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Is Rideshare Recession Proof

Is Rideshare Recession Proof -Part 1-

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June 3, 2019,


The concept of writing this article about what effects an impending economic recession would have on the rideshare industry, came to me because I realized that I have more questions than answers. I ran across something posted recently in MarketWatch (marketwatch.com) and I thought it would be worth sharing. I shall admit; when it comes to economy and securities exchange, I'm usually wrong. However, some basic indicators are hard to ignore.

I have been following the market with my tiny ant account for decades. I pay close attention to indicators such as 10 year treasury curve and several other indexes. On June 3, 2019, the 10-year treasury yield fell to 21 months low of 2.067%, which means investors are dumping stocks and buying US Treasuries, and we know higher bond prices means lower yields. It usually, but not necessarily, signals trouble ahead.

Our economy has a "Boom and Bust" pattern, economic expansions and contractions since 1940's. We have been in a decade long economic expansion. Usually they are shorter. The rideshare business was created during this prosperity period. It hasn't seen a recession, and it hasn't been through tough economic times. Remember 2008? Remember when the unemployment rates were in the double digits just a decade ago? The rideshare industry was nowhere near where it is today. Rideshare, was just in it's infancy.

Despite some indications of an economic downturn, I don't think we will see a "Bust" anytime soon. However, those numbers got me thinking, "Will the rideshare industry be able to withstand a recession? Will people still spend the money to be driven around?"

It's something to think about. I absolutely have no clues and no answers. I went back to check on the taxi business during recession periods and I couldn't find any reliable source of such statistics. Maybe someone reading this knows the answer. If so, please share. There were a couple of posts on MarketWatch which divided the rideshare needs from discretionary, such as driving people to and from social occasions (bars and restaurants), versus staple rides such as driving them to and from work, a doctor’s appointment, etc… It really doesn't answer the question. We know rideshare will contract with the economy, but right now, even in good times, ants are crawling on top of each other looking for a ping. What will happen when we have to endure the contraction time?

One thing is for certain. What goes up, must come down. I just hope this doesn't happen anytime soon, and if so, hopefully it will be just a "Soft Landing."

There are thousands of members here, some with amazing knowledge. I hope they share with us some of their thoughts and maybe even give some advice on how to traverse through this uncharted territory, if and when we get there...
 

Comments

Tom Oldman

Well-Known Member
Author
  • Thread Starter Thread Starter
  • #2
financial-crisis-544944_1280.jpg


June 9, 2019

Last week I created a thread here on UberPeople.net, that asked the question "Is Rideshare Recession Proof?"

https://uberpeople.net/threads/is-rideshare-recession-proof.332231/

It was rather a question than a statement and I asked for your opinion and help to better navigate the path through the troubled waters ahead, just in case. I was amazed by the depth of the knowledge and intuition of my fellow drivers. Thanks to your participation, this -Part 2- is inspired by your responses. I just summarized what I received from you..

Now again, I’m asking you to express your opinions because this economy of our has its own will and moods. Rideshare has seen only the pretty face of this moody $20 trillion monster during the longest expansion in recent history. We would not know the Rideshares’ reaction to a recession. There is no precedent.

I gather from your inputs that we need to look at two main factors; the Stage which would be an economy in recession and three Actors; the rideshare companies, the rideshare drivers and rideshare riders.

THE STAGE: This would be the economy in a hypothetical recession; will it happen? Most probably yes. When? We just don't know. What about those Harvard educated analysts and bankers? Those financial experts? Sorry, they mostly just talk into their own pockets. Worst of all are those characters on CNBC’s Fast Money, Mad Money, “This money” and “That money.” Usually they leave you “Without Money.” At this point, we just stick to the golden two letters: "IF.” What if recession occurs. It's just the nature and mechanism of our capitalist, consumer-oriented system: Boom and Bust, Expansion and Contraction, Consumer Sentiment. Presently, we are on the longest economic expansion in modern times and hopefully it stays that way. Our Stage is just a theoretical scenario.

