about those kinds of exaggerated claims. Yeah, Uber paid
a twenty million dollar penalty to the Federal Trade Commission
for misleading drivers about earnings and vehicle financing claims. So
what does Harry the rideshare guy say about driving for
Uber now? He says Uber has been changing all along,
(16:40):
and not many drivers are as accepting of this as Sophia.
The only constant in this industry is changed. Just knowing that,
especially from a driver's perspective, I mean, what the strategies
that you're using, or the places you are driving, or
even the pay that you're getting six months twelve months
ago is not going to be the same today, right,
And I think that's the big thing for a lot
of drivers. Drivers don't like change. Nobody likes change, whether
(17:03):
it's uberpool or whether it's lower rates or whatever it
might be. So you definitely have that side of the
equation for drivers, And I mean for drivers that have
been doing this for a while, they've sort of seen
a very big shift. Is that sort of vision of
the k a year salary still a vision that drivers
(17:23):
believe in today? How is sort of both the myth
and the reality of being an Uber driver changed since
you started tracking the company? Well, I don't think there
are any drivers today that are going in or getting
into Uber expecting to make anywhere near ninety thousand dollars
a year. I think that if anything, Uber has had
more publicity sort of against that notion than they have
(17:45):
for it. And you know, kind of like what I
always say is that it's still a good opportunity for
a lot of people. It is still one of the
most flexible jobs in the world. You can log on
and log off whenever you want. It's just that it's
shifting more towards if you want to make the most
amount of money, you need to log on during certain times,
you need to drive certain places, and so it might
seem like it's flexible, well paying from the outside, but
(18:08):
once you actually start doing it and you start driving,
you do realize that Uber does control a lot of
when and where you drive. Eric I've noticed this also
from talking to Uber drivers. Why are they dissatisfied with Uberpool?
As Harry suggests, Pool makes their lives harder, it's more complicated.
The hardest part of being Uber drivers picking up passengers
and dropping them off, and Pool asked them to do
(18:30):
much more of that an hour. There's the perception, at
least that they're making less money do you think that's right?
The pay on pool is super confusing and it depends
sort of who you trust. I think Uber would say.
When it works on an hourly basis, drivers are making
more because they're getting more people in their cars. But
drivers see that on a per passenger basis, they're making less.
(18:50):
Passengers pay less in the hopes that they'll be able
to cram multiple people and they may not always have
a full car exactly. So last summer, Uber hired a
new president, Jeff Jones, and marketing exact at Target and
Jeff is called two thousand seventeen the Year of the
Driver at Uber. What does that mean exactly? Well, One,
it means they're just going to communicate with drivers better.
You know, you can see him tweeting it, drivers trying
to answer their problems, posting on LinkedIn. They're going to
(19:13):
improve their support so that drivers have someone they can
reach out to. But this is an engineering company. More
and more in Uber really thinks it can build tools
to help drivers. That means, you know, when they want
to head home, helping the route more efficiently get them
home with fares along the way, so they're getting paid
for every hour. The more rides you can get, the
more your per hour pay is going up, or at
(19:33):
least staying the same. Uber has always, of course paid
lip service to drivers, but it feels to me that
the key constituency has always been writers, and that over
the years they've basically focused on lowering fares as almost
a competitive weapon to try to corner the market in
ride sharing. Yeah, Brad, you know this better than anybody.
Uber is built around the founding story of serving the writer.
(19:54):
It's about calling a car with a push of a
button when you want to go out late at night.
It's not a company that was built sort of to
give employment to sort of hundreds of thousands in the
United States alone drivers. And so I think after the fact,
there's sort of had to realize this is a two
sided marketplace. We need to celebrate riders and drivers. So
what is Uber telling you right now about this new
(20:15):
focus on drivers. I spoke with none new John A. Karam,
Uber's head of driver engagement, for the story about drivers
who sleep in their cars. I thought it had relevance
to this discussion. He said, the way to make more
money on our platform in general, and the way that
everyone makes more money is when the system becomes more efficient,
so there is less time between trips for drivers they're
(20:37):
driving to um, you know, places that are closer by
to pick up passengers or or or things like that,
expanding the number of different kinds of trips that they
can take, so uber eats and things like that. Like,
the more efficient our system gets for drivers, um, you know,
the more that drivers will engage in our platform, and
um you know, the more that we can you know,
(20:58):
keep driver earnings in a kind of able place. And
I think that's the big thing that we've been really
pushing for from product perspective, which is how can we
bring general kind of stability to earnings. So, Eric, what
does Harry Campbell think about some of these new driver programs.
