The Uberisation of the World

Photo: freestocks.org

In 2015, a one-way war broke out in France against VTC taxis (from French, Passenger Vehicles with Driver). They are invaders by the name of Uber, Lyft, Private Driver or Le Cab. At the origin of this anger is the development of the VTC and the unfair competition it represents according to taxis.

At the time the subject was different, they were mainly protesting against Uber POP, a service that connects customers with private individuals, which has since been banned. Although the climate has calmed down, we still see in France and all over the world a well-established rivalry despite the ban on services like Uber POP, because taxis still consider VTC to be unfair competition, with the main argument being the licence.

A taxi needs a licence to operate, whereas a VTC does not. If this is the main argument taxi drivers rose, it is because it is easy to shock people with corresponding numbers. A license can cost about 200,000 euros in Paris and 300,000 in Nice. What is less often heard, however, is that originally a licence is free, they are issued free of charge by the prefecture. But their limited availability means that it can take years to obtain them. As supply was less than demand, the taxis at the end of their careers began to resell their licences at the price at which they were prepared to buy them back.

The system, which is now criticised by taxis, was therefore set up by the taxis, and it was them who set the price. Like Nicolas Rousselet, managers of the taxi group G7, whose name is also found in the papers of several major players in the art of selling licenses, thus closing themarket by buying back licenses and inflating their prices, we generate profits while ensuring that supply does not exceed demand. These requests were only used in the street and were thus redirected to the taxi order provided by G7 taxis in particular. Add to this the package that drivers have to pay to take advantage of the service and the subscription that customers can take to be priority, driven by an apparent lack of vehicles, and you get a monopoly whose strategy is based solely on the license.

This licence does not allow the taxi driver to practice their trade. It allows them to park in public places in the tent of potential customers, actions that are necessary in the exercise of their profession. This is very different because the VTCs do not need this action, since they are in direct contact with their clients, even before they are at the pick-up location. The mechanics are reversed: it is not the customer who comes to the car but the car that comes to the customers. VTCs do not need to park, and therefore do not require a license. They are outlawed only in the sense that they do not need to be part of it. Powerless, the taxis not only see a competitor rapidly developing, a well-established monopoly being torn apart, but they also see a loss of clear value of a paper for which they have paid dearly. What is being tried to pass off as unfair competition is in fact a new player, with modern ideas, whose aim is to circumvent the current restrictions and put an end to the secretive monopoly that has hitherto allowed them to free themselves from any change in the service. An example of an ageing economy, contrary to what they accuse, this degradation that taxis show in demonstrations is called uberization.

Thus, the rise of Uber has coincided with the fall of the classic taxi. In France, it has caused many uproars and strikes, but the changes are felt throughout the world. Look at the evolution of pickups in New York over the last 5 years :

Source: toddwschneider.com

According to Maurice Lévy, the one who called it uberization, it is the idea that one suddenly wakes up, discovering that one’s historical activity has disappeared. A more movement centered definition of uberization can be found in Clément Berthollet’s book: “The rapid disruption of existing business models by trusted digital platforms without physical infrastructure or operators is customer-centric”.

Destruction is a mixture of upheaval and brutal revolutions. Companies that have pulverized their markets are plenty.

The rise of Netflix

Netflix and Spotify can be seen as the uber-video users. AirBnB that of hotel economics. Uber and BlablaCar are those of transport. They bring together one or more characteristics that can be associated with the phenomenon of uberization. These are digital platforms, whose success is based on their modernity. We can talk about disintermediation, that is to say that the intermediary between the professional and the private individual, if there is one, is invisible, often algorithmic. Dematerialization, as most models are based on an app. Collaborative economy or the economy of sharing, linking individuals like BlablaCar. Or misappropriation, i.e. an economy that requires fewer and fewer properties, as AirBnB has no more hotels than Uber has vehicles.

They have revolutionized their sector with new ideas, they scare the economy that we will soon be able to call the past, they are the actors of liberalization.

