Uber‘s Tyranny of Convenience
The car service gets us where we’re going, but perhaps we’ll only find out how much it costs once the door is shut and we’re at our destination.
This began as an essay but that has been reworked as short bullets.
Indolence aside, why bullets exactly?
- The essay kept returning to the idea that the same reserves we draw on to read — or write — a long article are those that we find depleted when we opt for an Über over a cab. And aren’t we all running near empty? So it was felt that short bullets might go further towards changing opinions, mine included, about new things. Despite your driver having little idea where we’re going, I can promise you you’ll be on your way in no time.
Let’s continue working from the upside-down and get a big pro for Über out of the way, which is —
- Über is deeply convenient. Thoughtlessly convenient. Convenient to the point of being a habit. Everything about the service is designed to free you from making any decisions. They have even, as was recently reported, built imaginary cars into the passenger-side app to free you from worrying about waiting. You are being driven before you even set foot in a car. This has its charms.
Now, onto the immediate negatives —
- Dear passenger, note that you aren’t fully insured, your driver has likely jumped past a cursory background check, and he might not be any good at driving regardless. To the last point, fear this: I can drive for Über. Cabs have these issues too — my most recent ride to La Guardia took years off my life — but they don’t have all of them, never all at once, and never to that degree.
- Dear driver, you probably fall into two camps. If you are a professional driver keen to make more money, you’ll find that Über’s promises are rosier than the reality. If you are an amateur keen to make money, you’ll find exactly the same thing only you’ll also get to discover just how hard it is to drive a car. Perhaps you got into driving an Über because you were a passenger once, and perhaps you became a passenger because you felt cabs were overpriced; perhaps you don’t feel that way anymore.
- Dear passenger, depending on the city, it isn’t really any cheaper than a cab. In places where there is better price competition (L.A. and NYC spring to mind), that might not last. Anyone who has gone through all the trouble of turning on their phone in a rainstorm is aware of the usuriousness of surge-pricing. But what about the free ice-cream? Well, remember that Über is deficit-financed and currently competes by running at a loss; if it achieves the scale and monopoly power that all its growth is predicated upon, it will raise prices because that is the entire point. More on this later.
- Dear driver, you do not have a boss. This sounds liberating, and for some it just might be; but you are also free from being an employee and equally free of healthcare, of being reimbursed for any costs, gas, mileage, or deductibles, or indeed free of any of the rights employees have won as a result of a century of political effort to ensure labour doesn’t have its face stamped on — forever. There are tradeoffs here. You are probably entitled to more than Über have led you to believe.
- Dear all, you are being watched and with little evidence to suggest that Über takes your privacy quite as seriously as you might.
- Dear all, if you have taken a city bus, ridden in the subway, walked on a public road, or sat in a cab, you have already experienced the glamorous sharing economy. All of these services are for the public, and equally so. They don’t always live up to that mission, but those failings are often against the law and it is to us to uphold them. The Über-funded study on taxis and discrimination in Chicago’s South Side is obviously biased but still a sign that politicians should hold taxi and limousine commissions to agreed upon standards. But Über does tacitly discriminate on wealth, and if our existing public transport is diminished because of it, the same people who have been priced out of city centres will find it that much harder to get home in the rain. (Full disclosure: me.)
- Dear passenger, if you feel that despite traveling through public you are always surrounded by yourself, you are not alone (it just feels that way). While controversial, it could be argued that one of the great joys in life is being with other people; should you disagree, opting against the walk to the subway for having an Über pick you up where you stand and drive you onwards to your own Spotify playlist is a great way to avoid this and remain safely in your own company.
The emotional response to Über does seem outsize for what is essentially a new taxi company. Partly, it fits into (and borrows from) various ideologies that people already love to get angry about, in favour or against; partly, it must be said, it’s because Travis Kalanick and some core employees are irredeemable pricks and the idea of their getting rich is genitally hurtful; and partly it’s because taxis fit into a larger system, imperfect but with some stasis, and, like with trees on a bog, this competition or disruption shakes things way off in the distance.
There is good in this —
- We’ve already gone over how taxi drivers fail to live up to many laws put in place to prevent discrimination. Enforce these laws, even if just for disgusting self-interest, because this is a point of differentiation.
