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The Uber Phenomenon, or Who Cares About Ethics if I Have Growth?

15 minute read
This article has been kept updated since the first publication in 2014.
Last update Sep 2017.

It’s not that often that appear in the world companies like Uber that in the process of creating a business, they touch at the same time different socio-economical forces.

Due to this, it makes any argument and discussion quite complex, because often people start referring at Uber – the company – and then they shift discussing social issues. Or they start talking about social issues, and they end up commenting on the long term structure of law making and government intervention. While every successful business have to an extent similar effects on society, it’s uncommon that this effect presents itself so clearly and so acutely in different aspects.

We can call this the Uber Phenomenon to separate it from Uber, the company. Also because “uber” means “more”, “superior”, and this is a more evident expression of the interplay of these elements.

There are three lenses that I feel are useful to analyze the situation:

  1. The business lens
  2. The law disruption lens
  3. The ethical lens

The Business Lens

Uber as a business is a great idea very well executed. Note how I pair the two ups: I find the common discussion of superiority of idea and execution pointless. You need both, they have both.

Uber isn’t just executing well: it’s also a very aggressive case of it. They don’t just execute, they do that very boldly. Excellent examples of this is how they approach regulation, how they incentivize private drivers to buy better cars, they do a lot of stunts to get the media attention (kitten deliveries!), they are in the right markets to use that hype (USA, where good means of transportation other than cars are rare), and so on.

That said, notice how there are however other companies that have both the same idea and a good execution, even if they aren’t maybe as agressive: Lyft. Hailo. Sidecar. Gett. Etc. I’m sure that with enough research you’ll be able to find many others.

Under the business lens Uber isn’t that special: it’s one of many well funded businesses that is following the sharing economy trend (while not being sharing economy) and it’s doing it well. But undoubtedly they are executing well, and likely more aggressively than all the others.

The Law Disruption Lens

This is one of the reasons why Uber is often attacked, but for me this is a no-issue. No issue not in the sense it’s not causing problems, but because that the disruptive, challenging approach is one of the ways that make institutions change their laws.

I hope that nobody would argue that the cab licensing systems in most countries is in a good shape. The words you find more often by analyzing them are: closed market, no competition, untouchable, price freeze, unfriendly, etc.

So how do laws get changed? You can go for the slow road to change them from the inside, but while this sometimes work, most of the time for certain laws requires a forced change in status quo. Sometimes it’s a popular revolt, sometimes is a big shift in the leaders, sometimes… companies challenge them.

This doesn’t always work well, for sure. It depends a lot on the company and their intent. It depends on how much the public cares or agrees. For example there are people that agree about oil companies lobbying for more freedom of action, because they feel oil is critical to the working of this society and they don’t feel the dangers are tangible. You can disagree with this as much as I do, but it’s a perspective which must be acknowledged, and in absolute terms from them being right to being wrong for the society it’s just a matter of how many people believe in it.

So: disruptive business have the ability and are beneficial to the society in trying to change laws: the clash generated between the company, the institution and the public usually brings us a better law.

To be clear: it’s not that these laws were formed just to create damage. These law were created to improve the situation from a previously worse one. They created a market. Government regulation here worked well, it’s just too slow: today, they can be improved.

The law and disruption aspect are surely big and surely controversial, generate a lot of discussions, but they aren’t related to the business itself. For example Hailo, a company that solves the same problem as Uber in the same way in terms of user perspective, went instead for a strategy of partnering up with existing taxi companies, city by city, and solving the law issues before entering a market. This means that while under the business lens they were exactly the same, under the disruption lens they were quite different: one challenged taxi laws, the others played nicely with them. From the perspective of final users? No difference. Still the same “call a car from your smartphone” solution, well executed.

It has been argued that being disruptive or not is part of the business model. It’s not. It’s part of a strategy for sure, but the model is the same: I need to go somewhere, I use my smartphone, get a transportation vehicle, get somewhere, pay automatically. Inside that experience there’s the business model.

The Ethical Lens

If the disruption lens is a controversial one, the ethical one is even more, because “ethical”:

  1. Is a non-issue for many business managers and financial advisor, under the motto that “if it makes money that’s ok”.
  2. Has a not very precise definition, and can escalate quickly to philosophical debates, and can get thus accused of being unsubstantial.

Nonetheless, the Uber Phenomenon does include an ethical standpoint, because the actions aren’t just aggressive they also too often take an unethical take. This means that the two aspects need to be separated.

The difference is between a company that help car driver to upgrade their car with good deals to get more drivers on the streets, vs a company that promise people a certain income level that they won’t ever see, and cover themselves in debt. A company that in a period where sexism and misogyny are hot topics and everyone is trying to do a better job, vs a company that comes out with an advertisement about “hot chicks driving you home”. A company that has a media problem and tries to fix it, vs a company that insults people when that problem arises.

