Much is being written about Uber now that some chiks in the PR machine have appeared. This piece is interesting. (via TPM)
6. Is Uber trying to distract attention from a deliberate strategy of labor exploitation? Since no one can provide plausible Uber growth theories based on major productivity/service improvements, one must consider the possibility that Uber management’s growth strategies may be at least partially based on drivers it would not want to publicize. The labor exploitation hypothesis suggests that Uber not only hopes to avoid paying higher costs that might be needed to attract drivers away from competing companies, but hopes to actually achieve driver costs lower than what existing companies face, by exploiting significant information dissymmetries. One key is Uber’s “independent contractor” approach, whereby those drivers provide the vehicle, vehicle maintenance and liability insurance. As mentioned earlier, traditional business logic suggests that this approach could not work because existing companies could always get much better rates than individuals acting in isolation. In these situations Uber has shifted the full vehicle capital risk (normally borne by a taxi company) to the driver; this allows Uber to grow without raising much capital, but there is no evidence that drivers are being compensated for their (collectively) large capital contribution, or the risk that Uber exercises it rights to suddenly terminate the contract of the person who had purchased a vehicle on its behalf. Similarly, the typical taxi/limo driver may not understand the true maintenance/depreciation costs of intensive commercial use as well as professional fleet managers, and multiple reports indicate Uber drivers do not always understand the requirement to purchase commercial insurance with significantly greater liability coverage than their personal policies (carrying paying passengers would invalidate their personal policies and violate laws in most cities). Some drivers may be willing to explore Uber options given the poor pay and conditions at other companies, but if the capital and insurance costs at Uber are not clearly covered by much higher passenger revenues (i.e. if net “pay” at Uber isn’t clearly higher than what taxi operators pay) than the Uber approach will be unsustainable. Uber might forgo its software charges in order to increase net driver “pay” in the near term as it tries to put existing companies out of business, but if it eventually was able to become the car service company it would likely regain the leverage to force labor to bear much more of the costs and risks currently borne by taxi/limo operators.
7. Is Uber trying to distract attention from deliberate regulatory arbitrage? Car service regulations fall into four major categories—minimum business standards/consumer protections (requirements for adequate financial resources, commercial vehicle and driver licensing, maintenance, driver screening and training, insurance, clear advance notice of fares, meter inspections, etc.), market entry rules limiting the specific services (taxi/limo) companies can offer and the number of vehicles that can serve each market, and labor law provisions (minimum wages, benefit and tax rules for full time workers, etc.). While there are a handful of cities with particularly problematic regulations (such as medallion based entry restrictions that transfer huge economic value from operators to medallion holders), most are designed to protect against the risks consumers might face in a totally unlicensed world, and to provide minimum recourse for consumers who might injured in an accident or harmed by a rogue driver. Operators are also constrained by insurance companies, who can adjust rates based on evidence of vehicle maintenance, driver training and similar factors. Uber appears to be pursuing a deliberate strategy of regulatory arbitrage; they appear to want to be able to evade rules they find inconvenient, but still want those rules to be imposed on their competitors.
a tip of the hat to Jim