About two years ago, I switched from taking my personal car to the airport, to hailing Ubers and Lyfts. The math of it was pretty simple: Uber was cheaper than paying for my driving and parking*. And that was before the considerable joy and time savings of not having to park in the airport lot and cram in among the huddled masses in the shuttle buses. Nowadays I sit in the back and get some work done like an Executive, leaving the driving to someone else.
Once I arrive at my destination city, these ride sharing services have replaced at least 90% of instances where a car rental would be useful. Between walking, renting a bike, public transit and calling a Lyft, a car rental is only useful for destinations deep in the boondocks such as a ski resort or a distant beach cabin. Which is another great improvement, since renting a car at an airport has never been a fun experience.
But during all these Luxury Executive rides, I’d often get to talking with the driver. We would talk about life, family, money and business. I always inquired about their experience with rideshare driving, and the response was inevitably something like this:
MMM: “Is that your profit after subtracting the cost of driving?” UBER DRIVER: “No, that doesn’t include gas. But I’ll only use, like, not even a full tank – maybe thirty bucks”
MMM: “Is that your profit after subtracting the cost of driving?”
“Hmm”, I would think to myself.
“If this driver is burning through $30 of gas, (twelve gallons), they’re probably covering over 250 miles. Whether they realize it or not, it’s costing them $125 in direct car costs before even accounting to the damage to their health or the risk of injury. Thus, the net profit might be as low as $50 for a big day on the road, or five bucks an hour.”
There’s no way Uber could be such a successful company if the pay rate were really this low. Is there?
But on the other hand, some of my Uber drives to the airport have included a Dodge Ram pickup truck (V-8 engine, fancy wheels, bought brand new on credit), a BMW X5 and even a Hummer H3 (with over 250,000 miles on the odometer). Maybe people really are that uninformed about the cost of driving. As my friend Bill said when we talked about this:
(the answer is of course that it would look like very much like Uber or any other ridesharing company)
To resolve this mystery (and as a way of getting some test miles on my new electric car), Mr. Money Mustache decided to go deep undercover in September 2016, and sign up as a driver for both Uber and Lyft services.
Using another driver’s referral code, I signed up on the Uber system and started to follow the instructions. I needed a background check, medical exam, car safety inspection and a few other daunting things. Luckily, Uber runs facilities called “Greenlight Centers” which put all this stuff in one place. The closest one to me was about 40 miles away in Denver, so I charged up my new Leaf and headed down.
When I arrived, I found an interesting scene that nicely personifies our new sharing economy. It was a mashup of an Apple Store and the DMV. Modern design and furniture, good music and glossy tablets everywhere, combined with an ocean of slightly desperate and bored looking people waiting to start their new driving careers. And Mr. Money Mustache, trying to blend in.
It was a funny feeling, spending those three precious hours of my Tuesday morning, waiting in queues and filling out forms. I was keen to learn about the driver experience and how things work in the New Economy. But I also felt a bit of the nervous “I’m applying for a new job” energy of the other applicants, and like a bit of a fraud for being here when I had absolutely no interest in truly having a job.
There was a trendy little cafe in the corner of the room, so I strolled over and picked up a Clif bar and a coffee. Due to my naive privilege as a former tech worker, I expected it all to be free – after all, don’t all offices offer free coffee and snacks, along with a keg of local beer and another tap for Kombucha? But a man popped out from around the corner and rung me up for $3.85. On top of that, it was a bland coffee in a small cup. This was an interesting reminder that working in a lower-training job is a different world than the one you and I probably both inhabit, here at the top of the economy.
When the process was finally done, my 25-year-old Uber concierge looked up from his iPad and issued me a genuinely warm congratulations and we shook hands.
“So that’s it?”, I asked
“Yeah! That’s it! You could go out and get in your car start making some money RIGHT NOW!”
“Nah”, I thought to myself. “Eighty miles of driving plus three hours in an office building is more than enough wasted indoor time for me for the next little while.”
The spoiled retiree in me loves hard work, but only the right kind of hard work. The sedentary locked-indoors variety of work always falls to the bottom of the list. As you can tell by the low frequency of these blog posts.
My First Ride
Eventually, I was ready to give it a whirl. I cleaned up my car, stuck the Uber decal on the windshield, put on some nice clothes, mounted my phone on a sturdy dashboard clamp, and fired up the app. Within minutes, I had my first ring.
RIDE REQUESTED! John, 5 minutes away.
The ring was deafeningly loud, because (as I later learned after half an hour of looking unsuccessfully for a way to change it) the Uber app overrides your ring volume setting and sets it to !!MAXIMUM!! I was so startled that I could hardly slide the “accept” button, but I eventually got safely on the road. I recognized the address as Longmont’s “Pumphouse” brew pub, right downtown.
I headed down the hill and scoped the area, and eventually found John. As he hopped in the car I slid the “start trip” button and his destination was revealed as the local Marijuana shop, just 1.9 miles away.
John and I exchanged pleasant conversation and he was impressed by the quick silence of the electric car. I dropped him off at Native Roots and then parked nearby, expecting another fare to pop up just as quickly.