(21:20):
He's a bit skeptical. Uh. He believes there's one thing
that can improve life for drivers, and that's more cash.
Show me the money. A lot of people ask me
what drivers care about, and honestly, drivers are just like
everyone else. They care about frankly, their money, right, how
much they're getting paid. All of the top articles on
my site have to do with how much you can
learn how to make more money. When we surveyed our audience,
(21:42):
pay was the number one thing and the drivers cared about.
So I mean, I think that anything that can affect
a driver's bottom line, and you know, if I'm sitting
at Uber, those are the things that I'm looking at. So, Brad,
let's get back to Sophia Newali and the Unicorn of
San Francisco. Is Sophian still drive? He is still driving.
In fact, I took a ride with him recently. He's
(22:03):
still a faithful Uber Black driver and he's starting to
work on a book sharing some of his tips about
driving for Uber. And whatever happened to the unicorn. The
unicorn actually met a tragic end. Here's Sophia describing to
me what happened on a faithful Easter two fourteen. So
the Unicorn. That was a very sad end of story
for the Unicorn. So one of my drivers actually, so
(22:27):
this is what I do with my drivers when they
have any problem with with their car, at their own
car that they are driving, I just decided to give
them my car, which is the Unicorn. Of course, I
gave the Unicorn for for one of my drivers, and
I got his car to some maintenance. And I remember
(22:48):
the day when I when I gave him the unicorn.
I said, hey, please take care of off my baby
and he said okay, yes, And two three hours later,
oh no, he called me and then he said, I gotta,
I gotta in an accident. I said, no, please don't.
(23:12):
And when I got there, I saw the car and
it was it was completely what happened total do you know?
So someone It was the night of Easter and some
drunk driver runner at laid and this guy hite him,
you know, he hits, he hit the unicorn. Was everybody okay?
(23:36):
Everybody was okay? Fortunately, yeah, but the unicorn was totaled.
So and from from then I just decided to not
to not buy another unicorn, you know. So and then
and so ends the story of the white Lincoln town Car.
And that was the end, the said, end, story of
(23:58):
the Lincoln Tonka. That's sad. Yeah, in a weird way.
Sophia accepts it, just as he accepts the changes to
the Uber system and seems to understand why the company
made them. Towards the end of our conversation, I asked
him one last question, do you ever dream about the Unicorn?
To be honest, yes, yes, I like that car. I
(24:21):
love that card, but it's a sad story at the
end of story. But I loved it. I loved the
whole experience, you know, So the whole experience was just beautiful, beautiful,
So no regrets, Eric, when all of a saidden done.
(24:43):
Do you agree with Sophion, do you think Uber has
been a generous steward of this powerful platform for drivers,
or to put in another way, has Uber been a
benign dictator in the taxi world? I don't think I
would ever use the word benign to describe Uber. I mean,
they're sort of ruth lists, economic marketplace optimizers. You know,
(25:03):
it's how can we get the most number of riders
and drivers, And so when that's meant that they were
getting plenty of drivers and not enough riders, they would
lower the fair, attract riders, and make life a lot
more difficult for drivers who are hoping to pay their bills. Yeah,
I think that's right. I think for a long time
the flywheel at Uber started with fares. If they lowered fares,
(25:24):
they increased ridership, they put pressure on competitors, and they
drew drivers to them. The problem is, and we both
saw this over the past few years, it alienated drivers,
even if they were making as much or maybe even
a little more money. And I don't know that that
was the reality. They saw the decreased fares and they
got mad and they protested, and Uber over over time
(25:45):
kind of developed a little bit of a poor reputation
with some of its hardest working drivers. And now obviously
they're trying to improve it. But I'd like to point
out one more problem on the horizon. Uber probably lost
three billion dollars globally in rebillion, and that's of course
counting the big China competition that they basically surrendered on right,
and they're losing money in the United States. So looking
(26:07):
at those numbers, you might think Uber is pain drivers
too much. Uber will need to do something about costs.
