I recently read an article on Uber in the New York Magazine that got me thinking. Not particularly about how Uber is a glorified taxi company and is headed for a crash soon, but about monopolies and innovation and the desire for change.
Uber has been largely vilified in every city that it has launched in, mostly by the entrenched taxi players. Here in Montreal, we’ve seen our fair share of protests against Uber and recently a billion dollar lawsuit against the local government for allegedly colluding with it.
As per the article above, the biggest weapon in Uber’s arsenal is the subsidized pricing. The app is not a big competitive advantage nor are any of its other business practices. There are a whole lot of other reasons stated as to why Uber will never be profitable and will hence meet its maker when investors (or stockholders) finally see through the charade.
This is what puzzles me. Isn’t there any way taxi companies could hasten Uber’s demise with innovation rather than waiting for the slow inevitable march to the end? However no local taxi company has come up with a way to combat Uber other than protests and litigation. I haven’t seen an app even remotely similar to Uber, easier ways to pay, split payments with friends, for families and enterprises to share expenses, give and receive feedback, real-time location updates, communicate with the driver, ways for passengers to feel safer, lodge complaints, get compensation, loyalty programs, campaigns to prevent drunk driving, partnerships with local businesses, additional services beyond basic transportation.
It’s a mistake to assume that the only reason that Uber takes business away from traditional taxis is on account of lower rates. Would consumers move to taxis if they suddenly became cheaper than Uber? How much lower do you think they would have to go to cause a switch? Uber has managed to dig into almost every user gripe ever against a taxi and create an elegant solution for it. While it may be true that an app does not a business make, the converse is also true – even if a business manages to replicate an app exactly, does not mean that it will meet the same success. And it would be a mistake to think that Uber is what Uber is because of its app. The app is just a convenient means to get the user’s job done.
Uber’s drivers may get effectively paid only $10 per hour after all relevant costs are deducted, they may make more money if they worked at a McDonalds. I’ve taken hundreds of Uber rides to date, and I’ve never come across a driver who had something negative to say about Uber. If that is not an incredible feat for a company to achieve, I don’t know what is. It is nothing short of miraculous. Each one of them had a different reason to start driving, but not a single one complained. The flexibility it gave them was cherished. No one planned on being a driver forever, it was not their first choice of profession, but it was their gig that gave them hope. Hope that one day they would be able to do something different. They were able to survive, they were able to choose, and they were able to support their families. Maybe the hope is unwarranted, maybe they are being exploited. But this goodwill cannot be discounted, this goodwill cannot be written off, and most certainly this goodwill is difficult to replicate.
Maybe Uber’s business model is not sustainable. Maybe it is headed for a crash. But what Uber has managed to create is a set of expectations that will be very difficult to match, and make no mistake, any service that wishes to take it’s place, will not only have to match those expectations, but also to exceed them – by a lot. There is no going back. And the taxi companies know that, they feel it in their gut. They are paralyzed by the sheer monumental scale of the task. And hence they prefer not to do anything about it. This story has been repeated ad nauseam. The dominant player in a market is blindsided by an upstart with the ideas, the means, and the willingness to follow them through. In this case it was an upstart with exceptional means – 26 billion dollars worth and quite ruthless. It is known that Uber’s business practices have not always been kosher. I don’t condone that. But why not at least give it a try and fight back? Why not at least attempt to change? Why not try to think of why users are switching and try to do something about it?
What is innovation? It is a desire for change. And monopolies by definition have no need for change. They would much rather preserve the status quo. And while I will cheer when the gong strikes on Uber’s IPO for the sheer audacity of their achievement, I will be working tirelessly with the next little guy with the gleam in his eye to overthrow the newly crowned titan.