Ride 1: 5 minutes waiting, 5 minutes driving, 1.2 miles unpaid, 1.9 miles paid. Net fare to me: $3.37
But the second fare wasn’t quite as quick. Fifteen minutes later, the Uber app rang again. It was John, now properly restocked and thrilled that I was still there in the weed shop parking lot. We headed back to the Pumphouse.
Ride 2: 15 minutes waiting, 5 minutes driving, 1.9 miles paid. Net fare to me: $3.37 … plus TIP $5.00!
Hey this wasn’t so bad: that five dollar tip really brought up the average. I was thirty minutes into my career and up about 12 bucks, minus five miles of car costs.
After another five minutes of idle time, the app rang again. This time it was a suburban address listed as 12 minutes (which turned out to be almost four miles) away. I decided to take the ride anyway, in the spirit of experimentation.
I got to the house, but nobody was there. After a minute, I used the Uber app to send the customer a text message. “Oh sorry!”, he said, “My phone GPS isn’t working well because we’re inside so it probably shows us in the wrong place! We’re just on the next street.”
I drove around a bit more and eventually found the young couple, and the app revealed a nice surprise: they were headed all the way to Boulder, which was over 12 miles from this part of Longmont. Surely now I would start earning the big bucks.
After 24 minutes of smooth, expert driving and pleasant conversation, I dropped them off at a restaurant. But I was surprised to see that the total wasn’t that impressive:
Ride 3: 10 minutes waiting, 4 miles unpaid, 12.4 miles paid. Net fare to me: $13.96. No Tip.
Driving in the Happening City
Now I was in Boulder, which has a much bigger scene than Longmont. Everybody is rich, every night is a big night, the University of Colorado is right downtown and it’s all action – there are no real suburbs. Due to high rider demand, the city operates in a perpetual “Surge Mode” which means Uber Fares are 20-30% more lucrative, and there is virtually no wait time for fares. And now, I was right downtown. So the app shrieked its notification tone immediately.
The customer was only a mile away, but due to the incredible slowness of trying to drive a 14-foot-long, 3300 pound Racing Wheelchair in a dense city it took me a lot of slow gliding in traffic and waiting at long traffic lights to get there. It was a couple of younger guys, heading back downtown.
We slogged through the dense traffic yet again at roughly one third of bicycling speed, and I earned my five dollar fare.
The app rang again, and I saw from the map it was yet another non-downtown person, probably looking for another ride downtown.
I decided not to play this game anymore, contributing to car traffic in a city that needs fewer cars. So I let this ride request go to another driver and set my destination to Longmont, hoping to find a customer heading that way so I could get paid for the ride home. There were none.
So I flew the Leaf back along the highway to home, and stopped at the grocery store to pick up some fresh food and a free battery charge for the car.
18.6 miles unpaid
17.2 miles paid
$32 including tips
~$18 of car costs
roughly $7 per hour net
After joining Uber as a driver, it was easy to add on a Lyft license: you can submit scans or photos of the same examination info to both companies. So over the course of 2017, I fired up both Uber and Lyft apps many more times to do some more driving and collect some more observations. I tried night driving, special events, and quite a few different parts of the metro area. I had a lot of fun, but made very little money.
- One time, I was summoned by a 13-year-old girl coming out of the middle school, effectively turning me into Mr. Schoolbus Dad. After finding her in the school lineup, she directed me to the elementary school, where we picked up her little brother. I dropped them both off safely at home in a rusty suburban area nearby. (note – readers have since informed me that this shouldn’t have even been allowed, as you must be over 18 to summon an Uber. She must have been using her mom’s account, and I was apparently breaking the rules by not knowing them)
- Another ride was from a college student, deep in the Colorado U campus. It took me forever to navigate the throngs of after school foot and vehicle traffic and find this young lad in the crowd. During the ensuing 3MPH transit of Boulder, I couldn’t help but remark, “Wow! I apologize for how slow this trip is going. I’m usually on my bike when I cross Boulder, which is a lot faster.”
Our final destination was a strip mall, and he directed me meticulously through the entire parking lot so he could be let off within 20 feet of the front door of the restaurant. End fare for about 35 minutes of work, even with surge pricing, was another six bucks. My resolve to avoid driving cars in Boulder was reinforced.
- My favorite times to be a driver were Friday nights. It was fun to feel the energy of people going out on the town, and find out what was going on. I could see Uber driving to be a good escape for single people looking to meet new friends (or romances), because I almost always got along well with the customers, often exchanging business cards or email addresses with people when we found something in common.
On longer rides with people over 30, the topic almost invariably led to life, business, and money, which led to Mustachianism, which led to me admitting my secret identity. Thus, some of my past Uber customers may even be reading this article today(?)
- But in the end, it was hard to stay motivated to keep doing this experiment. There is just usually something better to do than driving around in a car, and I wasn’t willing to sacrifice too much of my life to gather more data. And with the financial gain of rideshare driving being negligble, I am surprised that there are so many people who do it.