Is this where we say only time will tell? Only
time will tell? Hey, guys, it's acky. I co host
and helped produce this podcast. And as we were about
to publish this episode, a series of things happened that
(26:29):
made consumers question Uber CEO Travis Kalenik's relationship with President
Trump and also Uber stands on Trump's executive order banning
visitors from certain countries. I'm sure you all saw the
hashtag delete Uber trending over your social media feeds. We
ended up running out of time to discuss this in
(26:50):
the depth that it really deserves, but our episode next
week is going to be all about this, all about
the executive order, the tech industry's response to it, and
what it means for the companies that we cover going
forward to stay tuned, and that's it for this week's
(27:17):
episode of Decrypted. Thanks for listening. Tell us what you
thought of the episode. Send us a voice message to
our producer Pia at p G A D k A
r I at Bloomberg dot net, or write to me
on Twitter. I'm at Eric Newcomber and I'm at brad Stone.
Remember to check out my new book, The Upstarts How Uber,
(27:39):
Airbnb and the killer companies of the New Silicon Valley
are changing the world. Available from Amazon dot Com or
your friendly neighborhood bookstore That's really shameless red another book blog. Okay,
I know, I know. You can subscribe to Decrypted on
iTunes or wherever you get your podcasts and leave us
a rating and a review helps more listeners find our show.
(28:02):
This episode was produced by Pa got Kari Magnus Hendrickson
and Liz Smith Alec McCabe as head of Bloomberg Podcasts.
We'll see you next week. Don't let your legacy I
systems cost you money, innovation, and a place at the
digital table of the future. You can change your systems
(28:23):
and the economics of it with software from red Hat.
See how at red hat dot com.
Don't let your legacy I T systems cost you money,
innovation and a place at the digital table of the future.
You can change your systems and the economics of it
with software from red Hat. See how at red hat
dot com. More than one point five million people drive
(00:23):
for the global ride sharing juggernaut Uber. They're always available
day and night, taking us where we want to go.
But it's driving for Uber a productive, profitable way to
make a living. Does Uber come through and its promises
to drivers. It provides much needed income for college students,
the recently retired, and the unemployed. But half the driving
gets done by people working more than thirty five hours
(00:45):
a week. These people often fight to make ends meet.
The hours are long and the returns can be meager.
Today we're exploring the sensitive relationship between Uber and its drivers.
Our story starts back in the fall of two thousand ten,
when Uber was just starting out in the Golden City
by the Bay, San Francisco. One of the first Uber
(01:07):
drivers was a soft spoken immigrant in his mid thirties
named Sophia and Uali, an Algerian former safety specialist in
the oil industry. Like many immigrants to the US, Sophia
found work in the taxi and limousine industry. A fleet
owner gave him a smartphone with the Uber app and
a pearl white two thousand three Lincoln town Car. It
(01:27):
gets people to like the car because it's white and
the whole system was black. At that time, all Uber's
cars were black. This car stood out. In fact, as
Sophia tells us, Uber initially wanted him to change the car.
Even Ubert got in touch with me to UH to
(01:48):
try to to convince me to to change the car.
And I was like, if if the car changes, I
am not here too. So because you had no other option, exactly,
I had no no other option, and I started to
to build some right there's esteem to that car. And
how I did that it was it was like tedding
(02:09):
my riders that this is the only single white car
in the whole branded the car exactly, branded the car exactly.
