We Need to Talk about Uber

I have taken Uber rides on three different continents. Frequent Netopia-readers know I am critical of the company and its policies, but I like to think of those rides as field experiments. Each time, I was a guest on somebody else’s Uber-app, because the interface on the one I have on my Windows phone does not let me accept “surge-pricing”, and every time I want to ride, there seems to be a surge. (The Windows phone is a different story, let me just say it’s the least of all evils in smart phones.)

In the United States the Uber-drivers I’ve talked to are middle-class educated persons who drive for Uber as a side-job or between jobs. When I ask them about things like workers’ rights or Uber putting cabbies out of a job, they’re not concerned, they don’t think about Uber as a long term commitment. Instead, they talk about how Uber takes cars off the road (less congestion) and takes drunk drivers off the road. The cars are new, nice and clean, in contrast to most taxis I’ve ever ridden in in US cities.

In China, Uber-drivers tend to be a younger generation. I have not been able to figure out if they work for themselves or for some company that provides them with cars etc. The contrast to the taxis are similar to the US.

In Europe, most cities have better regular taxi systems than in the US and China. Here, Uber’s appeal is really the low cost. Many of the Uber drivers are recent immigrants who may lack the formal skills to become “real” taxi drivers. A series of courtcases in my native Sweden found their rights were abused by Uber.

My first observation is that Uber is different in different places. The service is basically the same, but the local circumstances changes it. That may sound like a shallow insight, but it’s actually profound. When people say things like “you can’t stop new technology”, they’re describing technology as an outside force. But if it adjusts to local conditions it’s not an outside force at all. Also, Uber is more about business than technology, but more on that later. And Uber, like self-driving cars, is a very American idea, which is born in a country that is built around the car. The public transport systems in most countries of the world are better developed than in the US (with some exceptions like New York and San Francisco). Riding bikes or scooters is not an option in the suburban sprawl of most American cities. So not only does the service change with the local conditions, it’s conception is a consequence of local conditions.

My second observation is about the sharing economy. That term can mean a lot of different things, but one idea could be that the sharing economy is about individuals allowing other individuals to access unused capacity and maybe pay a little bit for that. Think about how a neighborhood can share power tools or maybe a car pool. Businesses like Uber are not so much sharing economy, as on-demand business or “gig-economy” from the workers’ perspective. Like the farm workers that line up in the village square each morning to be picked up for the day’s work if the farm owners need them. If not, they make no money. If you’re the middle-class American Uber-driver, you can think of yourself as working for your own business. If you’re the recent immigrant, your situation is more like the day laborer’s. So in that perspective, the sharing economy is more a buzz-word than an accurate description of Uber. I’ve been to conferences where people involved in the true – grass-roots – sharing economy express their frustration over how Silicon Valley (ab)use the phrase.

Now, the business. In a recent op-ed, Uber’s Swedish manager Alok Alström announced that Uber will now share data with the Swedish tax authority, following criticism from other taxi companies that Uber does not follow the same tax rules as the competition. It’s revealing that Uber would make a point of sharing data with the tax authority, for every other company that is the norm. It is also telling that it took several court cases for Uber to cancel it’s illegal UberPop-service. Taxis are strictly regulated with special license plates, medallions, licensed drivers, meters, price caps, rights for riders, specific colours or designs, clear brand names, insurances, pensions payments, tax regulation etc. Uber’s advocates like to describe this as a bureaucracy full of nepotism, corruption and abuse, but while that may have some merit, it’s not intrinsic to the system but a collateral effect. Instead, the image of a corrupt taxi system justifies for Uber to by-pass many of the rules that the competition has to abide by. Only in that perspective does it make sense for one of its managers to announce that Uber will from now on follow a rule, rather than ignore it. By broadcasting itself as a technology company, Uber can pull the same trick as Google and many others, claiming its only connecting users (drivers and passengers in this case) with no responsibility for their actions. But Uber’s success is more about clever business than innovative technology. In the same op-ed, Alström claims that Uber’s algorithms are more effective in matching passengers and drivers than the classic taxi companies. Thus Uber drivers have paying passengers in their car more often and that’s how they can be cheaper. I don’t dispute that Uber’s algorithms are effective, but that’s only part of the story. The fact that it ignores most of the administrative burdens other companies deal with is a gigantic cost-saving. But perhaps more importantly, as author Tom Slee has shown, with its generous supply of risk-capital, Uber can operate at a loss. That’s right, what is the purpose of a normal company, making money, is at best a distant second for Uber. It wants scale, and its investors want scale. Revenue comes later, after Uber is the top dog in as many markets as possible. Not only geographical markets, but also expanding beyond passenger rides, to all kinds of transports and also financial services (leasing vehicles and selling insurance to drivers). The level playing field is lacking, not only when it comes to following the rules, but more importantly on the fundamentals of business. How do you compete with somebody who can take almost infinite losses to put you out of business?

A fresh study by consultancy Faber Novel Innovate calls Uber a “transportation virus”. That sounds like a disease, more than a gift to mankind. All this is great if you’re an early investor. For the rest of us, we become the hosts of the virus. I don’t worry about riders taking cheap trips, I worry about what comes after Uber becomes the global dominant player in transportation. It’s bad enough that single companies control things like our social networks and the world’s data. Bring those effects into the physical world and monopoly will have a whole new meaning.