An Uber-sized problem?

(This article was originally published on Backbench UK here, you can find my profile here)

This summer, after a typically naff Monday night at one particular Watford nightclub that anyone in south-east England will be familiar with, we took an Uber back to a friend’s house.

The quickest route back (via the A41 from Watford to Berkhamsted) was closed for roadworks, so our driver had to find an alternative route. With most of us borderline comatose in the back, he turned to the trusty smartphone satnav upon which all Uber drivers rely, largely because none of them really know the roads upon which they drive. Safe to say, we circled two separate roundabouts twice and got lost another three times before we made it home.

Now I’ve had entirely uneventful trips using Uber, but this was the one that was fresh in my mind when the news trickled through that Transport For London would not renew Uber’s operating licence for the capital after September 30. The decision supposedly stems from criticism over its apparent lack of corporate responsibility over reporting criminal offences and other public safety matters.

But, much in the same way that most of the reaction to this decision hasn’t really touched upon TFL’s decision itself, this post isn’t really about that. What I want to discuss is the wider impact of Uber on a city with a well-known, established taxi system.
Uber, like many of these start-ups from the parallel universe of Silicon Valley, likes to think of itself as a positively disruptive influence, forcing out redundant business models and reinventing the world around it.

This is especially evident in the petition posted by Uber London in the aftermath of the ruling that has already garnered over 600,000 signatures. Some of the body of the petition reads:

“The 3.5 million Londoners who rely on Uber to get a safe, reliable and affordable ride around the best city in the world will be astounded by the decision to ban Uber from the capital.

“This ban shows the world that London is far from being open and is closed to innovative companies, who bring choice to consumers and work opportunities to those who need them.”

The language of consumer choice, innovation and a cheaper alternative is a start-up staple. They are breaking down established industries in order to erect newer, better ones.

The online reaction to this decision echoes the language above. People seemed concerned with two factors. One; that Uber is new and innovative and that banning it sends a message that London is protectionist rather than progressive, and two; that it is cheap.

These two points are really both sides of the same coin: the idea that black cabs are now outdated and that Uber is a newer, cheaper alternative. But where do those cheap fares come from? One report from December 2016 explains that Uber subsidises almost 60% of the cost of each fare.

What’s more is that Uber, like Twitter or Snapchat, is a product of Silicon Valley - a strange place where the rules of financial gravity don’t seem to apply. In 2016, Uber lost $2.8b. In the first three months of 2017 it lost $708m. There is nothing innovative about an unprofitable start-up propped up by hedge funds and venture capital. And for those praising the cheapness of its fares, price gouging is not a business model. Black cab and Hackney carriage drivers don’t have the luxury of being able to make their fares artificially cheap because they don’t have billions of dollars being pumped into their bank accounts.

Finally, and most implausibly, Uber tries to win your sympathy by pleading the case of its forty thousand drivers based in the capital. Uber wants you to sign its petition to “defend the livelihoods of 40,000 drivers” whom the TFL decision would put “out of work”. This is of course in spite of the fact that it took an employment tribunal to force Uber to no longer treat its drivers as self-employed, provide them with holiday pay, pensions and workers’ rights. So please forgive me if your crocodile tears seem hollow.

Uber could just as easily become the next Amazon as it could go under. It might well reforge the transportation and private hire sector entirely. But the fact of the matter is that right now in the UK it isn’t as smart or as innovative as it likes to thinks. It’s not rendering Black Cabs obsolete, it’s simply a business losing money by subsidising its fare to undercut its competitors. Innovation should of course be applauded and encouraged, but this isn’t it.