Technology Disruption is Good, but Uber Disruption is a Disaster

In the rapid growth of the online gig economy, especially with the unprecedented growth of Uber in the transportation industry, many workers feel squeezed and at times dehumanized by a business structure that promises independence but often leaves them at the mercy of increasingly powerful companies. There is nothing wrong with being an independent contractor or working in the "gig economy", but there is a problem when the entity in question is named Uber.

Drivers are becoming increasingly dissatisfied and disillusioned by Uber......and no wonder why. Because Uber is not the Salvation Army and is not out to create jobs, but is out to continue to overly inflate the value of their company and then cash out via an IPO. Don’t be foolish, Uber is not looking to be "your private driver", but looking to steal your money via surge pricing (and place you in danger in the interim), destroy full time jobs, destroy existing businesses and upend the for-hire vehicle industry for the worse. People may not be, or may never have been satisfied with yellow cabs, but at least they are regulated by the NYC Taxi and Limousine Commission. This means that the vehicle has been inspected and deemed to be safe for operation and the driver has been vetted and deemed to not be a dangerous driver.

Ask any Uber driver in New York City and they will tell you that they have been relegated to being glorified taxi drivers and their recent protests and strikes are evidence of the cracks in the floor beneath Uber. Uber drivers have finally begun to speak out against the company that lies to them and the public. Uber makes false promises to its drivers and lulls the public into a false sense of security in the use of its service. Uber wants to have its cake and eat it too. They want to completely control their drivers, but keep them classified as independent contractors. This is so because if the Uber driver were classified as an employee, then Uber’s business model would be completely upended. Lawsuits against Uber have been filed all around the country, but the most prominent is one pending in Federal Court in San Francisco. Drivers there are claiming benefits under the Fair Labor Standards Act, which only applies to employees and not independent contractors. Whether the Uber drivers will ultimately prevail in the lawsuit is irrelevant because the reality is that Uber is likely to settle this case in the end. This is what will happen because Uber cannot afford to have an adverse ruling from the Courts that would threaten its muti- billion-dollar venture.

By all definitions and in all reality, under New York law, Uber drivers are employees and are entitled to certain protections, but this would be the death knell to Uber, so in the meantime Uber will continue to churn its PR machine (via a former political strategist best known as the campaign manager for President Obama's 2008 presidential campaign) and will continue to pay its lobbyists for access to politicians who now favor Uber (after the political contribution is made) all with the intent on neutralizing the threat that Uber drivers currently pose to its business. Politicians are pro-Uber because they do not want to be seen as anti innovation, anti-competition and/or against technological advances. What these politicians should be focusing on is simple. They have been charged with protecting the health, safety and welfare of its citizens. Despite their clear obligation, New York politicians all have made it clear that Uber is here and it is here to stay. The playing field is not level and the politicians in NYC have completely abandoned the traditional car services that have served the local communities of the 5 boroughs of New York for decades. These mom and pop shops will soon be gone just like the bodegas of the past. Barnes and Nobel is in and the little bookstore in the neighborhood is gone. Or just like in the move “You’ve Got Mail……. Tom Hanks’ Fox Books and his chain of "mega" bookstores is in and the independent bookstore run by Meg Ryan, The Shop Around The Corner, is out.

The yellow cabs may have become what they are today (run down second class vehicles with a second class service for hire) because the City of New York and the cab owners always held a monopoly over these medallions. At their height, before Uber, the cost of a medallion (the plate attached to the hood of each yellow cab is NYC) was north of one million dollars. Today that number is significantly less, all to the dismay of the banks that lent monies to the medallion owners with the belief that the monopoly they held over the economy that required on demand transportation would continue to be in their pockets forever. Some say that the medallion owners and the banks that lent them money deserve it because the advent of Uber made these cab owners come to the harsh realization that they are no longer needed, or not needed nearly as much as they were before and they should have used technology to their own advantage before Uber was born. Well, the yellow cabs are a day late and a dollar short. That train already left the station. Yellow cabs are in short supply and always will be, but the need for them is decreasing every day. This is not only bad for the for-hire vehicle industry, but bad for the City of New York as a whole, as it is the City that reaps the financial benefits of selling each one of these medallions. The NYC political machine may not care right now because it is still sexy to support Uber. But when Uber shows its true colors and completely upends an industry that has provided safe and reliable transportation to generations of New Yorkers and millions of visitors, what will the politicians do then? 

