In less than a decade, Uber has radicalized the ways in which we consume goods and services, through implementing technology into their business model. Companies no longer need to own any inventory or physical assets; instead, web platforms are created which facilitate sharing agreements between the owners of goods with those who wish to share or borrow them (Nina, 2018, p.113). This foundational structure has led to the prevalence of the sharing economy.
The sharing economy refers to “a set of techniques and practices that facilitate trusted transactions between strangers on a digital platform” (Calo & Rosenblat, 2017, p.1625). Uber, a ride-sharing service that matches drivers with riders who need transport to a destination, is at the heart of this new economic model.
By capitalizing on consumer’s dislike for the taxi industry as well as their lack of innovative pace, Uber has successfully disrupted the entire industry (Schneider, 2017, p.38). As such, they have established themselves as the hallmark of ‘disruptive innovation’, and have caused ‘creative destruction’, simultaneously transforming the economy and society as a whole (Schneider, 2017, p.63).
The transformative impact of this company has even generated its own buzzword, ‘Uberization’, characterizing various other new business ventures entering the market which mirror their model.
I argue that Uber has ultimately transformed and shifted the economy in a significant way, which has flowed on to alter both today’s political and socio-cultural climate.
The following essay will begin by mapping out the historical evolution and ownership of Uber, and then proceed by analyzing the economic, political and social changes that have taken place.
A Pre-Uber World to Uber Infancy
Before Uber was created in 2009 in San Francisco, taxis services monopolized their entire market. Surprisingly, they were once seen as innovative, even as a ‘technological vanguard of their time’ (Schneider, 2017, p.38).
This was before regulation was put in motion. Originating from the horse drawn cart, motorized taxis were a part of society in the early 20th century across the world in regions like the US, Europe and Australia. Following the Great Depression, regulations were put in place as two major problems came to light during this period:
- There were no entry controls limiting taxi numbers
- Taxis were cash-based and thus inexperienced drivers neglected regular maintenance of vehicles
(Posen, 2015, p.409)
Licensing were then put in place restricting the number of taxi drivers that could be operating, and putting in place standardized pricing which would follow a taxi meter per kilometer (or mile in the US). However, all this curbed innovation which meant that little has changed in the taxi industry since its inception.
But then came along Uber, after being founded by Travis Kalanick and Garret Camp.
Claiming itself as a tech provider and an intermediary, it evaded taxi regulations by clarifying that it was not a transport company. After all, Uber owns no vehicles and has no traditional employees – rather, it claims all participants are ‘consumers’ (also evading labour laws which will be looked at further on) (Calo & Rosenblat, 2017, p.1646).
As Rodgers (2015) exemplifies, key to the business’s success was their elimination of transaction costs such as searching and effort. Long are the days where we have to physically hail cabs on the street, or wait unknown lengths of time for our cab to arrive; we now get to wait comfortably indoors as we watch its progress to our location (p.88).
Uber is the world’s most valuable privately owned tech company, despite the losses in recent years which has seen its value decrease from $70 billion to $48 billion as of January 2018. New CEO Dara Khosrowshahi has big future plans for the company, including going public in 2019 and growing Uber twenty to thirty times it’s current size, hopefully leaving some of its various scandals behind.
The New Economy
As mentioned earlier, Uber forms part of a bigger technological ecology which is the sharing economy. With the increasing centrality of service-based consumption, platforms such as Uber leverage technology “to connect people and create the infrastructure to support transactions with common social goals” (Calo & Rosenblat, 2017, p.1636).
This is seen with many of the most popular (and wealthy) businesses today. AirBnB allows those with house ownership to lease a room or space to those who want it. TaskRabbit matches freelance handymen with jobs that individuals need done. Menulog connects customers with local restaurants, who are delivered by couriers who register through the app.
Apps and web platforms are the new black. And this has significantly changed the economy as we know it.
Smith (2016) iterates that Uber is working with the concept of conversion – converting goods into services and converting underleveraged service assets into valuable ones (p.385). Accordingly, it operates on 2 principal functions which are central to this new economy:
- Personal service – instead of physically going to a brick and mortar store, we make them come to us by shopping online (e.g. Amazon). Similarly with Uber, cars are finding us instead of us having to look and hail a cab.
- Immediacy – as the internet penetrates every aspect of our daily life, we expect something to be on-demand, available anywhere and anytime. This creates pricing models based on usage rather than ownership, such as Uber’s surge pricing which puts prices up for riders in high-demand periods for drivers.
An Agent of Internetworked Change
Whilst Uber’s app is indeed revolutionary, it is also easy to replicate and can be seen by similar ride-sharing apps such as Lyft, Grab, and GoCatch (Rodgers, 2015, p.94). However, Uber remains a token example of how we might regulate other sharing economy firms, as well as adapt to new technology, thus the company is commonly subject to much public debate. Uber interrelates with a range of other actors who come in contact with the app, from users (both drivers/riders), it’s competitors, and those who regulate it. These can all vary according to cultural and geographical context. The diagram below exemplifies Uber’s actor-network in a general global sense:
A Disruptive Innovator & Creative Destroyer
Disruptive innovation, coined by Clayton Christensen in 1995, describes a process by which a product or service has a simple model which begins at bottom of a market, and then moves up the market eventually displacing established competitors (Schneider, 2017, p.73). Creative destruction, an earlier concept founded by economist Joseph Schumpeter in 1942, is what results from this, driving companies or entire business models of out the market (Schneider, 2017, p.68).
