Here's a story about how Uber sold the false dream of riches to its contract drivers. Back in 2015, I gave over 500 rides on Uber to thoroughly understand the platform.
The sun was just starting to peek over the mountains so I pulled over to stretch my legs. It was 6 am.
I had only been driving for about an hour, but I had never come to this part of the Bay Area before. Right over the Golden Gate Bridge and down towards Stinson Beach I had dropped off a passenger.
Perhaps it was his “ride of shame” after a late night of partying? Or maybe he was going to some secret yoga studio retreat before the stock market opened at 6:30 am.
As an Uber driver, what my passengers did at unusual hours was always left up to the imagination.
How Uber Sold The Dream
In 2015, I was unemployed, childless and had a lot of time on my hands. After spending 13 years waking up by 5 am working in finance, I often found myself twiddling my thumbs for several hours before my wife woke up.
She was the night owl and I was the morning lark. To fill my time, I would write on Financial Samurai just as I still do today.
But as I read more and more about people's experiences making extra money driving for Uber, I just had to try it myself. After all, I was based in San Francico and Uber was founded in San Francisco.
Uber touted that I would be my own boss, drive whenever I wanted, and make a lot of money. Further, they offered me a $500 sign up bonus. Sounded good to me!
Everything counted towards my laser focus of building enough passive income so that both my wife and I could avoid full-time work forever. Besides, I knew there would be stories to write from my experience.
Excited About Earning Side Hustle Income In The Beginning
In the beginning, I was excited about my new side hustle. My two public park tennis teammates were making about $30-$40/hour driving.
I figured if I could make $90 – $120 by the time my wife woke up, I could make enough for the day to at least pay for food and entertainment for the both of us.
Further, I'm always encouraging readers to start a side hustle. It was only logical to try driving for Uber myself and report back my findings to help others make an informed choice.
Until this day, I still clearly remember my very first Uber passenger. She had flown in from Denver and I dropped her off at a random warehouse somewhere south of the city. She hinted at meeting up after she was done, but I politely declined.
As Uber kept touting the benefits of driving on their platform and as I got savvier as a driver, the more hooked I became. Instead of giving just one ride as some do as a PR stunt, I wanted to give at least 100 rides to make my experience statistically significant.
I learned various strategies to sometimes boost my hourly rate to $45-$50. Then I realized I could make even more if I referred drivers to sign up using my online platform. I even signed up my wife and drove as her to get the $500 bonus!
With experience, I started getting overconfident about how much I could make.
The Beginning Of The Decline
After about six months of driving, I began to notice my hourly rate had started to decline. No matter how strategic I was in terms of driving during maximum surge pricing, sometime in early 2016 it became rare for me to breach the $30/hour earnings threshold. Uber sold the dream of good income, but it didn't last.
It was like deja vu all over again, where the better I performed while working in finance, the less I got paid. All anybody really wants is a correlation with effort and reward. It was clear after so many price cuts, driving for Uber became less profitable.
Then I noticed that driver referral payouts were starting to decline as well. Instead of making $500 – $1,000 per referral for drivers who completed 25 rides on the platform, the payouts decreased to $50 – $100 per referral and qualification eligibility increased to 50 – 100 rides.
My dreams of making six figures on my driving and referral side hustle started to fade. What Uber sold didn't pan out.
But what irked me most was not the declining payouts, given the market is rational and nobody forced me to do anything for Uber. What irked me more was some of the people I met at Uber corporate.
Lured Drivers In To Dig For Info
Four fellow drivers and I were invited to Uber headquarters as a “reward” for being such great drivers and referrers.
I went because I was curious to visit their offices and to get free food. I was also actually hoping they'd be awarding us with some type of incentive or monetary bonus for being such great “partners” as they called us.
What a disappointment. The free food turned out to be water and cold pizza. I felt like prey lured into a trap by hunters. Their real purpose was to pick our brains and try to learn how Uber could replicate our success across its driving platform.
One guy just came in for 20 minutes and rudely left after he got what he wanted from us. I felt used. We were used.
Here we drivers were, a Black guy, a couple Hispanic guys, and an Asian guy talking to six White women, two White guys, and an Asian guy, who all went to private schools. The contrast was stark as only I went to college, and a public one at that. They continuously peppered us with questions about how to be better drivers.
And do you know why they peppered us with so many questions?
