Uber

= a company that uses a mobile application to find available private cars for people looking for an alternative to taxi cabs.

Description

Mark Pesce:

"This trip I got to experience a brand new car service, Uber. Designed to work with a high-end smartphone, it is an app that shows your location on a map of San Francisco, along with cute icons showing nearby Uber cars. You request a pickup, then that request gets transmitted to those cars; when one of the drivers agrees to pick you up, the other car icons disappear, and you see that driver’s icon make its way across the map, toward you. It’s wonderful, because it takes all the mystery out of a car service - you know how far away the car is, and how long you’ll have to wait.

While Uber is pleasant for the passenger (it costs anywhere from one-time to three-times a normal taxicab), it’s a complete revolution for the drivers. Limousine drivers live by their bookings, which are generally spaced well apart; hence, the drivers often have some unpaid downtime. Those drivers can now launch the Uber app on their own smartphones, bidding for jobs as they come in. They can earn 50 per cent more on a shift, because they’re more fully utilised. By taking the inefficiencies out of the system, Uber was able to create a rival taxi service in San Francisco with nothing more than a few computers and a smartphone application. They didn’t need to buy any cars, hire any drivers, or lease any office space.

Uber is expanding, moving into Silicon Valley’s Palo Alto, New York and Austin, Texas -- where you can to book a pedicab through the service. As the service expands, taxi companies throughout the developed world won’t know what hit them: Uber (or an Uber-clone) will quietly move into their markets, completely disrupting the business. When it comes to Australia, the oligopoly of Macquarie’s CabCharge won’t stand a chance. This is the new way of doing business: radically more efficient, more money to the drivers, and better customer service." (http://www.abc.net.au/unleashed/45026.html)

Discussion

How Uber is Changing Limousine and Transportation Economics

Excerpted from Mark Pesce's Next Billion Seconds:

"Limousine drivers like Charles love Uber, too. Before the service launched, those drivers would spend half their time doing nothing, idling their hours while waiting for the next pickup call to come in. Drivers now add Uber jobs to their regularly scheduled pickups, nearly doubling their earning power within the same eight-hour shift. Mobiles have given limousine drivers the same economic acceleration that mobiles gave the fishermen of Kerala fifteen years ago – creating a highly efficient market which satisfies an increased demand, dramatically improving the earning potential of everyone connected.

Economists recognize that when a sudden change in market dynamics produces a burst of new wealth it encourages people to enter the marketplace. A ‘gold rush’ begins, as everyone looks for a way to vacuum up some of the new-found fortune. Most markets have ‘barriers to entry’ – to be a fisherman, you need a boat and rigging and nets and a crew; to be a driver you need a rather pricey limousine. These barriers make it difficult for the market to become immediately overcrowded, but the lack of competition increases the incentive for everyone already participating in the market to maximize their productive behavior. The more productive you can be within a closed but growing market, the more you will earn.

For Uber drivers, this means putting their limousines where they’re most needed. But they’re not alone in this, so the busiest parts of the city are also those with the greatest supply of drivers, which means drivers still have to wait for jobs. Even closed markets can be locally oversupplied – particularly where participants within a market can smell all the money to be made.

Uber drivers run a companion version of the smartphone app that Uber customers use. This app allows them to bid on pickups, but does not reveal the location of any of the limousines around them, competing for the same business. Uber’s drivers have less information than Uber’s customers. As a consequence, limousines tend to cluster, because drivers don’t know that they’re all converging on the same small – and presumably lucrative – area.

My driver Charles has a solution for this dilemma: he owns two mobiles, and runs both Uber apps. The driver app delivers pickup requests, while the customer app reveals the locations of any limousines nearby. “One evening I came into the city,” Charles reports, “and there were four limousines within a block.” Knowing this, Charles moved on, finding another, under-served area of the city, and got plenty of work.

Uber may not want its drivers to know about the location of other drivers, but it wants to reveal that information to its customers, so drivers simply poke holes in the wall that separate the two sides, peering through, and learning where to position themselves for greatest profit. The drivers use all information on offer – from every source – to give themselves the greatest advantage.

Charles says he’s one of the few Uber drivers using his smartphone to give him the inside track with a degree of omnipresence. It’s a technique new to him, and he doesn’t say whether he thought it up himself, or if he copied it from another driver. Either way, as Charles’ success becomes more visible, his peers, watching what he does, will copy his keys to success. What he knows will be replicated throughout the fleet of drivers until this exceptional behavior becomes pervasive and normal.

Soon, Uber will either need to provide drivers with all of the information drivers provide to Uber, or every Uber driver will use two mobiles, one for orders, and another for omnipresence. As drivers learn more about one another, they learn how to avoid economically damaging behaviors, such as clusters. The drivers self-organize, spacing themselves throughout an area in a way which generates the greatest economic advantage for each individual. They will act as a unit – as if they all answered to a common mind – although they have no central command, accept no controlling influence, and simply work to maximize their own financial interests. This emergent behavior – seen first along the Kerala coast – is the inevitable consequence of connectivity." (http://thenextbillionseconds.com/2012/03/13/19-loop/)