Goodbye, subsidized services
Don’t blame investors for end of golden era of cheap fares
A few years ago, while on a work trip in Los Angeles, I hailed an Uber for a crosstown ride during rush hour. I knew it would be a long trip, and I steeled myself to fork over $60 or $70.
Instead, the app spit out a price that made my jaw drop: $16.
Experiences like these were common during the golden era of the Millennial Lifestyle Subsidy, which is what I like to call the period from roughly 2012 through early 2020, when many of the daily activities of big-city 20- and 30-somethings were being quietly underwritten by Silicon Valley venture capitalists.
For years, these subsidies allowed us to live Balenciaga lifestyles on Banana Republic budgets. Collectively, we took millions of cheap Uber and Lyft rides, shuttling ourselves around like bourgeoisie royalty while splitting the bill with those companies’ investors.
We plunged MoviePass into bankruptcy by taking advantage of its $9.95-a-month, all-you-can-watch movie ticket deal, and took so many subsidized spin classes that ClassPass was forced to cancel its $99-a-month unlimited plan. We filled graveyards with the carcasses of food delivery startups — Maple, Sprig, SpoonRocket, Munchery — just by accepting their offers of underpriced gourmet meals.
These companies’ investors didn’t set out to bankroll our decadence. They were just trying to get traction for their startups, all of which needed to attract customers quickly to establish a dominant market position. So they flooded these companies with cash, which often got passed on to users in the form of artificially low prices and generous incentives.
But the pandemic seems to have emptied what was left of the bargain bin. The average Uber and Lyft ride costs 40% more than it did a year ago, according to Rakuten Intelligence, and food delivery apps like DoorDash and Grubhub have been steadily increasing their fees over the past year. The average daily rate of an Airbnb rental increased 35% in the first quarter of 2021, compared with the same quarter the year before, according to the company’s financial filings.
Part of what’s happening is that as demand for these services soars, companies that once had to compete for customers are now dealing with an overabundance of them. Uber and Lyft have been struggling with a driver shortage, and Airbnb rates reflect surging demand for summer getaways and a shortage of available listings.
I’ll confess that I took part in this subsidized economy for years. I got my laundry delivered by Washio, my house cleaned by Homejoy and my car valet-parked by Luxe — all startups that promised cheap, revolutionary on-demand services but shut down after failing to turn a profit.
But it’s hard to fault these investors for wanting their companies to turn a profit. And, at a broader level, it’s probably good to find more efficient uses for capital than giving discounts to affluent urbanites.
And while it’s painful to pay subsidy-free prices for our extravagances, there’s also a certain justice to it. Hiring a private driver to shuttle you across Los Angeles during rush hour should cost more than $16.
The fact that some of these services are no longer easily affordable may seem like a worrying development, but maybe it’s a sign of progress.