Kaitlyn Montemayor- Aparicio
America. A country with a population of three hundred twenty-five million seven hundred thousand people, all with very busy days ahead of them from the moment they wake up. Most people have important places to go, such as work and school. Even after the day is over, people want to end their day on a good note, whether it is to go get a drink or spend time with family or friends. No matter where our destinations are throughout the day, the form of transportation is the question on our mind after we find the perfect outfit for the next event. But, our safety should be the FIRST and MAIN priority of the plan for the day, or night, ahead. When people think of Uber, they think of an easy and safe way to order a car ride to their destination from anywhere with just a few taps from their cell phone. Sounds safe, simple, and quick. Easy as pie, right? Just as safe as a car ride with mom! Uh, not really. Recently, the Colorado Public Utilities Commission fined Uber $8.9 million for not running proper background checks and letting quite a few people with felony convictions and driver’s license issues drive people around [1]. This is not the first time that Uber has been dishonest about its background checks and policies. From a convicted sex offender without a license in Boston to a driver charged with first degree murder in Maryland, Uber is becoming known for their weak background checks [2]. This is catching the attention of many people, especially in America. Even Lyft is noticing the defaults Uber has had.
Uber and Lyft are oligopolies, but there are a few differences that make one better than the other. Now, you may ask, “What are they?” Let’s talk. We have already discussed how Uber is known for their horrible background checks on their drivers. Lyft noticed how angry people became after Uber was so dishonest and jumped on the opportunity to attract Uber’s past customers by guaranteeing a safe ride with Lyft. As Charles Wheelan explains in Naked Economics Undressing the Dismal Science, “Creative destruction is not just something that might happen in a market economy. It is something that must happen” [3]. The competition between Uber and Lyft is healthy and actually better for the customers. It drives both companies to compete and do better than the other, making both companies better overall. But HOW does this creative destruction help the customers? Is the competition really necessary?
The competition actually is necessary so that it inspires incentives. Both companies, Uber and Lyft, want to help their customers get to their destination easily, fast, and safely at the end of the day. But, they do not want to make any mistakes and lose their customers to each other, losing money and business. If Uber raises its prices, more riders will choose Lyft, especially on a busy Saturday night where everyone is trying to find a cheap car ride to their desired destination. But, if Uber will cover more of the area you are in and will drive pretty much anywhere you want, more riders will choose Uber instead of Lyft [4]. These examples of different aspects between the two companies determines the customers’ decisions based on their overall self-interest. If Lyft seems more attractive to a customer and peaks his self-interest, then he will choose Lyft due to the fact that he believes Lyft will be the better option for him throughout his long night. It all comes down to what people think will be safest, fastest, and cheapest for them so that they can remain safe during their ride, get to their destination fast, and safe a few bucks. Their own self-interest is what matters since “Self-interest makes the world go around…” [5]
Although Uber has had its many scandals, the government did not need to ever intervene because the market corrected the issues so that the company would not lose too much of its business. If the government were to get involved with the problems Uber was having, who knows what would have happened. The government does not have a good reputation when it comes to controlling any kind of part of the economy. As Wheelan describes it, “When government controls some element of the economy, scarce resources are allocated by autocrats or bureaucrats or politicians rather than by the market” [7]. If the market did not adjust the policy to address the problem about the poor background checks, some people would have just stopped using Uber for good and start using Lyft from now on or even start using other transportation services, such as public buses, Lime Bikes, or even just going through the annoyance of driving themselves. If it were not for the market adjusting itself whenever Uber started falling under with its incidents, Lyft could have taken over completely in the ridesharing services for good. But, thanks to creative destruction and the market, Uber refused to give up. They decided to take a step toward improving its customers’ safety. Well, and to make sure they do not lose TOO much of their business.
Perfect destruction and self-interest go hand-in-hand when it comes to running a successful company, especially companies such as Uber and Lyft. The healthy competition between the two companies drives them to constantly wonder how they can do better and to meet the self-interest of their customers. But to whoever may be reading this, be safe. Remember that you are getting into a vehicle with a complete stranger. So, please make sure your driver has AT LEAST four stars and has comments about how fun he is or else, he may be a sexual predator. Safe riding!
[1] Leonid Bershidsky, “Uber’s Big Problem Is a Culture of Dishonesty,” Bloomberg.com, November 22, 2017, , accessed June 23, 2018, https://www.bloomberg.com/view/articles/2017-11-22/uber-s-big-problem-is-a-culture-of-dishonesty.
[2] John Bonazzo, “Uber’s New Background Checks Are Useless Without This Key Component,” Observer, April 12, 2018, , accessed June 23, 2018, http://observer.com/2018/04/uber-background-checks-fingerprinting/.
[3] Wheelan, Charles, and Charles Wheelan. “Incentives Matter: Why you might be able to save your face by cutting off your nose (if you are a black rhinoceros).” In Naked Economics: Undressing the Dismal Science, 47. New York: W.W. Norton & Company, 2010.
[4] Ridester Staff, “Uber vs Lyft: A Side-By-Side Comparison,” Ridester.com, June 14, 2018, , accessed June 23, 2018, https://www.ridester.com/uber-vs-lyft/.
[5] Wheelan, Charles, and Charles Wheelan. “Incentives Matter: Why you might be able to save your face by cutting off your nose (if you are a black rhinoceros).” In Naked Economics: Undressing the Dismal Science, 34. New York: W.W. Norton & Company, 2010.
[6] Wheelan, Charles, and Charles Wheelan. “Government and the Economy II: The army was lucky to get that screwdriver for $500.” In Naked Economics: Undressing the Dismal Science, 85. New York: W.W. Norton & Company, 2010.
[7] Wheelan, Charles, and Charles Wheelan. “Incentives Matter: Why you might be able to save your face by cutting off your nose (if you are a black rhinoceros).” In Naked Economics: Undressing the Dismal Science, 34. New York: W.W. Norton & Company, 2010.
“Uber vs. Lyft – Choose The One That Fits You Better,” News4C, February 12, 2018, , accessed June 23, 2018, https://news4c.com/uber-vs-lyft-choose-the-one-that-fits-you-better/. (Cover image)
Bear Market 