Uber is a Manipulative Bully. We Should Treat it Like One.

After the Mayor and Transport for London announced on September 22 that they will not be renewing Uber’s license, Uber quickly emailed frequent users urging them to sign a petition (now 845,000 signatures strong) to protest an attempt to “ban the app from the capital.”

This move is the latest in a repeated pattern of skirting or even ignoring regulations. When confronted on this failure in regulatory compliance, Uber manipulates users by framing disputes as an existential referendum on ride-hailing apps, using them as a political bludgeon to bully municipal politicians and regulators.

One clarification is sorely needed: London’s decision was not about the app.

According to an excellent article from London Reconnections, The Transport for London’s decision not to renew Uber’s license stemmed from the following concerns:

· Their approach to reporting serious criminal offences.

· Their approach to how medical certificates are obtained.

· Their approach to how Enhanced Disclosure and Barring Service (DBS) checks are obtained.

· Their approach to explaining the use of Greyball in London — software that could be used to block regulatory bodies from gaining full access to the app and prevent officials from undertaking regulatory or law enforcement duties.

The article notes one particularly troubling example: Uber failed to report a sexual assault to the police, resulting in a second sexual assault committed by the same driver, also unreported. Conduct like this directly contradicts Uber’s argument that it provides a safe service for women late at night and calls into question their obligations as responsible actors. Overall:

Uber had failed to report six sexual assaults, two public order offences and one assault to the police. This had lead to delays of up to 7 months before they were investigated. Particularly damning, with the public order offences this meant that in both cases the prosecution time limit had passed before the police became aware of them.

These practices demonstrate an unconscionable prioritization of corporate PR over public safety. These incidents represent only a handful of many that have been reported and documented among ridesharing companies worldwide.

Greyball and Hell

In 2014, Uber illegally entered the market in Portland. When the Portland’s Board of Transport (PBOT) tried to investigate, they were shown a fake screen populated with fake drivers. Real drivers were alerted of their presence and avoided them accordingly. If drivers picked a regulator up, they would even receive calls from Uber to end the ride immediately.

Originally developed to detect fraudulent transactions or protect drivers from physically hostile passengers, Greyball then became a means to hide from authorities. Uber would mine credit card data for identity information, such as an association with police credit card unions. They would also look for other indicators such as opening and immediately closing the app frequently. When Portland authorities began using inexpensive phones to make requests, Uber would note the cheapest devices on sale.

In an audit of Greyball conducted in April, PBOT noted:

PBOT asked these agencies if they have ever suspected TNCs of using Greyball or any other software programs to block, delay or deter regulators from performing official functions. As shown in figure 3.0 below, seven of the 17 agencies surveyed suspected Greyball use, while four agencies (figure 3.1) stated that they have evidence of such tactics. One agency reported that they only have anecdotal evidence, but felt that drivers took twice as long to show up for regulators during undercover inspections. The other agencies cities believe that their enforcement teams and/or police officers have been blocked from or deceived by the application during enforcement efforts.

Uber’s surveillance was not limited to governmental authorities. From 2014 to early 2016, Uber used a program called Hell to spy on Lyft and provide drivers who worked for both companies more rides to drive them towards Uber. The program exploited a vulnerability in Lyft’s app that allowed Uber to decipher identification data about Lyft’s drivers and cross-match those profiles to its own.

Indeed, “In some cities, where as many as 60% of drivers work for both companies, that could be the difference between breaking even and operating at a loss in the ultra-slim-margin industry.”

Hostile Work Environment for Developers

In February, Susan Fowler detailed her experience at Uber on her blog, emphasizing multiple incidents of sexual harassment and HR’s inaction when she reported them. HR obfuscated, claiming they didn’t have records or complaining that Fowler didn’t provide sufficient documentation (she did). Her reports also resulted in retroactively negative performance reviews that blocked her transfer requests and threatened her graduate sponsorship at Stanford.

Her post catalyzed an internal investigation in collaboration with former attorney general Eric Holder, culminating in the firing of 20 employees in June and recommendations on reforming Uber’s culture.

