K2 assignment - annotation

Read the below New York Times article about Uber.

Write a summary, in which you describe the situation. 1-2 pages (Arial/Times New Roman,
11/12 pt font size, Line spacing: 1.5 lines, alignment: justified). You may use tables, graphs or
charts if it supports your summary. Deadline: 08/03/2016
Pay attention to answering the following sub-questions. However, please note that they are
meant to guide you, so you do not have to confine yourselves to them or answer them in this
order.

What is the main reason for the drivers dissatisfaction?

Describe the changes and the relationship between the supply and demand of Uber
and other taxi companies after Ubers market entry. Support your answer with graphs.
Evaluate the elasticity of the service, and calculate the current elasticity considering
the data in the article.
Why did Uber promise a minimum hourly wage for its drivers?
What are the drivers costs and what benefits do they get from Uber?
What steps could solve the problem the drivers faced?

http://www.nytimes.com/2016/02/21/nyregion/uber-drivers-up-against-the-app.html

Uber Drivers Up Against the App

By ALAN FEUERFEB. 19, 2016
Photo

Drivers who assembled in front of the companys Long Island City office on Feb. 1 to
protest Ubers latest reduction in their rates.
On Super Bowl Sunday, a few hundred Uber drivers met in the cold in a public
park in Queens, plotting to disrupt the app that thousands of New Yorkers were
about to use to get in place to watch the big game. Gathered angrily on rows of
wooden benches were Uzbeks, Tajiks, Russians, Kenyans, Serbs and
Bangladeshis, many of them waving handmade signs. Their yellow placards
attacked the ride-hailing service in the innumerable languages of polyglot New
York. Shame on Uber! one announced in Spanish. Uber Broke Our Hearts!
said another in Tibetan. Then in English: We Made You Billionaires! and We
Are Not Slaves!
Ten days earlier, Uber had reduced the drivers rates by 15 percent,prompting
protests at the companys Long Island City office as well as in aparking lot at La
Guardia Airport where vehicles wait for passengers. The Super Bowl event was
meant to build momentum on those actions by turning Ubers app against itself.
When it was over, the drivers planned to spread throughout the city and order
rides from their colleagues who were working. As cars showed up, they would
pay their peers for coming, then urge them to go home in solidarity.
We want to show Uber that without us full-time drivers, they wont have any
cars on the road, Abdoul Diallo shouted from atop a concrete stage. Mr. Diallo,
a Guinean immigrant who has emerged as a leader of the strikes, was holding up
his own sign: No Drivers, No Uber Its That Simple.
Photo

Abdoul Diallo, an Uber driver, at a protest last month outside the companys
offices in Queens. CreditKevin Hagen for The New York Times

This is the formula! he hollered to the crowd.

It has been nearly five years since Uber arrived in New York City. With its
Randian philosophy and proprietary algorithms, the company promised to
reshape the driving industry, and in many ways that promise has come true. A
million New Yorkers have become accustomed to making cars materialize by
pulling out their smartphones and not just in Manhattan, but also in the other
boroughs, which have long been underserved by for-hire providers. In part as a
result, taxi owners have seen their profits crumble, taxi lenders are slowly going
under and taxi unions are scrambling to protect their members jobs.
More recently, however, Ubers indomitable rise has been clouded by an
insurgency from a small but vocal portion of its own drivers who say they feel
neglected, even used. From spring 2014 to spring 2015, the company
quadrupled its business in the city, and for nearly a year it has been signing up
new customers at a rate of 30,000 a week. The drivers argue that such dynamic
growth would not have been possible without them: They, after all, supply the
cars that keep the network liquid. Drawn to the company by advertisements that
promised decent wages, many now contend that they are victims of a corporate
bait-and-switch. As Uber has obtained a solid foothold in the market (and a $60
billion valuation), the drivers are complaining that it has slashed its prices in an
effort to destroy the competition and to finance its expansion on their backs.
In the beginning, your company was great for both drivers and customers, Mr.
Diallo and his partners wrote this month in a letter to the service. You treated
drivers well and we loved you for that. Little did we know that it would be a
short-lived momentary ecstasy that you used to lure us in in great numbers, just
so that you can execute your plans and strategies toward world domination.
Uber, mostly through the voice of Josh Mohrer, the 33-year-old general
manager of Uber New York, has said it is pained by the grievances of the drivers,
who, while not employees of the service, are known as driver-partners in the
companys jargon. Like most tech operations, Uber has a data set for everything,
and Mr. Mohrer said his numbers proved that Januarys price cut, like a steeper
one two years ago, increased the demand for rides and therefore led to larger
driver paychecks.
Its not intuitive to think that lower fares will mean more money, but that is the
reality, Mr. Mohrer said. He added that he understood why the drivers might
be anxious. Its a big ask to say, Just trust us.
And yet there are underlying reasons for the drivers not to trust him. Uber, like
other players in the gig economy, has a tenuous relationship with those who
make a living from its software. Its drivers 34,000 in New York are
independent contractors who buy their own cars, pay for gas and maintenance,
and provide their own insurance. Although they get no benefits, they remit to
Uber 20 to 25 percent of what they make as a fee to use the service. And unlike
its competitors like Lyft, Uber does not permit tipping through its app, but it
still reserves the right to deactivate its drivers, sometimes for little more than
a subpar rider rating.