Make no mistake, Uber and its founders are true geniuses, but lets not be foolish to think that they are operating as a not for profit organization to create jobs and better the economy. As soon as Uber makes its next big move, we will all have to take a bite out of reality and deal with the disaster that lies in its wake. I have my opinions about what that next move may be, but use your imagination and come to your own conclusions. Either way, some disruption caused by Uber to the for-hire vehicle industry was for the better, but remember the old adage about the law….it should remain stable, but not stand still. I believe the same holds true for the for-hire vehicle industry. Change over the past few years has been good, but the politicians (who are usually lawyers) that enable Uber to operate unimpeded and even encourage their disruptive conduct, should keep the legal adage in mind. The for-hire vehicle industry should not stay idle and must change with the times, but if things keep going the way they have been of recent, we may all find ourselves with an inferior for-hire transportation industry in New York City……and then who will the politicians blame?

Will Uber Become Orwell’s Big Brother?

I have spent the vast majority of my career being directly involved in the legal and operational aspects of the for-hire vehicle industry in New York City. The below is a summary of my current thoughts and predictions of what will happen in the future. Most people think that driverless vehicles are something that will be created, but an invention that we will not see during our lifetimes. Others believe that it will be an impossible feat. I believe in technology and have seen how technology has not only transformed certain major industries, but has revolutionized the world. But, while technology is a great thing, it can also cause drastic unintended consequences that may or may not be disastrous to our society.

I can go on and on about different examples of how technology has transformed the world, but my favorites are: who would've thought 30 years ago that people would pay to watch television? Who would've thought 15 years ago that people would be standing in long lines to pay $5.00 dollars for a cup of coffee? Who would've thought 10 years ago that kids would be taking small cell phones with them to school? Who would've thought 8 years ago that a device called the iPhone would in actuality not only be a minicomputer, but would become the primary means by which people communicate with each other? When Steve Jobs cofounded Apple in 1976, I doubt he would have believed that one day his company would become the most valuable company on earth.  

So based upon historical facts, is it so far-fetched to believe that the transition to driverless vehicles will come over the next few decades? While there are huge hurdles before there can be widespread adoption, I believe the sweeping change they bring will eclipse every other innovation our society has ever experienced.

They will cause unprecedented job loss and a fundamental restructuring of our economy, solve large portions of our environmental problems, prevent tens of thousands of deaths per year, save millions of hours with increased productivity, and create entire new industries that we cannot even imagine from our current vantage point. The transition is already beginning to happen. Tesla Motor believes that their 2015 models will be able to self-drive 90 percent of the time. We already know that certain models of higher-end vehicles already feature technology that takes control of steering, acceleration and braking at highway speeds of 70 miles per hour or in stop-and-go congested traffic. So is it so far-fetched to believe that driverless vehicles will be available to the public by 2020?

Next to a house, an automobile is the second most expensive asset that most people will ever buy. Accordingly, it is no surprise that companies like Uber and Zipcar are quickly gaining popularity as an alternative to car ownership. It is now more economical to use a car service if you live in a city than to own a vehicle. The impact on private car ownership will be enormous: The car purchasers of the future will not be the consumer – cars will be purchased and operated by the so-called “ride sharing” and car sharing companies.

It should be no surprise that, in my opinion, unless there is a drastic shift in the earth, Uber will eventually replace all of its drivers with self-driving cars. Consider this- why does Uber have a valuation of over $40 billion dollars? Currently, Uber drivers take home at least 75% of every fare. What will happen when Uber eventually replaces all of its drivers with self-driving cars?

The once coveted New York City taxi medallion, which used to fetch upwards of over $1,000,000.00, has drastically dropped in value since the onslaught of Uber. Additionally, Uber not only has more vehicles on the road than taxis in New York City, but more people are using this service because let's face it: who wants to take a ride in the taxi when, for approximately the same amount of money, you can take a ride in a “black car” or car service vehicle. There are approximately 171,000 taxis in the United States. If Uber were to purchase a driverless vehicle at the cost of $25,000 per car, the rollout would cost a mere $4.3 billion. This would be a drop in the bucket for a company that taken the transportation industry around the world by storm over the course three years. It took many car services in New York City decades to build brand names, reliable services and loyal customers. Uber came out of nowhere, took the transportation world by storm and has been rolling over everyone and everything that has attempted to get in its way.

