Is There Anything Wrong With Surge Pricing?

There has been a lot of chatter about how Uber’s surge pricing is really just disguised price gouging and that they should be ashamed of the mechanic. The backlash appears to have first begun after NYE 2011, and it lead to Uber posting this detailed explanation of surge pricing and forced CEO Travis K to publicly defend his company. The chief complaint, besides the high prices, was that Uber was not being transparent enough with surge pricing… it was not until after the rides were complete that customers realized what they had been charged. To address those complaints, Uber has since implemented a two-step authorization of sorts for surge pricing, whereby you have to enter the surge level into the screen and accept the higher rates. Additionally, on days where surge pricing is expected the app will display a pop-up upon loading warning users. Despite these UI change and pre-NYE surge pricing warnings (2010, 20112012, 2013) New Years Day anger and regret on social media from regretful riders has become an annual tradition.

Recently, a freak snowstorm in NYC led to yet another outcry against Uber, with many claiming that their surge prices in a weather emergency situation is an example of the worst kind of capitalism. Uber responded in the way it always does, defending surge pricing as a way to guarantee a ride is always available and as means to get drivers on the road; that it’s merely a supply and demand mechanic and by raising prices they can quickly boost supply side. Uber has released internal data which supports that claim, but there are still questions whether or not increasing prices 9x is really fair. I think the criticism of surge pricing is more fair in instances like the freak snow storm than during something like NYE, because at least with the former you should know better than to expect normal rates and you have the ability to plan other means of transportation in advance. Either way, I think consumers are being overly entitled to think they shouldn’t expect to pay a premium for a service that has supply constraints in a situation where demand will obviously be high.

I first tried Uber when it became available in Boston, but I didn’t start using it regularly until UberX. Since then, I’ve seen surge pricing go as high as 4x but never higher. Personally I do my best to avoid ever paying surge pricing, but if I really need a ride and it’s below 1.5x I’ll typically bite the bullet. That being said, I’ll check Lyft first to make sure it’s not cheaper. If surge pricing and primetime (Lyft’s version) is higher than 1.5x then I’ll typically try to grab a cab, but that’s nearly impossible in Boston, so I’ll likely end up just taking the T (pro tip: if you really need a ride and UberX has 2.5x-3x surge pricing, non-surging Uber black cars will now be about the same price but typically have shorter waits, nicer cars and more knowledgeable drivers). Even though it sucks when you can’t get a regular priced Uber, I’ve never felt that surge pricing was anything dirty. I simply chalked it up to a company raising prices based on demand in the same way that the travel industry and many others do. However, at least when Uber raises their rates it will (or at least should) actually drive the prices back down by increasing supply.

I would never even think to try taking an Uber on NYE, but this year I was curious to observe the surge pricing dynamics in Boston. My plan was to check in every 30 minutes or so, starting around 8pm, to see where prices were at. I expected things to start picking up at around 8:30ish and steadily rise until 11:30ish, at which point I figured things would die down for a bit due to people being at their NYE destination. Then around 1:00 I expected things to pick back up and peak at around 2:00ish when bars would be clearing out. My apartment is right by Back Bay Station, which for those of you unfamiliar with Boston is a fairly central and popular area, so I hoped it would be a decent barometer for Uber demand.

Around 8:00 I checked for the first time and prices were still normal, which I wasn’t entirely surprised by – I figured things were just getting started later than I expected. As I checked in every ~30 minutes or so over the next hour and a half I was surprised to see that the prices remained at normal, non-surging rates. I had dinner plans with my girlfriend for around 10:00, and I purposefully made us reservations at a restaurant that was walkable, as I was nervous about Uber prices, and I feared finding a cab would be impossible. Much to my surprise, when I opened the app at 9:45 prices were still normal so I figured this would be a good chance to talk to a driver and avoid walking several blocks in the cold :).

I asked our driver if he regularly drove Ubers and he said semi-regularly, but that he was driving tonight because the money was too good to pass up. I asked if he was surprised that prices weren’t surging yet, to which he emphatically said yes, mentioning that he had driving NYE last year and that it was certainly surging by the same point last year. Now he was nervous that he had traded in his NYE for a less than stellar check and an angry wife. My suspicion was that the prospect of a big payday had brought out a lot of drivers who were only semi-regulars, which had flooded the supply side and many would be passengers had made sure to plan alternate modes of transportation for fear of surge pricing.

