Uber and the Battle for Capitalism

I live in Massachusetts which has become a new battleground for Uber. Cab companies have lobbied the legislature to shut Uber down because…um…well…laziness and greed?

Americans love to decry how wonderful Capitalism is. And it is wonderful. No economic model has proven to be better at pulling people out of poverty. As Capitalism has spread across the globe, this point has gone from a theory to an outright fact.

However, one thing that Americans fail to take into consideration when singing the merits of Capitalism is the impact it has on those who do not need to be lifted out of poverty. On that front, the picture is much less rosy.

Essentially, what we’re seeing in modern American “Capitalism” is that established players neither want to pay a fair wage to those helping them make money, nor do they want to compete with new innovators. Nowhere is this more instructive than the fight between cab companies and Uber.

What makes Uber so innovative isn’t their fleet of cars or their drivers, it’s the software that they have created surrounding that infrastructure. This is the brilliance of their business model: the massive costs needed to produce a fleet of on demand vehicles are avoided by passing that down to their workers. In exchange for this contribution to the business model, drivers receive around 80% of the fare.

In my experience riding around in taxis and Ubers in Boston, Uber drivers are much more enthusiastic about their employer than taxi drivers, and unless Uber is running on rush pricing, it is almost always cheaper than a cab. This is the literal definition of innovation. So what are the cab companies responses to this challenge to their business model? Instead of innovating themselves (which is long overdue), they choose to act like a 5 year old at the grocery store who isn’t getting what they want, stomping their feet, shutting down the aisle, and wailing until they get their way.

To compete with Uber, cab companies simply just need to create software that enhances an infrastructure they have spent decades constructing. Many cabs already come with GPS locators so the dispatcher can keep track of them; all they would need to do is hook that GPS up to an app and they’re ready to go. Pricing is the next issue, however, with Uber’s rush pricing model, the consistent pricing structure of cabbies could easily win people over; it just would take the right marketing plan to frame the two options. Promoting fixed costs over variable costs is not that difficult to sell. Competing with Uber requires minor tweaks on behalf of the cab companies, not a revolution to their business model.

Politicians love to tell stories of people “pulling themselves up by their bootstraps” and how empowering Capitalism can be. However, without careful regulation to ensure that new innovators have a chance in the marketplace, Capitalism ceases to be Capitalism, and it devolves into oligarchy. This is what we are experiencing in this country right now. And nowhere is this hypocricy more evident than in the battle between Uber and established cab companies. In order to fight back against the nefarious forces in America who want to destroy the foundation of Capitalism, we must support new innovators in any way we can. If you live in Massachusetts, please sign the petition to tell your congressperson that their vote on this issue is instructive of whether their moral compass is dictated by principle or profit, and their action or inaction on this issue will have dire consequences for their next election.