Uber and the Nudge

A Transparency Tale?

Businesses have long studied human behavior in order to capitalize on it. The growing gig economy is no different, spurring many employers to use behavioral science to deepen their influence on workers. A case in point is the ride-hailing giant Uber. In 2017, the company was criticized in a lengthy expose by the New York Times 1 for using psychological tricks to encourage drivers to put in more hours.

While Uber has since launched a half-billion-dollar marketing campaign to revamp its reputation, its use of behavioral economics hints at the bigger picture: how data is being used (often discretely) to influence behavior in the modern workplace.

Nudging in the Gig Economy

Uber is often seen as synonymous with the ‘gig economy,’ in which temporary jobs are completed by independent contractors instead of full-time employees. This allows Uber to minimize labor costs (such as overtime, health insurance and worker’s compensation) as drivers are considered entrepreneurs in business for themselves.

While this gives contractors greater freedom to decide their own work hours — the words autonomy, freedom and flexibility are frequently emphasized in gig work — it also means Uber cannot demand drivers show up whenever and wherever it wants, which is at odds with the company’s business model to serve customers seamlessly.

To manage and exert some form of control over drivers, Uber started nudging them. Nudge is a term coined by behavioral economists Richard Thaler and Cass Sunstein in their book Nudge: Improving Decisions about Health, Wealth and Happiness. Briefly, behavioral economics combines knowledge from psychology, economics and neuroscience to understand how humans make decisions and therefore, influence our behavior. Nudges are psychological tools designed to prod us towards choosing certain options.

Since Nudge was published, many companies have created in-house nudge units to improve their productivity, performance, sales and products. A few examples are the Sustainable Energy Authority of Ireland, or the World Bank’s Mind Behavior and Development unit, or eMBeD 2. While many organizations have applied behavioral economics to nudge or encourage employees towards mutually beneficial goals, such as reducing work-related stress or helping them save for retirement, Uber nudged drivers for its own benefit, not theirs.

Gamification Tactics

Uber presents itself as the functional equivalent of taxi service, but it is actually a digital platform and go-between connecting riders to drivers. As such, it avoids many regulatory requirements and labor protections that apply to taxis, also giving it room to experiment with nudges those protections would prohibit.

Uber used several nudges favored by the gaming industry, including creating goals and offering rewards. Psychologists and video game designers know that concrete goals motivate people to complete tasks, even when the goal itself is impossible. This ties into the Ludic Loop 3, when someone repeatedly aims for something just out of reach in exchange for the occasional reward (think slot machines, Candy Crush, Tetris and Tinder). In this case, Uber used its DriverApp to nudge drivers with the clear intent to get more driving hours worked.

Let’s say a driver sets a goal of earning $120 a day. Once his goal is reached, he calls it a day. But Uber’s app nudged drivers to push the goal further with text messages like ‘Are you sure you want to go offline?’ When it gave drivers the options: Go Offline or Keep Driving, it was the second option that was highlighted and set as the default. This tempted drivers to extend their goals, and is Ludic Loop thinking: ‘Just one more fare then I’ll log off and go home.’ As the authors of ‘How Uber and other digital platforms could trick us using behavioral science – unless we act fast,’ 4 put it, ‘Drivers end up like gamblers at a casino, urged to play just a little longer despite the odds.’

Uber also designed its app to stimulate competition, another gaming tactic. The app showed drivers the number of trips they completed that week, they money they earned, and their overall rating from passengers. It also offered badges for achievements, such as Above and Beyond (showing a cartoon of a rocket blasting off), or Excellent Service (illustrated by a shiny diamond), symbolic rewards with no monetary value, though they did motivate drivers to work harder. Though most Uber drivers treat driving as supplementary income, averaging $8.55/hour 5, 25% for each ride, so every extra 100 driver hours worked brings them over $2000 extra income - a good return for posting valueless reward badges.

Finally, Uber used a method similar to Netflix’s algorithm that automatically loads the next program. Uber sent drivers the next fare opportunity before the current ride was over, a strategy that plays into the principle of Regret Avoidance 6: that we anticipate regret in taking new actions (that could potentially lead to bad outcomes) than none at all. Meaning, inaction becomes a deciding factor: the driver does nothing and takes on the next fare.

The Science of Nudge

Nudging is actually nothing new and there are countless examples: from a metro station 7 in Hamburg, Germany, where the stairs were designed to resemble a running track, encouraging commuters to take them, to mobile phone notifications urging immediate action. One of Thaler’s favorite nudges was when Amsterdam’s Schiphol Airport placed a small decal of a fly 8 in the men’s urinals, nudging users to improve their aim and reduce splash back.

