back to article Why does Uber keep its drivers' pay so low? Ex-CFO: 'Cos we can'

In an interview on Sunday's episode of Wall Street Week, Mike Novogratz, principal and director of investment firm Fortress Investments, who was speaking about corporate greed and income inequality, explained his thoughts with an anecdote about former Uber CFO Brent Callinicos. Callinicos, who had previously been a bean- …

  1. ItsNotMe
    FAIL

    Just ONE MORE scumbag running a company.

    What a wonderful world we live in...and there isn't a snowball's chance in Hell I would ever use Uber for a whole host of reasons. Starting off with being sexually assaulted by one of its low paid drivers.

    1. phil dude
      Thumb Up

      Re: Just ONE MORE scumbag running a company.

      @ItsNotMe: Are you claiming you were assaulted by an Uber driver? Or is this the Fox news empirical evidence section?

      A nod to El Reg for using a Batman quote!! Alfred (Michael Caine) "Some men just want to see the world burn..."

      P.

    2. Tom Maddox Silver badge
      Stop

      Re: Just ONE MORE scumbag running a company.

      While I don't condone Uber taking advantage of the drivers, you're living in a fantasy world if you think you're somehow better off or personally safer with cab drivers. To the contrary, at least taking an Uber, the Uber app is tracking your location, so you have evidence in the event that an Uber driver takes you off to some secluded location to have his way with you.

      http://www.businessinsider.com/despite-its-problems-uber-is-still-the-safest-way-to-order-a-taxi-2014-12

      This is purely anecdotal evidence, of course, but virtually every Uber experience I've had has been more pleasant than taking a conventional taxi would have been. If nothing else, Uber is putting pressure on the taxi companies and regulators to provide a better experience for consumers.

    3. asdf Silver badge

      Re: Just ONE MORE scumbag running a company.

      The obvious reply is well start your own company and do x, as usual. Some truth to that but it doesn't change the fact that Jack Welch got the American public to actually believe executives have a legal obligation to the shareholders in the short term instead of to the company in the long term like is the truth. That is %90 of what's wrong in corporate America along with there almost never being real personal consequences for being a bad actor (see bank settlements today). I suppose starting your own company you can change that but more likely if you do actually succeed you will probably eventually be bought out or die and the cycle continues.

      1. gnasher729 Silver badge

        Re: Just ONE MORE scumbag running a company.

        Well, Jack Welch was proven wrong, and GE took a very, very long time to recover from the damage that he'd done and undoing it.

    4. Anonymous Coward
      Anonymous Coward

      Re: Just ONE MORE scumbag running a company.

      First of all, Uber is living in period of economic repression if you are in the lower income bracket, and there are those who are able to say "because we can" which is so true. Who did you vote for? As history shows this will also change. hopefully sooner than later. I think Uber was a genius of plan, so many people wish they could have thought of it first, maybe with more insurable protection for the customer (liability wise). Taxis, face it or not, do not have the more favourable source of getting people around.

  2. Marketing Hack Silver badge
    Headmaster

    Cab drivers dont make a ton of money either ( at least in the U.S.)

    That generally voluable, most always first-generation immigrant that drives you to/from airports/hotels/customer sites in the U.S. doesn't generally make a lot either. Most of the money he makes goes to the actual owner of the cab, the cab company that tells him where to pick you up and the owner of the taxi medallion/license that actually authorizes that cab to be on the road conducting business. The driver is usually an employee who gets something like minimum wage plus tips. So most of the money is really going to capital there too.

    And by the way, the ex-CFO of Uber sounds like a jackass.

    1. Just An Engineer

      Re: Cab drivers dont make a ton of money either ( at least in the U.S.)

      Actually they are not employees, they are considered "contractors" and they usually rent the cab from the cab company. So by the time they pay the "rental" fee, and fuel, there is not usually much left. They essentially have to live on the tip they receive.

      1. Dan Paul

        Re: Cab drivers dont make a ton of money either ( at least in the U.S.)

        I don't know why you got a downvote for explaining how all taxi companies (including Uber) perpetually shaft their "employees". Have an upvote!

        Since many in the traditional Taxi services are also considered "contract" employees, they get screwed out of overtime and health benefits too.

        There are not enough pejorative words in the English language to describe how I feel about these "employers".

