Smartphone Uber

Convenience, Control, and Contempt: Uber (part one)

We all wish our communities to be supported by structures and customs whose value is matched by their continuity. Value and merit, however, are not always easy to recognize, especially when our minds and hearts are so preoccupied with the efficiencies and benefits of now. If it is obvious that what is old is not necessarily good, it is equally true that the new has no claim on our loyalty for the sake of its novelty or audacity. Yet the responsibility to challenge, rather than capitulate before, what is both influential and trendy seems less heeded than ever.

The dictates of presentism necessitate the counterweight of insistently critical thought. But our newly dominant forms of commerce benefit from a façade of communal localism while exultantly unleashing patterns of destruction that replace variety with uniformity. This is an odd and ominous feature of great forces of our age—they both demand our submission like emperors and modestly assure us that nothing alarming is occurring.

Confronted by such a zeitgeist, there is no better case study than a company which has, in the space of a few years, become both a cult brand and a modus vivendi; a company that started on one whim and now feeds on millions of whims around the world every day. That company is Uber, and, as I write, it is worth an estimated $62.5 billion—more than Ford and more than General Motors. While Uber is certainly not without its detractors, skeptical voices pale in significance compared to the cultural wind behind its sails.

Its popularity is based primarily on two factors. The first is that people using Uber experience it as a convenient, low-cost, and low-aggravation way of getting what they need and/or want. If people using Uber to journey across town found it irritating, expensive, and inconvenient, there would be no phenomenon to describe. Just as important as the service it facilitates, however, is the cultural cachet and buzz carried with it. Uber is seen as defeating complexity with simplicity, ending monopoly with adaptability, and eluding the status quo with innovation.

But is that dominant impression warranted? In cities around the world, Uber is in the process—overtly, intentionally, and rapidly—of turning transit on its head. And it is planning to leverage that revolution to dominate other areas, from food delivery to car ownership to the driverless car itself. Should we rejoice at this, as so many seem eager to do?

It is surely to Uber’s benefit that, at least in the United States, such enthusiasm cuts across the political spectrum. Many on the right, persuaded by their libertarian tendencies and wariness of government regulation, welcome Uber as a warrior for free enterprise at its spunky best. Meanwhile, those whose dispositions place them on the left appreciate Uber’s sense of spontaneity and personal touch, replacing a schedule and a uniform with common resources and adaptable local supply. Furthermore, young people on both sides tend to instinctively approve of the technological light-footedness with which Uber operates. Uber certainly encourages these impressions. And, as alluded to above, both Uber and its cheerleaders foster those images alongside the idea that what Uber is stimulating is a merely natural progression. It is just a matter of efficiency; it is just the encouragement of sharing; it is just providing a platform that facilitates the meeting of mutual needs.

Typical of the resulting consensus was a piece in the Washington Post by the analyst, writer, and money manager, Barry Ritholtz. Shooing away objections, Ritholtz encourages us to view Uber and its ilk “from 30,000 feet.” From that perspective, according to Ritholtz, one can see that “they attack an existing market dominated by entrenched incumbents that are inefficient, expensive or both,” identify “economic inefficiencies in major markets,” and bring “new efficiencies to underserved consumers.” That, he concludes, is why such companies are successful and wealthy—nothing more, nothing less.

While that may well be the story from a distance, a very different one emerges when we get much closer. In this article (and in the second part), we will see that the nature of this flagship company can, in contrast to its popular image, be defined by four unpleasant features: control, monopoly, an insatiable lust for growth, and contempt. We can say specifically of Uber what Tom Slee writes of the so-called sharing economy in general within his recent book, What’s Yours is Mine: “a starting point is that we recognize it for what it is.”