Also note that this doesn’t mean that everyone in the company is a bad person. Even if we refer to “Uber”, when we talk to individuals there’s no specific blame until proven. It means that the company has a specific culture that is statistically more likely to attract and have a specific attitude internally. And since company culture, even more in startups, comes from the leads, we don’t have to go much further than the founder and CEO Travis to see where the ethical issue comes from:

“OMG so f’ing EVIL OMG OMG… i can’t believe this shit, so horrible holy shit”
— Travis Kalanick just in time for Xmas 2013

Let me spend an extra word now on the topic of “Surge Pricing”. Surge pricing is an incredibly controversial element of the pricing logic of Uber where to “compensate” for having less cars, they raise prices. In purely economical terms, the drivers are a scarce resource, even more in peak time. So there’s surplus of demand, and that surplus means that someone won’t get a car. So surge pricing does one thing: instead of getting people on cars with the logic of first-come-first-served, which doesn’t discriminate people by how much money they have, they use the logic of raising prices. A logic that discriminates people by how rich they are. So in one case everyone has equal chances of getting a car, in another case just the rich people can.

That’s a fundamental difference, and of course it’s something that Uber doesn’t want to highlight, because of course the second dynamic means more money for them. It’s way better for Uber to justify this by saying that gets more drivers on the streets, of course. Until…

“UberX is very close to SURGE. It’s Valentine’s Day! People will be out all night and we didn’t activate new drivers to make earnings even higher this weekend.”
— Ben Popper (2014) Uber kept new drivers off the streets to increase fares

These dynamics however have multiple effects, and it’s fascinating how many people accept Uber’s explanation. My guess is that surge pricing sounds a lot like “free market” (which is not, these are all drivers working for a single company, remember?) so it gets a free ticket in this capitalistic and consumeristic western society. But that doesn’t change the truth of it: the model of surge pricing is elitist at its root.

Why I mentioned this element of surge pricing under the ethics lens? Because while it’s “just business” and there’s nothing unethical in that — as much as there’s nothing unethical in the fact that the society has a huge salary gap between rich and poor — the dynamic is there, and has ethical consequences.

Not just that: it also shows on which side the company exists, and what kind of culture it endorses. Once you factor this cultural element in, you might not be surprised to hear that Uber, and USA company, does surge pricing, while Hailo, an European company, doesn’t. By the way: have you ever wondered why there are laws that regulate pricing? Exactly. Protect the consumers. I’m sure that you wouldn’t trust the cab drivers in a city where they were allowed to do the price they wanted at will.

It’s also not surprising at this point reminding that Uber started as UberCab a company that used to hire luxury cars for a premium price (about 50% more).

Elitist, 1%ist, misogynist, sexist, disrespectful, unlawful, vindictive against journalists, anti-competitive, avoiding basic legal safety checks, getting the drives on the low end of contractual safety. This isn’t just an aggressive company. This is an unethical company. That however is using a great business model, executing very well and aggressively, and helping change old laws. We need to get out of these black and white analysis. We can have a bad company that does some good things, for sure.

I’m sorry for all the people that work inside there and they are different from the company culture itself. I’m aware you exist. And I’m sure you don’t like these kinds of dissecting. But there’s unfortunately no way to talk about this and at the same time making a clear distinction for you all, and that doesn’t change what your CEO does, and what the company does as a whole. I’m sorry.

In the end, it’s all about culture

Everything comes from the founders, the first people he hired, and everything cascades down from there. Uber is a prime example, under scrutiny and so clear under the sun, how much the person at the top shapes and crafts the culture of an entire company over time.

We could have good companies, even aggressive and disruptive ones, that are at the same time ethical. These are the companies we should finance and make thrive. Uber? Unfortunately gets two things right, but misses an important third. We need more companies that are able to do good under all the three lenses: good business, disruptive and ethical.

Am I calling then to boycott them? Up to you. I don’t feel to suggest anything, as I don’t feel it can be very effective, because in the end very few people care “as long as it gives me a benefit” and “as long as it makes money”, depending on which side you are. It’s mostly symbolic. However, you can still think about it, and maybe think about the alternatives you have.

These days, it’s likely there are a few.

 

Update: the London TFL Case, 2017

In September 2017 TFL after years of issues with Uber (see sources below) decided to let Uber’s license expire. This should not be surprising to anyone that followed Uber since they started operating.

Uber obviously replied with a sequence of actions, but most notably created a petition for Londoners to sign, and marketed to have the petition signed. They were able to spin this in their own terms:

  • “London is anti innovation” — clearly false, as there are many competitors in London with similarly operating apps currently operating in legality (Gett, MyTaxi, Addison Lee). Obviously, in the petition there’s no mention of competitors in London. I tried to sample, asking some people “what about competitors” and few seemed aware there were other options to Uber. It’s my own personal limited sample, I’d be very curious to be proven wrong here, yet: how can London be anti-innovation if Uber was let operating for years, and competitors are still able to operate?
  • “Uber is safe for people of color / women / …” — this is incredibly odd for me as one of the issues is Uber under-reporting criminal offences and obstructing officials. If anything, Uber’s track record seems hinting at the opposite, yet there’s an argument to be made to check if Uber is actually worse than the alternative. It still doesn’t discount other issues like obstructing officials: we don’t know because they don’t disclose it? And even if it’s better than the alternatives, it doesn’t mean it doesn’t happen. We lack data.
  • “TFL is doing protectionism for Black Cabs” — I’m sure there’s pressure on that side, no doubt. Yet, dismissing this whole question as simply this is ignoring a huge amount of evidence of problems that exist.

