Tomorrow is New Year’s Eve, and the on-demand car service Uber has put out a video explaining that because there will be so much demand for its cars, prices are going to surge. This has been a controversial topic in the past, as people freak out that a theoretical ride across Midtown New York ends up costing them $US200.
Despite Uber’s warning, everyone knows there’s going to be complaints about how unfair Uber is being and how they’re price gouging.
And in anticipation of those whines, there’s already a backlash of people (on Twitter) saying the people who whine are dumb and don’t get economics (supply and demand!).
Well, here’s the thing, it’s totally fine to whine about Uber. You can whine about anything you like. Yesterday I whined about being in an airport taxi line without any taxis. I’ve whined about big rent hikes in the past and I’ve whined about cold and rainy weather. And sometimes I’ve whined about cold and rainy weather that prevented me from getting a cab.
I’m not sure why it is, but it feels good to whine sometimes, and as long as you’re not too much of a baby about it, it shouldn’t really be that annoying to other people.
But here’s what’s not ok: Thinking that just because people are whining that Uber must be doing something wrong or immoral. Surge pricing is really important to the Uber business model. The Uber business model is about being able to deliver stuff to anyone on-demand all the time. Surge pricing reduces the amount of demand at a given time and it also increases supply (theoretically) if more car drivers are willing to forgo celebrating New Year’s because they can make $US200 for every quick ride.
If Uber put a cap on prices, it couldn’t balance out demand with supply, and then Uber would no longer be synonymous with instant. Uber would be like your neighbourhood car services. If you call your neighbourhood car service on New Year’s Eve, you’ll probably spend an hour trying to get through to the switchboard, and then you’ll have to wait 2 more hours until the car can come. That will suck, but for a different reason.
The less-aggressive form of the argument against surge pricing is not that it’s wrong, but that it’s bad for business, that Uber should heed all these warnings and rethink things, for its own sake. But it’s too big of an assumption that this is bad for business. For one thing, each of these spikes in people talk about surge introduce new people to what Uber is. Most of those people will realise that they can’t afford to take the service tomorrow night.
But then some other time in the middle of the day at some random time they might be inclined to check out how much Uber costs for a ride and decide to use it. And the huge prices might also attract new drivers into the system.
So there’s no moral problem with the surge pricing, and there’s no reason to think it’s bad for business.
But if you want to whine tomorrow, go for it!