The term uberization is used to encompass all of this, but it’s a very general phenomenon. To make it as simple as possible, it is just the brutal revolution of a market economy. This revolution does not necessarily rely on dematerialization or the collaborative economy, and it does not necessarily require significant technology. These are simply levers that may have enabled them to turn their market around. Uberizers have always been the revolutionaries of an economy, they simply had not been given a name.

What is most important in the definition of uberization is its purpose as a “customer-centric platform of trust”. At the origin of each of these companies is the need to solve a consumer problem. In the case of Uber, his creators couldn’t find a taxi in Paris. For AirBnB, the idea was to offer economical accommodation in the saturated hotel market of San Francisco. They all had the objective of modernizing a market in order to optimize it.

Imagine how a vehicle for a defined schedule and rate, in which you choose from among the thousands of restaurants on offer, to be delivered to the apartment you have rented, to eat in front of a set that is not yours either, and you get the uberization. All these uses are part of optimization and are part of a dynamic that makes us more and more connected to the service, and therefore more and more dependent on it. The confidence necessary for uberization is achieved through its stability, the abolition of friction, the reduction of time and money loss, or the transparency of costs. In the age of information overload and globalization, made possible by digital technology, consumers are more than ever in search of these values, in all fields. We’re constantly looking for them because we know it’s possible, we’re used to it, all the technology around us has been designed with that in mind. Now we just have to figure out how to design the change in a way that is favorable to us all.

In a market no longer of products but of services, how can we ensure a sufficiently large number of drivers, delivery personnel, vehicles and housing to cover entire cities? With an automated system that delegates what cannot yet be automated.

You order Uber, the server puts you in touch with an independent driver and takes 25% of the journey. You have an optimized tool, the driver of a tenfold clientele, and Uber has an automated income. A system that looks perfect on paper, but is widely criticized.

Despite the apparent improvements of such a platform, it has exceptional drawbacks on a social standpoint. The driver doesn’t work for Uber, he’s a contractor who uses him as a tool. Each delivery driver you are in contact with is a company, and is the competitor of another, which allows you to have an infinite crew, and therefore an unfailing flexibility. Indeed, uberization is the accentuation of liberalism, and this kind of system only aggravates the precariousness of employment by affecting all sectors of activity.

Job insecurity defines the difficulty of obtaining stable employment, whether in terms of income or duration. A liberalist movement such as this one, by definition, necessarily accentuates this precariousness of employment, since it does not employ, it is therefore essential to question the evolution of such a movement which would undermine our society, starting by asking why a company employs.

For example, what happens when a company is closed ? Well, you lose your job, and have absolutely no help whatsoever. This happened with Take Eat Easy, a french company delivering food, back in 2016. They used to “employ” more than 3000 deliverers.

So, when the company closed, those deliverers were left with nothing and had to find new ways to earn their life.

A company employs because it usually is a necessity. In order to secure a constant working force of individuals that are familiars with their role and how it helps run the company. Because of how a company is usually run, it needs people that are familiar with each other in order to collaborate, run projects and help the business make profit with expertise. In the case of Uber, and by extension the model it uses of per-service collaboration, those needs are only present in order to develop and maintain the application. Because almost everyone can drive a car, and individual drivers do not need to collaborate, there is no need for an uber driver to be formed, or even kept. Moreover, because the application works with a crowd of drivers, every driver can be considered as a replaceable asset to the company, which means that there is no need for any special service to be offered as a contractor, such as retirement funds, health insurance or even stable salary. So what is the reason for the existence of a business?

If the assurance of an income and a certain security for the employee can be a consequence, it is however not the motivation. A company is formed when the cost of these processes of creation, sale of services become higher by working with outsiders, instead of employees. At that point it internalizes the production. A company becomes one when it makes economic sense to do so, seeking to reduce costs to reinvent their market. It seems that users have stumbled upon an old model: wages have not always been the dominant model.

There was a time when wage-earning was not only a precarious situation but also socially despised. We were salaried when we had no value to exchange, except the strength of our arms that will benefit someone else’s strength. Salary was then an unworthy status, locking you into a rhythm of life imposed by professional failure. It developed in the 19th century and became widespread in the 20th century, to the point where it is an apparently indisputable 21st century norm, for the reason we have mentioned.

