The Don’t Be An Asshole Rule

by kstop • 13 years ago

34 43 13 years ago

jtokoph• 13 years ago

Maybe I'm naive, but I thought surge pricing was an automated change when demand is about to outweigh supply. I don't think it's some asshole switch someone flips.

area51org• 13 years ago

That might well be true, but maybe there should be a limit to how far the change goes. Code can be an asshole too, along with the guy who wrote it.

schrodingersCat• 13 years ago

This is probably true, but this story just proves that Hailo responded more quickly to the situation. Allowing machines to dictate pricing in a situation like this and not immediately offer refunds and an apology will only serve to alienate your customer base from your brand. Uber won't make that mistake twice I'm sure. Halio now has customers for life

mathattack2• 13 years ago

If you have one of only a small subset of programmers talented in ABCD, and you charge $2000/day for them, are you gouging your customers?

If you want to build slack into the system, allow people to make profit off of extra inventory. You want the hardware store to carry a couple crates of batteries in the back in case of emergency? Let them charge enough money in the once-in-a-lifetime storm to make it worth their while.

Taxis take risks riding in storms, if you want them to be available, let them make money.

scott_s2• 13 years ago

There's a reason that stores don't charge you extra for batteries, flashlights and water before a storm: you will be pissed off, and not come back.

tsax7• 13 years ago

Actually this is usually because of local anti-price gouging laws pushed by ignorant people such as the author of the above piece. You can thank these people for mile-long gas lines, and general shortages all around, because to them MORALITY has nothing to do with the consequences of disrupting supply in an environment of sudden excess demand. Its all about feeling good and punishing people for following market incentives to alleviate shortages.

tehwebguy• 13 years ago

Who gets to say when demand based pricing is gouging?

On New Year's Eve in NY I don't think there's anything in the world wrong with increasing the price to the maximum that customers are willing to pay.

The flood is different but I'm not sure where the line gets drawn? Uber already has rates that range from similar (for very specific trips) to drastically more expensive than taxi rates.

Something else not mentioned: incentivizing additional drivers to go out and work during a flood / the aftermath.

flipstewart• 13 years ago

Who are you to say what is right and what is wrong? Furthermore, who are you to judge another, especially individuals based on such limited examples of their business?

Name calling doesn't solve problems. Childish bickering doesn't get results.

kstop2• 13 years ago

Not the author, just thought it would be interesting to see how opinions shook out here.

And it has been! My own personal take is that this is bad policy. Calibrating price to demand is well and good, doing it automatically is clever, but not keeping an eye on it and overriding the algorithm in situations like this is dumb. There's no way the few hours of extra income will make up for the lost business over time.

Plus, Uber depends on a lack of regulation to operate. Doing stuff that only helps the argument for regulation, and makes them look bad in the public eye, could be suicidal for their business model.

Zikes• 13 years ago

It would have been great if Uber could have provided rides for free, discounted, or even at regular rates, but at the end of the day they're still a business. They have a responsibility to their employees and their investors to make a profit, and adjusting their rates to match demand is a reasonable way to do that.

Or you could act entitled and call them assholes.

tsax7• 13 years ago

There should also be a 'Don't be an economically illiterate douchebag' rule which is seldom followed.

tsax7• 13 years ago

http://www.econlib.org/library/Columns/y2007/Mungergouging.h...

tomjen32• 13 years ago

Agreed, but the better capitalism makes our society, the more people hate it.

johnjlocke• 13 years ago

Better for who is the question.

If your service doesn't figure out what your response is going to be before the disaster hits, then you are no better off than Enron diverting power to another state in order to price gouge.

rinon• 13 years ago

Really HN? I would make the case that price gouging occurs when your customers are in a dire situation due to no fault of their own, and other options are limited. While this make make a cheap buck, in the long run, fostering good relationships with your customers is even more valuable. That's reason enough not to, even without a moral argument, which I think is also clear.

fecak• 13 years ago

This is the point I think others may be missing. Charging suffering people more for something due to an "act of God" type scenario is where gouging comes into play. When supply and demand don't meet due to natural changes in supply and demand (more companies using Rails with even supply causes prices for Rails devs to go up), no one faults higher prices being charged. When demand goes up or supply goes down due to a natural disaster, you can be sure that people will notice.

Is tripling the price on New Years Eve in NYC gouging? Not really - it's the same as prices going up for flowers around Mother's Day or Valentine's Day. Demand will be high and would likely not be met if prices remained the same.