ACTOR ONE: Rideshare companies. The shares of the Uber and Lyft are mostly owned institutionally, which means investment bankers, hedge funds, mutual funds and of course offshore corps belonging to God knows who. About a decade ago, we learned and we were told; those financial institutions are "Too Big to Fail" and you and I must pay for them to survive. They will keep their “pet projects” such as Uber and Lyft alive even if they lose most of their stock value. They will stay as “Actors” in this play and someday, they will bring out the AV (Autonomous Vehicles) and let the shareholders walk into the promised land of profits and more profits. Hallelujah!

ACTOR(S) TWO: Rideshare drivers, you and I. The rideshare companies will water down our pay to the level of janitorial, agricultural and other low wage occupations, just to bridge the time until they can launch a successful AV platform. This will happen. There have been always those who don't mind taking their lives down a notch, just above slavery. Taking backbreaking jobs such as agricultural, farm jobs, mopping floors, boss boy and other low wage jobs. There's always going to be folks who can survive with very little income. Those of us who are working to pay a mortgage, a car payment, and manage a middle-class life will struggle, unfortunately.

ACTOR THREE: The riders. They will have less money to spend, and they will still use rideshare as a staple service such as to and from work, but Pool rides will be the new norm. Those that cannot even afford Pool/Shared rides on a regular basis, may opt for the city bus and other forms of public transportation. Some may even ride bikes, such as one member here mentioned. Unfortunately, public transportation isn’t very advanced in this beloved country of ours but that could change and cheap rideshare may fill the gap. One thing is certain; The discretionary rides such as barhopping, dining out and other unnecessary rides will be reduced and with it also goes away those nice fat tips.

UNEXPECTED RESULT: One more factor in all of this is the revolution of car ownership. There are tons of reports, statistics and editorial from highly credited sources that say rideshare will impact the car ownership and transportation overall. It will reshape the car ownership landscape but how and when, it is unclear. Each expert has his/her own take on this subject. I found a quote by Bill Gates which is worth sharing: “We tend to overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don't let yourself be lulled into inaction.” (1.)

Please share your thoughts. This rideshare business of ours hasn’t seen a recession yet and we all hope that it won’t happen anytime soon. Again, there are many members here with great knowledge and good education in this forum. Please enlighten us, share with us your thoughts, your opinions... This is about our future and I would like people to voice their concerns over what we should, or could do to prepare for this.

LASTLY: Please note that I’m writing this article because it’s just a complex subject about an “uncharted territory” that we may have to go through.



Sources Cited:
  1. Gates, Bill; Microsoft Corporation Co-founder. From his book: The Road Ahead. Penguin Books, 1996.
 

Yam Digger

Well-Known Member
Considering that the rideshare industry has never experienced a recession, it’s difficult to predict how it will affect pax use of rideshare.

But there is one thing I can predict with absolute certainty: As people lose their jobs and become desperate to pay their bills, it’s a given that many of them will turn to the Gig Economy.

You think there’s too many ants 🐜 on the road now? Wait till the recession roles into town and watch everybody and his dog become a rideshare driver. One shorty per hour will actually start looking good!
 

Tom Oldman

Well-Known Member
Author
  • Thread Starter Thread Starter
  • #5
Considering that the rideshare industry has never experienced a recession, it’s difficult to predict how it will affect pax use of rideshare.

But there is one thing I can predict with absolute certainty: As people lose their jobs and become desperate to pay their bills, it’s a given that many of them will turn to the Gig Economy.

You think there’s too many ants 🐜 on the road now? Wait till the recession roles into town and watch everybody and his dog become a rideshare driver. One shorty per hour will actually start looking good!
Well said.
Then, the golden rule of supply and demand will set in. A large supply of driver will certainly push down the driver's pay even further.
 

U/L guy

Well-Known Member
The real question to ask is will Uber and lyft survive a bad economy, if there losing there shirts now how do you think they’ll survive with less income generated. They can increase the drivers by 10 fold but if they don’t have paying pax’s to use the service they’ll go bankrupt. There not far from bankruptcy now.
 

jaxbeachrides

Well-Known Member
I can tell you from the taxi days that ride demand is a leading indicator.