The effects of the autonomous car movement will likely be staggering. Some people predict that the number of vehicles on the road will be reduced by 99%, estimating that the fleet of vehicles on the road will fall from 245 million to just 2.4 million. Since disruptive innovation does not take kindly to entrenched competitors – like Blockbuster, Barnes and Noble, Polaroid, and dozens more like them, it is unlikely that major automakers like General Motors, Ford, and Toyota will survive the leap. They are geared to produce millions of cars in dozens of different varieties to cater to individual taste and have far too much overhead to sustain such a dramatic decrease in sales. My prediction is that most automakers will be bankrupt by 2030, while startup automakers like Tesla will thrive on a smaller number of fleet sales to operators like Uber by offering standardized models with fewer options.

Ancillary industries such as the $198 billion automobile insurance market, $98 billion automotive finance market, $100 billion parking industry, and the $300 billion automotive aftermarket will collapse as demand for their services evaporates. We will see the obsolescence of rental car companies, public transportation systems, and, good riddance to the ever hated parking and speeding tickets. But we will see the transformation of far more than just consumer transportation: self-driving semis, buses, earth movers, and delivery trucks will obviate the need for professional drivers and the support industries that surround them.

The Bureau of Labor Statistics lists that 884,000 people are employed in motor vehicles and parts manufacturing, and an additional 3.02 million in the dealer and maintenance network. Truck, bus, delivery, and taxi drivers account for nearly 6 million professional driving jobs. Virtually all of these 10 million jobs will be eliminated within 10-15 years, and this list is by no means exhaustive. Others believe that despite the job loss and wholesale destruction of industries, eliminating the needs for car ownership will yield over $1 trillion in additional disposable income – and that is going to usher in an era of unprecedented efficiency, innovation, and job creation.

Is it really possible that a 90% reduction in vehicle crashes would save nearly 30,000 lives and prevent 2.12 million injuries annually. Driverless cars do not need to park – vehicles cruising the street looking for parking spots account for an astounding 30% of city traffic, not to mention that eliminating curbside parking adds two extra lanes of capacity to many city streets. Traffic will become nonexistent, saving each US commuter 38 hours every year – nearly a full work week. As parking lots and garages, car dealerships, and bus stations become obsolete, tens of millions of square feet of available prime real estate will spur explosive metropolitan development. The environmental impact of autonomous cars has the potential to reverse the trend of global warming and drastically reduce our dependence on fossil fuels. Passenger cars, SUVs, pickup trucks, and minivans account for 17.6% of greenhouse gas emissions– a 90% reduction of vehicles in operation would reduce our overall emissions by 15.9%. As most autonomous cars are likely to be electric, we would virtually eliminate the 134 billion of gasoline used each year in the US alone. And while recycling 242 million vehicles will certainly require substantial resources, the surplus of raw materials will decrease the need for mining.

Uber is certainly plotting its future without drivers as they have reached a strategic partnership with Carnegie Mellon University to create an “Advanced Technology Center.” The center is slated to perform research and development in the areas of mapping, vehicle safety, and autonomy technology.

So let's take a look at New York City alone. Inside of 3 years Uber has more vehicles on the road that available taxi medallions. Uber has created a name that is synonymous with car service and transportation.  The value of taxi medallions has dropped drastically. The entities the loan money to the holders of the taxi medallions are shaking in their boots. Car services that took decades to build legitimate community-based businesses are being displaced. Most of all, New York City elected officials and government regulators have been unable or unwilling to look into the future and consider what the ultimate effect Uber will have on the transportation industry, the economy of the city and the consequences upon the world of allowing Uber to continue their quest unabated.

At one point in the history of our nation, our President referred to the Soviet Union as the "evil empire". In recent history, Google has been referred to as an evil empire. Not an empire of territory, as was Rome or the Soviet Union, but an empire controlling our access to data and our data itself. Antitrust lawsuits proliferating around the company demonstrate Google’s quest for monopoly control over information in the information age. Its search engine has become indispensable for most of us, and we now allow Google to determine what is important, relevant, and true on the Web and in the world. We trust and believe that Google acts in our best interest. But we have surrendered control over the values, methods, and processes that make sense of our information ecosystem. And that's just the search engine.

