Wednesday, July 10, 2019

Uber Economy

Up until very recently, taxis were highly regulated affairs. Now, there are apps like Uber and Lyft that have made the taxi industry more of a free for all, and this has had a lot of cascading effects that most people are not aware of. Historically, being a taxi driver meant you had to work for a bigger company who paid for medallions in order to be allowed to operate in various cities. This meant that there were certain standards and expectations, but also better pay for the drivers. This is not the case with invention and success of apps like Uber and Lyft.

Being a taxi driver has now been turned into a high turnover business, because the payoff isn’t good enough to support anybody who tries to do it full time. Uber and Lyft have outsourced the labor pool to a level of competition that makes it so only people who are unable to do cost benefit analysis are involved. This doesn’t matter to the companies, because they get a cut of every drive without incurring any of the costs like spent time and wear and tear on vehicles.

Prior to the prevalence of smartphones, this sort of business model wasn’t feasible. In order to succeed, Uber and Lyft have allegedly bent a lot of laws from the beginning of their operations, knowing that by the time anybody noticed what they were doing that would mean that they had a significant amount of people using their service, which would mean they would have a lot of revenue, which would mean that they could pay lawyers and lobbyists to make their alleged legal improprieties inconsequential. This strategy worked.

Most of the people who drive for Uber and Lyft are losers. These are the people who get involved in things like Cutco or other multi level marketing endevours, not understanding that it’s almost impossible to run a profit for time invested. Traditional taxi drivers haven’t been losers, but they are now being increasingly priced out of operating a cab, because cabs are getting less use because they are less competitive than Uber and Lyft.

This sort of setup sounds nice on the surface, but it is a race to the bottom in terms of service. Eventually, everybody who isn’t a sucker will catch on that only suckers drive Uber and Lyft trying to make money, but that won’t mean that Uber and Lyft will stop. They will continue to collect their cut of suckers, and the traditional taxi services with higher fees because they (need higher fees to pay drivers a living wage) will struggle and go out of business or cut costs and start using the same predatory tactics Uber and Lyft engage in.

This situation is not limited to taxi services. Hotels as well as apartments are other industries that being harmed by this behavior. Hotels get less traffic and have to shut down. Apartments cost more because people have figured out how to monetize apartments. This also causes problems for landlords because they are unable to control who is living in their apartments, which opens them up to problems and uncertainties that previously didn’t exist.

I don’t really think there is any proper manner to address these problems. They are essentially companies that have figured out how to exploit a tragedy of the commons and work around laws and regulations that have served to protect and sustain industries and thus the people involved in them. This will have a lot of negative side effects that can’t be predicted, but it will also have positive aspects that can’t be predicted. As always, industries and people will adjust to the shifting reality to better accommodate what is working, and what is now not working will die off.