UBER and the Society coping with the Speed of Change
Uber is an example of how inefficiencies in regulation for specific markets can generate opportunities for a few, while hurting markets and the social fabric. Uber claims to be a sharing economy, however it seems to be exactly the opposite. A “sharing economy” according to Wikipedia can have many assumptions, however they are unlikely to match the Uber definition of sharing economy. We should talk instead of Ubereconomy.
A sharing economy means a peer to peer format where peers share something needed by someone else and therefore generating some value (money) out of it. For example the bike rack attached to my car. I bought it and used it for my mountain trips. Some years ago I would have loaned it to a friend or my sister, however today due to our platforms I can expand (scale up) my network and it’s not just my family and friends that can use it, but also a number of people I have never seen. It’s called “economy” because one could make money on it.
Source: GfK; Spiegel
The chance to earn more by sharing, heralded “sharing-aid platforms,” seem to allow us to share with others, however it’s not the case. When we use them, we share because the platform allows me to share. So it’s not peer to peer anymore, but at least peer-platform-peer. It’s like a hidden arbitrager actually creating a monopoly in the ability to share, deciding price, who can participate, etc. There is nothing like peer-to-peer actually.
A REAL SHARING EXAMPLE IS COUCHSURFING.COM WHERE YOU LEND A PLACE TO SLEEP AND THEN SOMEONE FROM THE NETWORK RETURNS A SIMILAR FAVOUR. THIS IS SHARING ECONOMY. THE BENEFIT LIES IN SLEEPING AT NO COST, OTHERWISE GET A HOTEL.
Uber and Airbnb are not sharing economies, however they use some similarities with it, marketing it as sharing economy creating sympathy amongst users. People understand it as sharing economy but actually it’s an Uberised version of it or a monopoly in disguise. The Ubereconomy principle is simple monopoly where there is a niche with a service everyone can deliver. The platform provides the technology and simply connects people. They also use a ranking that allows user and service provider. This ranking is based on likes. Thumbs up: you provide a great service. Thumbs down: you provide a bad service. For this like or dislike interaction, the platform charges a fee.
UBER SHOWED UP BECAUSE TAXIS WERE A KIND OF MONOPOLY WITH VERY LITTLE INCENTIVE TO IMPROVE THE SERVICE. UBER SHORED UP A LAZY BUSINESS BY CHARGING LESS PER RIDE AND SPORTING NICER CARS.
Further, Uber did not need to comply with labour laws as they don’t have employees. Uber argues they simply connect people, but actually they create a working relation not subject to any regulation: no invoices, no insurance, no social security, etc. Simply unjust for the driver. However, Uber (as Facebook and Airbnb do) actually make a great deal as they get all the data from drivers and service users, even when they are not driving. It’s the access to data that can later on be monetised. That is what comprises their business value. This asymmetry in information makes drivers a type of second class workers as they have no rights to protect their income. There is a growing number of drivers not just making ends meet, but their households depend on Uber.
Source: GfK; Spiegel
Taxi companies have reacted by freezing their fleets, as there was more offer than demand on the market. They intended to provide an implied protection: too many taxi drivers would not secure enough income for everyone. Uber has no such incentive. They actually don’t care about how low the income of drivers is. They care about a greater number of drivers, so they can fetch up their clients in no more than 30 seconds at the client’s door step.
Technology is unstoppable and there is no law on earth that could ban technological improvements, particularly when it refers to underperforming and ill-innovated sectors. But there still remains the question of how to incorporate these advances within our market economy. Perhaps cooperation amongst peers could be a good solution. Juno.com seems to be a good example: this is a cooperative model where drivers own the company and share profits.
Uber defines itself as a technology service provider and not as a transport service provider. Here lies a core reason for the company to be profitable. They have selected a niche with unsatisfied although resigned users as they will keep using the service. They have found the way to empower everybody so anyone can do the job, in this case, driving. They have created a software tool that through data and algorithms arbitrage transactions and charge for its intermediation. And voilà!, a company with a massive work force but hiring no one, and with a rating system to provide trust (like or dislike), with no need for bosses or supervisors to monitor service conditions as users search themselves for that quality.
Source: BMVBS; Statistisches Bundesamt
In countries with high levels of inefficiencies, or lagoons in regulation, this model could bring workers to precarious conditions. Let’s think of an Uber for nannies: weak regulation, where abuses are hard to prove, and even weaker payment conditions. What about an Uber for housemaids, child daycare, au-pairs, tutorial services, artisans, etc. All of these niches, just to name a few, would be welcomed by users who actually care about having an immediate service and nothing more.
WE CAN’T FORBID THIS MODEL BUT IT’S CLEAR THAT REGULATION WILL HAVE TO CATCH UP QUICKLY WITH TECHNOLOGY. OTHERWISE, THE OBSOLESCENCE OF LABOUR AND THE WEAKER PROTECTIONS SOME NICHES POSSESS TODAY IN THE MARKET WILL SIMPLY WORSEN AS AUTOMATION ADVANCES IN OUR SOCIETY.