Small bumps in price will probably be tolerated due to acts of God, but not outright gouging.

tsax7• 13 years ago

Again you are missing the consequences. Acting indignant is not going to bring you more oil/gas/water/ice/food. Letting the prices go up will do it. No amount of moral indignation and Talmudic discourse on when its right to charge what is going to change what incentives people follow to actually deliver you the goods in times of disasters.

tomjen32• 13 years ago

If you sell batteries at 50 usd/pack after an earthquake you aren't going to run out because, at the extreme, that is a high enough price that you can pay a guy to fill up a backpack with batteries and walk them to you, even if that would require him to walk 20 miles and he would have to be hired on a short notice.

yitchelle• 13 years ago

On Uber's Toronto's website [1], it says "• At times of intense demand, our rates change over time to keep vehicles available. "

It looks Uber is invoking this clause to increase their pricing during a really bad storm over Toronto. If this is true, please, Uber, have some decency and help out the community.

[1] https://www.uber.com/cities/toronto

fudged71• 13 years ago

In Calgary, during our recent flooding (which was far worse than yours, not that it matters), we crowdsourced information about which businesses were price gouging (for water, ice, etc) and they were called out very publicly.

The mayor stepped in to say that this kind of opportunism is illegal. Maybe the laws are different in Toronto.

kstop2• 13 years ago

No denying that - Calgary's got real damage, we just have a lot of inconvenience by comparison. Also you have the better mayor - not that that's saying much.

quantgenius• 13 years ago

Anytime there is an event that leads to a massive reduction in supply or increase in demand for a resource (in this case transportation), whether because it's New Year's eve or because there is a storm, there needs to be some mechanism to allocate the scarce resource. The best known mechanism for doing this is price. That way if you can wait to travel you wait and if you truly can't wait, you pay up and you get to use the resource (in this case transportation).

If you don't raise the price, people who desperately need whatever it is that there is temporarily a shortage of, may not be able to get it at ANY price because people who don't actually need it are using more than they would at the market clearing price. These users who wouldn't pay up do not receive as much benefit from the resource as those who desperately need it and would pay up. This ultimately leads to a reduction in the overall benefit that accrues to society as a whole.

What Uber did here is absolutely the "right" thing. Ultimately the problem is a scarcity of whatever the resource is. If you don't raise the price, you still have to allocate it and you can't just allocate it based on some arbitrary "need". The fundamental reason communism/socialism always fails is because a you can't ever truly judge how much someone else "needs" something. By asking people to pay up or not you make them evaluate the intensity of their own "need" while at the same time creating strong incentives for people to find substitutes, do without and for producers to produce more.

wizzard2• 13 years ago

The problem is that need doesn't necessarily correlate with wealth; in fact there may be a reverse correlation. The people who need to travel the most can't necessarily afford to spend six times the normal price to do so. For others money is no object when it comes to getting home in time to watch the game.

You're making an assumption that everyone can afford the increased prices and it's just about making a rational decision to "pay up" or not.

crazygringo• 13 years ago

It's not that simple, and this topic comes up after every kind of natural disaster.

The author is completely missing the fact that the flip side of "price-gouging" is making sure that a scarce resource is only utilized by those who need it the most.

If there are only 20 taxis, and there are 20 people desperately stranded who need a taxi, and 200 people who would just "like" a taxi, then if a taxi costs $200, those 20 people will happily pay for one.

But if a taxi costs only $20, then the taxis will mostly be used by the people who don't desperately need them, and the ones that do might die (if it's that desperate).

Likewise with charging $100 per bottle of water or batteries. It doesn't necessarily make you an asshole -- it's the simplest way of making sure a scarce resource is only allocated to those who truly need it.

And more than that, it incentivizes people to provide that resource -- extra taxis ferrying passengers, extra people supplying water or batteries -- even incentiving people with extra water/batteries at home to sell them to others.

Sure, when there are good networks of trust in a society, and the resource in question isn't really scarce, price-gouging can be unfortunate. And ideally, in cases of disaster, the government should be providing essential resources for all.

But the author of this post seems to be completely and utterly unaware of the positive and possibly life-saving effects of scarcity pricing.

miloshadzic• 13 years ago

    The author is completely missing the fact that the flip 
    side of "price-gouging" is making sure that a scarce 
    resource is only utilized by those who need it the most.

    If there are only 20 taxis, and there are 20 people 
    desperately stranded who need a taxi, and 200 people 
    who would just "like" a taxi, then if a taxi costs 
    $200, those 20 people will happily pay for one.

I think being able to pay 200$ for a taxi is not the same as needing it the most.

maw• 13 years ago

I think being able to pay 200$ for a taxi is not the same as needing it the most.

That is true. On the other hand, it is, so far as I'm aware, the closest anybody's managed to come to reliably, consistently figuring out who does.

wizzard2• 13 years ago

Again, wealth does not equal need. You're assuming all of the desperately stranded people have $200 at the ready for a taxi trip that's normally only $20. And some people will pay whatever price for convenience, because they have plenty of money.