- We might get a taxi app from our local taxi and limousine commissions. Those of us who are perfectly happy to wait for our taxis (or take other forms of transport) need not alter our behaviour. But some people will be over the moon and that’s nice.
And there is bad too —
- An argument could be made — Über certainly make it — that if everyone is well-served then less cars would spend less time idling about and that this would curb emissions. I remain dubious, especially in the present moment with Über living alongside preexisting taxi services. As we’ve seen in NYC and elsewhere, the promise of the quick buck has pushed more cars onto the road; beyond the extra number of tailpipes, the increased congestion has led to longer commutes for all cars which has its own compounding effect.
- More, as promised, on the push towards monopoly. Über’s strategy is the same one you see with most venture financed tech startups: growth. That’s it. All of its expansionism, its launch in advance of regulation, its work in China and India, its deficit financing and loss leaders, all the hopes of each successive round of investors, and all its massive cash reserves are for this end. If they become omnipresent, or give the impression, then a network effect kicks in which has more passengers going to Über for cars, more cars going to Über for passengers, and on it spins. If they can go one further and achieve a monopoly at the expense of existing taxi businesses then they can stop subsidising rides and drivers and start charging whatever they like because passengers no longer have a choice. As Peter Thiel would have it, or Standard Oil before him, a monopoly is a very good way to make money. They are right. It also is the lie behind Kalanick’s talking point that all Über are doing is giving consumers a choice.
There is also a common refrain, given that we’re criticising technology, that things were better back in the day. This is wrong too. Since we’ve made it this far, are we feeling alert enough to take a break from bullets? Good. Let’s use New York as an example —
When I was a child, you used to get into a cab, hear a brief recording of Eartha Kitt asking you to buckle up, and then start a 10-minute conversation, not always entirely appreciated, until you got to wherever it is you were going. As no one had phones, the only alternative was silence (and a recording of Jerry Seinfeld).
If not lowercase-r romantic, there was at least something human there. This is no longer the case. In New York City, driving a cab is no longer mythologised as the striver’s first step on the ladder to better things, and the great conversationalists are either long gone or having those conversations down their headphones with people they actually know. In return, we got Regis, relentlessly enthusiastic, part of the pricetag on a divisive TV/credit card reader that has, with each successive improvement, become harder and harder to mute. It’s not great.
Why did we end up with this?
As is true of a lot of modern things you might disapprove of, the fountainhead (ahem) of trouble is a perfectly normal profit motive grown malignant with monopoly. The City also did its fair share of bungling things. Because the number of auctions for medallions was suppressed, in all likelihood due to lobbying, a medallion’s value skyrocketed (sometimes to more than $1,000,000) while driver incomes barely kept apace with inflation. This was a nice incentive for the individual owner-operator to pack up and sell out to a garage and for larger garages to buy smaller ones. These garages stop looking like the Sunshine Cab Company and start looking a lot more like some blend of the multi-million dollar businesses they are and a payday lender.
All this brings us to Regis. The man is a classic entertainer and a joy in the prescribed dose; if you force someone to listen to him more than a hundred times, I think you’ll find that exceeds the Geneva convention. The ads probably bring in an extra two bucks a day, which is lousy enough that any driver would take a hammer to the machine himself and go without. But they don’t because (a) that 2 bucks is very real when aggregated across a large fleet, and, more to the point, (b) it’s not his cab! Drivers put up with Regis and the cost of leasing their cab because, owing to language barrier, or immigration status, or just being at the start of their lives, or having no other alternative, they are forced to buy their jobs. This is hardly a friendly alternative to Über and if the City already has its regulatory pens out and pointed at the tech company, it might consider fixing some of this too.
Happily, the arrival of Über and Lyft has sent medallion prices down (somewhat). But that’s not because they’re disrupted an ugly system; Über are succeeding because they’ve coöpted it.
Über spends more on lobbying than Wal-Mart. They spend more on lobbying than Google and have even poached the search firm’s chief lobbyist. She will no doubt build on the peerless work former Obama advisor David Plouffe did before her and which has won a lot of battles in cities where Über leapt in in advance of any legal right to do business and while the courts debate.