Corporate Employees Have No Experience
Because none of them had ever driven before! You would think that one of the best ways to improve your driving platform is to actually experience for yourself what it's like to be a driver. It's not as though they were making some product that required a PhD in chemistry.
When I asked them why they didn't just spend some of their work hours driving themselves, none of them responded. One might have even snickered.
It was as if they were too rich or too privileged to do the very job that was going to make them rich.
I'm not a fan of people who think they are better than others or too good for some type of work just because of their fancy backgrounds.
This experience was the beginning of the end for my enthusiasm for Uber.
When I then saw Uber roll out its predatory car leasing program to keep drivers enslaved, I finally deleted my driver app for good. Uber sold a false dream and I was sick of them.
Uber Culture Is Rough
From my one meeting at its headquarters, I'm not going to generalize all Uber corporate employees as rich clueless people who take advantage of others. That would be unfair as I've met several fine Uber corporate employees as well.
But what I will say is that if you've never gotten your hands dirty by working a close to minimum wage job, especially in the service sector, you have no idea how hard it is to make a living in such professions. You will likely take for granted how good you have it too.
By the time I stopped driving in mid-2016, my hourly wage after taxes and expenses was only around $15. During the process of giving over 500 rides, my car had been barfed in and nicked up.
I had also encountered several incredibly snooty passengers once Uber Pool was introduced. It seems as if people who spend the least on a product are often the worst behaved.
A firm's culture starts at the top. And it was clear from Uber's sexual harassment lawsuit and multiple complaints that Uber had a culture problem. It had grown accustomed to treating people poorly in general, not just its contractors, due to its growth.
Below is a recent example of Uber's culture from a guy who led some of Uber's rider growth teams from 2015-2018. He's now a VC at Andreessen Horowitz.
Instead of calling the people who helped make you rich “underclass,” it's probably better to simply say “thank you.”
Let's try to humble ourselves as soon as we start believing we're hot stuff. It's very easy to confuse our success with our own abilities, rather than being fortunate to hop on a train that was going somewhere.
Uber Millions And Billions
At the end of the day, Uber has improved the quality of lives for millions of consumers, which is why the company is able to raise billions in an IPO and value itself at close to $80 billion.
None of us ever want to go back to paying 3X more for a taxi that never comes. Having the ability to get a variety of food using Uber Eats is great too.
It is also true that driving and delivery for Uber are choices. Nobody is forcing people to work for close to minimum wage or less while simultaneously risking a situation where one accident can wipe out a month's worth of profits.
Even if Uber continues to lose $1.8 billion a year as it did in 2018, its IPO will fund them for at least another five years.
I just ask the thousands of Uber and Lyft employees who are now millionaires and billionaires to not forget about the people you used to help make you rich.
If you aren't at least thankful, you might one day find yourself stuck in a pickle with nobody willing to pick you up.
Final Takeaways From Uber
1) To get rich, you must sell people the dream to work for you while giving them little-to-no equity. Work on your selling skills. Work on building your own equity.
2) While trying to convince your underpaid contractors that you are doing them a favor, work on new innovation like self-driving cars so that when your contractors finally revolt, you've got your bases covered.
3) Excess profits are always eventually competed away. Therefore, to make the most money, you must be an early adopter. Drivers in 2013 made way more money than drivers today. Of course, the same goes for Uber’s corporate employees. Practice recognizing opportunity.
4) Don't be too proud to get rich. Do what you must to provide for your family. I don't care if people make fun of me for only making $1,100/month as an assistant high school tennis coach or when I gave hundreds of rides one year. It is because of these experiences that I've continued to grow and appreciate what I have.
5) No matter how successful you become, try to stay grounded. If you don't, you will eventually be eaten alive.
6) Even better than grinding away at Uber corporate is being an early investor. Make your capital work hard for you so you don’t have to.
As of 2023, Uber is trading around $46/share, 10% above its IPO price. There is still also a battle over the classification of whether its drivers are employees or contractors. It's hard to see Uber continue to grow and innovate in this environment.
If You Want To Get Rich, Invest In Private Growth Companies
All the people who got rich from Uber invested when the company was private. Uber has been a terrible performer after it went public. Hence, consider investing in the next Uber through an open venture capital fund.
Check out the Innovation Fund, which invests in the following five sectors:
- Artificial Intelligence & Machine Learning
- Modern Data Infrastructure
- Development Operations (DevOps)
- Financial Technology (FinTech)
- Real Estate & Property Technology (PropTech)
Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!
The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. You can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.