You can't just assume that everyone CAN pay whatever price is set, and just decides not to because they don't need it enough. In this scenario, the poor people die and the rich stay comfortably unaffected while using the resources others are far more desperate for.

alangfiles• 13 years ago

It seems like it's too hard to solve "who needs it" without employing some flawed metric like money. But I'm not sure there's any better solution.

$200 would dissuade me, in situations where $20 wouldn't (unless I was in a heavy bind). This isn't true for everyone, but it seems to work well in the middle.

I think Uber did nothing wrong, but maybe they need to work on how to not be perceived as assholes, they could have had customers queue up for lower prices, and specify their need, and worked through the queue judging each persons priority (but maybe you'd have even more angry folks).

bryanlarsen• 13 years ago

The flip side of this is that the best price in emergency situations is to drop your price to $0. That sends a very strong signal that the service is for emergencies only; that anybody who takes advantage is an asshole. It also removes barriers: people in emergency situations often don't have their wallets on them, et cetera.

It also generates a huge amount of goodwill that cannot be bought in any other situation.

nickzarzycki2• 13 years ago

Under certain circumstances, often involving human suffering or vulnerability, demand based pricing becomes price gouging. Uber's actions here look like price gouging. It's all very simple.

Everyone defending Uber here seems to be either deploying the 'where do we draw the line' fallacy, or claiming that there's no such thing as price gouging.

If you want to defend Uber, you need to show me why what they did isn't price gouging. Or you need to show me that price gouging doesn't exist.

tsax7• 13 years ago

More blather. Its irrelevant whatever you choose to call the phenomenon. The fundamental problem is scarcity of goods and services. Its a shortage of fuel, water, food and other goods the delivery of which won't be carried out because you have determined that raising prices is morally bad. Prices are a signaling mechanism. You focus only on the nominal price and its supposed "profit-mongering" by the suppliers, but it signals where demand exists and for tankers/suppliers to deliver the goods where the demand is highest. Or you can stand in the street corner calling the suppliers immoral and demand that the cops arrest them for price gouging. Great! But you won't get your ice/fuel/water. Good luck.

nickzarzycki2• 13 years ago

Let me ask you then: do you think that all scarce emergency supplies should be allocated using price (perhaps via auction) during a disaster?

MaysonL• 13 years ago

Seems to me to be basic iterated Prisoner's Dilemma theory: you defect, and you better expect to get tit-for-tatted until you stop. And lieing about it will only make it worse.

aet• 13 years ago

Isn't it just supply and demand?

chrisbennet• 13 years ago

When there is more demand for my services than I feel like handling, I can raise my rates. If a customer doesn't like it, they can find someone else. They don't need me.

However, when your business sells a necessity (like public transportation or runs a hospital) don't expect your customers to understand that your decision to charge them much higher prices during an emergency is simply done "to better allocate a scarce resource". Keeping poor people from using all the scarce resources is probably not the best thing to do if you want repeat business.

reeses• 13 years ago

Maybe Uber is different in Toronto, but in SF it's basically making use of unallocated livery, i.e., Town Cars, etc. (with a useless taxi hailing service) I'm not sure riding in a "luxury" vehicle with a private driver is a public necessity.

Poor people don't use Uber. Poor people very rarely use taxis. Poor people ride the bus or walk.

And yes, it sucks to be poor.

emhs• 13 years ago

I agree that demand pricing has a valuable role in our economy. On the other hand, notable kindness and lack thereof can easily have significant reputation and PR effects, both positive and negative. The "Don't Be An Asshole Rule" does not seem to be about preventing demand pricing in general, but instead about the PR value and cost of such actions in the wake of a disaster. Clearly Hailo is reaping a PR payout for leveraging its infrastructure to assist Toronto residents.

The point is that Uber does not appear to have included the PR cost of surge pricing in their calculus, and subsequently tried to deny that it happened in order to recoup some of the PR losses. Perhaps they should have included an earlier human intervention option.

Comments regarding the risks drivers bear going out in a storm also merit some attention. Possible responses that come to mind easily:

* Cut the margin the company takes off the fee * Allow drivers to enable some form of hazard rate when things get dicey * Providing additional advice and hotlines and such things has nothing at all to do with rates, and gets PR points, if Hailo's experience is any indication

I'm sure the rest of y'all can come up with more suggestions. The point is that demand pricing is not evil, but PR costs matter.

tsax7• 13 years ago

This is the most sensible comment in the whole thread to me. PR costs should be factored in, and if I recall correctly Uber waived fees during Hurricane Sandy in the NY/NJ area last fall.

The Don’t Be An Asshole Rule

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