Art Carden  

Uber's Strategy: Appeal to People, Not Power?

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A Public Transportation Patch:... The economy is more subtle and...

Birmingham is just one of many cities in which Uber is fighting to be able to do business their way; they've launched an entire social media campaign centered around it, and local leaders are upset that instead of showing up and asking "please, sirs and madams, may we possibly do business in your fair city," Uber is going straight for their throats and trying their own case in the public square that is social media.

On Reddit a few days ago, I mentioned that the way cities are handling this might someday be a textbook example of how to frame a problem incorrectly. They're thinking "how do we update existing regulations to accommodate ride-sharing" when, as Russ Roberts and Mike Munger pointed out recently on EconTalk, the sharing economy has the potential to completely reshape the way we live, work, and play. Cities and states are trying to make marginal adjustments to an obsolete framework. Instead of trying to change codes--even recently-updated codes--they should be scrapping the entire apparatus.

At first glance, their strategy appears to be backfiring. Uber didn't get what they wanted in Birmingham, and they probably won't get it elsewhere. They've agreed to get rid of surge pricing in New York City during emergencies.

I think co-blogger Alberto is on to something, though, in his discussion of Marcus Wohlsen's article on the controversy. Uber can operate at a loss in the short run and even take a lot of abuse from travel-heavy cities like New York and San Francisco in order to build brand equity and get people on their side. They're also enlisting consumers' preferences in a political battle. They're willing to "lose" a few battles locally in order to win the larger war. If Birmingham is any indication, politicians are staying on the defensive even though they're getting what they want in the short run.

In most cities, ride-sharing is a matter of "when," not "if," and more people are learning how utterly dysfunctional transportation regulation is in their cities because of these kinds of controversies. Their valuation suggests they know what they're doing, and people investing in Uber are giving them the resources to do it.


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COMMENTS (5 to date)
Tom West writes:

Instead of trying to change codes--even recently-updated codes--they should be scrapping the entire apparatus.

I think politicians are well aware that if the sharing economy becomes broadly accepted, they will be crucified if they "allowed" bad things to happen.

At the moment, they escape blame because sharing is weird, and if bad things happen to weird people, it's their own fault for being weird.

As soon as sharing becomes popular enough that bad things in the sharing economy start happening to "real" people, then politicians who did not make a visible (if ineffectual) effort to protect their constituents will lose office.

Dan W. writes:

Investors are not buying Uber on the hope of getting a share of the "sharing economy". No, they are buying with the intent that Uber becomes the dominant rent-seeking, monopoly in on-demand transportation.

If you disagree then tell me what are the Uber investors smoking? Without government protection the on-demand transportation industry will always be fragmented and low-margin. No matter how good the app.

The comparison to Amazon is valid but not for a good reason. Amazon has been selling products at a loss both in the short-run and the long-run. By so doing it holds a dominant share in e-commerce. But on what basis will the business ever return value to its shareholders? It isn't happening. But the shares continue to sell at a premium on the premise that Amazon could, even if it never does.

Tom West writes:

Amazon: A free-market tool for redistributing money from wealthy investors to poorer customers for 20 years.

Of course, it's been tough on the competition like bookstores that actually had to make money in order to survive.

Art Carden writes:

@Tom: excellent point. CYA is huge here, and it drives a lot of government action. They get blamed if they allow something "bad," but they don't get blamed for the equally-foolish decision of banning something good.

@Dan: I don't doubt that Uber wouldn't like a monopoly position, and they may well get one given how bizarrely transportation is regulated in most places. I think, though, that Roberts & Munger are on to something in the EconTalk episode to which I linked: they could be fundamentally re-shaping the world we live in, and there's a lot more to it than just moving people. How long, I wonder, before they're also moving pizza?

Nathan W writes:

The only legitimate concern I'm aware of is for identity checks if operating through formal business. There's a difference between a zero charge service where I can meet potential abductors through craigslist, free of charge, to save $20 when getting from city A to city B.

But if a business is involved in facilitating this transaction where I buy and/or sell extra ride space, then they must be able to ensure that people are who they say they are, in order to assure legal accountability. Amigo express in Quebec does precisely this, but cannot offer rides across the border into Ontario because regulations are not up to date here. You have to show up in person to show ID and verify identity before you can use the service.

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