So now back to Uber. We know that Uber collects data on its drivers and its customers, we know that Uber keeps track of the data of each in every trip its drivers perform and most of all, Uber seems to be developing a master plan for logistics. Logistics is the management of the flow of goods between the point of origin and the point of consumption in order to meet requirements of customers or corporations. The resources managed in logistics can include physical items, such as food, materials, animals, equipment and liquids, as well as abstract items, such as time, information, particles, and energy. The logistics of physical items usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security. The complexity of logistics can be modeled, analyzed, visualized, and optimized by dedicated computer software.

In a nutshell, it appears that Uber is collecting data for a still yet to be determined purpose. People using their service are providing Uber with this information, which at one point a near future, may or may not be in the best interest of the consumer or the public in general. So just as Google’s search engine has become indispensable for most of us, will the information and data obtained by Uber, via the current services it provides, be used to determine how the world will operate, what industries will be decimated, what means will be available for people to travel, communicate, work and think?

Overall, by the time the world wakes up to Uber’s “grand plans”, will we have surrendered control over the values, methods, and processes that make sense of our world, just how we have surrendered the entire information ecosystem to Google. Currently we trust and believe that Google acts in our best interest. But in light of what Google has accomplished, are we as a society going to be so willing to trust and believe that Uber will act in our best interest in the future?

In my opinion, elected officials, governmental regulators, leaders of all major industries and society in general should take a broader look at what Uber is currently doing, what is likely to do in the future and whether the impact of its effect on the world is something that we are willing to blindly accept today, all while taking the risk that Uber will not cause just a major disruptions to the world as we know it, but take the risk that it will not become a true “evil empire”, by using all of its knowledge, data, software and logistics sophistication, and of course the huge amount of money that will make over the coming years, to create a world that we either do not want to or are not prepared to live in.

Whether Uber will ultimately control the world is yet to be seen. But remember where this article started: there was a point in history were no one could've imagined travelling in an automobile instead of riding a horse, traveling across country in an airplane rather than a steam locomotive or using email to communicate with another rather than using the pony express. The tyranny that is epitomized in the book “1984”, involved George Orwell’s view that one day Big Brother would enjoy power entirely for its own sake, not interested in the good of others, but interested solely in power. Will Uber become the Orwellian “Big Brother”?

A Distinction Without A Difference? Uber Is Just A Car Service By Some Other Name

You have probably heard of Uber, the app that lets you pre-arrange transportation from your smartphone. You may also have heard of its competitors Lyft and Sidecar.  Uber, Lyft and Sidecar have described their services as "ride-sharing." They claim they are not a taxi company, or even a car service. Instead, they claim to provide "marketplaces" where drivers can offer their services and users can get a ride. Lyft even goes so far as to describe their users, on both ends, as a "community." It's "your friend with a car," according to the website - not a driver you are hiring.

 There is an obvious tension in New York City, and around the country, between our traditional idea of a car service and the model that Uber, Lyft, and Sidecar provide. This is at the heart of the debate over government oversight and fairness to traditional car services, who are heavily regulated in New York City. The California Public Utilities Commission (CPUC) was the first to categorize Uber, Lyft, and Sidecar as an entirely new category of transportation services: transportation network companies, or TNCs.

 The issue of what exactly a transportation network company is has plagued Uber and its competitors across over the country and around the world. So far, some city governments have embraced Uber and Lyft like they are the best thing since sliced bread, while other officials have been unimpressed by the companies' insistence that they are not providing transportation, and therefore get to skirt around regulations that are in place for the safety of the riding public.

 Uber, Lyft, and Sidecar would rather have you think of them as technology company. As Uber wrote in a legal filing with the CPUC: 

Uber operates no vehicles, and does not hold itself out or advertise itself as a transportation service provider. In fact and law, Uber does not provide transportation services of any kind and does not own, lease or charter any vehicles for the transportation of passengers. On the contrary, Uber is a technology company that licenses the Uber App to transportation service providers. The transportation service providers pay a fee to Uber to use its software technology; the passenger of the transportation service provider pays the transportation service provider for transportation services received.

 Current car service owners in New York City, who have been in the industry for dozens of years have retorted that Uber’s claim to be a technology company is a farce. This is so because Uber sets the rates for both the passengers and the drivers. They collect the money and pay the driver. They hire the drivers. They blackball undesirable passengers. They tell their drivers where the best places to pick up are and, if the drivers don't pick up a high enough percentage of the fares, Uber fires them. But Uber isn't in the transportation business. Right!

 Some believe that government agencies and regulators who agree with Uber’s take that they are a technology company are likely to be in the pockets of politicians who make the laws and government regulators who have resisted the calls of the traditional car services to subject Uber to the same regulations as any other car service.

