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Posts Tagged 'price'

Hacking Uber’s Surge Pricing

Das Über SurgeSurge pricing. If you’ve ever taken Uber you know what that is. Demand is high for rides, so the price goes up. It doesn’t always seem like that is the case though when you see surge pricing in effect at odd times and I found out some interesting information yesterday.

I was at a meeting when someone mentioned that Uber has a team of employees whose job it is to keep the drivers from hacking the surge pricing system. This person thought it was only in effect on the East Coast, but I mentioned that I’ve heard from online groups that the drivers in San Francisco are doing this as well. Here’s how it works:

When Uber isn’t surging the price is usually less than a taxi. This is good for the riders, but not the drivers. So the drivers have organized online through various ways of communicating to all go offline when Uber does not have surge prices and then request and cancel rides to increase demand causing Uber’s servers to automatically turn on surge pricing thereby increasing the cost of the fare.

There have been recent articles over the past couple of days of Uber & Lyft accusing each other of booking and canceling rides as a way to take drivers off the road. While I don’t know about Lyft because I haven’t met as many Lyft drivers the same might be true there so that in reality it’s not drivers collecting to try to screw up the competition, but the drivers are actually working to increase their profitability by hacking their own systems. This is all just theory from me since none of the other companies working as TNC’s are being affected and none of the other companies increase their pricing when demand is high. In the end it seems that the only people who benefit from less drivers being on the road is the drivers because that then increases how much money you can make.

As an example, I tweeted that after Outsidelands because of Uber’s surge pricing [Lyft doesn’t give you estimates] it would have cost me $40 for a ride home just over a mile from the concert. While this wasn’t a forced form of surge pricing because demand definitely was high, there was also traffic involved which means that $40 estimate [or $75 estimate to get from Outsidelands to Russian Hill] didn’t take into account that it would be a slower ride which would increase the cost and drivers income even more making the fare more expensive.

Most of the drivers who were driving during the Outsidelands surge pricing were making between $60-$100/hour. This is much better than the $17-$30 you hear drivers talk about during non-surge times. Some of these drivers where earning the equivalent of a 40 hour week at $15/hour in six hours in one day.

Now can you see why drivers would like to be able to drive only during surge pricing? I would suspect that because surge pricing pops up so much that Uber isn’t working too hard to stop it because after all it just increases their bottom line.

A lot of this is just speculative talk as I’m not on the inside with Uber, but I am on boards where there are lots of Uber [and Lyft] drivers with loose tongues who think that no one will ever see what you’re posting on the internet and if it’s on the internet it must be true. 🙂

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What’s Wrong With Housing In San Francisco, Part 2

For SaleBuying a house in San Francisco. That’s a whole new world now a days that is a far cry from when the houses were first built. Just to give you a little idea, my parents bought their house in 1954 when it was first built. Back then the rubric was that you earned in a week what you spent in a month and you put the excess aside to come up with a downpayment on a house. Back then a 20% downpayment was around $5-8k believe it or not. You continued on those same lines after purchasing the house so that you could use your excess money to pay off the mortgage on your home. Then when you had paid off your home and you were in your 50’s you could spend the some of the excess money on you and your wife [think back to the Cleaver family here]. When retirement came along you could sit back in your house living comfortably with a nice little nest egg to supplement your Social Security and when you died you would give your kids the house so they could sell it to get down payments on houses they would buy or if you only had one kid they would get the house.

Then in the 70’s though the market started to go through the roof and the houses that were bought in the 50’s suddenly were selling for 3-4 times the price they were bought at and the property tax started to go up. Every year you’d have to shell out more and more money to stay in your house until Proposition 13 passed. It actually wasn’t just for homeowners at the time as it is still in effect today, but since there aren’t that many people who’ve held on to their houses for 40-50 years you don’t see as much savings from it. If you buy a house today you won’t see the benefit for another 3o years unless there’s a huge housing market crash.

