Uber charged people in Australia surge pricing as they were trying to get out of the area of the hostage crisis. David Shechtman looks at the possible reasons why, but wonders about the patterns he is seeing in the company.
You know you’re in trouble when your customer treatment looks barbaric compared to the major US airlines. United, Delta, American (and whoever else is left) regularly take it on the chin by commentators, passengers, and employees for the way they treat passengers. Everyone loves to hate the airlines.
I guess we now have a new piñata to play with.
Uber— a company already pilloried in the media for its delusions of grandeur and NSA-envy—decided to blow its entire foot off by allowing “surge pricing” to go into effect during the hostage crisis in Sydney, Australia.
What is surge pricing, you may ask? Here’s Uber’s explanation on its website:
“With surge pricing, Uber rates increase to get more cars on the road and ensure reliability during the busiest times. When enough cars are on the road, prices go back down to normal levels. It’s important to know that you’ll always be notified in big, bold print if surge pricing is in effect. When rates are more than double, the surge confirmation screen also requires you to type in the specific surge multiplier to ensure you understand what rates to expect.”
Simple enough. Supply and demand: 101. More supply leads to an increase in pricing, which leads to a more attractive investment prospect, which untimely leads to new entrants. This is what Uber is saying in its company verbiage: if demand surges, we raise our prices, which brings in more drivers, which, ultimately, lowers prices. It’s a pattern we all live with on a regular basis. And I would say that it works out, more often than not, in creating sustainable growth and functionality in an economy, at least during normal times.
But let’s go back to the airlines again. What do airlines do in moments of crisis? Do they say, “Oh, your relative died – you must really want to get to Cleveland on short notice? We’re going to charge you twice the going rate for a ticket.” No, they offer a bereavement fare. Do the airlines take advantage of a snow storm to charge you higher change fees because your flight was cancelled? No, they make their best effort to get you on the next available flight (or on another carrier) and waive the change fee. They even preemptively waive change fees for passengers who haven’t yet traveled in some cases.
I’m not here to defend the airlines, but at least they seem to understand that impersonal macroeconomic price dynamics shouldn’t apply to crisis situations.
In extraordinary circumstances most companies rise above the base instinct of price gouging. They either do this because they have a moral compass or because of laws that prohibit it.
Can you imagine an airline holding a live ticket auction at an airport about to be hit by a hurricane? “Ticket prices just jumped 400%; first come first served!” No way, for a lot of obvious reasons.
A terrorist attack or hostage crisis is an extraordinary event that creates a legitimate threat to people’s lives and spreads panic among a community. This is no time to test the efficacy of Adam Smith’s invisible hand of the market.
In my estimation this outcome occurred as a result of one of three plausible reasons, none of which is particularly satisfying.
Plausible reason number one: Uber doesn’t consider these situations to be very impactful to its business. According to the Washington Post, it agreed to a cap in surge pricing in the US after it was pursued by the New York attorney-general in response to its doubling of rates during Hurricane Sandy in 2012. This is a US-only policy. So, the company has had to face this type of situation before and it has had its hand slapped for taking advantage of desperate customers in New York and New Jersey. It seems that the Aussies aren’t so lucky.
I find this reason unacceptable and reprehensible. Desperate people need help, not a new set of problems to deal with, especially in the face of imminent danger. Is it up to individual jurisdictions to negotiate crisis rates with Uber corporate offices? Shouldn’t the company have a uniform approach based on its values?
Plausible reason number two: Uber’s technology applications completely run the show through algorithms, meaning that human interventions come too little too late in a crisis matter. This would suggest that surge demand leads to surge pricing before anyone has a chance to assess the reason for the demand surge in the first place.
This reason concerns me greatly, but I could at least live with it as a symptom of overreliance on technology in the spirit of low-cost efficiency. At least the motive in this case is doing something that benefits customers by reducing human error and shrinking decision cycles. That being said, I do worry about the machines taking over our lives. I consider it a Faustian bargain that ultimately creates more problems than it solves. We aren’t data; we are people.
Plausible reason number three: Uber just doesn’t care about people or their experiences; a bunch of crisis-addled, price-gouged Australian customers are acceptable casualties in the war of disruptive innovation. This suggests that the ends justify the means, that demand is demand no matter what’s causing it to increase.
This is the most ghoulish reason of them all. I hope this is not the case. I really do. It would suggest that Uber has set its sights on long-term growth, impact, or profitability at the expense of some of its current customers in their time of need. Or this reason would suggest that its leaders are simply insensitive to human tragedy.
I’m hoping for reason two. At least that way the company could alter its overreliance on technology by building in some tripwires for human intervention in times of crisis. If reasons one or three turn out to be the case, then I’ll be concerned that there’s no fixing this mess. It’s just a company doing its work for the wrong reasons or in the wrong manner.
Another possibility in this situation is that Uber is an organization that considers these types of issues, makes decisions based on reasoned deliberation, and fails to communicate any of this to us, the general public. This might indeed be the case, but even if it is I don’t think it lets the company off the hook. My father used to say to me, “In the absence of information, people usually assume the worst.”
I think Uber is leaving large vacuums of information about how it operates its service, which for many people has become a lifeline–literally in the case of the Sydney situation.
If they’re to be trusted, by us, they need to communicate more clearly and proactively.
All this being said, I think that Uber has demonstrated enough lapses in professionalism and leadership to call into question its core values as an organization. A series of blunders constitutes a pattern. I’m beginning to consider my alternatives. Uber should only continue its industry disruption if it does so in ways that serve its communities, build trust, and foster transparency.
As participants in a market-based economy, we get the companies and experiences that we tolerate. We deserve better.