The Reason Uber and Lyft Are Accusing Each Other of Sabotage
Over the weekend, hundreds of thousands of people attended Outside Lands, a music festival in San Francisco’s Golden Gate Park, to purchase $9 sweet potato tots and maybe even to listen to some live music. With so many people involved, getting to the park was a hassle, and many turned to Uber, the ride-requesting service. With the service’s surge pricing in effect, one rider ended up paying $470 for a one-way trip—well above $275, the cost of a three-day ticket to the festival.
Uber, which was launched in 2010, has a history of making the news for its sometimes outrageous prices, but that hasn’t stopped it from growing rapidly.
Bad publicity continued this week. On Monday, CNN reported that Lyft, another ride service, claims that Uber employees have been requesting and then canceling rides on its service in an effort to sap its resources and drive up its prices. Coming from a competitor, this accusation deserves some scrutiny, but it’s worth noting that Uber has already acknowledged that it employed a similar tactic against Gett, yet another ride service, last fall. (The bulk of the alleged 5,560 Lyft cancellations are said to have occurred after Uber’s apology for its behavior toward Gett.)
Uber’s response was venomous. The company called Lyft’s claims “baseless and simply untrue,” accused Lyft of the same cancellation tactics, and then went on to suggest that Lyft’s behavior was “somewhat expected,” given its fear of being acquired by Uber.
This back-and-forth is only one short chapter of an ongoing saga in which the companies have tried to undercut and undermine each other. While it’s not clear whose accusations are valid, it’s safe to assume that both companies are to some extent telling the truth, and to some extent fudging it. Why, then, do Uber and Lyft keep acting so unwholesomely in public without fear of losing customers?
The answer, says Michael Norton, a professor at Harvard Business School and the co-author of the book Happy Money, could be that people aren’t good at understanding why they spend their money on certain services. Consumers might claim that they prefer to support companies with upstanding morals—something that Norton says is especially true of millennials, the target demographic of Uber and Lyft—but these preferences have “a very weak influence on actual behavior,” he says.
The way we process information only confuses us further: We tend to be good at remembering information, but not its source. “You can put information out and at the time, people will remember, ‘Company X said that,’ but a week later, what they may have forgotten is exactly who said [it], and just remember the information,” Norton says. This effect, which has been observed even when a source is shown to be disreputable, explains at least in part why Uber and Lyft can get away with the accusations they lob at each other.
But this industry seems like it would be different from others, as riders can start using less vitriolic alternatives simply by installing a new app. Norton says that's not the case. “Even when technical switching costs are very low, psychological switching costs can still be very high,” he says. He points to the example of Yahoo.com, which remained the homepage of millions for perhaps a decade, simply because it was among the first of such pages available. Uber and Lyft, Norton says, are well aware of this staying power.
The companies' open skirmishes might even be actively helping business. “Most Americans have not heard of Uber at all, and it's not in their city,” Norton says. “If you think about the ramifications for the market at large, being in the news is probably better than not being in the news…even if they’re fighting with each other.” He likens the conflict to the cola wars of the 1980s, which subtly and successfully changed the question of thirsty consumers from What should I drink? to Which soda should I buy?
Ultimately, all this bile might be what’s pushing us away from How should I get there?, and pushing us toward Which app should I use?
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