About that sharing economy/gig economy, or whatever you want to call it...
Uber (and Lyft) are facing an action by their drivers today May 8 to get better compensation, as Walter Einenkel reported for Daily Kos. They have reasons:
Lyft recently went public and Uber is planning on going public any day now. Thousands of employees are projected to become millionaires over the next few months. But the drivers for these companies? Not so much. Recent weeks have seen a considerable increase in gas prices across the country. For the first time in five years, Californians are seeing $4 a gallon costs at the pumps. The San Francisco Chronicle reports that these costs are shouldered by the drivers themselves, as companies like Uber and Lyft refuse to raise the costs of rides for fear of losing out on consumers and deflating their newly published stock prices.
NPR has more on this:
Uber's valuation could be as high as $91 billion when trading begins, which would place it among the top three most valuable firms to ever debut on a U.S. exchange. Co-founder and former CEO Travis Kalanick's stake may be worth as much as $5.9 billion.
But the IPO won't be life-changing for most drivers, who Uber insists are independent contractors, not employees. Some drivers will receive one-time bonuses according to their loyalty: Those who completed more than 2,500 trips before April 7 and at least one this year are eligible for a bonus, ranging from $100 for those drivers with 2,500 completed trips to $40,000 for 40,000 completed trips. U.S. drivers can use that bonus to buy up to $10,000 in stock in the company at the IPO price.
There’s something about the business model of Uber and Lyft that seems so right for the age of vulture capitalism and ever-increasing shareholder value at the expense of anything that gets in the way. They can undercut traditional cab companies because they don’t have to invest in a vehicle fleet or comply with the regulations that cover them. Their workers are totally dependent on customers coming to them via the apps that are the cornerstone of the business, and they have (so far) little leverage with the companies over working conditions and compensation. Uber’s business model depends on paying the people who make it work as little as possible. Don’t even ask about benefits.
Looking for an alternative ride? Not if Uber can help it.
Thanks to 48Hills, an independent in the San Francisco area, we now know Uber is planning to continue expansion not just by getting people out of their cars, but by replacing public transportation as well. Tim Redmond reported on May 6 that:
Uber has acknowledged in a federal filing that its long-term goal is to privatize public transportation around the world.
In a document filed with the Securities and Exchange Commission, the ride-hail company reports that it seeks, as part of its growth strategy, not just to get people out of private cars but to get them off public buses and trains.
Those public services would be replaced by Uber Buses, now being tested in Cairo.
That stunning revelation is deep in a 300-page document called an S1, which the SEC requires for any company planning an initial public offering.
Uber’s IPO is expected this Friday. The document was filed April 11. I don’t think any of the major news media covering the IPO have noticed or reported on this part of Uber’s plans.
Uber according to wikipedia has grown immensely since its startup. The flexibility it offers and the dynamic pricing that undercuts competition from cabs and public transit make it attractive to customers. It makes it easier to live without a car in areas where Uber service is available — but it doesn’t reduce traffic congestion; it can increase it under some circumstances.
Along the way, Uber has demonstrated some of the less fortunate behaviors of startup culture: aggressive tactics edging into bad behavior, management by a**holes, etc. It has taken a “catch us if you can” approach to local laws that are intended to regulate TNCs.
It has also burned through a lot of money, reporting operating losses in the billions. The intent is to cash in big by going public, emphasizing growth over profits to gain dominant market share. That, according to Einenkel is one reason Uber is squeezing its drivers, to boost its value to attract investors.
And another way to gain market share is to eliminate the competition. As 48 Hills notes, Uber is looking at its “Total Addressable Market” or TAM — everyone who might use Uber, including people who use public transportation.
The S1 [SEC filing] is fascinating reading (if you’re into this sort of thing). You can find it here. Uber admits in the document that it might never make a profit; that it continues to lose billions by underpricing its product (rides) to gain customer loyalty and market share; and that its entire business model could collapse if regulators or the courts decide that its drivers are employees, not private contractors.
So how is this company going to be attractive to investors? By about page 160, the company starts talking about its “Total Addressable Market.”...
...Here’s where you get the real point:
Increasing Ridesharing penetration in existing markets. Our large addressable market opportunity means that with approximately 26 billion miles traveled on our platform in 2018, we have only reached a less than 1% penetration of miles traveled in trips under 30 miles in the 63 countries in which we operate. We believe we can continue to grow the number of trips taken with our Ridesharing products and replace personal vehicle ownership and usage and public transportation one use case at a time, including through continued investment in our affordable Ridesharing options, such as Uber Bus and Express POOL.
That’s right: Uber plans to grow its business by replacing public transportation.
Now if you’re a die-hard believer in privatization, this may seem like a good idea. Except we’ve been here before. America used to have a comprehensive network of trolleys, streetcars, and interurbans — until the automakers and the fossil fuel companies got them in their sights. A CNBC report on why America does so badly with High Speed Rail references this about 51 seconds into the video at the link. If we still had those electric rail systems today, we could have near carbon-free public transportation around the country. (Here’s how.)
This comes at a time when free or low cost public transportation is gaining ground in Europe and elsewhere. Fares usually cover a fraction of the costs of operating a public transportation system in the first place; raising fares lowers ridership, leading to a downward spiral. It’s not enough to go the other way though. Besides free or low fares, systems also have to provide frequent and reliable service. When they do that, ridership goes up.
If the intent is to reduce traffic congestion, air pollution AND make it possible to live and work in cities even if you can’t afford or don’t want a car, then this makes sense. It’s a thing called the public good. America has been heavily subsidizing the auto industry and the fossil fuel industry for decades with its pro-highway policies. We’re paying a heavy price now.
Uber may be offering low-cost transportation to the public, but it remains highway-centric, meaning it is subsidized by public money. It also remains to be seen if Uber can make a profit doing it. In a worst case scenario, Uber succeeds in wiping out public transport alternatives — then declares bankruptcy and shuts down, leaving nothing.
A slightly better than worst case scenario sees Uber succeed in eliminating public transportation and all other competition — but then the company is free to set pricing, service, employee compensation, etc. according to its own needs. A de facto monopoly will give them tremendous leverage over customers, employees, businesses that rely on public transport in any way, communities, and politicians.
Privatizing public transport shifts to a system where the primary goal is keeping shareholders happy. Accountability to the public — the users of the system — is not a primary concern.
We are in a Red Queen’s race, where billions of dollars are riding on the IPO for Uber — and the potential consequences are far higher. Government and regulation is having a hard time keeping up. We’ve already seen how Amazon morphed from an internet book seller to a behemoth dominating consumer spending. Facebook and other social media went from ways of keeping in touch with others to massive invaders of privacy and purveyors of weaponized disinformation.
Where will Uber take us, and will we like where we end up?