Uber and Lyft have plenty of problems between them--not the least of which is that neither company seems to be able to make money. That's ironic, especially in light of the fact that an investigative report from Jalopnik says the companies aren't even paying their drivers what they claim publicly. 

That report reviewed driver receipts for over 14,000 fares and found that Uber and Lyft took as much as 35 and 38 percent from drivers, respectively, despite claiming they take between 20 and 25 percent. 

But this isn't just about how poorly drivers are being treated, it's about why. Uber and Lyft are desperately trying to show they can make money, despite the fact that neither has given any indication it can. As a result, they've created a culture where the people who make their business possible--their drivers--are treated as disposable.

I reached out to Uber and Lyft, but did not immediately receive a response from either.

Ridesharing was a revolution for getting around big crowded cities, especially on the West Coast, where taxis and public transportation aren't as robust as in places like New York City. Ridesharing was also a way for anyone with a decent car to create a side hustle. 

It seemed like an amazing business model for Uber and Lyft. Create an app that matches rider demand with an enterprising network of entrepreneur-drivers, and take your cut off the top. Market the heck out of it, and set something aside for the inevitable fights with union-entrenched taxi commissions. It doesn't sound that hard to make money at.

Especially considering drivers for both companies are responsible for all their own costs. That means monthly car payments, insurance, gas, and upkeep. In addition, drivers the responsibility of providing the service and interacting with customers.  

Apparently, it is expensive, since both companies are losing lots of money ($5 billion last quarter for Uber). Of course, paying those independent contractors is by far one of the biggest expense for Uber and Lyft. In fact, both companies are pouring massive amounts of cash into self-driving cars in an effort to completely eliminate those pesky humans.

There's a reason for this. Not only do the companies not make money, but both recently went public. That means their primary interest is no longer simply matching up drivers with an empty seat with a rider standing on the curb. Their primary motivation is showing Wall Street their outrageous valuations are worth it.

The report gives credibility to claims by many drivers that they are overworked, underpaid, and poorly treated. More than that, Jalopnik's investigation appears to demonstrate this isn't just a fluke, but rather a standard operating procedure. 

As the two companies compete head-to-head for riders, fares have tended to drop. The problem is the drivers have borne most of that burden, even though they have no control over the cost of a fare. They also have no control over what percentage they receive as payment. 

And Uber and Lyft aren't even being upfront about what that percentage is.

Make no mistake: If the claims are true, both companies are not only underpaying their drivers, they're doing it in as opaque a way as possible, and are potentially misleading the public about it. That doesn't happen by accident, and it says a lot about both companies.

Published on: Aug 27, 2019
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