After dinner we walked home so we could watch the fireworks and walk off dinner, but we still could’ve grabbed an Uber at normal rates. I kept checking the app throughout the night until going to bed at around 2:30 and never once did I see any surge pricing. To say that I was shocked would be putting it mildly. While this was no doubt a big win for consumers, I couldn’t help feel bad for drivers like the one we had earlier in the night, who had given up their own NYE plans because of the allure of a big payday. Granted, it could just be that my area didn’t have high surge rates for whatever reason, and that other areas of Boston saw crazy rates, but who knows. It would appear that things in New York were more or less as expected, as evident by this article.

In order to stop the surge pricing backlash, people have suggested that Uber change how surge pricing functions, which I don’t necessarily agree with. If they were to mix things up, these are the only plausible alternatives in my mind:

1) No surge pricing – and instead have “no cars available” show up

Let’s be honest – this is absurd and not an option. The guaranteed availability of Ubers is huge part of what makes the service so sticky and fules the habit forming/changing. This would be a terrible user experience, particularly for any new customers, who might initially open the app to see “no cars available.” It would also be the worst solution for drivers, as they would be constantly slammed with requests but reap no rewards.

2) Cap surge pricing and if demand still outstrips supply then go to “no cars available”.

In my mind you set the cap at 4x to 5x, because at that point the Uber black cars are much cheaper. This would then allow them to re-configure the UI/UX so that it automatically syphoned some of the UberX demand into Uber black car when their pricing is equal or less, which would help lower the frequency of the “no cars available” being displayed. There is still the issue of the bad user experience if you are presented with the “no cars available” screen, but I think that would be fairly rare at a 5x cap. But the biggest issue is, why should Uber prevent someone from paying more than 4x – 5x surge pricing if they’re willing to do so?

3) Uber doesn’t take a cut from surge rates as Kevin Rose suggests here, instead they give the excess profit to the drivers.

Hopefully this would have the affect of getting even more drivers on the road during common surge pricing times and during extreme events like the snow storm, due to the increased incentive. It might also stop people from hating on surge pricing so much and help Uber shed some of its evil corporation moniker. People would be less apt to think Uber was surging just to make themselves more money, as I feel people often assume. However, I don’t think this is very fair to Uber and I’m not sure how much that excess 20% would really motivate drivers. Unlike the other solutions, I think this one is worth experimenting with.

4) Uber lets drivers set their own rates

Turn Uber into a true marketplace where providers set their rates rather than the service model with marketplace dynamics that they currently employ. The biggest issue here is that the experience would become a lot less seamless and I don’t think this would benefit drivers or Uber. Drivers would have to deal with undercutting and there would be more work involved with getting each passenger, creating more downtime between rides. All that would contribute to less rides and money flowing through Uber and so this is nearly as bad a solution as eliminating surge pricing entirely.

5) Uber continues with their current model

I think this is probably the correct solution and, in all likelihood, what will happen. The product team can continue to work on improving metrics/apps/notifications for drivers to help them better understand when they should be driving for the most demand, as I’m sure they’re already doing. This will eventually lead to situations like the one I witnessed on NYE where despite high rider demand, driver supply is high enough to keep pace. Eventually I imagine their algorithm and ability to get drivers on the road will be so powerful that only unique situations such as the freak snow storm will cause a big surge pricing spike.

Regardless of how you feel about surge pricing, it’s tough not to be in awe of what Uber has built. It’s funny how in that original article about surge pricing during 2011 NYE Travis K called the night a success because they saw requests in the 5 figures, I’d impinge they’re seeing WAY higher number of requests on an average day in most of their biggest cities. However, because they’re adding so many new drivers daily, demand, which would have previously caused surge pricing, no longer does, and in my mind that means the surge model is working.

Distraction Free Thinking

It’s tough to not to get distracted in today’s digital age, but if you have ADHD, like me, it’s damned near impossible. The Internet is just so limitless, and my curiosity is so endless… it’s a pretty bad combination. Even those of you without ADD or ADHD would likely agree that there is so much distraction these days that it can be tough to find a moment for nothing but your own thoughts. However, there are two places I’ve found where I do my best thinking: in the shower and on my bike.

I unapologetically take very long showers. You better hope you’re not sharing a hot water tank with me because I’m likely to shower until the water gets cold. I don’t even realize how long I’ve been in there most of the time, I just get so lost in my thoughts – it’s incredible! It is unequivocally where I do my best thinking. A friend recently asked for my advice on something and I told him I’d get back to him the next day because I wanted to dedicate a shower to mull things over. If I have a particularly vexing work problem I’m dealing with, I’ll often make a point to think it over in the shower. If I ever start my own company I plan for midday showers to not only be kosher, but encouraged!