Nonetheless, according to the New York Times, “Uber also faces at least three lawsuits in at least two countries from former employees alleging sexual harassment or verbal abuse at the hands of managers.”

However, Uber’s hostile culture is not just limited to sexual harassment and misogyny. Fowler explains in her post:

In the background, there was a game-of-thrones political war raging within the ranks of upper management in the infrastructure engineering organization. It seemed like every manager was fighting their peers and attempting to undermine their direct supervisor so that they could have their direct supervisor’s job. No attempts were made by these managers to hide what they were doing: they boasted about it in meetings, told their direct reports about it, and the like. I remember countless meetings with my managers and skip-levels where I would sit there, not saying anything, and the manager would be boasting about finding favor with their skip-level and that I should expect them to have their manager’s job within a quarter or two. I also remember a very disturbing team meeting in which one of the directors boasted to our team that he had withheld business-critical information from one of the executives so that he could curry favor with one of the other executives (and, he told us with a smile on his face, it worked!).

The ramifications of these political games were significant: projects were abandoned left and right, OKRs were changed multiple times each quarter, nobody knew what our organizational priorities would be one day to the next, and very little ever got done. We all lived under fear that our teams would be dissolved, there would be another re-org, and we’d have to start on yet another new project with an impossible deadline. It was an organization in complete, unrelenting chaos.

This kind of hypercompetitive, cutthroat environment is awful for organizational morale and drives out talented developers. If unchecked, it will place serious limitations on Uber’s prospects in the long term.

Board member Arianna Huffington’s pledge of “no more brilliant jerks” is a step in the right direction. Time will tell whether she can successfully shake up Uber’s culture.

Driver Exploitation

Uber’s troubles don’t end at treating developers poorly. For years, Uber mislead drivers on the true costs of driving for them, either by inflating gross earnings or excluding or underestimating operating expenses. Initially, Uber claimed that its drivers made more than $90,000 a year in New York and $74,000 in San Francisco. When questioned about these figures, Uber partnered with Alan Kreuger, former chief economic advisor to the Obama administration, to report that Uber drivers made more in hourly wages than their taxi counterparts. This study, however, made no attempt to calculate net earnings and conveniently omitted that Uber was subsidizing these wages with massive losses.

By contrast, an investigation into the net earnings of Uber drivers in Denver, Houston, and Detroit yielded an average of $13.17, $10.75, and $8.77 an hour respectively, below Uber’s previous releases of earnings estimates (it is also worth noting that the assumed price of gas is $1.75 an hour, which is significantly less expensive than it is today). It also noted that Uber continued to recruit drivers by using gross revenue figures rather than net earnings.

Uber’s classification of drivers as contractors is also problematic. While contractors have some flexibility in how many hours they work and when they work, they have few worker protections and no access to benefits such as health insurance. Moreover, a significant portion of drivers effectively work full-time: in a survey conducted by The Rideshare Guy in 2016, about 14 percent of drivers worked more than 30 hours a week and provided about 31 percent of the hours worked.

Gamification

Just as unsettling are the behavioral tricks Uber is pulling to keep drivers on the road longer (because it employs contractors, its tactics receive little regulatory scrutiny). Indeed, many of Uber’s tactics can be categorized in a list of ways apps exploit cognitive shortcomings to hijack our attention, often aligning with the company’s interests rather than the user’s interest.

These features include:

· Income goals to nudge drivers to drive longer (ludic loop)

· An array of badges, achievements, and metrics that fuel external validation (ludic loop)

· Constant push, text, and email notifications (slot machine, instant interruption)

· Forward dispatch, where drivers receive another ride request before the current ride is finished (autoplay, fear of missing out)

All of these features are both automatic and, in the case of forward dispatching, inconvenient to disable: drivers have to pause it after every ride.

Collectively, these features could mean more drivers on the road, defusing surge prices and decreasing the potential earnings of each driver:

Underlying the tension was the fact that Uber’s interests and those of drivers are at odds on some level. Drivers, who typically keep what’s left of their gross fare after Uber takes a roughly 25 percent commission, prefer some scarcity in their ranks to keep them busier and push up earnings. For its part, Uber is desperate to avoid shortages, seeking instead to serve every customer quickly, ideally in five minutes or less.

