“We are not setting the price. The market is setting the price,” he says. “We have algorithms to determine what that market is.”
- 1. v.i. (seek to) make excessive profits out of others' needs, esp. in times of scarcity.
Algorithms are good for models but they are not good for markets that are supposed to reflect actual human need.
I've used Uber quite a lot in Melbourne and a few times in New York. It's a useful service for times when taxis are hard to find and people are willing to pay a premium. Uber has also provided in-kind sponsorship to our live Nudge events.
The structure of Uber's surge pricing model is simply exploitative at worst and represents the most heinous part of capitalism: the removal of human responsibility for "the market".
Blaming the algorithm does not absolve anyone of poor humanity. A human created the algorithm. It is by design.
Mike Monteiro gave an excellent talk at Webstock last year in which he explained how designers ruin the world.
While in New York I saw surge pricing on the Uber app while there were still, clearly, plenty of cars available. The first thing one sees when opening the app is how many cars are available.
From a customer's point of view, it seems like price gouging. One would only expect the price to surge when there were not plenty of cars available.
The fact that prices can surge to higher than seven times the standard fare favours privilege over service. But it's also a sign that a business is out of step with reality and economic history.
A 700% increase in prices based on an algorithm shows only that the algorithm is flawed; prone to hyperinflation.
There's an argument that increasing prices will entice more drivers to go out during high demand times. Surely this is also exploitation. The 700% increase in price was during heavy snow in New York. It's a dangerous time on the road and Uber is asking drivers to risk their own safety because the financial reward might be worth it.
That being said, Uber car availability is not a right to anyone with a smart phone. It is a business and it's going through some pricing teething problems.
The algorithm is currently poorly designed, but Uber, as a group, has never suggested that it is the final version. If they are smart, and I think they are, they'll continue to tweak their service.
The biggest error here is for Kalanick to stand firm, telling the world that Uber is doing the right thing rather than admitting that work still needs to happen to make the service behave better.
There's also a problem here in the economy of outrage. When Uber pricing is high, by all means people have the right, and sometimes even an obligation, to alert/warn others and let the organisation know that it is unacceptable.
However, reasonability is not the default position of the outraged. A lot of the time the anger in tweets about Uber surge pricing just reads as people being upset that they've discovered they're not as privileged as they originally thought.