Most of the time I don’t have a specific agenda for what I want to think about in the shower, so I just let my mind wander. Sometimes I tap into my imagination and daydream up crazy scenarios, other times I’m more practical and think about what I need to accomplish that day. What is consistent is the fact that I’m able to think without distraction for at least 15 minutes. This deep thinking helps clear any remaining grogginess in the morning and helps get my mind prepared for the day ahead.

Speaking of knocking off grogginess – I’ve found that riding my bike to work is far more effective at waking me up than coffee. It’s an incredibly invigorating feeling to have sunshine on your face, wind in your hair and the chaos of a city whirling by. I find that it really gets my creative juices flowing and is another one of the very few opportunities I have alone to my thoughts. It’s not quite on the same level as a shower, because you need to be paying attention to ensure you don’t get yourself killed, but it’s a close second. Sometimes, I’ll opt out of thinking and instead just listen to music (I know, I know, very dangerous – don’t tell my mom!) and just enjoy the ride. But even that clears my head and helps gets me more easily into a focused morning groove once I get to the office. Similarly, biking home at the end of the day has been a great way for me to unwind after a busy day.

Just as an aside, purchasing a bike has been one of the best decisions I’ve ever made. In addition to the benefits of helping to clear my head, disconnect and de-stress that I’ve already mentioned, it allows me to avoid public transportation, which I absolutely detest. Not for the typical reasons of over crowding, delays and general unreliability… Sure those things suck, but what really bothers me is the palpable dread on the morning commute. Everyone is just so damn sullen about the fact that they’re heading off to work: you’d think they’re heading to their own funerals. That kind of negativity is infectious and makes it harder to start the day off on a good note.

One of my goals for the next few months is to make a point of finding 30 minutes a day to just relax and think without distractions. The only thing I’ll have with me is a notebook so that I can jot down any ideas that may surface. My biggest concern is that I might just end up spending that time thinking about my typical day-to-day stresses and that it won’t be all that useful, but I won’t know unless I give it a try.

Have you had success with putting aside time just for thinking – how did it go? Let me know in the comments and stay tuned for my results!

The Internet Never Forgets

It used to be that if you made a stupid decision when you were younger you got in trouble, you apologized, you learned from your mistake and everyone moved on. Unfortunately, this is no longer the case. Now if you do something stupid, it ends up on the Internet and if you’re unlucky enough to have you’re name attached to it, you’re permanently branded for the rest of your life… Constantly in fear that when someone Googles you they’ll find this embarrassing tidbit from your past.

I’m not talking about big things that may well deserve to be attached to your name forever — I’m talking about things like lighting off fireworks in the parking lot of your school and getting some trumped up attempted arson charge. Posting something dumb on Twitter and having it retweeted a ton of times while you’re asleep and suddenly you wake up and you’re infamous for something taken completely out of context or for something maybe you shouldn’t have written to begin with, but you were in a half asleep daze and it was only meant for your 75 followers. Or worse yet, you send an email to a friend privately and he forwards it along and suddenly it’s out in the public. In today’s Internet age, it’s easier to screw up your life. Even something meant to be private can very easily become public. Most people still don’t truly understand this until it’s too late.

(As a quick aside, there is something to be said for giving people second chances and believing that people can learn from their past mistakes, no matter how serious, but that’s a conversation for another time.)

Given the effect the internet and social media can cause on the rest of your life, I think it’s imperative we teach kids about the potential long term ramifications even a single action can have in this new digitally recorded age. It’s always been stressed to kids that they need to stay out of trouble because they don’t want to get a bad name in their community or have something on their high school record that could hurt their college applications. Now the potential damage is far more long lasting. You can do something at twelve that could haunt you for forever.

It’s similar to my feelings around schools needing classes on basic computer programming and finances, particularly debt. The internet, computers and loans are now a huge part of most young people’s lives, yet we don’t do nearly a good enough job of educating kids on these subjects. Instead, we’re too focused on helping kids memorize equations and historical facts, things they’ll never need to recall from memory because they have access to that information in their pocket at all times – but I digress…

In some extreme circumstances, it’s not just your long term employment prospects that get damaged, but your safety that is at risk. If you post something stupid that pisses of the online hive minds over at 4chan, Reddit or any other online community, you can look forward to having your accounts hacked, to death threats and everything in between. Typically, when someone is individually targeted in this manner it’s because they said something incredibly ignorant and hateful, but that doesn’t mean they deserve the backlash. My guess is that most of the time these people don’t fully understand the possible repercussions of their comments in today’s socially connected world so a statement which they expected to have a small audience can get amplified to the general public.