  3. EL Vark

    Ah, yes. "Capitalism"

    Uber was and is an interesting and clever idea, with a long list of "buts". It's defenders, who tend to be of the loud, demonstrative, sign-carrying cohort (laudable in the face of injustice, laughable in the face of lining the pockets of the already wealthy), have been on display in my backyard, recently (Toronto), where the new-ish mayor has declared that Uber should have a place within the transportation system. The fuss concerns the fight with Big Taxi. Toronto has a byzantine licencing system for taxis, where one essentially has to be born into the business to have the licence handed down, or independently wealthy to buy into the program, which is hardly a thing with which we associate hacks. It's much easier to sign up with Uber, who then offer greater convenience and affordability for passengers.

    The subject that Uber glosses over, even with present and pending litigation, is that of liability (as well as the whole, "Uber the company are making out like robber barons at the expense of their drivers, but we won't mention that part"). If there's an accident or incident involving a taxi, as a driver, a passenger, or anything else, you're basically covered within the limits of the justice and insurance systems. With Uber, the rules are nebulous at best, despite their arguments to the contrary. One could well say that it isn't worth the risk, perhaps especially for drivers.

    If the liability questions can be resolved and some element of fair play brought to the table with the heavily taxed (in terms of fees and insurance) taxi system, great. Otherwise, it's a risky business. Plus, you know, billionaires laughing at you is irritating.

    1. Anonymous Coward
      Anonymous Coward

      Re: Ah, yes. "Capitalism"

      From my understanding, drivers aren't vetted at all by Uber. So as far as the passenger is concerned, he or she might be taken from A to B in a stolen and/or not roadworthy car, by a driver without a licence or, indeed, appropriate insurance cover. Here in the UK, I'm pretty sure that the insurers will show you the middle finger when it turns out that you provided transport to paying passengers without their knowledge (read: without having your car insured accordingly, thus paying a lot higher insurance fees).

      I mean, as an Uber driver you can essentially work when you feel like, which just screams trouble... it will be a second or third job for many students or other people who have time to spare and want to make a few quid without any obligation to show up for X hours on a regular schedule. How many of those people will upgrade their car's insurance accordingly?

      I completely agree that insurance is a huge problem for the passenger.

      1. LucasNorth

        Re: Ah, yes. "Capitalism"

        why should the passenger care if their taxi is insured or not?

        1. Edwin

          Re: Ah, yes. "Capitalism"

          Yeah, when the driver clips you as they drive off, their enormous net worth will more than cover your medical bills.

          Or when an Uber driver broadsides your car and your insurance company points out it's the other driver's fault so their insurance will ...oh...wait...

          So maybe the PASSENGER shouldn't care, but YOU damn well should.

          1. Triggerfish

            Re: Ah, yes. "Capitalism"

            How about a unvetted taxi driver having a crash, whats your sick benefits like when you are off work?

            How about if you cannot work anymore? Figure a normal household insurance is going to give unlimited liability like a taxi for the pasengers, or are they going to use the excuse of it being used as a cab to just not pay anything?

          2. P. Lee Silver badge

            Re: Ah, yes. "Capitalism"

            Could someone explain why the insurance bills are so much higher?

            Ah yes, "because they can."

            1. Montreal Sean

              Re: Ah, yes. "Capitalism"

              Insurance rates are higher for vehicles used for business as it is understood they will be on the road more hours of the day, covering many more miles than a vehicle used solely for commuting.

              More hours/miles per day equals higher probability of an accident.

              1. big_D Silver badge

                Re: Ah, yes. "Capitalism"

                @Montreal Sean and add to that that a normal commuter car probably has no passengers 99% of the time, whereas a taxi is likely to have one or more passengers for most of the time it is on the road (depending on how far they have to drive for pickups).

                The biggest problem in Germany is that without a professional driving licence you cannot get commercial insurance for carrying passengers. I'm pretty sure most Uber drivers aren't willing to pay out for the extra training, exams and tests. That means that, currently, most of Ubers cars in Germany are driving illegally - they are driving on private insurance, which is null and void if you carry paying passengers.

                At least with a registered taxi, if he isn't insured, he will lose his taxi plate and his registration plate, until he gets the insurance. With Uber, they can continue driving, until the insurance company or the police get suspicious and check the driver out - or the driver has an accident and is personally liable for all damages, injuries and compensation.