Pretty soon Uber's customers were tweeting about the car and
reviewing it on Yelp, hoping that they would call an
Uber and get Sophian's majestic white ride. There was something
magical about Sofian's car, and someone who it was exactly
(02:32):
it's lost to history decided to call it the Unicorn. Hi,
I'm Brad Stone and I'm Eric Newcomer. Welcome to this
week's episode of Decrypted. Now, Brad, come clean. The timing
of this podcast isn't totally coincidental, Okay right. My new book,
(02:53):
The Upstarts comes out this week on January one. It's
about the rise and rapid expansion of the global sharing economy, juggernauts,
Uber and Airbnb, and the nearly NonStop controversy and turmoil
that they have left in their week. Today's story of
Sophion in the Unicorn is drawn from Brad's book, and
through Sophia's experience, will dig into the skills at all entrepreneurs,
(03:15):
including Uber drivers, need to make it in a rapidly
changing business world. Will also looks specifically at what Uber
offers its drivers and ask whether one of Silicon Valley's
most celebrated successes is living up to its mission of
helping drivers generate self sustaining income. Sophion is one of
(03:42):
the world's most prolific Uber drivers. He's been there since
the beginning and says he's driven around thirty thousand rides. Now,
that's five thousand rides a year. More than four fifteen
rides a month, more than eighty three rides a week,
working six days a week. Not to be glib, but
that's a lot of sitting down. It is so it's
San Francisco in the fall of two thousand ten. Even
(04:04):
in Uber's early months, sophia On implicitly understood its potential.
Customers loved it. Drivers didn't waste as much time sitting
around waiting for fairs, and the app was easy to use,
so newcomers to the city could seamlessly find their way around.
In the beginning, sophia says it just paid the bills,
(04:25):
but after a while the money started pouring in. Sophion
was like a lot of early Uber drivers. He saw
the company as a platform on which he could build
a business. Uber encouraged this. Travis Kalinnik, Uber CEO, boasted
about drivers who were building fleets of cars on the
Uber system. After seven months, Sophion left the fleet and
(04:47):
took over the Unicorns lease from the owner. Then he
started taking loans out, leasing new town cars and hiring
new drivers. His company was called Global Way Limousine because
he had aspirations to expand a around the world, and
business was good. He told you he was making seven
hundred or eight hundred dollars a day, right, he was
(05:07):
doing that by taking commissions from his drivers who were
driving his cars for Uber. Meanwhile, Sophie and kept driving
the Unicorn, which was getting famous in the city. And
at the same that You've got this car and it's
kind of a local celebrity, right, the exact unicorn. Did
you find that people wanted the Unicorn, that they were
trying to hail it? Oh? Yes, definitely. I mean a
lot of people who I get every day, they all
(05:31):
the ones who love it. They all say, how how
could we How can we get you every day as
our driver? But unfortunately the Uber system doesn't allow allow
people to have that option. Well, that might have been
some of the magic of the Unicorn, that I could
only show up like a real unicorn. It can only
(05:52):
it can only show up through a circumstance. Exactly, luck, Exactly,
that's what I say when when I find people who
doesn't like that. And then the ground shifted under his feet.
In the fall of two thousand thirteen, following rivals like
Lift and Sidecar, Uber introduced a ride sharing service called
uber x that let anybody with the driver's license pick
(06:13):
up a passenger with their own vehicle as long as
they met certain criteria. And with the rollout of uber X,
Uber started lowering prices and it kept on lowering them. Travis,
the CEO of Uber, raised a fortune and venture capital.
He was using price as a weapon to grow quickly
and outpaced rivals with less money. There was also a
bigger mission. He said that Uber would replace car ownership
(06:37):
right but Travis is, above all else a competitor. He
wanted to make sure Uber, not Lift or anyone else,
dominated the market for ride sharing. It took a while
for Sophie On to feel the effects of these changes.
Writers slowly migrated from Uber Black to the cheaper alternatives
Uber Black rates fell each ride became less profitable. But
(06:57):
worst of all, Sofian's drivers eventually gured out that they
shouldn't be giving them a commission at all, but driving
their own cars directly for Uber. So when uber x
rolled down, I I was thinking to find other ways
how to how to balance up my my business with
the changes. So so the business kept being good up
(07:23):
up to to the first I would say, to the
first quarter of of the thousand and fourteen, and then
it started we started to uh to fill the effect
of uber X, you know, so prices started to drop down,
and maybe the demand was the same, but prices started
(07:43):
to drop down because of the the Uber x launch.