They have been very successful at this spin, as a huge amount of people signed the petition and are vocal about “how good Uber is”. From a PR perspective, this is outstanding: regardless of how things are going to end, the real winner here is their marketing team.

On the other hand, this scenario is far more complicated and troublesome — as usual.

Many companies provide the same experience as Uber, but Uber managed to get more drivers (40k Uber vs 21k Black Cabs, even if Uber’s one don’t operate full time) and lower costs. Specifically, a cost so low that I’m not aware of any competitor able to under-cut them. Most of the reason seem to be they are giving back to riders a very small share, the ethical concern I detailed above, and subsidizing rides with investor money. In short: the business model is not sustainable.

This is part of the strategy, a common one in the Silicon Valley: they used investor money to become a reference to people. Nothing bad with this by itself of course: it depends what’s being fueled. Given the service they provide is so useful, so cheap, and safer than many alternatives, people like it. And that’s exactly what’s happening in London: millions of people find it useful – correctly so! Without being aware of the history and long term impact of the business, they simply endorse it. Uber won them over… but at what cost?

I’m not sure of the answer here: if I’m alone at night and with a salary that doesn’t allow me to pay for other competitors, Uber could literally save my life. Yet, they did it by operating aggressively and illegally. My original post above questioned if it made sense to boycott them: many did in the past months, yet, it’s a boycott not everyone can make.

This is another reason by Uber strategy is so dangerous: now they reached this position, and it’s impossible to go back. People know it’s useful.

The ethical implications are even more far reaching, and troubling.

 

Sources

  1. P. B. Carr (2012) Travis Shrugged: The creepy, dangerous ideology behind Silicon Valley’s Cult of Disruption
  2. Sam Biddle (2013) The Weekend Uber Tried To Rip Everyone Off
  3. Sam Biddle (2013) Uber CEO Continues Condescending Asshole Routine
  4. P. B. Carr (2014) “We call that Boob-er:” The four most awful things Travis Kalanick said in his GQ profile
  5. Matthew J. Belvedere (2014) Peter Thiel on Twitter and pot, Google, Uber and gay CEOs
  6. Casey Newton (2014) This is Uber’s playbook for sabotaging Lyft
  7. Josh Constine (2014) Uber CEO Thinks It Needs To Be Kinder And Gentler Now That It’s On Top
  8. Charlie Warzel (2014) Sexist French Uber Promotion Pairs Riders With “Hot Chick” Drivers
  9. Sarah Lacy (2014) The horrific trickle down of Asshole culture: Why I’ve just deleted Uber from my phone
  10. Nitasha Tiku (2014) Uber and Its Shady Partners Are Pushing Drivers into Subprime Loans
  11. Jay Yarow (2014) The CEO Of Uber Proudly Admits He Tried To Nuke His Biggest Rival’s Fundraising
  12. John Battelle (2014) Whither The Public Commons? Enter The Private Corporation
  13. Chris O’Brien (2014) Uber removed blog post from data science team that examined link between prostitution and rides
  14. Chris O’Brien (2014) VC Fred Wilson says Uber’s ‘ruthless execution’ and ‘swagger’ are key to its success
  15. David Lewis (2014) Uber blocks transport inspectors to avoid fines
  16. Oliver Smith (2015) Uber was prepared for ‘high court ban’
  17. Miri Mogilevsky (2015) Why Uber can’t fix rape culture
  18. Anil Dask (2016) Another reason to stop using Uber (Twitter thread)
  19. Mike McPhate (2016) Uber and Lyft End Rides in Austin to Protest Fingerprint Background Checks
  20. Sarah O’Connor (2016) Uber drivers win UK legal battle for workers’ rights
  21. Julia Carrie Wong (2016) California threatens legal action against Uber unless it halts self-driving cars
  22. Yves Smith (2016) Can Uber Ever Deliver? Part One – Understanding Uber’s Bleak Operating Economics
  23. Susan J. Fowler (2017) Reflecting On One Very, Very Strange Year At Uber
  24. P. Anand (2017) Uber CEO Says He’s Seeking “Leadership Help” After Video Shows Him Yelling At Driver
  25. M. Isaac (2017) How Uber Deceives the Authorities Worldwide
  26. M. Isaac (2017) Uber’s CEO Plays With Fire
  27. W. Turton (2017) Uber employees are miserable
  28. J. Kollewe (2017) Uber apologises after London ban and admits ‘we got things wrong’