I consider Uber and its competitors to be among the most potentially exciting innovations of the past few years (at least, of the innovations that I know of).  In support of this contention, let me offer a couple of personal anecdotes.

First, my wife and I were planning to buy a second car this summer.  But we decided to experiment with using Uber instead.  So far, this is going so well that we don’t think we will need a second car.  This strikes me as potentially huge, at least if a sufficient number of other families find themselves similarly situated.  Extrapolating from our experience, its not too hard to imagine a future in which individual ownership of cars becomes rare, with most of us instead relying on services like Uber.

Second, in taking Uber home from work today, my wife asked her Uber driver how much he makes.  This is only one unverified anecdote, of course; but the driver reported that he makes approximately $50 an hour when driving in San Francisco and $30 an hour when driving in Oakland.  (If you are wondering why any Uber drivers drive in Oakland at all, in light of this disparity, see below).  Again, this strikes me as potentially huge.

It costs us about $12 to Uber to our house in the Oakland hills from the UC Berkeley campus, or about $25 to Uber between downtown San Francisco and our house.  This is significantly cheaper for us than it would cost to take a traditional taxi.

How then is it possible for Uber drivers to make so much and yet for Uber to remain so affordable for passengers? 

The answer comes from high utilization.  When we call a taxi, the taxi driver has to get to our house before the driver can start charging us, and then the driver has to get from wherever we are dropped off to the location of another paying customer before the driver can start charging again.  In contrast, when we request an Uber, we quickly end up with a driver who just happened to be nearby.  Presumably, the Uber driver can make $30 an hour driving in Oakland because the driver can get 2-3 fares equivalent to driving between the Oakland hills and the UC Berkeley campus per hour.  My guess is that a traditional taxi driver would be very unlikely to get 2-3 such fares per hour.

And this answers the question of why Uber drivers drive in Oakland at all, rather than just remaining in San Francisco where they can earn more per hour.  Presumably, many of the Uber drivers that find themselves near our house when we request an Uber got there by dropping off passengers that were picked up in San Francisco or elsewhere.

Ten years ago, if you had asked me to list the benefits of being truly wealthy, as opposed to merely well off, I might have placed having a personal chauffer near the top of that list.  Today, Uber and its competitors offer most of the benefits of having a personal chauffer, but on the cheap.