Uber's cancellation loophole

By Adam L. Penenberg , written on December 24, 2013

From The News Desk

Lately, I haven't had much luck using UberX, the ride-sharing company's lower cost alternative, or its taxi service either. The last few times I've used the Uber app to order one, I've been informed a car would show up in around 10 minutes. Then the driver called to tell me he's caught in traffic or still in Manhattan, and suggested I cancel my order because it'd be, like a half hour or more before he could make it to Brooklyn, where I live. I suppose I should be grateful I haven't been charged for this (since Uber reserves the right to do that.)

This, I think, creates a loophole in its rabidly incentivized platform. A driver who claims my ride does not suffer for not carrying through with my order. He only gets rated if he actually picks me up. Now, I realize judging New York City traffic is challenging even for native New Yorkers. It once took my family an hour to travel 3.5 miles in a taxi from the Upper West Side to Brooklyn Heights. There's rubbernecking, lane closings, road and bridge construction, and the police seem to relish closing the on ramps to the Brooklyn Bridge at odd times and for no apparent reason. Still, after placing my Uber order, I could see where the car was on the map, and knew full well there was no way the driver would get to my door in time.

Uber, for all of its Ayn Randian-fueled market-based strategies, is ultimately all about incentives. On the flip side, though, there's little disincentive for drivers to claim a rider only to cancel.

Contrast this with the way traditional car services work in New York. One of the big ones, Arecibo, which is based in Park Slope, might get 14,000 or more calls a week. Each driver acts as a kind of franchisee, owning or leasing their own cars and paying $90 a week for the privilege of competing for pickups. This wonderful New York Magazine article by Jennifer Gonnerman illustrates how it all works. A call comes in to the storefront and an operator answers each call the same way: "Arecibo. Where are you? Five minutes." An address pops up on the dispatcher's screen and he announces the pickup location over the radio.

Outside, on the streets of Brooklyn, a swarm of drivers struggles to keep up. One hand on the steering wheel, the other on the radio, they hit their mikes the moment they hear an address they’re near. The first driver to respond has the best shot at getting the job…
Then he has five minutes to get there. If he doesn't, the dispatcher will say "time is gone" and any driver in the vicinity can swoop in for the kill. The dispatcher acts as the ultimate arbiter when there are disputes, and justice is meted swiftly and ruthlessly. If a driver complains over the radio, the dispatcher can ban him from any pickups for a couple of hours or an entire day.

The livery cab business is brutal and there are hundreds of car service businesses in Brooklyn alone. Arecibo can call the shots because the supply of drivers, by and large, outstrips the demand for rides. In the case of Uber, it hasn't scaled enough for that. Its thorny problem is getting enough drivers on the road, especially during inclement weather or times of high demand, which is why it has surge pricing, despite heaps of criticism. A couple of days ago I tried to order a taxi on the Uber app and was informed no cabs were in my vicinity. I walked outside and hailed one within three minutes. There were plenty of taxis, of course. Just not any taxis affiliated with Uber.

Experiences like these have led me to skip the Uber app altogether and simply dial my local car service or hail a cab. They are for the most part reliable and at least I know how much it will cost (rates are competitive and there's no surge pricing). Maybe after Uber scales more and adds sufficient numbers of drivers, I'll try out the app again.

Until then, there's plenty of competition in New York. Just ask Arecibo.

Image via Flickr.