If anyone proclaims that you cannot have your cake and eat it too, you are now free to point to Uber as ample refutation. When it comes to the laws, safeguards, regulations, best practices, and mores that apply to other parts of the industries Uber seeks to dominate, the company becomes as coy as the proverbial maiden. None of them apply to Uber because, according to it, Uber is merely enabling connections. Its drivers, insists Uber, are “independent contractors”—or even, as Uber co-founder Travis Kalanick fancifully portrays them, small-business owners—and, therefore, Uber owes them no protection or loyalty. In this view, there is a transaction of mutual interest between company and independent driver, and that is where the relationship begins and ends.

This flight of self-interested legerdemain would be easier to tolerate if the reality were not so radically different. Far from establishing a disinterested platform, Uber is attempting to take charge of every aspect of the market, from supply to demand to assets to the overall playing field, for the sake of its own extremely narrow interests. This difference between image and reality is aided by the fact that the original practice of ride-sharing—what Uber claims to be promoting—was indeed a collaborative effort that fit the term. Some of the first examples of harnessing technology to connect private drivers and those in need of transportation were merely online versions of the formerly ubiquitous college message boards, where you could see who was driving home to your area and cadge a lift. But this is not remotely what Uber is up to. As Temple University law professor Brishen Rogers summarizes, ride-sharing, as a description of Uber’s business, “is a misnomer—nothing is shared.”

In order to ensure that it can, seemingly magically, be at the instant beck and call of millions of demanding would-be travelers, Uber needs to ensure that a critical mass of drivers is available. And for this it needs not freelancers, but employees in everything but legal rights and security. To achieve this, in addition to both setting the price which these supposedly independent contractors can charge riders and entirely controlling all access to these customers, Uber must use all means to determine how much they drive and when they do so. If drivers fall short of a minimum number of hours or turn down too many rides for any reason, then they are summarily removed.

It has required a degree of bait-and-switch, as writer Avi Asher-Schapiro demonstrates, to meet the demand Uber has itself stimulated with the supply over which Uber pretends to exert no control. When it launched in Los Angeles, Uber set a rate of $2.75 per mile. With drivers keeping 80 percent of this fare, many saw the possibility of an hourly rate between $15 and $20 if they worked full-time. In Asher-Schapiro’s words, “drivers rushed to sign up, and thousands leased and bought cars just to work for Uber—especially immigrants and low-income people desperate for a well-paying job in a terrible economy.” But when Lyft posed a threat in the City of Angels, Uber followed its imperative to eliminate competition by cutting the rate that drivers could charge riders to $1.10 per mile, leaving even those driving very long hours struggling to make the work pay.

NightUberHail_iStock_LDProd_900 / LDProd

Uber’s advice, typical of their cavalier attitude, is that these “independent contractors” should simply work longer hours to make up for the decrease in the fare over which they have no control. With such incentives at play, one can easily begin to see that the ability of Uber to provide sufficient drivers to riders at a cheap rate has nothing to do with any miracle of innovation or competitiveness. As drivers increase their hours to compensate for lower fares, of course, their expenses in gasoline and maintenance also increase. It is no class war hyperbole to conclude, as Asher-Schapiro does, that “drivers take all the risks and front all the costs—the car, the gas, the insurance—yet it is executives and investors who get rich.”

Naturally, at this point, comes the retort that if it is not worthwhile driving for Uber, why do so many people do it? They can stop any time. Leaving aside bait-and-switch rates, as well as deceptive claims such as Kalanick’s that a New York Uber driver could earn $90,000 per year, the fact is that ceasing to drive for Uber is exactly what most of their drivers do—very quickly. Fifty percent of Uber drivers quit after the first six months; one in ten pack it in after just a month. What does all this demonstrate? Uber has factored in the costs of treating the people who deliver the one productive, practical, and essential aspect of the whole process as expendable drones. This is not a by-product, but a central element.

A different company, with the same incredible market share and remarkable brand loyalty, might determine that now was the time to either make good on the illusion that its drivers are independent contractors, or provide them with stability, benefits, and decent pay as employees. Instead, faced with extraordinary attrition and turnover in their driving force, Uber has once more demonstrated its belief that there is no problem that cannot be solved with the assertion of greater control. As Slee indicates, Uber is just one of the doyennes of the alleged “sharing” economy that is “taking a more and more intrusive role in the exchanges they support to make their money and maintain their brand.”

