Need to Fryft? Think twice.

Recently, I began to notice the amount of spam I’ve received from the Uber Eats app on my phone. Take yesterday, for example, I received two Uber Eats notifications: one at 7:04 a.m. that reminded me of “a sweet deal” they’re offering, “Take 40% off your next 3 orders over $25,” and another at 12:10 p.m. that said, “Try Wingstop’s new chicken sandwich for free … Now through 9/5.” I would receive offers and promotions like these from Uber Eats and other third-party delivery services such as Grubhub and DoorDash every day, so much that it made me start wondering “what is going on?”

While I have always used third-party food delivery services here and there over the years, it wasn’t until the pandemic that I became a loyal fan of them. Indeed, by last year, the food delivery market had already more than tripled since 2017 and doubled during the pandemic. With just a few simple taps on the phone, I could have warm, delicious, ready-to-eat food delivered to my door — whether that’s boba, sushi or cacio e pepe. Most importantly of all, it was cheap.

With the low price and convenience, I became spoiled by these urban-tech services — not just for food but also for everything else. I started Lyfting everywhere and got a Peloton bike at home. If you fit into roughly the same demographic as me — young, urban-ish and professional — then you’ve probably also been spoiled by the sweetheart deals companies like Uber have been offering for the past few years.

With USC’s Lyft Ride program, which offers free rides to USC students, faculty and staff to locations within a certain radius from the University Park Campus during certain hours, we get further accustomed to a lifestyle dependent on urban amenities in travel, food and retail that vaguely fall on the border of tech companies. I must partly thank these services for my now expired driver’s permit and poor cooking skills.

These modern urban amenities are so convenient and cheap that I extensively used their services for the past two years without any hesitation or reservation; that is, until this summer. I was living in New York and on my way home from the gym one day, I decided to order an Uber. I could not believe my eyes when I saw the number of the estimated cost pop up on the screen: almost $45 for a trip that was less than a mile and would have taken me only 20 minutes on foot.

Soon after that, I began to notice the surge in prices for other urban-tech services as well. When I decided to look into the economics behind it, I found out that food delivery platforms have remained largely unprofitable for years despite its explosive growth during the pandemic. They were actually hurting rather than profiting from the surge in business during the pandemic, hence all the discounts and deals I have been getting spammed with.

All these services that seemed to be dominating the market were actually losing money this whole time. The Atlantic staff writer Derek Thompson wrote, “If you woke up on a Casper mattress, worked out with a Peloton, Ubered to a WeWork, ordered on DoorDash for lunch, took a Lyft home, and ordered dinner through Postmates only to realize your partner had already started on a Blue Apron meal, your household had, in one day, interacted with eight unprofitable companies that collectively lost about $15 billion in one year.”

Challenges in the food-delivery and other urban-tech amenities businesses were underscored by DoorDash Chief Operating Officer Christopher Payne, who told the Wall Street Journal last year that “this is a cost-intensive business that is low-margin and scale driven.” We must remember that the too-good-to-be-true era of cheap, ready-to-eat food at your doorstep was only made possible by low demand and a weak labor market — people who drove Uber or delivered Grubhub because there was no competing job offer available that would pay more. Delivery drivers making low, unpredictable wages are prime examples of gig economy problems.

In fact, it wasn’t just the drivers that were getting hurt by the business model. Small restaurant owners are also losing money. “Who is profiting then?” you might ask, “surely someone’s got to be!” Well, venture capitalists — private investors that buy a stake in an entrepreneur’s idea they believe to have high growth potential — seem to be the only ones with faith in this model. The Silicon Valley venture capitalists have their bets on long-term growth rather than short-term profit, willing to lose money for a short while if they can acquire a gazillion customers, of which both you and I are a part of.

We better get ready to go back to the way things are supposed to be, which is paying what things actually cost, because the sweetheart deals from Uber sponsored by the venture capitalist are now gone. The next time you are about to order a Lyft ride, may you be reminded of the bizarre financial engineering that has gone into constructing the business model behind all this and the even more bizarre capitalist world we live in.