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Reflecting on Uber

Adam Rust's picture

Posted December 8, 2014

The ride-arrangement service Uber is a disruptive technology that seems to provoke strong and opposing opinions.

Given that some have estimated its market value at as much as $40 billion, it seems like few could contend that Uber is going to go away anytime soon. It has gained legions of loyal users in just a few years. It has upended a market that was ripe for improvement.

The marketplace for taxi cab medallions has reset in its wake. A recent story in the New York Times says that the medallion market is virtually illiquid. The transactions which are occurring reflect severe distress in the net present value of a cab license.

Uber uses surge pricing, so that equivalent rides may not cost the same.  But surge pricing doesn't necessarily mean that it is more costly. In fact, though there are many critiques of Uber, high cost is rarely one of them. 

Uber works because it taps the power of the smart phone, offers cost certainty, shifts the cost of capital investment on to contractors, and avoids operational liabilities.

Comparing Uber to a Traditional Cab

Although I traveled the same route, my Uber and cab rides last week went very differently. In the morning, I took an Uber from Crystal City to downtown Washington, DC. It was during the rush hour and there was a lot of traffic.  The car wasn't the greatest - it was a tiny Ford C-Max with hard seats and no leg room. But it was clean and the driver took us directly to our destination for $13. That evening, well after traffic had subsided, I went back to Crystal City. But this time the ride was in a regular cab. The seats in the Crown Victoria were different, but they were not any better. It wouldn't be a fair description to say that I sat down. More accurate would be say that the seats swallowed me. I was reminded of the smell of old fries and wet umbrellas. The cracks in the vinyl upholstery were filled with black dirt.

The ride did not fail to disappoint. When we exited from the highway, the driver immediately lost his way. Although the Hyatt was on a main thoroughfare, he couldn't seem to get us there. By the time my co-passenger took out his GPS, the fare had surpassed $25. With tip, the ride cost us more than $30. 

Disrupting Something that People Don't Like

Uber isn't disrupting something for which a lot of people have warm feelings. Cabs aren't like the print newspaper or the bookstore. A cab ride is at best bland and at worst an expensive regret. Even worse, some people find it hard to get a cab ride in the first place. Cabs are regulated, but even so, they seem to beg for more. 

But even as some embrace change, others greet it with anxiety. A cab loyalist in the same city opined that much could be lost with disruption.

"I guess I'm just not as offended by cabs," he shared. "I think the industry varies a lot by city. It's also not really my issue, but I think a lot about the idea that Uber has the potential to disrupt a number of industries, in a way that ultimately creates a new and more powerful monopoly and leads to lower labor standards, protections, etc."
He's not alone. In fact, I'd say that Uber skeptics outnumber its fans. Many people don't like the way that Uber drivers can work in areas that are otherwise unionized.  Some doubt that an unregulated system can survive for long without producing some horrific problems.  As well, don't forget about Halloween Uber.
Being an Uber fan or detractor should depend on how you think of the virtues of the market place. If you believe in the free market, then logic would say that you like a system that replaces one that restricts supply and imposes constant regulation. If you think the market is imperfect, then you might prefer the system that currently exists for livery. But it turns out that support or disdain for Uber doesn't break that way. 
"An Uber comes right away," I was told by a former union organizer not too long ago, "and it doesn't cost as much!"
In fact, this contradiction is what intrigues me the most about the Uber phenomenon. People who should be repelled by Uber often love it.  Have you noticed how those most likely to reject a market-driven, industry de-stabilizing technology react favorably to this service?  
I hate the fact that I hardly know anyone under thirty who reads a print newspaper. Something very significant to our society is being lost. But disrupting the cab ride is, in my opinion, no great loss.