The world probably woke up on Monday to the shock of the unnecessary hostage siege in Sydney. Having grown up in Sydney, I know that corner very well. The literal center of Sydney, from which all measures were historically taken is a stone-throw from the Lindt Cafe.
I have a friend who works in that building where the Lindt Cafe is. My aunt works in a neighboring building. All, I am pleased were strongly encouraged to leave in an orderly fashion, and everyone is safe. But then the next day, every news agency reported, including Sydney’s leading newspaper, The Sydney Morning Herald, normally known for its conservative and accurate reporting, started reporting how Uber, the car-sharing upstart increased their rates immediately after the siege began to 4.0X the normal rate, with a minimal fare of AU$100.
More sensationalist news outlets, such as New York’s gawker.com led with headlines such as Uber Turned on Surge Pricing for People Fleeing Sydney Hostage Scene. Apart from the fact that this is irresponsible reporting, it is an outright lie. Uber didn’t “turn on” surge pricing, surge pricing is part of the “features” you get when signing up for Uber! As the demand for Uber cars and drivers go up, so does the price to distinguish those who are willing to pay more for their ride from those who are not. This is a known fact when we sign up for Uber!
Uber (and many start-ups like it), rely on technologies we now call Big Data. Big Data is what we all used to call artificial intelligence (AI). Is it perfect? No it is not. The system was designed specifically to increase the prices as demand increases. Perhaps Uber can provide gentler notices about the increase in demand, leading to the increase in price.
But ultimately, it is simple market dynamics. Every child who studies economics (or as it is sometimes called in Australia, commerce) in high school learns about Adam Smith, and John Keynes. In fact, if your child doesn’t learn that in the first term of school, call the headmaster/mistress! I still have the text book, by J.R. Chapman from which I learned this in my home. An increase in demand supports an increase in price, to bring market equilibrium.
Unforeseen acts of God, and heinous, cowardice acts of terrorism cannot be effectively properly programmed into Big Data.
Now, I’m not defending Uber. I don’t like surge pricing either. But I understand it. I live in a part of New York City, where I have to admit, I would at times pay a premium to get into a clean car to go where I need to go, especially in the rain. But I can understand why people can get angry. They feel that companies like Uber are punishing or abusing them.
Regretfully, I doubt there is a happy middle ground. As a society, we choose to live in a modern market economy. With that does come discrimination on the basis of available resources.
This will probably be my last blog post for 2014. I wish all our Clients, our prospects, and our colleagues the happiest, safest and the most peaceful holiday season, and a wonderful new year.