Salary has never been and still is not a duty, it is a mean. All these factors mentioned earlier: dematerialization, disintermediation, disappropriation, in short, innovation, have led to a revolution. It is no longer economically advantageous to have employees.

The value of a profession should not be blamed on its actors, they only adjust its blow between supply and demand. If you are not prepared to pay 10 more euros to have a McDonald’s delivered to you, it is not the Liberals who are to blame, you yourself consider, without devaluing it, that this profession has a low value, and yet you should soon be unable to do without it.

The subject has an inherent duality however. Because it is so easy to join those fleets, it is extremely easy for an unemployed person possessing a driver’s license to get an income by performing this service. Taking in light how unemployment has been an increasingly important problem in the past few decades, this can be seen as an extremely positive impact on both economy and an individual’s personal economic finances.

Thus a question arises: which entity should have the role to protect the contractor in such a business model? Should the business model be blamed entirely and be made illegal? It is true that a lot of steps toward social safety that have been made during the last century -because deemed important for a worker to have- are avoided using this business model, being a step back towards precarious employment. But there are other means to counter that apparent regression in the social status of the worker. Mandatory unions, corporate responsibility of their contractors, or even a special status granted by the government are several means to restore the safety net for such a worker. Whose responsibility is it to restore that safety net? One could argue that it is the disruptor’s own responsibility. But isn’t the role of the government to protect its citizens?

The fact is, the drop of standard contractual employment did not begin with the wave of uberization. It would be the other way around: the rise of this business model is only a reflection on what is already happening in other companies. As shown by the graph below, detailing the kind of contracts worker in humanities in Spain from 2008 to 2014, self-employment was already on the rise before the deployment of the Uber platform in 2012.

Because of the changes the internet brings to our society, self-employment and by extension non-contractual work becomes more and more advantageous, despite the loss in social security. We, as a society, need to evolve in order to adapt to such a change, and bring back the advantages decades of social progress brought to us.

The impact of such companies is not only social, but environmental. As a matter of fact, Uber and other software companies operating such business models run on servers, consuming a non negligible amount of electricity. Where the usual taxi company service used cars and phones, Uber and Lyft bring servers to their footprint. But here is more to that. Researchers from UC Berkeley argue that the convenience of being able to get a drive that easily makes the consumer more readily to take a car trip than say, public transportation or even staying at home, thus generating more carbon footprint. For example, “in 2014, Shaheen and other Berkeley researchers found that 8% of 380 passengers surveyed in San Francisco used on-demand ride services to take trips they would not have taken otherwise”. Using similar thoughts, critics argue that these companies have brought more cars on the road rather than fewer, considering people that would use bikes or walk instead, for example.

Here’s a study made in the UK, comparing the emission of CO2 and the number of PHV drivers:

Source: Transport & Environement

The results strongly suggest there’s a correlation between the rise in the number of VTC and an increase in overall CO2 emissions (+23% in 5 years). It mainly comes from the fact that most cars used by Uber drivers are diesel based. French government data revealed in 2017 that 90% of the registered private hire vehicles, which includes Uber, were diesel cars.

Conclusion

Disruptive, exponential, liberating and brutal, it is already part of our society, with no possible turning back. The paradox is such that the privileges that uberization has brought us and will perhaps question the economic and social consequences of the latter, but never abolish it. By speeding up processes, eliminating friction, reducing the wait that we are now conditioned to despise, uberization enhances the value of our time. But if we develop it at the speed we are doing, we should soon have enough of it, as liberalisation is reinventing itself to optimise the very way it works. This desire for automation will soon erase the need for delegation. While we wonder about the professional status of the arms that turn the machine, they only think about one thing: they do without their arms to be totally robotized. When it has succeeded, this struggle to impose wage labour will be a distant memory. At one time, work itself will be called into question, by its lack of supply while managing to meet demand — a society that functions almost automatically leaves something to think about. But that’s good, because when it happens, we’ll have time.

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