How to Make the Most of a Low-Profit Situation
Still, as with everything in life, I did my best to optimize Uber driving for both fun and money. From my experience as well as reading online forums, the best way you can do it is:
- Use the referral and bonus system heavily. Actual driving doesn’t pay well, but I have seen bonuses pop up on my app offering between $100-$500 to refer other drivers. There are also “weekly guarantee” offers that come up occasionally, offering more pay in exchange for meeting a certain threshold.
- Use the lowest cost and most fuel-efficient car you can find. Uber requires you to have a fairly new (under 10 years) car, so get something on the older side of that spectrum, but with low miles. A 2009 Prius, for example, uses less than half the fuel of most cars of similar size.
- Focus your driving around on “Surge Pricing”. By watching the app throughout the days and months, you will learn when your area enters periods of higher demand. Special events like Halloween, late weekend nights or major league sports events are popular times.
- Try to find trips involving highways. Since you get paid mostly by the mile, you earn almost ten times more money at 60 MPH than you make in on a long trip through central city where you might average only 6 MPH. (There is an “hourly” component to your wage as well, but it is incredibly low, somewhere in the single digits per hour.)
- Experiment with the “set destination” feature to filter for rides going your way. Taking fares with you on your commute to work or to an airport.
- Make the most of your downtime: there will still be lots of waiting between fares. If you bring a book, podcast, laptop or make business-related calls that help you learn a trade that pays more than driving, you can get yourself into a more lucrative trade.
Suggestions for Uber and Lyft
During the course of this experiment, I happened to receive emails from relatively senior people at both Uber and Lyft for unrelated reasons. So I took the opportunity to make some suggestions to make things friendlier for drivers:
- Report the total driving time and miles for each ride and each shift, clearly specifying paid and unpaid miles and hours.
- Provide drivers with an estimate of the car costs incurred, and estimated hourly earnings after these costs.
- Allow drivers to specify the types of rides they are willing to accept. For example, “only ring me for riders within 1 mile”, or “I would like to be paid for for both pickup mileage and rider mileage.”
- Provide drivers with the details of where the person is going, or at least how long of a ride it is. Right now, Uber has all this incredibly useful information at the time of booking, but deliberately withholds it from the driver.
- And here’s the best one:
Instead of setting a reasonably high price per mile (around $1 in my area) and an almost-zero-dollars-per-hour rate for the driver’s time, let’s do the opposite:
– 50 cents per mile, which just covers the cost of the car
– plus 33 cents per minute (driver’s net after Uber fees), which is about $20.00 per hour.
This has many benefits. It reduces any temptation for drivers to rush or break the speed limit. It makes urban trips (where nobody should be using a car anyway) more expensive. It makes more necessary highway trips cheaper. And it guarantees that if a driver has a customer in their car, they are not losing money.
I was surprised that both companies immediately dismissed all of these suggestions, with a round of vague excuses. This was a disappointment to the Economic Libertarian in me, because it seems obvious that an open market between buyer and seller is the key to more efficiency.
In fact, early in my driving career I learned how much the unpaid driving was hurting my profitability so I stopped accepting distant fares. The app quickly sent me this note:
When these companies deliberately tilt the field, they are being sneaky, which causes them to lose public trust, which causes the public to vote in a bunch of sclerotic regulation to protect the drivers and the public. If you, as a company, just avoid being a dick to people in the first place and treat them with complete openness and good old-fashioned honesty, they are more likely to let you run free.
Since I started this experiment a year ago, Uber has fallen into a world of trouble and bad publicity. Their internal culture of sexual harassment was blown wide open, along with the misdeeds of the wild and temperamental former CEO. From specific programs to evade government regulation to annoying treatment of drivers, Uber triggered a widespread backlash which became the #deleteuber campaign. Saying “Uber” is now a bit like uttering the words “ConAgra” or “Philip Morris” or “Exxon”.
Meanwhile, from the very beginning I noticed a friendlier tone in the way Lyft operates – see this 2016 interview with Lyft more laid-back founder John Zimmer.
In the End..
In general, I really want companies like Uber and Lyft (and Tesla, AirBnb, Google, Amazon and many of the other tech companies that have been stirring things up so much lately) to succeed, because the benefits to all of us greatly outweigh the inconvenience of the disruption.
For example, some people worry about what will happen to driving jobs as self-driving vehicles gradually take over. But I’m excited about the ways this can make our lives safer, quieter, and less expensive as we give up on owning personal cars, ride bikes much more, and use automated cars as a service whenever the bike is impractical. Technology provides a lumpy ride, but it also provides change which is an essential ingredient in every human life to avoid getting into a rut. So, share on.
Further Reading: How Big Oil Will Die – an interesting walk through the changes today’s technologies have already set in place – leading us very quickly to a place where nobody in 2010 would have even guessed.
* this sentence surely made you ask, “but what about the BUS, Mustache?!?” – good question. Of course I’d always choose biking, then public transit as the first two options, but the airport is 45 miles away (well over 2 hours by bike) and the bus requires a transfer in Denver, which makes it even slower than biking. Also, both Uber and Lyft have referral programs which give you credit for referring friends – I still have a few credits in my Uber account.