Uber is excellent, not evil

Uber does not force drivers to join its service any more than it forces customers to use it. Its growth is not a result of manipulation but of excellence. (AFP)

Uber does not force drivers to join its service any more than it forces customers to use it. Its growth is not a result of manipulation but of excellence. (AFP)

Earlier this month, the little guy won a historic victory against a big mean corporation. That little guy or, in this case, girl is a Californian named Barbara Ann Berwick who successfully sued Uber, an online taxi finding service, for refusing to treat her as an employee.

At least that’s the story that the labour unions and taxi industry lobbyists are spinning. The reality is a lot less romantic and a lot more muddy. For a start, Uber is neither particularly big nor particularly mean.

  The global taxi industry is worth around $100 billion per year. Even the most optimistic estimates put Uber’s current market share at 10% of that. That’s big by some standards, but it hardly makes Uber the dominant player in the world.

What is extraordinary is how quickly Uber reached that market share. Six years ago, the company did not exist. This growth is attributable mainly to the quality of the company’s service. Open the app, touch a button and within 5 or 10 minutes a cab arrives. 

Because the app uses GPS tracking, there’s never any confusion about where to meet. You can track a driver’s car and only step outside when he or she arrives - no waiting in the cold. All payments are automatic, strictly metered and via credit card. No haggling over fares and no convenient lack of change for large banknotes.

Most customers are fanatical about the service, and recommend it to whoever will listen. As a result the company has spread extremely quickly without spending much on marketing. And even that spend is extremely canny, using channels like social media to magnify its efforts at a comparatively low cost.

Uber also works because it disrupts a large existing market by turning the business model on its head. Its drivers are independent contractors. They usually own their own vehicle and work for themselves. Uber does not require exclusivity, nor does it set their wages. It connects them to passengers and takes 20% of each fare.

This kind of disruption is only possible where markets are inherently inefficient. In many countries the taxi industry is heavily regulated and dominated by aggressive cartels. This keeps prices high and entrenches vested interests.

Perhaps the best example of this is the price of taxi licenses in New York city. To legally operate one of its iconic yellow cabs, you require a license from the city known as a “medallion”. The city periodically auctions new medallions as old ones expire. The average price in 2013? Over $1 million per medallion.

When the entry price is this high very few drivers can ever hope to afford to be anything more than employees. That puts them at the very bottom of the pecking order, competing for a limited number of jobs against tens of thousands of other unskilled workers.

There’s a reason that the cliched taxi driver is an immigrant who barely speaks English - it’s often the only job they can get and they are underpaid and overworked as a result. 

  New York is a particularly extreme example, but the same market structure exists in most of the world’s large cities. London’s black cabs are another good example. They recently blockaded the city as a protest against Uber. The result? Thousands of new customers flocked to Uber as a result of the free publicity and general disgust at the bully-boy tactics of the black cab owners.

Opponents of Uber argue that the company is destroying once secure jobs and replacing them with what amounts to temporary work. Uber touts the virtues of flexibility and independence, but drivers with families to support cannot depend on a steady income.

This image of the predatory corporation is appealing and convenient, but largely wrong. Uber does not force drivers to join its service any more than it forces customers to use it. Its growth is not a result of manipulation but of excellence. 

And the supposedly steady jobs in the rest of the taxi industry are often little more than myth. In most countries the industry is notoriously cruel and capricious to its drivers. 

They work long hours for low wages. And, as is the case in New York, very few ever get the opportunity to work for themselves. Little wonder, then, that so many of them have jumped at the opportunity to work with Uber.

  And what of Ms Berwick, who successfully extracted $4 152,20 from Uber? She worked for the company for a total of eight weeks because she was bored of her desk job as an (unlicensed) money manager. When Uber refused to reimburse her for expenses, she sued.

She is fond of suing people. She once sued an employee of a local pizza parlor for $500 in damages for leaving menus on her gate. There is nothing working class about Ms Berwick - she is an opportunist not an activist. The idea that she represents the plight of the working poor is laughable.

Uber is not perfect. Its executives are prone to sexist gaffes, its marketing can be obnoxious, its screening processes are not watertight, and it will probably need to be more tightly regulated in time. But to pillory it as the new Satan of capitalist exploitation is silly. The world has bigger problems to deal with than a taxi service that actually works.

 
Alistair Fairweather

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