…As a result, much of Uber’s communication with drivers over the years has aimed at combating shortages by advising drivers to move to areas where they exist, or where they might arise. Uber encouraged its local managers to experiment with ways of achieving this.

To be fair, some of its gamification strategies are relatively harmless and may even help drivers maximize earnings. Nonetheless, Uber’s app features deserve closer scrutiny, and drivers should be made closely aware of how these features are influencing their behavior.

Predatory Pricing

Even discounting Uber’s explicit efforts to sink Lyft, it has also sustained massive losses and investor subsidies to gain market share and drive out local incumbents. Transportation expert Hubert Horan estimated that Uber had losses of $2 billion and an operating margin of -143% in the year leading up to September 2015; in fact, passengers only paid for about 41% of the cost of the trip. This artificially low pricing allowed Uber to place immense financial pressure on existing players.

In 2016, Uber declared losses of $2.8 billion on $6.5 billion in revenue, an effective operating margin of -43%. However, most of this improvement in operating margins stemmed from a decrease in driver compensation from 80% of the fare to 70%, partially nullifying the incentive to drive with Uber in the first place.

While operating margins are inching towards breaking even so far in 2017, transportation economics is inherently difficult to scale. As much as 85% of the costs of running a taxi / ridesharing service are variable costs: driver compensation (58%), fuel (9%), and vehicle ownership and maintenance (18%).

Uber relies on reasonable compensation for its drivers to incentivize them to (continue) driving for Uber. Indeed, it needs a critical mass of drivers to keep response times low. While the ongoing development of driverless cars may ease that pressure, driverless cars remain at least several years away from mass adoption, and Uber’s own deployments rest on the outcome of its ongoing legal battle with Google.

Meanwhile, Uber’s decentralized network prevents it from discount purchasing vehicles, financing arrangements, insurance, and maintenance. Uber even faces diseconomies of scale because it must face competitive and political challenges when expanding to other cities or countries. Finally, Uber’s overhead expenditures are much higher, not just in software development, marketing, or lobbying, but also in meeting ROI expectations for its $68 billion valuation.

Looking Forward

For all of Uber’s faults, its technological contributions towards making hailing rides convenient drew in a lot of people who would never ride or drive a taxi. Indeed, before the entry of players like Uber or Lyft, taxis in many US cities were notoriously overpriced, unreliable, and complacently uncompetitive.

However, there is a middle ground between traditional taxi operators and Uber or Lyft: ridesharing coops could incorporate Uber/Lyft’s underlying ride-sharing technology while providing the best balance of worker rights, convenience, regulatory compliance, and safety.

In Madison, Wisconsin, Union Cab sets a model for how drivers should be treated:

The average wage at Union Cab is roughly $14.48 an hour, plus 60% health insurance, paid days off, safe-driving bonuses and end-of-year surplus sharing. There are also dozens of revolving committees, and general manager McNamara estimates at least 50% of members “are in some way engaged in the decision-making process outside of their job.”

As Thom Hartmann observed in The Crash of 2016, Union Cab enjoys an employee retention rate of 85 percent (most workers stay there more than five years); it is one of the few that provides health insurance to its employees, and unlike traditional cab companies, drivers do not have to work 60–80 hours a week, enabling them to pick up side projects such as writing short stories and recording music.

All the same, Union Cab lost about 15% of its business when Uber and Lyft entered Madison. It belatedly introduced an app to compete, but it is unclear whether Union Cab’s model is sustainable as long as ridesharing apps continue engaging in predatory pricing and regulatory avoidance.

A ridesharing coop could be made obsolete in as little as a decade or so by the advent of driverless cars. Nonetheless, a successful cooperative network can restore worker rights and adequate compensation levels until then. It may even provide enough political muscle to smooth the transition: for instance, it could demand an automation tax for driverless cars to finance retraining programs for drivers.

In any case, it is certainly worth a shot.