The playbook is somewhat similar to the rollout of Obamacare. With the enactment of the Affordable Care Act — which I love because of its moral dimension rather than any economic argument — there was a sense that if you give people something they view as a right, even if under challenge in a court, it will be that much harder to claw it away after the fact. In Über’s case, beyond rolling services out faster than governments can say no, the lobbying team have defended those gains with a mix of tactics pulled from current politics. Robocalls, direct lobbying, signature drives, easy calls to action within their app, driver picketing, and (old-fashioned) well-lubricated influencers were all employed in their recent win over de Blasio. It’s hauntingly professional and with results impressive enough to have started a cottage industry. It is also a process that, to borrow from President Carter’s recent comments, is ugly in its “unlimited political bribery” and is deeply undemocratic for something supposedly about free choice. As it was, it must be said, when the Taxi and Limousine Commissions had graft all to themselves.
That about gets us up to speed. This ride has taken longer than promised, so let’s pick up the pace with bullets as we get through this unknown part of town and near your destination. As the meter ticks higher, let’s talk business —
- Regulation is what keeps Über and its investors up at night. Its lobbying talent — and their important friends — are where I believe Über have calmed investor fears (and Lyft haven’t) and how they have raised funds that now value the company at 51BN dollars. But regulation can be pretty binary where most other business problems are linear. Amazon can sell less books than than they would hope but they’ll still bring home some revenue; if Über is banned from a territory, their revenue drops from something to nothing. Some of the zags to secondary services like People’s Uber are far less profitable and often function as feet uncomfortably wedged in a door while the company waits for popular opinion and political moods to shift. 51BN is rosy enough to make one suspicious of how much this risk has been factored into their models, certainly of Kalanick’s claims that their (gross?) revenue doubles every six months.
- The other fear is that there is no such thing as second place. One of the reasons tech companies push for growth, beyond having little added cost per incremental user, is that the industry is one (brief) history of platforms. From Wintel in PCs through to Google in search, there is a winner-takes-all aspect to these things and a corresponding effort on engineering a network effect. You see this in their underhanded competition with Lyft. This is entirely unnecessary and not just for reasons of good taste. Where Microsoft or Google just had to get to a certain percentage of total users before a virtuous cycle kicked in, neither the taxi business nor Über exist in a world where one platform wins (despite having a valuation that reflects that). In effect, discounting the Tumi-sporting consultants of the world who move from city to city, each location is its own individual market with its own unique set of passengers to try and capture.
- The last fear is that they’ll be found out. Beyond growth, there is no great strategy, nor is there a purpose in having a global taxi business. The dynamics in, say, Hong Kong are very different from Los Angeles. One is a city where the few people who own cars, which are taxed at 100% and which take the world’s most expensive petrol, are also the kind of people content to drive others around for the minimum wage. In L.A., this might be different. Fine. But these are completely different businesses, as unalike as each and every city is, and beyond the real power and savings of a shared lobbying strategy (where none existed) there is little there there.
- Why people have invested and continue to invest in Über with such passion despite the bad press is a little beyond the scope here (plus, we’re near our destination). Where motive is murky, a quick list: that some investments VCs make, especially in later rounds or at lopsided valuations, are more advertisements for the next vintage of fund than a good investment; that all funds are required to invest the money they are given and, despite a period of low interest rates has swollen the size of those funds, there are still relatively few good investments to be found; that some of the investors, like Microsoft, are looking to a possible partnership that offers other returns; they we’re seeing some combination of groupthink and stupidity; that the only idiot here is me and Über will reshape the world and this article will keep me from holding a job in the future; that all this activity is focused on getting a foothold in personal transport before self-driving cars take over, faster than one can imagine I have no doubt. With the lack of teardown value, one hopes investors see something others don’t. Most of the miners who went to the Yukon left without a spec of gold.
We’ve arrived. Given how we’ve wandered about, you may have your doubts about our existing system, the future, your driver. I share them. We got the pro’s out of the way rather quickly when convenience might be all we want. Perhaps it’s a 51-billion-dollar-sized hole in our lives and we’re content to sacrifice a lot of what we already have for it? Or perhaps we don’t know what we’re giving up and we’ll just end up paying for something we already have? Perhaps grabbing an Über will become a habit of mind like much of what we do on our phones? Perhaps we’re looking at a future where we live our lives in public but go around in private cars? Perhaps this is just a stopgap before self-driving robot cars take us everywhere? Or perhaps there’s no we here?