Uber is a Cancer!

Uber’s marketing and public relations afterburners are running at full blast with a new CEO, new driver rules and promises to make amends and “turn the company around” – whatever that means. If Uber is sincere about making changes it may find itself at war with its own nature.

Uber is a liar and a thief.

Don’t get me wrong. I love the service and the drivers. But the business is grounded in deception – an elaborate Ponzi scheme orchestrated around using billions in investment capital to undercompensate drivers and undercut public transportation, rental car companies and taxis – all in the name of convenience. Uber is out to disrupt transportation markets. In Uber’s crosshairs are such legacy transportation concepts as car ownership, car renting and taxis. If Uber and its ilk were to be uber-successful all three experiences would be eliminated. Even public transportation is vulnerable to Uber’s transportation takeover.

At the core of this proposition is lowering fares such that consumers opt to use Uber for all of their transportation needs relinquishing their owned cars and maybe even eschewing public transportation. But getting to Uber ubiquity requires an over saturation of under-compensated drivers willing to sacrifice their own financial and physical well-being in the name of disruption.

To achieve its goals Uber recruits drivers – 600,000 of whom are occupied as Uber contractors on any given day in the U.S. alone – to fulfill driving needs on demand within Uber’s managed transportation network. The core of Uber’s success derives from its deeply discounted rates, subsidized as they are by investors, and inadequate driver compensation.

This equation delivers a generally delightful experience for Uber passengers, who also benefit from chatting up drivers drawn from a richer demographic segment, on average, than the typical cab driver and in cars that are more often than not in better condition than the average cab. But it’s a Potemkin village since the only way to make an Uber living is to work extreme health-compromising hours and keep careful track of miles driven for tax deduction purposes.

In the words of one researcher (an Uber driver interviewer), Katie Wells, a visiting scholar at George Washington University, the driver motivation comes down to hormones. “For some of them adrenaline was involved,” she told Martin de Caro of NPR’s “Here & Now” program. “They were going to ‘beat the system.’ ” Uber has 30,000 drivers in the Washington, D.C. metro area.

– “As Uber Evolves, a New Effort to Please Its Drivers” – “Here and Now” – NPR

My own personal experience of this phenomenon is summed up a local DC area driver who told me he just drives occasionally to save up vacation money. He added that he does not keep track of his miles for tax purposes.

Researchers at George Washington University interviewed 40 Uber drivers and found what so many passengers, dispassionate observers and regulators have long known:

• As contractors, Uber drivers have no protections or benefits (workmen’s comp, vacation, etc.) and no power to negotiate compensation with Uber;
• Uber drivers are responsible for all costs of doing business such as vehicle cleaning and maintenance, fuel, food, insurance;
• Uber controls and manipulates fares based on demand – meaning only certain hours pay well and those same hours also present the greatest competition from other Uber drivers;
• Uber controls and constantly changes the rules for operation and compensation – ergo, drivers rarely have complete and accurate information about how much they are being paid (including bonuses) and may not realize the limitations of Uber’s provided insurance;
• After reviewing expenses vs. compensation with drivers many realized for the first time that they were barely making minimum wage – and some were making less;
• Uber will help drivers who do not own cars obtain cars but at exorbitant, subprime-like rates through organizations such as Enterprise or Bama Leasing;
• Unlike the regulated taxi industry where the number of taxis is limited, Uber is free to recruit as many drivers as it wants – and it is constantly recruiting since the churn of drivers remains high.

– “What Uber Drivers Say about Uber” – Citylab.com

This last point represents a key quirk of Uber. Like Tesla Motors, Uber does little advertising targeted at consumers. What few advertisements I have personally seen for Uber have been focused on driver recruitment.

In the past week, Uber has taken steps to make driving for the company more attractive including:

• Allowing in-app tipping of drivers;
• Adding 24-7 phone support for drivers;
• Providing $15 to drivers who return lost items to passengers;
• Conducting faster background checks;
• Providing protection from unjustified negative ratings.

What Uber won’t do, in the words of GWU researchers, is increase driver compensation, nor will it treat drivers as full-time employees, one of many recommendations from GWU researchers as follows:

• Make drivers full-time employees with access to sick days and workman’s compensation
• Allow disputes to be addressed in courts, not via arbitration
• Clarify or eliminate the onerous leasing offers

GWU’s Katie Wells concludes (in an interview with Citylab):

“Until these things happen and the working conditions of Uber are addressed, cities should not partner with Uber for any public transit provision unless they want to underwrite poor-paying jobs. Workers should also be very careful about driving for rideshare platforms—Uber or otherwise.”

I love Uber. But the model of undercompensating drivers who are willing to abuse their own vehicles in the name of transportation disruption is not sustainable. Uber has yet to turn a profit even as it undermines the taxi industry, the automobile industry, the rental car industry and public transportation.

I was wrong. Uber is not a liar and a thief. Uber is a cancer.

Is there good news on the horizon? A treatment for Uber? Yes. Legacy taxi operators are introducing apps and enhancing transparency while lowering fares in some places around the world. In this way they are responding to Uber’s convenience while still offering a more structured and employee-friendly working environment.

P.S. Drivers will ultimately determine the future of Uber. Smart ones give up when they determine that the math doesn’t work for them. Smart and determined ones are trying to and will organize. But there is a disturbing trend as Uber is increasingly overwhelmed by churn – the quality of drivers and the quality of the cars is showing signs of declining. Have had some drivers lately with old cars and sketchy driving behavior. But, hey, you can get that in a normal taxi!