Is Uber a disruptive innovator? Well Christensen, Raynor & McDonald (2015) disagree, due to failing certain conditions:
- Disruptive innovation originates in low end or new market footholds
- Disruptive innovators don’t catch on with mainstream customers until quality catches up with their standards. Uber is rather, sustaining innovation.
However, I take Schneider’s (2017) position in believing that Uber has indeed disrupted the taxi industry. Uber’s use of intermediation via technology has actually diminished costs and has optimized capacity, therefore placing it at the low end of markets (p.82). The creative destruction that has resulted, is rather the end of regulated taxis, or by large a regulated taxi market (p.83-84).
Digital Labour and Exploitation
I want to introduce the concept of digital labour, which according to Fuchs (2014) relates to a “specific form of cultural labour that has to do with the production and productive consumption of digital media” (p.492). Whilst the term is used extensively to relate to our use and consumption of social media, in which our content is the primary capital that earns the company profit, digital labour is also present in Uber’s platform structure.
As Kim, Baek & Lee (2018) put it, Uber’s ‘share-the-scraps’ economic model means the majority of profit goes towards the platform’s owners with the leftovers going to the workers (p.119). As an intermediary, they merely act as a conduit for peer-to-peer interaction, but garner the most profit whilst drivers and users are the primary generators of labour.
Exploitative? Many drivers think so, and some have taken it to court.
Driver’s status as ‘independent contractors’ means they forego traditional work place regulations which ensure security and safety, such as sick leave or workers compensation. In addition, both drivers and riders are expected to perform “emotional labour” through the rating system that Uber employs (Rodgers, 2015, p.97).
The ‘Uberized’ business model and the sharing economy are dependent on the exploitation of digital labour of users, which has produced critical questions regarding both worker’s entitlements and the blurring of boundaries between work and leisure.
The strongest political tension playing out in the sharing economy and for Uber concerns regulation. Finding the balance between regulating and leaving enough room for innovation proves difficult, yet we can’t expect companies operating in this space to be complying with regulations that were enacted long before such technologies were imagined (Posen, 2015, p.407).
The first regulatory concern relates to Uber’s disruption in the taxi industry. It’s ability to undercut traditional taxi operators has inevitably caused ‘fierce opposition’ to its services across many countries, particularly in relation to it’s classification as a ‘tech company’ rather than taxi service (Dudley, Banister & Schwanen, 2017, p.493). As such, taxi operators have challenged Uber on factors such as unfair competition, consumer fraud and deceptive practices (Posen, 2015, p.418). By avoiding the strict licensing imposed on taxis, Uber is considered to be unfairly competing within a market by not complying with the traditional regulatory framework (p.421).
Secondly, as mentioned above, worker’s employment status has been subject to regulatory debate. Uber continuing to deny that it is an employer undermines worker’s rights, especially as the low barriers to entry are salient for marginalized groups or others excluded from the workplace (Calo & Rosenblat, 2017, p.1642). Inevitably, this will contribute to increased job instability into industries where it was not previously common.
But beyond these two primary issues, Uber has been in the spotlight with regards to a number of regulatory fallouts and scandals. For example, in 2016 the company began test riding their autonomous vehicles for public use but did so illegally without first receiving a permit, as explained in The New York Times. And in September this year as reported by The Times, Uber will be forced to pay $148 million to settle an investigation into a 2016 data breach, where a hacker gained access to 57 million users information. What’s more disturbing, is that the company paid the hacker $100,000 to keep quiet about the breach, rather than disclose it to the public in 2016.
Uber presents to us a range of both social costs and benefits. On the positive note, Uber and other sharing economy firms encourage us to forego ownership of products, and with the case of vehicles that could save large sums of money whilst also being eco-friendly (Rodgers, 2015, p.90). Uber even claims that their services prevent drink driving (although studies show it’s disparate across cities).
Yet, Rodgers (2015) makes clear the implications this may have on the future of low-wage work, particularly if Uber drivers are rendered obsolete by driverless cars. Whilst reducing society’s need for work that is “deadening to the human spirit” may increase productivity and efficiency, doing so would put millions out of jobs and basic income (p.101). Another cost to consider is the increasing extraction of value out of customers, who can be subtly manipulated as they’re seen as none other than a commodity. For example, in studying it’s consumers through data analysis, Uber found out that people who have lower phone batteries are more willing to pay for surge pricing (Calo & Rosenblat, 2017, p.1630).
Interestingly, the success of Uber has varied significantly depending on cultural context. Southeast Asia serves as a prime example, where in many regions such as Indonesia the service was temporarily banned in an effort to protect local taxi drivers (although the service still secretly operated). Competitors have also arisen in such regions such as Singaporean-based company Grab, who recently bought out Uber and is now the primary ride-sharing service in the Southeast Asia.
An ‘Uberized’ Future
What will the future hold? Will we rid of all our own possessions and share with those who keep them? Will everything be subject to the tap of a finger on an app? It could well be we are heading in that direction.
Nonetheless, one thing remains clear. The creative destructiveness of Uber means our new world will have to adapt to such processes, until the next innovative start-up topples them over.
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