My parents were actually pretty good about ensuring that my brother and I didn’t do dumb things online. There was a rule that we were never allowed to use our real names online or ever mention anything that could be used to infer who we were or where we lived. To be fair, this wasn’t anything to do with trying to protect our personal brand from being tainted for life so much as they didn’t want some axe-wielding murder tracking us down and killing our entire family. I don’t think they had the foresight to understand what search engines would do to our names and personal brands – I don’t think anyone did. Then when Facebook came around, they were smart enough to know that just because we thought it was “private” didn’t really mean that it was. They told us to assume anything we post or say on Facebook will be public, and while I didn’t completely listen to them, they had enough of an affect to make me more cognizant of what I posted than some of my friends.

So while I’ve been fortunate becauseI managed to escape my ignorant youthful years without damaging my long term reputation, there are many who are not as lucky. Some of you might say, “so what, they deserve it for their stupidity,” to which I say – bullshit! I think if most of us are being completely honest, we would admit that we’ve done things that if they somehow found their way online and attached to our names we would be incredibly embarrassed. We’ve just either been lucky or slightly more aware/informed about the potential repercussions and so have managed to prevent it.

PS – scariest part of writing this post is that now I’m worried someone is going to go digging into my digital past and unearth something embarrassing that I didn’t realize was out there. Fingers crossed that doesn’t happen or if it does, whoever does the digging is nice enough to email me about it privately rather than expose it publicly (pretty please :P).

Manufacturing Serendipity

Whenever I talk with someone interested in getting into startups, my main piece of advice is to “dive in headfirst and manufacture some serendipity.” What people fail to realize is that most startup jobs never get listed on a company’s careers page or posted on AngelList. Even if they do, it’s still likely the position ends up being filled through their employee or investor networks and not via a cold application. This is why serendipity is so important; you need to meet the right person at the right time. Fortunately, one of the most incredible aspects of the startup community is how open it is, which makes it possible to create your own happy accidents. Go to Meetups and events, tap your LinkedIn network, and tweet or email people you admire about grabbing coffee or beers. Your goal is to build relationships and create an opportunity for serendipity to strike. The way to do this is… just kidding there is no magic formula, sorry. What I can tell you about is the process I used when I was searching for my job after college, which will hopefully be helpful in getting you started.

Your first step should be to identify what type of startup interests you. Start with B2B or B2C. Next decide if you’re interested in SaaS, Marketplaces, eCommerce, etc. Finally think about what vertical: healthcare, sports, food, etc. The more specific you can get, the better. If you really have no idea, it might be good to focus on companies with good investors and experienced entrepreneurs on the team. This helps ensure that the relationships you’re working to build will have the best chance of being helpful. The next step is to create some targeted lists based on the startup profile you created. My list suggestions would be: companies you’re interested in and their employees, entrepreneurs or investors you admire, Meetups and local events. Remember, the name of the game is quality, so try to keep your lists short and ultra-relevant to the startup profile you’re interested in.

You’re going to want to join all the Meetups and RSVP to all the events you identified. When joining the Meetups, make sure to put some thought into your bio. People often review the attendee list before an event (I suggest you do too), so having a bio that will help facilitate conversations is key. You may even consider including your email address in case anyone wants to reach out beforehand to help ensure you two have a chance to meet. I would recommend going deep and becoming a regular at a few Meetups or regularly occurring events, rather than RSVPing to all of them and only attending each sporadically. Being a regular at the Hardware Meetup, rather than showing up there once and the SasS Meetup once will allow you to build real relationships over time, rather than just having one-off random 3 minute conversations.

When it comes to the companies, employees and thought leaders, I’m old school and use Excel to track this. If you want something snazzier, feel free to try a Google search, as I’m sure there is something out there for this purpose. Fill the excel doc with as much information as possible… Website/blog URLs, email addresses, social media accounts, etc. I’m not going to list out everything, but the goal is to take down any piece of information that you think is relevant and might be useful. My only firm suggestion is to make the 2nd to last column “interactions,” and the last column “notes.” Interactions is where you’ll keep track of just that, your interactions with that company or person – whether that be stopping by their office, grabbing coffee or interacting on Twitter. Notes is where you put any relevant information you learn about that company or person. Recently nominated for an award – write it down. Learned they’re bullish on wearables – add it to the list. Found out they’re a fan of the Patriots- you guessed it, add it in there. These two columns can provide great context when following up with someone or provide relevant talking points for any first or subsequent meetings.