The power of a nudge is that it can go either way. It can encourage positive behavior, such as when a company vending machine places fresh fruit at eye level (while candy bars require bending down) aiming to improve healthy eating habits among its employees. Or negative behavior, such as when supermarkets place candy at child’s eye level to boost sales, or McDonalds’ notorious supersize policy.

What’s most problematic with nudges is we are largely unaware they are being used to shape our decisions. With the proliferation of online data and businesses collecting it, nudging has become increasingly effective and pervasive. In 2015, Jeff Bezos told shareholders Amazon sends out 70 million plus nudges a week through its Selling Coach program 9.

In Nudge, Thaler and Sunstein wrote that all nudges should be transparent: they should never mislead, always allow individuals to opt out and should only be applied when they improve someone’s welfare. In other words, and Thaler reiterated this in a New York Times op-ed 10, companies should always nudge for the good. Nudging for the good happens when the interests of business and employees are aligned — like improving job satisfaction, as satisfied employees are both motivated and perform better.

As Uber illustrates, workers can be unknowingly manipulated or nudged for the bad, making it the nudger and his/her intent that really determines outcomes. Uber responded to the New York Times 11 that yes, it had manipulated drivers, but claimed this benefitted both customers (with faster pick up times) and drivers (who experienced less down time between fares). However, by nudging more drivers onto the road, Uber profited at the expense of its drivers’ wellbeing in a simple case of supply and demand: the larger supply of drivers pushed fare prices down, forcing drivers to work longer for the same money.

As behavioral economics gains traction in the workplace, a crucial question going forward is how to use this knowledge as a helpful tool and unlike Uber, establish ethical rules for its use.

Uber Today: Is Change in the Air?

For several years, with 2017 being the worst, Uber exemplified unrestrained corporate misbehavior, experiencing a string of controversies, such as allegations of sexual harassment to collecting fares during a taxi strike.

In 2017, Uber’s current CEO Dara Khosrowshahi replaced Uber co-founder Travis Kalanick, who established the company’s bold and reckless reputation. Big on integrity, Khosrowshahi immediately updated the company’s mission statement to: ‘We Do the Right Thing. Period.’

After Kalanick left, Uber launched a ‘180 Days of Change’ 12 campaign to improve relationships with its drivers, adding a tipping option to its app, paid waiting time and 24/7 phone support. The company also overhauled its hiring process for greater inclusivity, and as of 2018, women made of 38% of Uber’s global workforce 13.

So, how does Uber stand today with nudging? The company did not respond to requests for an interview. But actions often speak louder than words and Uber’s history of skirting hurdles that impinge on its business model speaks loudest when it comes to how it treats drivers.

For example, Uber has repeatedly fought against reclassifying contract workers as employees. In London, former Uber drivers Yaseen Aslam and James Farrar won a 2016 court case 14 classifying them as employees. Uber appealed and the final ruling is only expected this month.

Last January, California enacted AB5, a law changing how contract workers are classified. Uber responded by making changes within its app, allowing drivers to set their own rates, though many critics claim it only gave the illusion of autonomy and was only a public relation ploy. Uber has since raised $48 million towards a proposed November ballot initiative exempting the company from AB5 15.

Furthermore, the App Drivers and Couriers Union (ADCU) a UK registered trade union, is currently taking legal action against Uber in Amsterdam (where its European headquarters are located), charging Uber with unfair algorithmic management and demanding transparency.

To paraphrase the Guardian newspaper, despite making promises to do the right thing, Uber’s business model is still exploitative 16. In 2019, Uber stated in legal documents 17 that if it is forced to start classifying drivers as employees, it will have to ‘fundamentally change’ its business model. This is what worries many in the cab industry - that whether Uber changes or not, the company is too big to regulate, yet also too big to fail. On 28 September, Uber won the right to continue operating in London 18 after being banned twice by the city’s transport authority for putting passengers at risk. As London is Uber’s largest European market, it’s a big win. The same can’t be said yet for Aslam and Farrar.

In the meantime, since COVID-19 hit, Uber has laid off 14% of its workforce. The pandemic is a game changer for the gig industry, highlighting how gig workers lack access to many protections needed during a time of crisis. An Uber press release 19 about enhancing the quality of independent work points to this, stating: ‘Uber’s platform can be a bridge to economic recovery if we establish a better standard of work for all who need it. The opportunity is now, and the responsibility is ours. The world has changed, and we must change with it.’

If Uber is sincere, it will finally offer what drivers want: flexibility and autonomy coupled with greater benefits and protections.

Picture of Dara Colwell

Dara Colwell

Dara Colwell is a freelance journalist, content editor, and writing instructor with 20 years’ experience writing about culture, the environment, politics, relationships, and the arts. She teaches professional writing and storytelling techniques at the University of Groningen, where she has developed the curriculum for several classes. She seeks to provide insightful content with an observant eye.


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