It really goes down leading into a recession, and quickly recovers as people who lost jobs start selling their cars or not buying cars they dont need and buy cheap rides instead.

What is not recession proof is saturation. You will have twice the drivers for several years once unemployment spikes. And they wont care how little they make because they're just out there networking, looking for other jobs, or just need to fill their gas tank for the day.

It will be interesting to say the least. Uber will benefit from a recession in the long term because it works towards their goal of people not owning cars.

Drivers will lose just because they almost always do. This has been going on long before uber.
 

Tom Oldman

Well-Known Member
Author
  • Thread Starter Thread Starter
  • #9
I can tell you from the taxi days that ride demand is a leading indicator.

It really goes down leading into a recession, and quickly recovers as people who lost jobs start selling their cars or not buying cars they dont need and buy cheap rides instead.

What is not recession proof is saturation. You will have twice the drivers for several years once unemployment spikes. And they wont care how little they make because they're just out there networking, looking for other jobs, or just need to fill their gas tank for the day.

It will be interesting to say the least. Uber will benefit from a recession in the long term because it works towards their goal of people not owning cars.

Drivers will lose just because they almost always do. This has been going on long before uber.
Well said, every word of it.
And thank you for sharing the taxi ewxperience in a recession. There is no doubt in mind that the saturation of drivers will happen as you wrote.
Both companies area already hiring drivers aggressively. They understand the very economic basics of supply and demand. Saturating the market with drivers is reducing driver's pay, as it happened in Los Angeles.
 

Listentoreality

New Member
I’ll help you in the simplest way. Recession or no recession, Uber/Lyft won’t survive. They are selling $3 bills for $1 and hoping to make it up in volume, which is an economic falsity. The business press has repeatedly pumped them up. As Uber/Lyft racked up thousands of complaints ranging from rape to robbery by drivers, suddenly they’d flood the market with news about FLYING CARS! They are currently doing that right now because of the botched IPO. FLYING CARS coming soon! But..... the facade is cracking. They need to show growth and profit now that they are beholden to stock holders. Neither is going to happen unless they do one of two things, one of which is the only that can work in the long run. Cut drivers pay even more is one way. However, they will lose drivers completely so that’s a no go on the long run because they will never get to driverless cars in time. The second option is to raise the prices by at least 40% to bring them even with market level rates(the actual price of running a transportation company). They will take an even larger cut from the drivers so there pay won’t rise, but Uber’s profits will. This of course is not what the customers want as the leading reason people use Uber is because it’s cheaper. You can try and defend its convenience but the brand has no loyalty. Whoever is cheapest wins. It’s been proven, look it up.

Also, STOP CALLING THEM RIDESHARE. Check the reports of how many rides are shared, it’s about 2%. It’s the word they came up with when UberTaxi was running into regulatory issues. The amount of energy and time used to talk about these companies is ludicrous. They are ILLEGAL TAXIS. Most major insurance carriers don’t cover them. Commercial insurance companies don’t cover them because they are not recognized as a legal entity of transportation. Only in SOME of the US and Canada are they moderately successful at buying off(lobbying) state governments to let them undermine the legal transportation industry. They are detrimental to all large cities. They cause more traffic and deaths. The drivers are not vetted. They are fully regulated or outright banned in most of the world.
 

U/L guy

Well-Known Member
I’ll help you in the simplest way. Recession or no recession, Uber/Lyft won’t survive. They are selling $3 bills for $1 and hoping to make it up in volume, which is an economic falsity. The business press has repeatedly pumped them up. As Uber/Lyft racked up thousands of complaints ranging from rape to robbery by drivers, suddenly they’d flood the market with news about FLYING CARS! They are currently doing that right now because of the botched IPO. FLYING CARS coming soon! But..... the facade is cracking. They need to show growth and profit now that they are beholden to stock holders. Neither is going to happen unless they do one of two things, one of which is the only that can work in the long run. Cut drivers pay even more is one way. However, they will lose drivers completely so that’s a no go on the long run because they will never get to driverless cars in time. The second option is to raise the prices by at least 40% to bring them even with market level rates(the actual price of running a transportation company). They will take an even larger cut from the drivers so there pay won’t rise, but Uber’s profits will. This of course is not what the customers want as the leading reason people use Uber is because it’s cheaper. You can try and defend its convenience but the brand has no loyalty. Whoever is cheapest wins. It’s been proven, look it up.