Now that the prep work is out of the way, time to execute. I recommend starting with your LinkedIn connections. Hopefully you haven’t treated your profile like Facebook in the early days and gone on a connecting spree with everyone you’ve ever spoken a word to. Going with our quality > quantity theme, 100 real connections on LinkedIn are better than 1000 quasi-connections. Open your excel document and start typing in the names and companies into LinkedIn to see if you have any 2nd degree connections. If you do – great, now send that person an email asking for an intro. If you have some 2nd degree connections, but with people you don’t feel comfortable asking for an intro from then start by reconnecting with that person. If you come up empty on your LinkedIn search, it’s time to send some cold emails or @ tweets.

I want to point out that, I’m recommending sending an email, rather than sending a LinkedIn message. This is purposeful. I find that LinkedIn is most useful as a data source, and that you get more responses when leveraging email, followed by Twitter. LinkedIn should be your third option for when you can’t track down their email or Twitter. I think there is something to be said about taking the time to figure out someone’s email address, it shows that you went the extra mile and really care about reaching them. It shouldn’t be too hard to track down someone’s email address in today’s day and age, but if you need help learning the technique just google “finding anyone’s email address” and plenty of good articles should come up.

As for the Meetups, make a point of meeting at least one person at any event you attend – not including the host (although they’re a great connection to have). It’s really easy to go to an event and stay in your personal bubble, absorbing what is going on around you but not really getting involved. That’s why your goal should be to make at least one connection – no need to shoot for the moon, we want to make this an easily attainable goal. I want to reiterate that you shouldn’t spread yourself too thin and go to a ton of different Meetups. The point of the earlier exercises were too make sure you’re only attending the most relevant to your goals. As you become a regular, you’ll get to know the host and other regulars who can then help introduce you to anyone who only shows up semi-regularly.

Your goal for any intro, cold email or Meetup/event connection is for the two of you to get a coffee, beer, lunch or even some caramels (youtube scene). If that’s not possible for whatever reason, try to get an email correspondence going. You should do your homework before meeting; make sure you know about their background and what you want to talk and ask about in order to get the most of the time. If they work at one of the companies you’re interested in, ask about the team, culture, their role, how they got there etc. If it’s a less direct connection to your employment goals, ask about their background, how they got into startups, what trend are they most excited about etc. There is nothing more disrespectful than asking for someone’s time only to show up with nothing to ask them, just be careful not to make it seem like a KGB interrogation with too many or too rapid-fire of questions.

The final piece of advice I want to impart is to not be afraid of reaching out to anyone. Worst case scenario, they don’t get back to you… best case scenario, you get coffee with a total badass whom you admire. The more people you meet and the more strong relationships you form, the more chances you’ll have for serendipity to strike. So get out there and make it happen!

Another Day, Another Twitter PR Disaster

In case you haven’t heard bye now, KitchenAid sent out an offensive tweet involving President Obama’s recently deceased grandmother during the debates Wednesday night, which promoted them to quickly issue this apology:

Lately these twitter PR faux pas seem to be accuring with increasing frequency. Particuliarly in the form of a tweet that was clearly meant for someones personal account, but ended up on being sent from the company account. My personal favorite was when The Red Cross tweeted about getting #Slizzerd (additional here). Each year more and more companies are embracing and expanding their usage of social media, so I wouldn’t expect to see these slip-ups stop anytime soon. If anything they will probably become more frequent, so I would expect to see functionality introduced to try and prevent it.

Unfortunately I don’t see Twitter being the one to help companies curb these fuck ups – user experience is something, in my opinion, they don’t do well or seem to care much about. So a TweetDeck or a HootSuite or someone else who actually does care about improving the Twitter experience, should create a quasi “two-factor authentication” setting. When you send a tweet you’re shown a preview of the tweet and asks for confirmation before sending. This would give you one last chance to check for benign mistakes like typos and provide an additional opportunity to notice if you’re using your company’s account accidentally.

It’s a relatively simple feature that I think all companies would appreciate and take advantage of. I know I’ve personally made the mistake of sending a tweet from the ShopCube twitter, rather than my own. Fortunately it was nothing embarrassing or damaging, and I noticed immediately and quickly deleted it, likely before anyone noticed as we have so few followers. For larger brands with huge followings, there is no grace period; the second an inappropriate tweet is sent the damage is already done and depending on the nature of the message, can cause irreparable harm to your brand.