              2. Trigonoceps occipitalis

                Re: Ah, yes. "Capitalism"

                Also a car used for hire or reward is likely to be carrying higher risk passengers. By that I mean that they are likely to earn more and thus off work compensation will be higher. They are also more likely to be able to mount a court case. It is the same for normally staid classical musicians. Try playing a violin with a broken finger or a trumpet with a bruised lip - neither injury requires a full blown crash as its cause if you are with a friend (likely to be another musician) in your car.

                It is all about risk - actually "what we can get away with" multiplied by risk.

            2. gnasher729 Silver badge

              Re: Ah, yes. "Capitalism"

              Insurance for professionals isn't higher "because they can". It is higher because when a professional driver is involved in an accident, he is taken as a professional to be fully responsible for his actions, and supposed to drive in a professional way, at a higher standard than your average driver. The professional driver is therefore more likely to be legally liable for an accident, which means the average payout by the insurance company is higher.

              The professional is also likely to have a limited liability company, which means that when the insurance had to pay out for third party damage because of his fault but has the right to get it back from the driver, they are less likely to succeed.

              In addition, the professional driver is obviously more likely to drive many different people around, and there is the risk that because he wants to make money, he might engage in less careful driving, which again drives up the cost.

          3. TheVogon Silver badge

            Re: Ah, yes. "Capitalism"

            "their enormous net worth will more than cover your medical bills"

            What medical bills? Health care is free in all civilised first world countries...

        2. Roland6 Silver badge

          Re: Ah, yes. "Capitalism"

          why should the passenger care if their taxi is insured or not?

          Well most passengers won't even think about insurance, until they need it...

          However, because of the way Uber contracts with drivers, a business would be daft to use Uber as its preferred taxi company, because if your business arranges my taxi to the airport and it has an 'incident' and it is found not to have insurance etc., your company many find it has liabilities!

          1. big_D Silver badge

            Re: Ah, yes. "Capitalism"

            why should the passenger care if their taxi is insured or not?

            Because it is a legal requirement in most countries in order for the vehicle to even be on the road!

            As to the driver, if they are caught without insurance or with invalid insurance (i.e. private insurance whilst plying for hire), then they will usually lose their licence for a year or more, they can have the vehicle confiscated (depending on country), they can face jail time and they face heavy fines.

            That is the positive side, assuming they are caught by a spot-check. On the negative side, if they are involved in an accident, then they are liable for paying for all damage, for personal injury, compensation etc. for all parties!

  4. Anonymous Coward
    Anonymous Coward

    Uber is evil, isn't it? Makes me despair. I often think of the Ultimate Business Model(tm) if one were to take capitalism to its ultimate logical conclusion: have your customer shove cash thorugh your letterbox; you give them nothing in return, they have the hassle of givingyou the money, travelling to your house; you get all the benefits - cash, no risk. I can imagine the ultimate Uber app, just a Pay Now button linked to your credit crd, and all you get in return is a "thank you" pop-up accompanied by the sound of a fat-cat laughing up their sleeve at you.

    1. LucasNorth

      if the taxi drivers have only been able to be shafted by uber because they resolutely refuse to come into the 21st century

      1. keithpeter
        Windows

        "if the taxi drivers have only been able to be shafted by uber because they resolutely refuse to come into the 21st century"

        What is this 21st Century of yours like?

        Mine is the one with electric self-driving cars and motorways lined with solar cells to generate electricity. I'm not sure who will actually need to *own* a car then. We can just rent one by the minute. Automated lorries and deliveries by drone.

        1. Anonymous Coward
          Anonymous Coward

          @Keithpeter - Are you out of your mind ?

          Can you figure out for a second police, firefighters or paramedics renting their vehicle with their iPhones ? Don't you get it that self-driving cars concept is all about control, do you ?

        2. Dilbert1969

          21st Century

          My 21st Century is now - and has been for the last 15 years.

      2. Edwin

        True

        I think the point is that Uber isn't only shafting existing taxi companies. They're shafting *everyone*, or more specifically: they don't care *who* they shaft.

        Taxi laws in many places are onerous, but they do afford the travelling public some protections. Uber claims to be great because they avoid the onerous bits, but they don't mention the small print they're circumventing.

        So I think it's great they're shaking up the system. I just hope they go down with the ship when lawmakers get around to reforming it.