Also, STOP CALLING THEM RIDESHARE. Check the reports of how many rides are shared, it’s about 2%. It’s the word they came up with when UberTaxi was running into regulatory issues. The amount of energy and time used to talk about these companies is ludicrous. They are ILLEGAL TAXIS. Most major insurance carriers don’t cover them. Commercial insurance companies don’t cover them because they are not recognized as a legal entity of transportation. Only in SOME of the US and Canada are they moderately successful at buying off(lobbying) state governments to let them undermine the legal transportation industry. They are detrimental to all large cities. They cause more traffic and deaths. The drivers are not vetted. They are fully regulated or outright banned in most of the world.
Millennials and those who don’t have a car are Uber’s and lyft’s primary source of income. All other riders use U/L when going out and tourist flying in are secondary sources, this is not sustainable in the long run.
The only way for U/L can survive is to cap the number of drivers in a market, stop wasting money on SDCs and flying cars and focus on their original business model.
Gas prices are going to rise, society is aging faster then young people are born, this will help sustain rideshare companies. Uber and lyft are going to have local competition in the near future, these companies will be the new transportation services that’ll put U/L out of business.
 

Listentoreality

New Member
Millions of millennials have cars. The major car producers are moving towards full electric/hybrid which will be a huge boom for them. When the millennials start coming out of debt they will buy vehicles just like every other generation. U/L will collapse but the technology will stay. It will be for hailing regulated licensed taxis, which exist solely as a go between to Mass Transit, not a permanent sole rider chauffeur service.
 

ntcindetroit

Well-Known Member
Since rideshare is not an organic product, it's highly speculative trying to analyze it with any business theory or model. If anyone is interested to take a peek of the future, she or he can simply review how Uber fares in the Republic of China or how it got out of communist China. Two regions outside US jurisdiction have no Lyft but some vestige of Uber operation.
 

TwoFiddyMile

Well-Known Member
Taxis barely survived recessions. I remember in 1990 or 1991 I was renting a cab usually on night shift out of the South End of Boston. Many nights I barely turned a profit. It was a bad recession, and one of the first things to go by the wayside in a recession is supplemental spending like non-essential Transportation. People ride the busses and Subways during a recession.
Post automatically merged:

and furthermore if you think there are a lot of ants now, just wait till the recession. After the layoffs the entire pool of blood is going to turn their car into an Uber Lyft car. LOL!
 

Fuzzyelvis

Well-Known Member
financial-crisis-544944_1280.jpg


June 9, 2019

Last week I created a thread here on UberPeople.net, that asked the question "Is Rideshare Recession Proof?"

https://uberpeople.net/threads/is-rideshare-recession-proof.332231/

It was rather a question than a statement and I asked for your opinion and help to better navigate the path through the troubled waters ahead, just in case. I was amazed by the depth of the knowledge and intuition of my fellow drivers. Thanks to your participation, this -Part 2- is inspired by your responses. I just summarized what I received from you..

Now again, I’m asking you to express your opinions because this economy of our has its own will and moods. Rideshare has seen only the pretty face of this moody $20 trillion monster during the longest expansion in recent history. We would not know the Rideshares’ reaction to a recession. There is no precedent.

I gather from your inputs that we need to look at two main factors; the Stage which would be an economy in recession and three Actors; the rideshare companies, the rideshare drivers and rideshare riders.

THE STAGE: This would be the economy in a hypothetical recession; will it happen? Most probably yes. When? We just don't know. What about those Harvard educated analysts and bankers? Those financial experts? Sorry, they mostly just talk into their own pockets. Worst of all are those characters on CNBC’s Fast Money, Mad Money, “This money” and “That money.” Usually they leave you “Without Money.” At this point, we just stick to the golden two letters: "IF.” What if recession occurs. It's just the nature and mechanism of our capitalist, consumer-oriented system: Boom and Bust, Expansion and Contraction, Consumer Sentiment. Presently, we are on the longest economic expansion in modern times and hopefully it stays that way. Our Stage is just a theoretical scenario.