Photo

Uber drivers at a rally in June with Josh Mohrer, the general manager of Uber
New York.Creditngel Franco/The New York Times
Two years ago, Travis Kalanick, Ubers chief executive, said in an interview
about the companys plan to field a fleet of driverless vehicles that a reason the
service was relatively expensive was that customers were paying forthe other
dude in the car. As the companys ridership explodes and the investor class
anticipates a potential public offering, the drivers say they often feel like just
some other dude: a frictional human substance that gets in the way of an
idealized experience of seamless digital travel.
Uber treats its drivers however it wants, Mr. Diallo said. But were the ones
who do everything except provide the technology.
A former import-export trader who studied for a business degree, Mr. Diallo,
29, has been driving for the company for three years in a $50,000 Chevrolet
Suburban. At first, he said, the job was great: He could afford his lease and still
make money because he was taking in as much as $5,000 a week.
But in 2014, Uber cut its rates by 20 percent and not long after that it increased
its commissions. Last year, it forced new drivers working for its luxury arm,
Uber Black, to pick up passengers through its less expensive option, UberX. On
top of this, Mr. Diallo claimed that Ubers aggressive hiring has flooded the city
with too many drivers chasing too few fares.
The price cuts last month were the final straw that set off the rebellion. Most of
the drivers learned about the change through a company email, whose lack of

warning and remoteness were softened by the fact that Uber promised, for a
month, to guarantee an hourly wage at pre-cut levels. Within days of the
announcement and despite the guarantees Mr. Diallo and two other
drivers, Fabio Krasniqi and Farrukh Khamdamov, decided on a strike. Calling
themselves the Uber Drivers Network, they created a Facebook page, designed a
flier and paid for nearly 20,000 copies at a print shop near La Guardia.
People cant make a living, Mr. Diallo said on the phone after a meeting to
coordinate the New York actions with others in London and San Francisco.
Theyre picking up $8 fares. Theyre driving their cars into the ground.
Collectively, theres a lot of money coming in, but no one individual is making
much.
Photo

Taxi drivers rallying against Uber in July. CreditHiroko Masuike/The New York
Times
Its gotten to the point, he said, where its literally unbearable.
Uber likes to say that its drivers, not its riders, are its customers. And while the
company might not give its customers health care or a pension, it does provide
them access to high-tech support centers, modeled on Apples Genius Bars,
where they can ask questions about commercial licenses, receive free medical
exams or get a can of soda. Uber also helps its drivers negotiate leases with car
dealers.
The conflict over the price cuts has been especially vexing for the company,
which is adamant that the lower rates have been a boon to both the drivers and
its own bottom line. Shortly after the strikers wrote to Uber, Mr. Kalanick
posted a memo onto his Facebook page showing that the previous cuts had

increased the average drivers gross hourly wages from $28 to $37. On Tuesday,
Mr. Mohrer released numbers indicating that from the three weeks before the
last round of cuts to the three weeks after, drivers wages went up by 17 percent.
Uber also disputes the claim that there are too many drivers in New York. There
are still more taxi riders that the company could woo, and, according to Mr.
Mohrer, after the recent cuts were made, trips in the Bronx and Queens, where
many drivers live, went up by nearly 25 percent.
But if all this data has the weight of scripture for Uber executives, it has been
less persuasive to the drivers, who say the statistics do not fully describe the
experience of working for the company. Though lower prices might increase
their workload and thus their gross, they say, the increased revenue will be
eroded by a corresponding increase in expenses.
At the Super Bowl rally, a driver named Mustafa, who declined to give his last
name because he feared reprisals from Uber, said he expected to make about
$40 an hour after the cuts. But that was before he paid for higher costs of
maintenance, gas and washes; for his car lease, insurance and sales and income
taxes; for emissions inspections and the 2.5 percent of earnings he gives each
year to the Black Car Fund, a drivers trade group, for workers compensation;
and, of course, for his commissions.
When you put it together, the numbers dont add up, Mustafa said. Im taking
home less than minimum wage.
Photo