    2. Gannon (J.) Dick

      I have to agree, although "thank you" is a bit excessive and "thanks" will do with three fewer expensive letters. As a start-up you could probably go with "thx". Investors would applaud your passion for success. Just don't mention Bnk Rbbry in your business plan. Bankers insist on details ... Othr Peopls Bnks or something like that.

  5. Anonymous Coward
    Anonymous Coward

    "no comment"

    "Uber had not replied to an invitation to comment at the time of publication."

    Maybe Tim W could offer an opinion in the absence of an official one?

    1. silent_count

      Re: "no comment"

      I'm no Tim W but I'll have a stab at it.

      Uber matches drivers to passengers. The passenger pays the driver a 'fare', and the driver then pays a 'cut' of the 'fare' to Uber for their matchmaking service.

      If the 'fare' is too high, there will be no passengers. They will catch a train, taxi, bus, or drive themselves, or just decide a night out is too expensive and stay home instead.

      If Uber's 'cut' is too high, that is the drivers don't get to keep enough of the 'fare' to make driving people around worth their while, there would be no drivers. They would find a different job or maybe just stay home and watch TV or read Tim W articles instead.

      This article is about Mr Novogratz saying that Uber's 'cut' is too high - Uber is overcharging for it's matchmaking services. If he's right, a free market will create a competitor which will kill Uber. One who is willing to take a lower 'cut' and thus is able to charge lower fares (which will steal all of Uber's customers) or pay the drivers more (how well would Uber do if their drivers all left Uber to work for a higher paying competitor?).

      1. Magnus_Pym

        Re: "no comment"

        "This article is about Mr Novogratz saying that Uber's 'cut' is too high - Uber is overcharging for it's matchmaking services. If he's right, a free market will create a competitor which will kill Uber. One who is willing to take a lower 'cut' and thus is able to charge lower fares (which will steal all of Uber's customers) or pay the drivers more (how well would Uber do if their drivers all left Uber to work for a higher paying competitor?)."

        Once 'entrepreneurs' smell the money they will all want in. There are/will be hundreds of wannabe Ubers trying to take the market by being looking cheaper, safer or nicer than the incumbent although usually they just advertise heavily and litigate, They throw money at it, lots of money. To defend against this intrusion Uber will need money, lots of money. They have to get what they can now or lose out later.

  6. zxcvbnm

    Opposite day?

    "the percentage of earnings going to capital, versus labour, has decreased over the last 35 years."

    "employees – drivers – get between twenty and twenty five per cent of the fare. And the thought was if we could raise that to twenty five to thirty per cent [...] our margins would go up"

    Am I tired and misreading this? This seems to say that labour is getting an increasing amount of money than capital and uber is trying to increase its drivers wages? And yet the article seems to be implying the opposite while stating this?

    1. Midnight

      Re: Opposite day?

      I think there's a missing bit there. It makes more sense if you insert an extra phrase:

      "employees – drivers – get between twenty and twenty five per cent of the fare [and give it to us]. And the thought was if we could raise that to twenty five to thirty per cent [...] our margins would go up"

      The details are a bit foggy, but my understanding is that Uber takes a 20-25% commission off the top, depending on how much they like driver, followed by another 10% because they're just so awesome, and some additional insurance fees for the same reason.

      1. Jack of Shadows Silver badge

        Re: Opposite day?

        Historically, in the US, it's been about two-thirds to labor, one-third to capital. In individual industries it's been a bit different but that's what was generally true. Ton-of-salt-time:Studied this (I found it interesting) at the university taking American Economic History, Labor Economics, and Business Cycle Theory. Probably why it came up on my radar :P.

    2. This post has been deleted by its author

  7. tempemeaty
    Big Brother

    Inhuman.

    Uber's Executive pool has failed the human test. Someone who has still the littlest bit of humanity in them would not respond that way.

  8. Anonymous Coward
    Anonymous Coward

    I've told my wife this thousands of times

    Recently, as I was looking for a new drill the black sheep of the family, a niece married to a French man (shudder) said she could get a reduction on power tools through his family, Hilti to be precise. So I looked up the price in different countries for the same tool. In the UK, often called rip-off UK by people who have never lived away from their mother the price was the equivalent of 280 euros, in France 385 Euros and in Spain a staggering 475 Euros. Same drill, same spec, same part number.

