Why Uber Keeps Its Driver Pay Rate So Low


Why Uber Keeps Its Driver Pay Rate So Low

Mike Novogratz, principal and director of investment giant Fortress Investments, offered an amazing anecdote about Uber in an upcoming podcast.

His comment appears to be from Uber CFO Brent Callinicos, who had previously worked at Google, and concerns why, exactly, Uber pays its drivers such a low rate. Novogratz did not mention Callinicos by name, but the anecdote was set during a period in which he was CFO.

Novogratz began his comment by noting that regardless of whether America has a Republican or Democratic administration, the percentage of earnings going to capital, versus labour, has decreased over the last 35 years.

He remarked "I had an interesting meeting with the CFO of Uber [...] and they were raising capital. [They] had started their [fund-raising] roadshow at twenty five billion dollars valuation, and a week later the valuation had jumped to forty."

"And I asked [the CFO], how do you justify the valuation? So he took me through their business model, and roughly, employees – drivers – get between twenty and twenty five per cent of the fare. And the thought was if we could raise that to twenty five to thirty per cent [...] our margins would go up, and if you look at the growth and you add that extra, pure margin, we make a lot more money and we justify this forty billion dollar valuation."

"And I asked a cheeky question," said Novogratz. "'Well, listen, you've got happy employees, you've got happy customers, you've got happy shareholders. The holy triumvirate are all really excited about your company. Why are you going to risk that and push the employees' salary down by five per cent?'"

Without missing a beat, Callinicoss simply replied: “Because we can.”

The remark goes to illustrate just how hard-nosed Uber is, essentially waging wars on government, tax cab owner, tax cab drivers and its biggest investor, Google. All at the same time.

Read this next:

Must Read