ACTOR ONE: Rideshare companies. The shares of the Uber and Lyft are mostly owned institutionally, which means investment bankers, hedge funds, mutual funds and of course offshore corps belonging to God knows who. About a decade ago, we learned and we were told; those financial institutions are "Too Big to Fail" and you and I must pay for them to survive. They will keep their “pet projects” such as Uber and Lyft alive even if they lose most of their stock value. They will stay as “Actors” in this play and someday, they will bring out the AV (Autonomous Vehicles) and let the shareholders walk into the promised land of profits and more profits. Hallelujah!

ACTOR(S) TWO: Rideshare drivers, you and I. The rideshare companies will water down our pay to the level of janitorial, agricultural and other low wage occupations, just to bridge the time until they can launch a successful AV platform. This will happen. There have been always those who don't mind taking their lives down a notch, just above slavery. Taking backbreaking jobs such as agricultural, farm jobs, mopping floors, boss boy and other low wage jobs. There's always going to be folks who can survive with very little income. Those of us who are working to pay a mortgage, a car payment, and manage a middle-class life will struggle, unfortunately.

ACTOR THREE: The riders. They will have less money to spend, and they will still use rideshare as a staple service such as to and from work, but Pool rides will be the new norm. Those that cannot even afford Pool/Shared rides on a regular basis, may opt for the city bus and other forms of public transportation. Some may even ride bikes, such as one member here mentioned. Unfortunately, public transportation isn’t very advanced in this beloved country of ours but that could change and cheap rideshare may fill the gap. One thing is certain; The discretionary rides such as barhopping, dining out and other unnecessary rides will be reduced and with it also goes away those nice fat tips.

UNEXPECTED RESULT: One more factor in all of this is the revolution of car ownership. There are tons of reports, statistics and editorial from highly credited sources that say rideshare will impact the car ownership and transportation overall. It will reshape the car ownership landscape but how and when, it is unclear. Each expert has his/her own take on this subject. I found a quote by Bill Gates which is worth sharing: “We tend to overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don't let yourself be lulled into inaction.” (1.)

Please share your thoughts. This rideshare business of ours hasn’t seen a recession yet and we all hope that it won’t happen anytime soon. Again, there are many members here with great knowledge and good education in this forum. Please enlighten us, share with us your thoughts, your opinions... This is about our future and I would like people to voice their concerns over what we should, or could do to prepare for this.

LASTLY: Please note that I’m writing this article because it’s just a complex subject about an “uncharted territory” that we may have to go through.



Sources Cited:
  1. Gates, Bill; Microsoft Corporation Co-founder. From his book: The Road Ahead. Penguin Books, 1996.
You lost me at "nice fat tips."
 

Tom Oldman

Well-Known Member
Author
  • Thread Starter Thread Starter
  • #20
Taxis barely survived recessions. I remember in 1990 or 1991 I was renting a cab usually on night shift out of the South End of Boston. Many nights I barely turned a profit. It was a bad recession, and one of the first things to go by the wayside in a recession is supplemental spending like non-essential Transportation. People ride the busses and Subways during a recession.
Post automatically merged:

and furthermore if you think there are a lot of ants now, just wait till the recession. After the layoffs the entire pool of blood is going to turn their car into an Uber Lyft car. LOL!
Well said and thank you for sharing the taxi experience during the 90-91 recession. That economic contraction started in late 1988 into 89 and hit the bottom and showed its ugly face in early 90's.

I couldn't agree more with you in regards to ants flooding the streets. The U/L are already hiring drivers aggressively as they follow the simple "supply and demand" rule; more supply of drivers will reduce the driver's pay. There are always those folks from everywhere and anywhere who can live with very little as they work in farms, at janitorial jobs, and other minimum wage jobs. U/L know that they need to cut on drivers expenses and they are intentionally targeting and inviting those folks and they will replace us in a recession or prosperity. I'm witnessing it right now in Southern California.
 
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