 While Uber disclaims that it is a “transportation company,” Uber has previously referred to itself as an “On-Demand Car Service,” and goes by the tagline “Everyone’s Private Driver.” Indeed, in commenting on Uber’s planned expansion into overseas markets, its CEO wrote on Uber’s official blog: “We are ‘Everyone’s Private Driver.’ We are Uber and we’re rolling out a transportation system in a city near you.” Other Uber documents state that “Uber provides the best transportation service in San Francisco . . . .” Moreover, Uber does not sell its software in the manner of a typical distributor. Rather, Uber is deeply involved in marketing its transportation services, qualifying and selecting drivers, regulating and monitoring their performance, disciplining (or terminating) those who fail to meet standards, and setting prices.

The central premise of this argument is Uber’s contention that it is not a “transportation company,” but instead is a pure “technology company” that merely generates “leads” for its transportation providers through its software. Using this semantic framing, Uber argues that its customers buy dispatches that may or may not result in actual rides. In fact, Uber notes that its terms of service with riders specifically state that Uber is under no obligation to actually provide riders with rides at all. Thus, Uber passes itself off as merely a technological intermediary between potential riders and potential drivers. This argument is fatally flawed in numerous respects.

First, Uber’s self-definition as a mere “technology company” focuses exclusively on the mechanics of its platform (i.e., the use of internet enabled smartphones and software applications) rather than on the substance of what Uber actually does (i.e., enable customers to book and receive rides). This is an unduly narrow frame. Uber engineered a software method to connect drivers with passengers, but this is merely one instrumentality used in the context of its larger business. Uber does not simply sell software; it sells rides.

A United States District Judge in the Northern District of California recently said in a court decision that”

Uber is no more a “technology company” than a Yellow Cab is a “technology company” because it uses CB radios to dispatch taxi cabs, John Deere is a “technology company” because it uses computers and robots to manufacture lawn mowers, or Domino Sugar is a “technology company” because it uses modern irrigation techniques to grow its sugar cane. Indeed, very few (if any) firms are not technology companies if one focuses solely on how they create or distribute their products. If, however, the focus is on the substance of what the firm actually does (e.g., sells cab rides, lawn mowers, or sugar), it is clear that Uber is most certainly  a transportation company, albeit a technologically sophisticated one.”

TNC’s have been operating in many states by thumbing its nose in the air and laughing at government regulators. These TNC’s are taking advantage of loopholes in local laws to sidestep regulations that protect the public, drivers and others.  Although they purport to provide “ridesharing” services or be the provider of a “marketplace”, the business model of TNC’s is in direct violation of any traditional understanding of ridesharing and the means by which transportation is provided and regulated, especially in the City of New York. 

 In New York City, some people still use a telephone to call a car service for pre-arranged transportation, while others use smartphone app created by the TNC. Some car services in New York City actually have their own smartphone application, just like the TNCs, that allows the customer to pre-arrange transportation. But in New York City, the traditional car service that has its own smartphone application is subjected to a whole set of arcane rules and regulations, while the TNC’s are not. This is truly a distinction without a difference.

 The laws that apply to car services and their drivers require measures to safeguard the safety of the public who uses such services. Our elected officials must provide a public policy rationale that justifies having two sets of standards. One for car services and one for for TNCs. Politicians like to support TNC’s because the reference to innovation is sexy and these TNC’s are heavily funded and are able to pay for access to elected officials who make the laws. They also have access to high powered and costly lawyers who can go into court to defend their claims of being the creator of a “marketplace”, rather than what they actually are, which is just another provider of transportation, albeit a technologically savvy one. A passenger’s safety in one vehicle should not be any less valuable based on arbitrary differences.

 At the end of the day, the fundamental acts of either a TNC or a car service are essentially the same – a passenger entering a vehicle, either pre-arranged or hailed by a smartphone app, and then being transported from point A to point B.  There are no other differences between traditional car service and the new TNCs. The only difference is the manner in which transportation is arranged. Either the TNC’s must be subjected to the same regulation as the other car services in New York City or the traditional car services must be freed of the vice grip that the NYC Taxi and Limousine Commission has placed on them over the years and continues to do so despite their insistence that TNC’s should be treated differently.         To do otherwise would not only be unfair and irrational, but would jeopardize the safety of the riding public.