As it is in Portland, where it's nearly impossible to get a cab 99% of the time, unless you're at a bar that provides them regular business.
People type in 4.00 to show that they understand they'll pay 4x the rate. But then they bitch that a ride that usually costs them $20 ended up costing $80. The multiplier probably just feels very abstract and people don't actually do the calculation, then are surprised by the high total cost. Add to this that many people order Uber when drunk and don't realize how much they spent until the next day...
Surge pricing is automated, for obvious reasons. What the algorithm presumably responded to was no cars in the area and a lot of people requesting cars from there --> surge pricing. It's only fucked up if you ignore the driver, who has to drive into a potentially dangerous situation to pick someone up. I'm guessing they couldn't find taxis either...