Uber drivers demonstrating in support of the company in May.CreditMichael

Appleton for The New York Times

And beyond money, culture matters, too, the drivers say. Some mentioned a
photograph that Mr. Mohrer posted on Twitter during his early days at Uber,
which showed him smiling with Mr. Kalanick above a message that read,
Jamming with @travisk and plotting city domination. Others pointed to their
own support of Uber this summer when the company went to war with Mayor
Bill de Blasio, who wanted to cap its growth, ostensibly to lessen road
congestion. During the fight, which it won when Mr. de Blasio dropped his plan
for the cap, Uber mobilized millions of dollars and an all-star team of political
tacticians, but it also made use of the sympathetic image of hard-working
immigrants telling City Hall that Uber put food on the table for their families.
We stood behind them, said Ronnie Paulino, a driver who has worked for
Uber for a year. Then they turned around and cut our pay.
After speaking this month to an economics class at New York University, Mr.
Mohrer acknowledged that when he first came to Uber, there were fewer drivers
and stronger bonds between them and his management team. But as the fleet
has grown, he said, he has tried to remain responsive to the drivers, who, on
average, work 30 hours a week or triple the rate of their peers in smaller
cities.
Theyre more vested and engaged in Uber, so we take a more careful approach
here, Mr. Mohrer said. He added: Its a deeper relationship.
But deeper doesnt necessarily mean easier. A few weeks ago, Mr. Mohrer met
with the leaders of the strikes at his office on West 27th Street in Chelseas
gallery district. He said they had a frank discussion about the rate cuts, which
could be rescinded if the cuts do not achieve their goals. While he was not
explicit about what those goals might be, he insisted that the conversation had
been useful. I want to do this regularly, he said. Giving drivers the
opportunity to speak to me and my staff can result in more rapid change.
The strikers found the meeting less successful. It was a joke, Mr. Diallo said.
They treated us like jokers. From his perspective, Mr. Mohrer offered no
concessions on the cuts and was firm on only one position: that there would
never be a tipping option on Ubers app.
And that was the message Mr. Krasniqi delivered to the crowd in Queens on
Super Bowl Sunday. Cupping his hands to his mouth, he reported on the
meeting, then told the drivers to call their friends and relatives who also worked
for Uber and urge them to stop driving.
Thats how we built them up with our friends and families, Mr. Krasniqi
roared. And if we built them up, we can destroy them!
It is hard to tell at this point just how serious the threat to Uber from sustained
unrest would be. The challenges of organizing a work force composed of men
and women of disparate ethnicities and languages loosely connected by a cloudbased app are significant. If the drivers can come together in a block causing
problems, they might get something, said Evan Rawley, a professor of strategy

at the Columbia Business School who studies the taxi industry. But this is not
West Virginia coal miners who all grew up together in the same small town.
Uber has been somewhat clumsy in dealing with the problems with its fleet. In a
stroke of unfortunate timing, Wired magazine published a 3,000-word
treatise on Ubers new corporate logo one day after the drivers went on strike
outside its New York office. It was an inadvertent study in tech-world navelgazing: as hundreds of immigrants were splashed across the Internet attacking
Uber, Wired described how Mr. Kalanick had been working for two years on the
logo, immersing himself in organic color schemes and kerning.
There is a potential wild card: Class-action lawsuits have been filed against
Uber, including in the federal courts in Brooklyn and San Francisco, which seek
to make the drivers full employees. If the suits are successful, they could cripple
Ubers business model, though some legal experts have said they are skeptical
that the drivers could prevail when they use their own vehicles, and decide
themselves when and whether to pick up passengers.
Photo

Uber drivers at the companys help desk on West 27th Street in Manhattan this
month.CreditDave Sanders for The New York Times
That leaves the traditional route of union organizing, which, in the case of the
strikers in New York, has become chaotic. About a year ago, the Uber Drivers
Network approached Local 1181 of the Amalgamated Transit Union, one of
whose organizers has been helping them plan rallies and collect union cards.
The New York Taxi Workers Alliance, an advocacy group for yellow cabdrivers,
claims to have signed up nearly 5,000 Uber drivers in the city. And on Feb. 2,
the International Brotherhood of Electrical Workers, Local 1430, filed a

petition with the National Labor Relations Board asking to represent another
600 Uber drivers who work at La Guardia.
Mr. Diallo and his team have been working on a secret weapon: a driver-owned
app to compete with those from Lyft and Uber, those from other ride-hailing
companies like Gett and Via, and the taxi industrys own two e-hailing
systems, Way2Ride and Arro. The drivers designed the app themselves and have
hired a company called Swift Technologies to build it. It could be ready as early
as next month.
The solution is not to stay with Uber, Mr. Diallo said. The solution is to have
our own platform to build a real partnership and really be partners.
For now, however, they are still planning strikes, even if the one on Super Bowl
Sunday was of questionable effectiveness. The drivers celebrated the action on
their Facebook page, posting a screen shot of Ubers app that night
accompanied by the hashtag #SHUTDOWNSUPERBOWL that showed a wait
time at Kennedy Airport of 72 minutes.
But the very next morning, Uber sent an email to its drivers announcing that the
day before, it had broken its record for the most trips on a Sunday.
Thanks to you, our driver-partners, the email read, hundreds of thousands of
New Yorkers moved safely around the city this weekend.
Correction: February 21, 2016
A cover article this weekend about Uber drivers dissatisfaction with the company
misstates, in some editions, the percent of earnings that Uber drivers pay to the
Black Car Fund, a drivers trade group, for workers compensation. It is 2.5 percent,
not 3 percent. And an accompanying timeline in some editions misstated the month
and the year that Uber began UberPool, its carpooling service. It began in
December 2014, not in July 2015.
A version of this article appears in print on February 21, 2016, on page MB1 of
the New York edition with the headline: Uber Drivers Up Against the App . Order
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