New Kids On the Block

Felix Salmon Pinpoints the Problem: ‘Uber Is a Car Service for Computers’

felix salmon head Felix Salmon Pinpoints the Problem: Uber Is a Car Service for ComputersWhen someone forwarded Betabeat Aubrey Sabala’s New Year’s Eve Uber misgivings (“@Aubs While I’m glad I’m home safely, the $107 charge for my @Uber to drive 1.5 miles last night seems insanely excessive. :(“) before we’d even woken up Sunday morning to greet 2012, we knew the holiday backlash against the car service app was on its way. (A different type of holiday backlash, mind you, than the Halloween 2010 incident that left 95 percent of customers stranded.)

Not everyone was appeased by Uber CEO Travis Kalanick’s apology the next day, in which he called the evening an overall success despite 95 complaints and 15 users who didn’t get the surge-pricing notifications that a safe, prompt, and sober driver on New Year’s Eve was going to cost them a pretty penny, or in some cases, a pretty Benjamin.

“They’re a combination of smug and aloof in dealing with customers. arrogant entrepreneur syndrome. . . His uber pedantic response to that variable pricing debacle last night was just ugh,” tweeted the Barbarian Group’s Colin Nagy, after Betabeat asked him what he meant by: “Lots and lots of questionable judgement from @uber since the start. I want to love but they make it hard sometimes.”

Thankfully today, Felix Salmon delves into that wonky pricing model to figure out why, exactly, exorbitant prices for a luxury service rub consumers the wrong way.

A number of factors go into Uber’s pricing system, as Mr. Salmon explains:

1. “Uber raises its prices pretty much in lockstep with local taxi rates,” which means surge pricing in cities where cabs are already expensive can quickly get out of hand. “It’s easy to see why people in Washington feel happier grabbing an Uber to get home than people in San Francisco do. If you get stuck in traffic and it takes 30 minutes to get home, that’s $29.50 in Washington; in San Francisco, it would be $45.50.”

2. “Uber has dynamic GPS-based pricing which automatically charges you on a per-mile basis whenever the car is going faster than 11mph, even if it’s only for a brief period of time.”

3. Add to that, the surge pricing, like what happened on New Year’s Eve, when demand gets tight.

As you can see, the internal calculation quickly gets more complicated than an app-savvy early-adopting user is prepared to make, even, perhaps, before they imbibed all that cheap champagne.

“If Uber pricing was continuously dynamic, prices might well come down during periods of light demand, especially in the early mornings. But our brains hate having to do dynamic cost/benefit calculations. Instead, we rely on simple heuristics: “I should always take the subway if I can”, “cabs in New York are cheap enough that I can take them when I want to”, “cabs in London always cost more than you think they will”, “I can afford Uber if it’s just a short ride”, that sort of thing. When we think about the costs and benefits of various different types of transportation, we don’t actually think in dollars, most of the time, just in terms of a vaguer cheap/expensive spectrum. Dynamic pricing like Uber’s New Year’s experiment takes us out of that comfort zone, and people hate being forced to re-think these things.

. . . Uber, in other words, is a car service for computers, who always do their sums every time they have to make a calculation. Humans don’t work that way. And the way that Uber is currently priced, it’s always going to find itself in a cognitive zone of discomfort as far as its passengers are concerned.”

It short: Nice service, needs more humanity.

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