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Mon, 22 Dec 14

Uber Underhanded

Last week, the City of Portland and Uber reached an unusual compromise. The notoriously controversial transportation service, normally disdainful of regulators, has agreed to suspend pick-ups in Portland city limits for three months. During this time, the Portland Bureau of Transportation will work on a temporary plan to suspend or streamline the existing taxi regulations to “see how the market operates without those rules”.

Uber’s accomodating attitude may be in response to weeks of bad press and negative coverage. Portland, in turn, acknowledges that the taxi regulations need overhaul while ensuring fairness to other operators. In the past few months, the city has shown itself to be quite flexible towards sharing services.

However, its worth thinking about the larger issues raised by Uber’s practices and expansion.

The Mythical Sharing Economy

Uber, Lyft, AirBnB et al have promoted their offerings as leading to a new sharing economy. Many pundits and opinion makers have been cheerleading this as yet another disruptive paradigm that will create jobs or foster “micro-entrepreneurs” or both. But the phrase “sharing economy” is as deceptive as it is oxymoronic.

Lest anyone think otherwise, Uber runs a marketplace for riders looking to hire cabs. Uber owns zero cars and employs zero drivers. For buyers, Uber is a substitute for taxi cabs and each ride is extremely transactional. The drivers are not sharing their car out of goodness, but are instead selling cab-for-hire services within the constraints imposed by Uber.

Unethical Tactics

When Uber muscled their way into traditional taxi services with UberX they ignored almost all taxi regulations around permits, metering, fares and insurance. Uber’s stated position has been that these rules are antiquated and do not apply to their technology and business model.

For the most part, technologists and free market supporters eschew government limits and quotas, so there were few champions outside of the taxi industry for the oligopolistic medallion or licensing system.

Fare metering and anti-gouging regulations are another matter. Passengers used to the benefits of predictable pricing have not been too keen on “surge pricing”. The first backlash against Uber started when party goers got hit by unpredictable doubling, tripling or even septupling of normal fares.

Amongst the technorati, Uber’s tactics against competitor Lyft met with universal condemnation. In targeting Lyft drivers for recruitment, Uber agents used burner phones to book spurious rides, cancelling them when the driver showed no interest in signing up for Uber.

With their billion-dollar war-chest, rallied up riders and politically connected influencers, Uber has built out a nation-wide lobbying machine to bend and bankroll their way around laws and regulation.

Unfair Marketplace

Growth targets and investor expectations require Uber to aggressively expand service areas and rider volumes. It cannot wait for organic influx of providers (i.e. drivers) to sign up to its platform. Unlike Ebay or Amazon sellers, Uber drivers are not signing up to hedge fares or arbitrage capacity. For all practical purposes, they are wage-seeking contractors, even if technically not employees.

In a playbook typical of “sharing” companies, Uber offloaded all legal liability and financial risks to the drivers. UberX drivers are tacitly encouraged to use personal insurance inappropriate for their driving profiles, exposing them to personal losses and perjury.

Uber drivers have just 15 seconds to respond to service calls and accept fares. This is not enough time, especially while driving, to look at the pickup location and make a calculated decision. Drivers who decline or ignore calls while “on app” are temporarily suspended. A string of poor customer interactions can get a driver deactivated, cutting off their income stream.

With no choice in the dispatch, no leeway over payments, no access to the customer relationship and a rating system which treats them as a commodity, Uber drivers have no way to build a brand or control their business.

Umpires, not Empires

In the absence of guiding principles, network effects from choices of convenience quickly lead to lock-in and lack of choice. Privacy concerns around Google and Facebook should make us more cautious of enabling new data empires, especially ones such as Uber, known to fool around with God View.

Uber’s CEO can’t wait for a future where drivers will be replaced with a network of self-driving cars. Well before that happens, it is more likely that Uber’s very success will shrink all other taxi driving opportunities for drivers. Think about drivers building out their own shackles.

Uber is a microcosm of the new Silicon Valley, intent on algorithmically optimizing every human endeavor while inserting itself into every relationship. Software eating the world and egesting automatons at an ever accelerating pace. While this is portrayed as an inevitability, it does not have to be.

Software, more so than other artifacts, embodies the philosophy of its creators. Decades ago, GNU seeded a software commons to enhance choice and freedom for users. It is high time to extend those principles into the cloud. Uber’s underhanded tactics should be a warning to us that fair market algorithms and open reputation systems are absolutely essential.

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