So from there I I felt that it was a
turning point for the Uber system. Not necessarily on the
bad way, I would say. I would say, knowing the
business from the beginning, I had to take some some
(08:06):
action to to not lose money. What about your drivers,
did they start to leave and go out on their
own because there was this opportunity to use their own cars? Well,
definitely you have. You have you have this pressure from
your drivers to to go away from you because there
is that that opportunity to end and honestly you don't
(08:29):
have any choice. Then of course encouraging the drivers just
being nice with them and make as much as business
they can with you, and then encourage them to go,
you know so, because because it's open for them. By
two fourteen, Sophie had to shut down his business Global
Wey Limousine. But it's remarkable that he really understands why
(08:51):
Uber made these changes and it is a piece with it.
There was a huge, huge demand from from customer customer
site and the huge demand from Uber to encourage people
to to have fleets at the beginning. But when the
business started to change and policies change and prices started
(09:11):
to go down a little bit, they had this idea,
which is a brilliant idea and I totally understand it.
Drivers are more happy being their their own to be
to be our own boss, you know. So I think
(09:33):
that that what makes Uber change change their their policies
to not encourage people to have to have fleets anymore,
because the drivers are more happy, happier when they have
their own car and their own business. And to be honest,
(09:54):
it's a good decision. It's a good decision from them
because the companies health here this way then he used
to be. Because some of the partners who had fleets
and a lot of drivers, I can't tell you my
drivers they were happy, but not all drivers who were
(10:17):
driving for someone they were happy. So because they were
sharing their income exactly, they were sharing their income and
sometimes without any any good business criterias, you know, so
they are sharing it. Ah, there was a lot of
injustice in there, you know. So I saw things from
(10:38):
from partners who had fleets. That's that's sometimes you hire.
They hire drivers and they give them like a very
very low, the lowest portion from from the business they had.
They they were doing it in percentages, and the percentage
they give them it's it's just fair low. So let's say,
(10:58):
let's say the part to know who hires ten drivers,
they give deals that that are not in the favor
of the driver. It's there is no badance to help
to help a driver. So they were given, let's say,
for an example, sevent thirty percent deal, So the owner
(11:19):
of the card takes seventy and the driver takes which
is not not right. So at this point Brad is
Sophia and still writing that white unicorn. Well Eric will
get to that, but yeah, Sophie and was now working
for himself, driving for Uber Black, trying to make it.
In Uber's new economic reality, the days of seven hundred
dollars a day earnings were a thing of the past.
(11:41):
How much are you making now per day? I would
say it's an average of three fifty three three fifty
three hundred, three hundred fifty dollars, which is still pretty
pretty good. Pretty good. Sounds like half of what you're
making in the heyday. Yes, but I would say, let
me tell you this. I would say, back in the day,
(12:02):
it wasn't normal. The prices were there was very little competitions, yes,
little competition, and it was to be honest, it was overpriced.
I mean for someone to take an Uber and Uber Black,
which is the only option on the system, take an
an Uber black from the financial district to the North
Beach for twenty five bucks, that's that's a lot of money.
(12:26):
That's a lot of money. It sounds like Sophian is
happy being his own boss, working for Uber Black, making
a decent living well. His story is a bit of
an aberration. There are many drivers who work for uber
x and other Uber services who struggle to make ends
meet and don't make much above minimum wage. Up Ahead
(12:46):
will zoom in on that struggle so many drivers are facing,
and we'll see what Uber is doing to make things
better for drivers. But first a word from our sponsor.
Inside the most successful organizations, I t has gone from
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(13:11):
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(13:31):
Learn more at red hat dot com. Okay, we're back.
Right before the break, we saw Sophion forced to dismantle
its dreams of running a global taxi fleet and deal
with a fifty pay cut after Uber started rolling out
(13:52):
cheaper services like uber x and Uberpool, chipping away at
drivers salaries. Eric you and olivia's Aleski recently wrote an
amazing story about one extreme Some drivers now go to
trying to make ends meet sleeping in their cars in
parking lots. Now, why would anybody possibly do this? You know,
we talked to one driver who lives in Sacramento, drives
(14:12):
into San Francisco, slept in a safe way. Now McDonald's
worked all week. It's a way to maximize his income
while keeping costs low. It's free to sleep in your car.