For Uber that means actively seeking supervision and command of the one aspect of the Uber experience that has until now escaped its grasp: the cars themselves. Since it is becoming harder to persuade drivers to throw in their lot with Uber, the company has arrived at a medium-term solution in which it provides loans to people with bad credit to obtain cars, deducts repayments from their Uber fares, and, of course, retakes the vehicles if repayments are missed. Thus, Uber raised $1 billion to start Xchange Leasing, which set terms that Mark Williams of Boston University’s business school concluded were “predatory.” In an imaginary world filled with perfectly autonomous people making cool and omniscient choices, perhaps such an arrangement would deserve the complacent shrug with which many will doubtless greet it. But in the real world, where people who struggle to gain the credit they need and the transportation they lack will get trapped into driving for less than a living wage, it is despicably cynical.

This foray into sub-prime auto loans is merely a medium-term solution because Uber is actively and ultimately aiming for the complete removal of what Kalanick has dismissively described as “the other dude in the car.” No wonder that Uber is one of the main players pursuing driverless car technology, establishing a research and development center in Pittsburgh. After initially partnering with Carnegie Mellon University, Uber opted instead to lure away some of the university’s experts and mostly work alone. Dispensing with the inconvenience of compensating human beings, replacing them with driverless vehicles, is the logical conclusion of Uber’s attitude and business model to date. There can be no doubt that as soon as it is able to do so, Uber will be delighted to rid itself of a human-factor that only disrupts its laser-like focus on market-share, expansion, and capital accumulation.

But in order to benefit from a dominant market share until driverless cars increase Uber’s profitability, it must fend off a short-term threat to its ubiquitous expansion. That threat is the rectification of the unequal legal playing-field on which Uber relies to undercut older car services. Uber regards this unfair advantage as its birthright in every city it enters, and, here too, it seeks the path of control and manipulation.

The city of Austin, Texas recently introduced rules mandating that Uber and Lyft drivers abide by the same requirements as cab drivers—providing fingerprints and undergoing background checks. After a ballot measure was placed before the electorate to repeal this entirely reasonable measure, both Uber and Lyft swung into action, outspending their opponents fifty-to-one, beseeching their customers to back their cause, and offering free transportation to the polling stations. Surprisingly and admirably, a majority of those who voted on the measure resisted this pressure and defeated the attempt to restore the so-called ride-sharers’ exemption from modest public safety measures. As Chris Tomlinson pointed out in the Houston Chronicle after the vote, “Uber and Lyft spent $236.12 for each of the 38,539 votes they received, more than it would have cost for fingerprint background checks for all of their Texas drivers.”

Most instructive of all was the reaction to this defeat. If we were to buy into Uber’s own self-aggrandizing hoopla, we would assume that these alleged warriors for competition would roll up their sleeves and beat the taxis at their own game. Instead, the very next morning, both Uber and Lyft pulled out of Austin. As the Houston Chronicle again noted regarding these events in its home state, “The current Uber battle going on in Austin isn’t about regulations. It is a fight about power.” Uber demands control and, deprived of it, the company will pick up its ball and sulk off home. Quite simply, Uber will operate on its own terms or not all.

That is the mindset of a monopolist not a competitor. Monopoly is what Uber seeks, and, as we shall see in the second part of this article, this approach sits compatibly alongside an institutionally insatiable lust for growth and a contempt for anyone and everything that dares to get in its way. This is not the manner in which a service such as Uber’s has to operate, and not all “sharing” ventures are guilty of its approach. But it is the way that Uber is establishing a dominance that will soon be hard to dislodge. Yet, it is only inevitable at the point when Uber persuades enough people of its inevitability. Until then, we can subject Uber to the wary scrutiny it warrants, unless we want the lionizing of the unscrupulous to be yet another era’s defining foible.