Uber is the rapidly growing transportation service that connects cars willing to provide rides for a fee with individuals needing a ride. It has addressed a need that the current highly regulated cab industry is failing to meet.
Uber has a current market cap of about $18 billion. But that stratospheric market cap underlies a rapidly growing user and supplier base.
After you download the app and set up the account, it is elegantly simple. The location feature on your phone shows on your map, and you can see Uber cars on the map near your location. You can request an Uber X, which will be a small car like a Prius; an XL, which will seat six passengers; a Black Car, which will be a limo-style Lincoln or Cadillac or Mercedes; or an SUV. Each choice is progressively more expensive than the previous one. After you pick the ride type and select your destination, the app will quote you an approximate cost of the ride, and you can request a driver. The app will tell you how far away the driver is, and you can then contact him by text or a phone call.
I used Uber on a recent trip to Houston, and the experience was terrific. No pickup took more than a few minutes, the drivers were courteous, and the vehicles were clean. I rode in a Honda Pilot (XL), a Prius (X), and a GMC Tahoe (SUV for an XL price). When you are contacted, you get a picture of the driver and the tag number. There is no cash changing hands and no tipping. Your credit card is charged, and you get a bill messaged to your phone number on file within minutes of your trip’s completion. Lateefah picked me up at the airport, and Seid returned me. Can you remember the name of any cab driver you have used?
You rate the driver from one to five stars, and his rating is displayed when you are offered his services. The passengers are also rated by the drivers. Abusive passengers may have a hard time getting a ride. Drivers with low ratings are quickly removed from service. Can you imagine this kind of accountability in any highly regulated cab service?
The cabbies are understandably very hostile to this new competitor, who is not subjected to the high fees and licensing requirements they themselves must undergo. Municipalities and states are trying to level the playing field, and some have outright banned the service. They may claim that it is to protect the public, but it is clear that their object of protection is the cab cartel and their own regulatory power.
Uber has created far more than a cab substitute. It will have an impact on the rental car business – Uber is much more available than cabs and thus reduces the need to rent a vehicle. It also reduces the rental car hassle and the gasoline and insurance rip-off, saves the time in renting and returning the car, and eliminates parking fees. If a city is Uber-friendly better to Uber than rent a car. (Yes, Uber has become a verb – a marketing dream come true.)
Uber provides the driver with a great business opportunity that he can start with little cost, other than that the vehicle which must meet Uber’s standards. Drivers do not have to report to a central location, and they can work whatever hours they wish. Their dispatcher is their iPhone and an app provided by Uber.
Some cities have noticed an uptick in night spot business, as the convenience and availability of Uber has allowed many to leave the car at home and avoid the hassles of parking or the chance of a DUI. Uber may even improve public safety.
The real conflict is not between Uber and cab companies, but between Uber and the regulatory power of the state. Uber users are more likely to be young and will see the state’s attempts to limit Uber as an encroachment on their lives and personal choices.
While Uber has created a community of users and providers predicated on trust and accountability, the regulators focus on the bad side of human nature that we must be protected from. The politics of fear is used to empower government and allows them to control market participation. But any need for consumer protection is quickly subverted to an unholy alliance between government power and revenues and the cronies who capitalize on that fear, using government to reduce if not eliminate competitive threats.
Uber is not unique in this idea of a commercial community. Airbnb is the hotel equivalent of Uber and connects private owners of homes and apartments with individuals seeking lodging. Many of the dynamics of Uber are repeated with Airbnb, including conflicts with regulators and entrenched competitors.
There are similar commercial communities among iPhone users, Amazon customers, and other enterprises. Such modern businesses scale up remarkably fast, creating huge commercial communities, quickly threatening the regulatory agencies, and empowering a new generation of Uber Libertarians. These new commercial communities give a face to the principles of a free market, bringing life to ideas that have long remained buried in books and think-tanks or held in contempt by thick progressive elites self-imbued with moral supremacy.
When Fred Smith, founder of FedEx, presented his idea for next-day shipping, it was greeted with substantial skepticism. But a free market and a growing economy are always greeted with such surprises. The problem with modern regulation is that it can never keep up with a changing market, and the rate of technical development moves far too fast to regulate. We are shortsighted to focus on the competence of government, such as the miserable failures of the ACA website. The critical flaw in central control of the economy and regulations is not the lack of competence, but the lack of imagination.
This is becoming unavoidably clear to a new generation of Uber Libertarians.
Henry Oliner blogs at www.rebelyid.com.