I can't imagine that they're smelling too good after a
couple of days. Well, some sneak off to a hostel
or find a gym and take a shower. So is
there anything Uper is doing to incentivize this or to
put another way, could they discourage it if they wanted to?
(14:34):
But sort of the ultimate Uber value here, right, flexibility.
The drivers are free to do whatever they want. Lift
restrict drivers to fourteen hours of working continuously. Uber drivers
set their own schedule. It makes me wonder if drivers
are kind of locking themselves into a career and the
lifestyle that's getting worse and worse and harder and harder
over time. Drivers say their pay has gone down over
(14:56):
time and they're not really building up the skills to
find another job. It feels to many of them like
their career as they've chosen is getting worse and worse.
But we should point out that some of the drivers
you guys spoke to were actually proud of the fact
that they were sleeping in in parking lots and in
camps at night. That they felt like they kind of
hacked the Uber system. Yeah, they're taking fars when they're
(15:16):
at their most lucrative, you know, late at night, early
in the morning, building their schedule around sort of the
commuter and the late night millennial going out to a bar.
So so you know they're they're going into this pretty
clear eyed. UH. To explore this further, I spoke with
one of our favorites, the ride share Guy Love the
ride chair Guy. He's one of the most prominent experts
when it comes to sort of thinking about the best
(15:38):
way to make a living as an Uber driver. My
name is Harry Campbell. I'm an Uber and Lift driver
and founder of the Ride Share Guy blog, podcast, and
YouTube channel. Harry has been driving for Uber and Lifts
since two thousand fourteen. I pretty quickly realized that it's
not the most difficult job in the world, but it's
definitely a little bit more complex than it seems, And
(15:58):
so I started a blog about my experience as a driver,
what it was like getting signed up, what it was
really like working for the services, and now we try
to really highlight the good and the bad about being
an Uber and Left driver. When Harry started driving for Uber,
drivers could make thirty to forty dollars an hour on
weekend nights, and Uber was advertising drivers could make ninety
(16:18):
thousand dollars a year right. Although they recently settled the
lawsuit about those kinds of exaggerated claims. Yeah, Uber paid
a twenty million dollar penalty to the Federal Trade Commission
for misleading drivers about earnings and vehicle financing claims. So
what does Harry the rideshare guy say about driving for
Uber now? He says Uber has been changing all along,
(16:40):
and not many drivers are as accepting of this as Sophia.
The only constant in this industry is changed. Just knowing that,
especially from a driver's perspective, I mean, what the strategies
that you're using, or the places you are driving, or
even the pay that you're getting six months twelve months
ago is not going to be the same today, right,
And I think that's the big thing for a lot
of drivers. Drivers don't like change. Nobody likes change, whether
(17:03):
it's uberpool or whether it's lower rates or whatever it
might be. So you definitely have that side of the
equation for drivers, And I mean for drivers that have
been doing this for a while, they've sort of seen
a very big shift. Is that sort of vision of
the k a year salary still a vision that drivers
(17:23):
believe in today? How is sort of both the myth
and the reality of being an Uber driver changed since
you started tracking the company? Well, I don't think there
are any drivers today that are going in or getting
into Uber expecting to make anywhere near ninety thousand dollars
a year. I think that if anything, Uber has had
more publicity sort of against that notion than they have
(17:45):
for it. And you know, kind of like what I
always say is that it's still a good opportunity for
a lot of people. It is still one of the
most flexible jobs in the world. You can log on
and log off whenever you want. It's just that it's
shifting more towards if you want to make the most
amount of money, you need to log on during certain times,
you need to drive certain places, and so it might
seem like it's flexible, well paying from the outside, but
(18:08):
once you actually start doing it and you start driving,
you do realize that Uber does control a lot of
when and where you drive. Eric I've noticed this also
from talking to Uber drivers. Why are they dissatisfied with Uberpool?
As Harry suggests, Pool makes their lives harder, it's more complicated.
The hardest part of being Uber drivers picking up passengers
and dropping them off, and Pool asked them to do
(18:30):
much more of that an hour. There's the perception, at
least that they're making less money do you think that's right?
