Uber The Colonist

It seems that Silicon Valley is at last waking up to what Uber really is.

  1. “Monopoly as the Uber Business Model”
  2. “Understanding That Unregulated Monopoly Was Always Uber’s Central Objective”

I am a bit disappointed that it took this long for Silicon Valley to see this, but I suppose better late than never.

Over a year ago, I wrote this;

The question is will Uber be a sustainable business? Will it raise prices after venture capital runs out and there is no competition left? If they are forced to employ their drivers as employees and if they have to also pay for their driver’s cars, which is quite possible long term, can they still maintain current prices? If Uber becomes a monopoly, will they be any better than the regulated monopolies before them for both the drivers and the customers? I have serious doubts on this, and unless Uber discloses the sustainability of its business, commits to future low prices and the welfare of its drivers, I think that strictly regulating Uber makes a lot of sense. The last thing that you want is for Uber to kill your local taxi industry, and replace it with one which is just as expensive (potentially more) and where all the profits are funnelled to a Silicon Valley company far away. This is why we have anti-trust laws, for example, and this is why we regulate industries (like the public transport, mail, health and food industries) that directly affect the welfare of our citizens.

The point that I want to emphasise is that if the US is killing itself as a result of its relaxed views on anti-trust and disdain for regulation, then so be it. I do not mind the world’s largest superpower shooting itself in the foot.

I am however not OK with how the US is exporting this to other countries. If Uber is killing local taxi industries in developing nations, preventing the deployment of public transport by providing an artificially cheap option, and in general making these countries dependent on the US for basic needs, then I see this as a new form of colonialism. This is what Gandhi fought against with the Swadeshi movement.

And we should also note that this is not restricted to Uber. One could argue that the stagnation of tech in developed countries has caused Silicon Valley giants to search for growth in the developing nations, and their huge resources are allowing them to use predatory, money-losing tactics. It’s just that since the US is inherently an inwards-looking country and nowhere near being truly cosmopolitan, they don’t realise how much damage they’re causing.

Just see how much China’s Internet has prospered by shutting out Silicon Valley.

If Silicon Valley wants to earn money in developing nations, I see no problem in doing so. However, they must compete on equal terms. They must earn profits. For example Apple is OK because even in developing countries, they charge the same price (which turns out to be super-premium in these places). Apple does not drive out local competitors, but encourages them to copy and provide the same features at lower prices (again, look at China). Local cheap competitors thrive because of Apple.

  • I think your analysis is excellent and a way of framing things that has not been discussed much, from a truly global viewpoint. I think you raise very important points. It’s surprising that countries have not discussed this danger more broadly… probably because each is only narrowly focused on their own issues and views. Probably a “divide and conquer” strategy that Uber has counted on.

    On the other hand I think many in the Silicon Valley sphere have discussed monopoly e.g. Ben Thompson has been talking for years about monopoly as Uber’s goal and warning -albeit rather mildly- of some of the dangers.

    And Naked Capitalism, while a good site in general, seems highly obtuse in this analysis. e.g. most of their claims are equally applicable to Amazon but they largely hand-wave that away; dismissing all innovation and user experience comes across as extremely Luddite Zoe curmudgeonly: and last and most important, he completely ignores the well-known primary likely drivers of Uber profitability, namely carpools e.g. Lyft Line/UberPool, and more importantly self-driving cars (both topics that Ben has discussed at length)

    I’m not saying his conclusion is incorrect, but his method is highly sloppy. “I worked in travel before Netscape existed so trust me” 😉

  • obarthelemy

    What’s frightening is that the gig economy is gnawing at the foundation of the western welfare state, while those states haven’t even solved the decade-old transational services/IP taxation issue yet. These are two huge loopholes in our current economic setup that don’t seem to be adressed as urgently as they need.

    I’m not overly concerned by/about Uber per se: in the end it’s just an app, it can be Myspaced. Plenty of well-capitalized and established companies will be able to take over especially at the moment of the self-driving pivot.