“On a snowy Paris evening in 2008, Travis Kalanick and Garrett Camp had trouble hailing a cab,” reads the “Our Story” section of a popular ride-sharing service’s website. It continues, “So they came up with a simple idea—tap a button, get a ride.” Indeed, tap a button is, more or less, all that one has to do to get from A to B in most major cities in the world. The convenience and affordability of Uber—the idea that spawned during the snowy evening in Paris—took cities by storm, and its popularity made billionaires out of Kalanick and Camp.
Yet, Uber is only a big slice of the ever growing pie that is the “sharing economy.” Airbnb’s $10 billion valuation surpasses that of Hyatt Hotels, and Uber’s $62.5 billion valuation is on par with those of GM, Ford, and Honda. Services like Lyft, TaskRabbit, and Rover are all on track to upset the incumbents in their respective sectors. While all indications show that the players in the sharing economy should have a smoother ride, government red-tape and industry inertia seem to be limiting them in their bid to bring much needed overhaul to many of the services that we have gotten used to. Bringing efficiency and transparency to transportation, rental housing, and business reviews should be a welcome initiative and a dialogue-starter, not one to be met with intimidation and violent strikes.
Large trade unions and established industries have a vested interest in maintaining their grip on their respective sectors, and they have a right to voice out their concerns as long as they strive for meaningful negotiations with those who want to reform the market. But that does not seem to be the case, instead taxi-labor unions have mostly attempted to modify their competition instead of adapting to it. Their demands mainly consist of unreasonable requests to completely shut down competing services, or requests to increase competitors’ prices.
Last January in Paris for instance, thousands of cab drivers started fires that blocked roads and disrupted traffic. They were protesting against competition from Uber and other ride-sharing services. According to the BBC, at least 20 of them were arrested for “violence, carrying weapons, and starting fires.” The fact that they have to resolve to such means of advancing their grievances highlights their recalcitrant attitude.
Nearly five years ago, Marc Andreessen, a Silicon Valley titan and co-founder of the venture capital firm Andreessen-Horowitz, wrote, “Software is eating the world.” The expression has since become the de-facto characterization of the transformation that various industries are undergoing in this technological era. And no field of business was more ripe and ready for a complete overhaul than the taxi services industry. Perhaps, the taxi-drivers’ union leaders did not get the memo, but if a business can provide a service cheaper, more efficiently and with greater convenience to its customers, it is a no-brainer that the market will favor that specific provider.
That is not to say that the business model of the likes of Uber is without faults. The debate on whether Uber drivers should be classified as employees or independent contractors is still playing out in courts across the country. The largest court case in this debate is a class action lawsuit by drivers alleging that they have been misclassified as independent contractors, and that Uber should cover the maintenance, traffic, and fuel costs of the fleet. Also under scrutiny is the way Uber splits fares with drivers. The company recently lowered prices for customers but increased its cut from 20% to 25% of every ride. These are, however, only kinks that will have to be ironed as we transition into a “gig-economy.”
Going forward, innovativeness, open-mindedness, transparency, and a willingness to engage in dialogue are the qualities that we need as we face a future in which technology bleeds into every aspect of our lives. In contrast, the desire for consistency, and the tendency to get ensconced upon becoming established, will be the pitfalls for many a business. And unless the traditionally lethargic industries wake up and integrate technology into the way they offer their products or services, Andreessen Horowitz’s words will surely come back to haunt them.