So let’s look at today. Houses from the time I was talking about have increased by 50%-100% depending on what part of town you’re talking about. There are a few parts of town where you can get an $800k house, that is if you aren’t going to push a $20k incentive on top and pay it all in cash like a few of the big techies can do today. 20% down would be $160k and your monthly payments would be about $4700. Add to that a property tax of $15,200/year and you’ve got to earn $71k just to pay off the mortgage and property tax. If you continue to pay it off for the next 30 years your property tax will increase a bit, but let’s say it stays at $15,200 for the sake of argument. When you retire at age 70 and you’ve put in the maximum amount possible to Social Security you’ll be getting $3,350/month. Hopefully you’ll have some set aside because more than one third of your SSI income will be going to pay off your property tax [that will probably increase a little in 30 years, but not much]. It’s not a very easy way to retire and keep your house anymore even if you’re a rich techie who bought it all in cash from day one. You still have that $15,200 every year until the tech bubble bursts and you have to find another job which may or may not be offering anywhere near the salary you’re making now. If you decided to buy one of those nice $1.5 million dollar homes you can pretty much double all the costs, but now you’ll be paying out three quarters of your SSI just to cover your property taxes. You better have a pretty huge nest egg tucked away because if you retire earlier your SSI income drops significantly.

The housing market has been artificially inflated due to the fact that there are people with more money who aren’t thinking ahead and are willing to throw it at things they thing they need now instead of looking down the road. Unless you’re planning on selling and retiring to a lesser expensive place like Costa Rica and can get a significant payback on your investment real estate isn’t a good long term investment anymore in San Francisco.

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What’s Wrong With Housing In San Francisco, Part 1

For RentThis took me awhile to put together so that’s why there’s been a delay. I’ve been talking with people over the past few weeks, many of whom have been in San Francisco for less than a year. As you all should be aware renting in San Francisco is ridiculous right now and it looks like it might only get worse over time.

I have heard people are paying anywhere from $1k-$5k for rent in this town and the difference really just depends on the number of roommates and the size of the closet you’re renting. I have to smirk when people say, I love living in Pacific Heights as they walk out of an unmarked door next to the garage that isn’t even ornate enough to be an entrance to an legal in-law or servants quarters on one of these mansions, but it’s more of a room built off of the garage that’s not fully furnished. A good deal for $2k-$3k in Pacific Heights I suppose. Many of these people have to make anywhere from $24k-$52k/year just to afford rent. That’s a pretty stiff bill when you think about it and many of them are resorting to credit cards which just brings them to a time when they run out of money after a year long spring break party where they end up owing a huge amount of money that they haven’t made since they weren’t making that to begin with.

These people are not rich. Last time I checked you didn’t move to San Francisco and move into Pacific Heights. It was a place the rich people of San Francisco earned, not bought. Most of the new renters I meet are 20 somethings with a job that might pay $25/hour that are supplementing their income from help from their parents or whoever can lend them some some money until they can get a better job. These people push up the rental prices, but don’t stay long. Most of these people aren’t even renting an apartment, but usually as mentioned above a room off a house…a very small room.

Then you have the people that have been renting for 10-20 years which due to rent control makes their landlords want to move them out. It’ll cost the landlord around $8k [or more] per person and the landlord will have to occupy the house for three years to successfully get an Ellis Act eviction to go through. That can be kind of costly in my neighborhood where a 3 bedroom house is renting for $5k, but has a fourth person living in the dining room and a fifth person living in the living room. Sometimes a couple or two will share a room pushing the price to get the renters out from $40-$56k. That’s almost a year’s rent and they have to live there for three years meaning the cost to the landlord can be in the $240k range.

If the landlord decides to flip the house and profit off the sale they better be sure they bought the house at least 10 years ago to make a decent return on their investment. Many of the landlords that I know of in my neighborhood haven’t owned the homes they purchased that long yet so they actually would do better just holding on and renting unless they’re going to pull an illegal Ellis Act eviction.

Even when renting was actually somewhat reasonable in San Francisco I always thought of it as a temporary sort of thing and I think that is part of the reason why most of the people I meet today have been in San Francisco for less than a year. San Francisco going back to the 1800’s was a happening place and if you look back on articles from the news back then you’ll see people complaining about how expensive it was to have to pay $3/month to rent a house and how San Francisco was turning into a town for only the rich.

People will always want to live here, not Daly City, not Oakland, but San Francisco proper. Sure a few might take the outlying areas and say they live in San Francisco, but they know full well that they don’t. If you’re seriously thinking of staying here longer than 10 years, renting at this point in time isn’t the best option anymore in my mind. If you’re lucky and you’ve got a landlord that likes you and isn’t trying to get rich [is there really a landlord like that anymore?] You might be able to work things out, but that’s a slim chance. For the long term you probably want to buy a house, or do you? See what I have to say tomorrow to find out what’s on my mind.

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