Theoretical thoughts on Uber

When I was in college, way before Uber, way before the “sharing economy,” I was lucky enough to have a car. As my college was about an hour and a half away from home, I’d drive home almost every weekend, and drive back every Monday morning. For those rides back, three other students would join me, each preferring my direct route to the longer, multi-transfer public transportation option. In return, they’d share some of my fuel costs. It was a win-win situation: for my passengers a cheaper, more direct ride and for me, payment for a drive I was going to do anyway.

I imagine that it is that kind of win-win that Travis Kalanick envisioned on that cold and rainy night in Paris in 2008: connecting between people who are already on the roads and those looking for a ride. From the theoretical, “pure” product perspective Uber did something amazing. It took existing mobile technology, growing smartphone adoption and the location-tracking capabilities of those phones and created apps for drivers and riders and an algorithm to pair them efficiently. The result: “push a button and get a car.” Rating for drivers and riders was created to keep everyone honest and the surge pricing algorithm was supposed to bring more drivers to an area of temporary high demand.

When it launched, Uber was light years ahead of any other public transportation options out there. Taxis, the nearest possible equivalent, were/are extremely challenging and inefficient to hail. Stand at a corner, hope to see a vacant taxi driving by, wave hands, and watch helplessly as another rider “steals” the cab, or call one of many cab companies, only to be told that a cab is “on its way” but after 30 minutes have none show up. Sure, this wasn’t always the case but in most cities the number of cabs was artificially limited making operating licences were very expensive. Buses, subways and trains had greater availability but ran on a predetermined route that obviously do not consider personal destinations. Taking an Uber ended up being more expensive than public transportation and cheaper than taking a cab (sans surge pricing.)

Uber Pool Source: Uber

Uber Pool
Source: Uber

Then Uber launched UberPool, where riders heading to a common area can, in return for the inconvenience of pickups and dropoffs en route, share an Uber and its cost. A benefit for some riders, perhaps less so for drivers, but still, an efficient way to find rides for as many people as possible.

“In the Uber world,” said Mr Kalanick on the Late Show last week, “you can use your own car, you don’t pay $40,000 to rent a vehicle, you make more dollars per hour, and it’s flexible, you don’t have a shift, you can turn on your work when you want to and you can turn it off.” But real life and real users have a way of intruding onto the best product concepts. While some drivers behave as Mr Kalanick described, many see Uber as their only source of income and want to be considered Uber employees, having Uber “reimburse drivers’ expenses (for example, gasoline, wear-and-tear on cars, and bottles of water for passengers.)” Uber argues that its “agreement” with drivers is “not an employment agreement, it’s a software licensing agreement,” which is an interesting (to say the least) take on the “sharing economy” model.

Where some drivers want to be employees, some riders complain that Uber isn’t doing enough to vet drivers, leading to a few cases of actual harm (especially to women.) The rating system wasn’t enough to protect riders from problematic drivers.

What fascinates me is that, at its core, and if “used as intended” (to paraphrase the pharmaceutical industry) Uber could be an amazing product, beneficial to both riders and drivers. Worldwide adoption and its incredible growth in the last few years have proved that Uber solved/is solving a real problem in public transportation. How will Uber continue supporting this growth? On the operations side, will it classify some drivers as employees? Will it create an option to really “work for Uber” and give drivers options to work as either employees, contractors or on-demand workers? For riders, will there be more safety precautions built into Uber’s driver screening? Could riders choose drivers by gender, or have more than a certain amount of Uber driving experience, or any other safety promoting characteristic?

The progress of Uber from a concept to a product to a business is interesting to follow and it’s far from over. Whatever Uber does and whatever legislative and legal battles it will need to overcome will also influence the rest of the “on-demand” players such as Instacart and Postmates. In any case, it’s doubtful that Mr Kalanick can continue creating products in an “Uber world” and might just have to join the rest of his users here in the real world.


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