The pay on pool is super confusing and it depends
sort of who you trust. I think Uber would say.
When it works on an hourly basis, drivers are making
more because they're getting more people in their cars. But
drivers see that on a per passenger basis, they're making less.
(18:50):
Passengers pay less in the hopes that they'll be able
to cram multiple people and they may not always have
a full car exactly. So last summer, Uber hired a
new president, Jeff Jones, and marketing exact at Target and
Jeff is called two thousand seventeen the Year of the
Driver at Uber. What does that mean exactly? Well, One,
it means they're just going to communicate with drivers better.
You know, you can see him tweeting it, drivers trying
to answer their problems, posting on LinkedIn. They're going to
(19:13):
improve their support so that drivers have someone they can
reach out to. But this is an engineering company. More
and more in Uber really thinks it can build tools
to help drivers. That means, you know, when they want
to head home, helping the route more efficiently get them
home with fares along the way, so they're getting paid
for every hour. The more rides you can get, the
more your per hour pay is going up, or at
(19:33):
least staying the same. Uber has always, of course paid
lip service to drivers, but it feels to me that
the key constituency has always been writers, and that over
the years they've basically focused on lowering fares as almost
a competitive weapon to try to corner the market in
ride sharing. Yeah, Brad, you know this better than anybody.
Uber is built around the founding story of serving the writer.
(19:54):
It's about calling a car with a push of a
button when you want to go out late at night.
It's not a company that was built sort of to
give employment to sort of hundreds of thousands in the
United States alone drivers. And so I think after the fact,
there's sort of had to realize this is a two
sided marketplace. We need to celebrate riders and drivers. So
what is Uber telling you right now about this new
(20:15):
focus on drivers. I spoke with none new John A. Karam,
Uber's head of driver engagement, for the story about drivers
who sleep in their cars. I thought it had relevance
to this discussion. He said, the way to make more
money on our platform in general, and the way that
everyone makes more money is when the system becomes more efficient,
so there is less time between trips for drivers they're
(20:37):
driving to um, you know, places that are closer by
to pick up passengers or or or things like that,
expanding the number of different kinds of trips that they
can take, so uber eats and things like that. Like,
the more efficient our system gets for drivers, um, you know,
the more that drivers will engage in our platform, and
um you know, the more that we can you know,
(20:58):
keep driver earnings in a kind of able place. And
I think that's the big thing that we've been really
pushing for from product perspective, which is how can we
bring general kind of stability to earnings. So, Eric, what
does Harry Campbell think about some of these new driver programs.
(21:20):
He's a bit skeptical. Uh. He believes there's one thing
that can improve life for drivers, and that's more cash.
Show me the money. A lot of people ask me
what drivers care about, and honestly, drivers are just like
everyone else. They care about frankly, their money, right, how
much they're getting paid. All of the top articles on
my site have to do with how much you can
learn how to make more money. When we surveyed our audience,
(21:42):
pay was the number one thing and the drivers cared about.
So I mean, I think that anything that can affect
a driver's bottom line, and you know, if I'm sitting
at Uber, those are the things that I'm looking at. So, Brad,
let's get back to Sophia Newali and the Unicorn of
San Francisco. Is Sophian still drive? He is still driving.
In fact, I took a ride with him recently. He's
(22:03):
still a faithful Uber Black driver and he's starting to
work on a book sharing some of his tips about
driving for Uber. And whatever happened to the unicorn. The
unicorn actually met a tragic end. Here's Sophia describing to
me what happened on a faithful Easter two fourteen. So
the Unicorn. That was a very sad end of story
for the Unicorn. So one of my drivers actually, so
(22:27):
this is what I do with my drivers when they
have any problem with with their car, at their own
car that they are driving, I just decided to give
them my car, which is the Unicorn. Of course, I
gave the Unicorn for for one of my drivers, and
I got his car to some maintenance. And I remember
(22:48):
the day when I when I gave him the unicorn.
I said, hey, please take care of off my baby
and he said okay, yes, And two three hours later,
oh no, he called me and then he said, I gotta,
I gotta in an accident. I said, no, please don't.