    My wife insists it can't be the same drill and the one costing more must be better. I repeatedly tell her that the price of anything reflects what people will pay not what it is worth. If a company can get away with charging more in a given market they will.

    Oh, and the employee price on the drill was still more expensive than buying in the UK.

    1. squigbobble

      Re: I've told my wife this thousands of times

      That works both ways round. I bought a monitor from amazon.es 'cos it was cheaper than it was on amazon.co.uk.

    2. Anonymous Coward
      Anonymous Coward

      Re: I've told my wife this thousands of times

      "Same drill, same spec, same part number."

      Same warranty?

      You'll find lots of outfits in the UK trying to dodge their legal warranty obligations after a minimal period, even though two years would generally be a reasonable warranty period.

      Counties that accept EU consumer law would likely have a problem with less than two years.

      That'd make for a pretty expensive warranty uplift, even Dixons would be proud.

      "If a company can get away with charging more in a given market they will."

      In general. Exceptions apply, e.g. the race for the gutter in the UK broadband+telephony market.

      Even Adam Smith acknowledged there's a tendency for traders to form cartels when they can, though I suspect even Adam Smith would have been surprised by the criminal cartels of modern City banksters - multiple outfits fined yet more billions of pounds yesterday, an amount said to be 'less than expected' (!), for systematically fiddling the Forex markets over a period of five years or more.

      Did any of the responsible *individuals* pay the price, other than the handful of Barclays employees who will lose their jobs? Or is the role of management just to take bonuses when times are good, and deny all knowledge when things don't go so well?

      Short: http://www.bbc.co.uk/news/business-32817114

      Longer: http://www.wsj.com/articles/global-banks-to-pay-5-6-billion-in-penalties-in-fx-libor-probe-1432130400

      Quote: The possibility of five large banks pleading guilty to criminal charges in a single day—including the largest and third-largest U.S. banks by assets, J.P. Morgan and Citigroup—would have been unthinkable only a few years ago, when executives warned the fallout from such a move would be disastrous to their ability to conduct business. But other large overseas banks have pleaded guilty to criminal charges in the past year, with minimal effects to their operations. The five banks said they expected little disruption to business.

      1. Anonymous Coward
        Anonymous Coward

        Re: I've told my wife this thousands of times

        Ah, warranty. I think you'll find consumer protection in the UK is far greater than anything you'd find in most other countries.

        Cartels are for price fixing, they rarely do this to benefit the consumer.

        1. Anonymous Coward
          Anonymous Coward

          Re: Two year mandatory EU warranty

          "I think you'll find consumer protection in the UK is far greater than anything you'd find in most other countries."

          Citation welcome. Here's mine [1], feel free to inform readers what UK-specific extras our Westminster folks have added for us.

          I think you might find that the relevant UK rules are largely inherited from the EU, with the exception of warranty length, where the EU standard warranty is two years by default, vs the widely-attempted one year in the UK.

          [1] http://europa.eu/youreurope/citizens/shopping/shopping-abroad/guarantees/index_en.htm

          "[Updated : 20/06/2014]

          Free of charge, two-year guarantee (legal guarantee)

          Whether you bought the goods in a shop or online, under EU rules you always have the right to a minimum two-year guarantee period at no cost.

          This 2-year guarantee is only your minimum right and national rules in your country may give you extra protection. Remember that any deviation from EU rules must always be to the consumer's benefit.

          If an item you bought anywhere in the EU turns out to be faulty or does not look or work as advertised, the seller must repair or replace it free of charge or give you a full refund or reduction in price. In some EU countries you will be offered the choice between all four remedies from the outset. Otherwise you will be able to ask for a full or partial refund only when it is not possible or convenient to repair or replace the item."

          [continues]

          1. Anonymous Coward
            Anonymous Coward

            Re: Two year mandatory EU warranty

            >Citation welcome.

            Here's mine. Experience, you should try it some time, it's a lot better than reading about the theory.

          2. TheVogon Silver badge

            Re: Two year mandatory EU warranty

            In the UK you typically have rights under law equivalent to a 5 year warranty.

  9. Tim Almond

    Reduced Prices

    I'm sure no-one here has gone into a small shop and asked them if they can equal Amazon. I'm sure no-one here is only looking out for getting things at the lowest price.

    I thought people at The Register were a bit more intelligent than Guardianista "big business" herpy-derp.

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2019