A “network-wide system failure” in the CN Rail system left thousands of commuters forsaken in Toronto’s core on Tuesday afternoon. Metrolinx stopped its trains. GO trains and UP Express trains were held. Marooned travellers faced limited options. Walk home. Stroll to the nearest bar. Try to hail a taxi. Use a ride-share program.
For those who opted for the last choice, it was then that insult was added to injury. Uber UBER-N had surge pricing in effect. Irate commuters called into radio stations to report that a ride from Union Station to Scarborough was about $140. Outraged, incredulous voices appeared on social media to express their indignation. It was not the first time we’ve heard such a chorus of discontent. It happens every time there is a major weather or commuting infrastructure delay.
Only a few days earlier, commuters in New York City were lamenting surge pricing during a time of heavy rain and flooding. Ten-minute rides were costing US$80 and a trip to JFK airport was said to cost $200.
In both instances, it was a case of that thing that you know always happens, happening again.
The theory behind surge pricing is simple. It is a way of increasing supply to meet demand. When bad weather or a “special event” (CN Rail system outage) cause demand to rise, Uber ramps up prices to incentivize drivers to hit the road. According to Uber, “In these cases of very high demand, prices may increase to help ensure that those who need a ride can get one. This system is called surge pricing, and it lets the Uber app continue to be a reliable choice.”
It’s unlikely that anyone who paid $140 to travel from Union Station to Scarborough used the phrase “reliable choice” to describe their journey.
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Surge pricing has a long and glorious history. The first recorded incidence of what we now know as surge pricing happened in Rome in the 1st century BCE. Marcus Licinius Crassus, the richest man in Rome, enlisted 500 slaves to form the world’s first fire brigade. Crassus’s firefighters would arrive at the scene of a blaze where the demand for firefighters had increased because of a fire. They would offer to put it out if the owner sold the property to Crassus at a big reduction. If the owner refused, they would allow the “special event” (the fire) to continue, and as it did the price Crassus was willing to pay would drop as the demand for the charred building dropped. Once the property had burned to the ground, Crassus’s men would move on to the adjoining property and offer to buy it, pointing out to its owner that it was about to burn down. The practice allowed him to buy up much of the city.
Since then, prices have been surging like so many highly surging things. During famines and blight, whenever demand for food “surged,” prices were right there alongside them loyally surging away to correct the market.
This phenomenon is found in all sorts of industry, from airlines to hydro, but instead of calling it surge pricing they call it “dynamic pricing.” Bloomberg reports that the biggest pub operator in the United Kingdom recently introduced dynamic pricing for a pint of beer. “At the company’s venues such as Slug & Lettuce and Be At One, the price would go up when the place is packed; it might drop below the standard price at less crowded times in an effort to induce customers to come in.” It’s a move that could make the 18th century London Gin Riots look like a cricket match.
The name is the tip-off. Dynamic is a word that sounds like it describes something that would be fun but is, in fact, not fun at all. Put the word dynamic in front of any other word and it kills it. It’s an empty promise. Case in point:
- Dynamic Training
- Dynamic Workflow
- Dynamic Relationship
- Dynamic Sushi
Not all ride-sharing services are enamoured with surge pricing. Lyft announced in August that it wants to get away from the practice, which it dubbed “primetime.” While it increases the supply of drivers, it hampers demand. According to chief executive officer David Risher, surge pricing “is a bad form of price raising. It’s particularly bad because riders hate it with a fiery passion. And so we’re really trying to get rid of it, and because we’ve got such a good driver supply … it’s decreased significantly.”
By Wednesday, the trains were running again and Toronto bedraggled commuters returned to their daily sleep-deprived ordeal and forgot about surge pricing. Not to worry, like a dormant boil or an ingrown hair, surge pricing sits patiently, waiting for the right special event to bring it to the surface once again.