(23:12):
And when I got there, I saw the car and
it was it was completely what happened total do you know?
So someone It was the night of Easter and some
drunk driver runner at laid and this guy hite him,
you know, he hits, he hit the unicorn. Was everybody okay?
(23:36):
Everybody was okay? Fortunately, yeah, but the unicorn was totaled.
So and from from then I just decided to not
to not buy another unicorn, you know. So and then
and so ends the story of the white Lincoln town Car.
And that was the end, the said, end, story of
(23:58):
the Lincoln Tonka. That's sad. Yeah, in a weird way.
Sophia accepts it, just as he accepts the changes to
the Uber system and seems to understand why the company
made them. Towards the end of our conversation, I asked
him one last question, do you ever dream about the Unicorn?
To be honest, yes, yes, I like that car. I
(24:21):
love that card, but it's a sad story at the
end of story. But I loved it. I loved the
whole experience, you know, So the whole experience was just beautiful, beautiful,
So no regrets, Eric, when all of a saidden done.
(24:43):
Do you agree with Sophion, do you think Uber has
been a generous steward of this powerful platform for drivers,
or to put in another way, has Uber been a
benign dictator in the taxi world? I don't think I
would ever use the word benign to describe Uber. I mean,
they're sort of ruth lists, economic marketplace optimizers. You know,
(25:03):
it's how can we get the most number of riders
and drivers, And so when that's meant that they were
getting plenty of drivers and not enough riders, they would
lower the fair, attract riders, and make life a lot
more difficult for drivers who are hoping to pay their bills. Yeah,
I think that's right. I think for a long time
the flywheel at Uber started with fares. If they lowered fares,
(25:24):
they increased ridership, they put pressure on competitors, and they
drew drivers to them. The problem is, and we both
saw this over the past few years, it alienated drivers,
even if they were making as much or maybe even
a little more money. And I don't know that that
was the reality. They saw the decreased fares and they
got mad and they protested, and Uber over over time
(25:45):
kind of developed a little bit of a poor reputation
with some of its hardest working drivers. And now obviously
they're trying to improve it. But I'd like to point
out one more problem on the horizon. Uber probably lost
three billion dollars globally in rebillion, and that's of course
counting the big China competition that they basically surrendered on right,
and they're losing money in the United States. So looking
(26:07):
at those numbers, you might think Uber is pain drivers
too much. Uber will need to do something about costs.
Is this where we say only time will tell? Only
time will tell? Hey, guys, it's acky. I co host
and helped produce this podcast. And as we were about
to publish this episode, a series of things happened that
(26:29):
made consumers question Uber CEO Travis Kalenik's relationship with President
Trump and also Uber stands on Trump's executive order banning
visitors from certain countries. I'm sure you all saw the
hashtag delete Uber trending over your social media feeds. We
ended up running out of time to discuss this in
(26:50):
the depth that it really deserves, but our episode next
week is going to be all about this, all about
the executive order, the tech industry's response to it, and
what it means for the companies that we cover going
forward to stay tuned, and that's it for this week's
(27:17):
episode of Decrypted. Thanks for listening. Tell us what you
thought of the episode. Send us a voice message to
our producer Pia at p G A D k A
r I at Bloomberg dot net, or write to me
on Twitter. I'm at Eric Newcomber and I'm at brad Stone.
Remember to check out my new book, The Upstarts How Uber,
(27:39):
Airbnb and the killer companies of the New Silicon Valley
are changing the world. Available from Amazon dot Com or
your friendly neighborhood bookstore That's really shameless red another book blog. Okay,
I know, I know. You can subscribe to Decrypted on
iTunes or wherever you get your podcasts and leave us
a rating and a review helps more listeners find our show.
(28:02):
This episode was produced by Pa got Kari Magnus Hendrickson
and Liz Smith Alec McCabe as head of Bloomberg Podcasts.
We'll see you next week. Don't let your legacy I
systems cost you money, innovation, and a place at the
digital table of the future. You can change your systems
(28:23):
and the economics of it with software from red Hat.
See how at red hat dot com.
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