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Competition Between Uber And Lyft Shows How Free Markets Make Life Better


I drive for Uber and Lyft. Yes, you can actually do both. Drivers like me independently contract to both companies, so I can do pretty much whatever I want with my time.

The only real accountability is the accountability of a free market: if I do a bad job, I get a bad rating. If my rating gets low enough, I get fired. Totally fair. Both companies have policies like no profanity (something 95 percent of my passengers violate) and no touching (something like 10 percent of my riders violate, usually in the form of a handshake), but unless a violation is reported there’s really no way for them to know or do anything about it. So basically I’m free to conduct my driving business however I like as long as I’m not doing anything illegal and my riders are happy.

And for the most part, Uber and Lyft are just about as free. Except for some of the regulatory battles they’ve had, most infamously in NYC, thus far these companies are relatively unrestrained. Which means they’re only accountable to the market, as well. Along these lines, I tell people that driving for both companies actually helps both companies, because of the free-market space they occupy.

Today I saw actual written confirmation of this when I opened my email to find a notification from Uber titled “Our commitment to you.” It could have easily said “our commitment to becoming more like Lyft.” Basically, they outlined new policy changes they will be implementing over the next 180 days. And almost all their proposed changes are good. Also, almost all these proposed changes have been standard Lyft policies for some time.

Tipping Capability Won’t Change My Job Much

What they are touting as their numero uno change is tipping. You can now tip through the Uber app. This is a good change: Lyft has used this as a point in their favor over Uber for quite some time. But it’s also probably the least significant change for most drivers. In my experience and the experience of most drivers I know, tips are essentially the ghost at the feast. They are invisible. People just don’t tip very often for our services.

But that’s anecdotal evidence. Surely the numbers tell a different story. After all, I got a text message from Lyft a few days ago celebrating that we as a company had earned a quarter billion dollars in tips. That’s a lot of money for the first six months of 2017, right? But when you click on the link it doesn’t say anything about tips for this year… or really anything about the time period during which the data was collated. I contacted Lyft for clarification, and yes: the tips are being counted from August 2012 to the present.

So if we do a little math we can see what this means. According to Business Insider, Lyft had 162.6 million completed rides in 2016, up from 53.3 million in 2015. That astounding increase in sales aside, that’s over 200 million rides just in the last two years. The tip numbers are not looking so good.

According to BI, between 2012 and 2016 Lyft gave 236.8 million rides. Let’s say that they plateaued in 2016 for rides (which is unlikely, especially considering Uber’s recent bad press); that would mean currently they should have given at least 81.3 million rides in 2017 so far. So that means Lyft could have given 318 million rides when they sent out that milestone text. Which means in all likelihood, they were celebrating an average tipping rate of $00.80 per ride. The lowest amount a rider can tip in the app is $1. In other words, I was right: tips aren’t common.

But it’s still a good thing for Uber drivers. All of our pay rates potentially went up by 3 quarters and a nickel. That’s something. And since Uber rates tend to be lower than Lyft rates, that means riders may be more generous when they tip for an excellent Uber ride. And this is not just an app change, this is a policy change for Uber. Previously they did not allow tipping at all.

Lyft also just announced that they are increasing the amount riders can tip in-app for longer rides. This announcement appeared in my inbox not very long after I received Uber’s outline of new changes. This cannot be a coincidence—these companies are in direct competition with each other. And each one is having to adapt to the other. As a result, both are becoming better.

Uber’s Making Other Good, Competitive Changes

But Uber’s other changes are more significant—for riders as well as drivers. For Uber, the cancellation window has gotten shorter: it’s two minutes now instead of five. Personally speaking, this is the best new change, and it’s actually an improvement over Lyft. It is extremely frustrating to spend almost five minutes driving to a location only to have it cancelled and my time wasted. A two-minute penalty seems far more appropriate and still reasonable from a rider’s perspective.

Wait time is also included in an Uber fare now. This is something Lyft has done for a long time, and it makes perfect sense. If you request a ride, you should be on time for it. And if you aren’t, drivers should be compensated for that time.

But Uber has also instituted the wait fare differently than Lyft. Lyft drivers begin earning as soon as we arrive at a location. Uber gives the rider a two-minute window. Then after two minutes, the driver begins to earn while waiting. Both of these earning policies make sense. What does not make sense is not compensating a driver for waiting. And it’s very possible that Uber may have never seen that without Lyft.

These are pretty significant improvements, and they are produced by competition and market growth—not via legislation or regulation. Lyft wanted to compete with Uber, so they came up with a better product. Now the big boy has had to adapt and become better.

These seem like little things, but they aren’t. All these changes make for a better environment for drivers and riders. And this also increases job opportunities, especially for low-skilled individuals. This is a job almost any able bodied person can do to supplement income or use as a safety net. And it’s become better through competition. Gordon Gecko was an idiot. The economy isn’t a tiny pie that gets divided up by the money gods, it’s an endless ocean where new things can be discovered all the time. And that ocean should be free to swim in.