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Conversation with an Uber Entrepreneur By Josiah Go

Conversation with an Uber Entrepreneur By Josiah Go

I attended various courses at MIT Sloan and Harvard in Boston last March 22-April 6, 2017. My sister-in-law Wally, who lives in North Quincy, was generous to host me again while I was there.

I would take the red line subway daily from North Quincy to Kendal for MIT and the Harvard stop as well. In between Wally’s house and the MBTA subway station, I would take Uber. Years before, when I was completing my executive certificate series at MIT, I would walk one mile from Wally’s house to the subway station and back. Since the weather was freezing cold, even raining on some days, Uber became a very convenient choice, hence, a change in my routine.

On my way home, McDonald’s and Panera are both near the subway, and I would reserve Uber rides through the free wifi of these outlets. Of course, on most days, I would order a drink or soup to acknowledge the wifi service they are offering.

Many of the Uber drivers who picked me up at night were part-timers or in-between jobs. Most of them are in the 20’s, trying to have more money during their discretionary time instead of doing nothing at home.

I enjoyed the long conversation with my Uber driver on my way from Harvard to the airport, a good 35-minute ride during afternoon peak time. My Uber driver, let’s call him Mr. M, is of Palestinian descent. He was quite friendly and helpful in loading and unloading my two luggages. I learned that he has been an Uber driver for 3.5 years and has two grown up daughters. He was happy that he sold his taxi at its peak market value as the taxi business volume went down dramatically after Uber entered.

Mr. M told me that it takes about 10 days to start an Uber business because of the need for background check by both Uber and the State of Massachussets.

Since he started, more people have joined Uber but his Uber business is not affected because the demand is still there, while many of the part-time newbies don’t actually last long.

I learned that Uber drivers don’t get to know the destination of their passengers until passengers are picked up. This discourages Uber drivers from being choosy of their passengers as farther destinations would be normally preferred for higher fare. This, however, does not bother Mr. M as this method is the same as when he was driving a taxi.

Dislikes:
I asked Mr. M what he doesn’t like about the Uber business. His response was instantaneous.
1. No rest because of non-stop customers.
2. 20% commission to Uber (25% for newer Uber drivers) is rather high.
3. Fare rates keep going down to the advantage of consumers but to the disadvantage of the drivers.
4. Fare rates may go down further with the entry of a new competition, Lyft.

Mr. M shared he makes about US$40,000 a year as a full time Uber driver but aside from the commission paid to Uber, he allocates 15% for his social security, 17% for tax (10% for state tax and 7% federal tax), netting him less than half of what he charged passengers. He also spends about US$5,000 a year for gas (US$100 a week).

Likes:
The following are what Mr. M likes about the Uber business:
1. Assistance to get car lease (but according to Mr. M, this will cost US$1000 a month returnable with a simple two-week notice).
2. Flexible time. Mr. M works 5-6 days a week, typically from 1-9pm.
3. Sales Promotions — Uber has an ongoing promotion of US$80 weekly incentive if a driver makes at least 75 trips a week. This encourages drivers to accept UberPool to meet the number of pick ups required.
4. Prompt payment every Wednesday via bank deposit.
5. Accurate reporting of trips.

Wish List
Mr. M has one single-minded wish list — Health insurance. He wonders what will happen to him if he will suddenly suffer a disease, has to pay out medical
bills out of his own pocket and cannot work at the same time.

Overkill
I asked Mr. M if there is something Uber is doing that should be stopped, his immediate answer –UberPool. While this feature benefits passengers, this does not benefit Uber drivers as they do not get the fares in between UberPool trips. I sensed this may be correct from his perspective. I took UberX on my first trip but subsequently used UberPool as I do not mind sharing my ride with others. Instead of paying US$6-7 for UberX, I paid closer to US$3 for UberPool where I was just alone in most of these one mile trips.

On my part as a passenger, I like that I know the waiting time as well as the name and location of the driver who will pick me up. I love the receipt record sent to me after my ride, detailing the cost and distance travelled. I also get to rate my driver if I choose to do so.

Uber is still ‘illegal’ in many places with regular taxi operators fighting them. One of my Harvard professors, Dr. Mark Esposito, shared that in some places in the U.S, an Uber driver when caught can be penalized with US$500. ‘But their presence is being tolerated!’ apparently referring to government regulators knowing the convenience it offers the riding public. No wonder, Uber is valued even more than other companies like General Motors, Ford, and Honda.

Q1: If you are Uber,
A) what will you do with the negative feedback of Uber Drivers about UberPool?
B) what can you do for riders not to shift to Lyft?

Q2: If you are Lyft,
A) what unmet needs can you exploit to effectively compete with Uber?
B) What will you do for riders to try and stay with Lyft?

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Josiah Go

About Josiah Go

Bestselling author Josiah Go is the Chairman and Chief Marketing Strategist of Mansmith and Fielders, Inc. (the leading marketing and sales training company in the Philippines), President and CEO of Waters Philippines (the market leader in the direct selling of premium health durable products in the Philippines) and President and CEO of PT Noah Health Indonesia. He is Chairman / Vice Chairman / Director of over a dozen companies.

1 Comments

  1. If I were UBER I’d find a way to subsidize the health insurance with conditions to lock in for 2 years Depending on the average attrition rate of new drivers. And also include a qualifier for meeting a certain monthly quota.

    Also come up with an incentive scheme specific to Uber pool to motivate drivers on the value of the ride option.

    On the other hand, if I were lift I will offer the above mentioned tactics to poach the high performing drivers from Uber.

    Lyft being the late comer, they have to position themselves as the best in class in service for both the passengers and the driver. With all the failings that Uber has been experiencing, Lyft can win the market if they do it right.

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