Uber may be what supporters claim: a way to break the rentier structure of many cities’ taxi companies. But Uber also needs to respect the society it claims to benefit. (More)
It’s no secret that I don’t like to travel. My last cab ride was, well, the
Professor of Astrology Janitor and I agreed that we won’t talk about that ever again.
Anyway, that was over three years ago and Uber had just started a year before that. Officially, Uber is a “ridesharing service.” You open an account and give them your credit card information. Then you can connect with your smartphone and tell them you need to get from Here to There and what time. Uber sends a driver and bills your credit card, so passengers can’t stiff drivers by hopping out without paying. Plus drivers don’t have to carry cash so they’re less likely to get robbed.
Basically, Uber is a limousine and taxi service. They call it “ridesharing” because most cities limit the number of limos and taxis, and in some cities those medallions cost hundreds of thousands of dollars. Last year in New York City, a “mini-fleet” of two medallions sold at auction for $2.5 million.
In short, most city taxi services’ business models rely on economic rent. That is, a big chunk of your fare goes to the person who owns the medallion, solely because he/she owns that very expensive, limited-quantity medallion. That’s rarely the driver, as conservative economics-journalist Megan McArdle explained in 2012:
Many defenders of regulation argue that restrictions are necessary because cabdrivers make so little money as it is. But there’s very little evidence that restricting the number of cabs improves the lot of the people who drive them, rather than the lot of the companies that, by and large, own the licenses. It’s simply too easy for new would-be drivers to show up at a taxi service and compete cabbies’ earnings down—in these days of GPS, you don’t even need to be familiar with the area. So any excess profits from restricting entry tend to accrue not to the drivers, but to the people who own the right to drive.[…]
“In New Haven, nearly every taxi is owned or controlled by [the same] person,” Robert McNamara, an attorney at the Institute for Justice, which litigates against these sorts of rules, told me. Restricting entry “hasn’t made the drivers better off.”
The Institute for Justice is a libertarian public interest law firm and many of their cases would rightly set progressives’ teeth on edge. They’re real big on property rights, unless that property happens to be a city taxi medallion or a city tour guide license. Then not so much.
So you read about cabbies being upset at Uber and that makes you think the cab drivers are hardworking Davids against a libertarian-backed, Silicon Valley based Goliath. But the cab company owner who compared Uber to ISIS may own over $20 million worth of medallions, and Boston cabbies say they have to bribe company officials to get enough fares to make ends meet. In fact a lot of cabbies have applied to drive for Uber, both for better pay and fairer treatment.
The fairer treatment is because Uber’s business model is based on data:
A substantial portion of Uber’s employees are statisticians and engineers who work in its “math department,” using the data the company gathers from customers to develop ever more sophisticated algorithms that can predict demand. The mass of data that Uber collects has generated some surprising insights – Kalanick says, for instance, that by looking at demand on days when the San Francisco Giants play at home, his statisticians can predict wins with a slight edge over the Vegas odds. Whether or not you’d be willing to put money behind this claim, relentless data crunching has clearly allowed the company to continuously improve the speed with which passengers can find cars – or cars can find passengers – by providing increasingly fine-tuned forecasts of demand, neighborhood by neighborhood.
The data and the ability to set fares are what let the company patch the holes in the current system. A car is always available (because at peak times, such as New Year’s Eve, the company raises prices until supply matches demand). The car is well maintained. And as long as you’re willing to pay the fare, that car will take you wherever you want to go, without regard to race, ethnicity, or ZIP code.
And that’s exactly what made Uber executive Emil Michael’s ‘joke’ about smearing journalists who criticize the company so chilling. Uber gathers and keeps a lot of personal data about users, and they been pretty cavalier about sharing it. They even keep a “rides of glory” database about users’ sex lives. Hrmm.
Add to that, many members of Congress like Uber, and the Republican National Committee circulated a petition to support the company. You don’t need a tin foil hat to worry about how that might play out if Uber decided to leverage their data on behalf favored politicians.
Uber’s business depends on the trust of the riders and drivers that use our technology and platform. The trip history of our riders is confidential information, and Uber protects this data from internal and external unauthorized access. As the company continues to grow, we will continue to be transparent about our policy and ensure that it is properly understood by our employees.
As Uber gets bigger and more established, its executives can look less like brash upstarts and more like assholes. Moves like hiring former top Obama advisor David Plouffe, show that the company is hardly on the outside looking in. It has a valuation of $18 billion, and clear aspirations to move beyond the ride business to a broader array of “urban logistics” operations.
That’s all great. But to succeed at that level, the company needs to grow up.
The vision of free entry into the rides-for-hire market is appealing, and it took a certain devil-may-care attitude to get it off the ground. But it is off the ground now. Uber is a major company. And it’s time to start acting like it. Not all rules are made to be broken. The fact that Michaels is getting a kind of verbal scolding rather than suffering real consequences suggests that maybe the company’s board and CEO still don’t get that.
Also, their cars should have macadamias. Just sayin’.
Good day and good nuts