Mere days after the world stood in awe of the 5-year old startup hailing from San Fransisco for being valued at $41.2bn by its investors, Uber managed not only to shoot itself in its feet, it also exposed one of the many short comings of its business model. In what the company calls a model built on capitalism, the world called an absolute tragedy this Monday and showed no restraint in its mocking condemnation. It seems I was right to have my skeptical hat on after all.
One of Uber's many pricing features includes an adjustable fare rate that is allegedly priced on supply and demand; namely the supply of Uber drivers in a given area or region at given span of time, and also the demand for Uber rides in that specific area at the corresponding time frame. Great, a market-based model that adjusts fare rates based on equilibrium, fair enough. Well, it seemed like it was all smiles until this past Monday when the awful act of terrorism sent shortwaves across Sydney, Australia.
We all knew what transpired on the afternoon of Monday 15 December 2014 when an Iran-born Muslim radical and a self-declared cleric walked into an uptown city cafe with concealed firearms and locked up the place, holding more than 20 innocent civilians as hostage as live collateral. The dramatic siege eventually ended in the wee hours of Tuesday but left 3 dead, including the terrorist himself. Australia might still be reeling from those shocking events while reassessing its laws and policies on granting asylum, but on the corporate side Uber will have alot to reflect on; patching up the damage to its public image stemming from its PR snafu will take time and effort.
So what exactly did Uber screw up? Well, the following snapshot should paint a thousand words in the aforementioned context.
For the correct intents and purposes, Uber may have indeed meant well by raising fares during the immediacy of the situation; because it wasn't a qualitative event that triggered the pricing surge but a quantitative one which had tripped a few switches embedded inside Uber's pricing mechanism. Capitalism is mostly a good thing in substance, but not always in form as grotesquely exemplified herein.
Uber's pricing structure may have been automated but were its tweets also sent out by robots? One has his deep reservations. What the world was essentially viewing Uber when it sent out those tweets was in polar opposite to what the company actually wanted to convey: "Uber is an opportunist that wants to profit handsomely in crises as emotional as this", as opposed to say, "Uber wants to help evacuate the area by pumping in more drivers through a natural incentive."
In short, it was terrible handling of a situation mostly through a PR mess up, probably by an intern behind its Twitter desk or, by a bloke smoking too much weed after a heavy bacon-laden breakfast. If its price surge mechanism was previously already controversial, this debacle makes it even more so. 40 minutes was also way too long for a resolution of a very obvious mistake. 10 minutes would have been acceptable, but 40 minutes is atrocious for a technologically savvy firm.
I'm guessing the tinkerberries at Uber are in the process of making some changes to their pricing framework, and ensured that the person that tweeted without thinking was fired. So one wonders if a $40bn firm would actually make such ludicrous blunders? We'll see.