Ride-hailing

Sharing Economy is still Capitalism: Uber and Lyft Battle for Drivers

uberlyft3There’s been a lot of recent media coverage of the Uber and Lyft fight for drivers, particularly of Uber’s use of contractors to book fake rides with Lyft and either cancel them or use the rides to recruit the drivers. The Verge ran a full exposé of this Uber practice recently. Lots of people are outraged, with talk about deleting the Uber app and boycotting the company. The truth is, almost all peer to peer services are about profits, just like regular taxis and other businesses in this capitalist economy.

The sharing economy is an economy. Organizations offering a platform for sharing of goods and services for free are not part of an economy, they are providing a public service. I couldn’t find any numbers on this but I know in the travel space public service organizations are a tiny minority of peer to peer companies (just check out my spreadsheet to see how many don’t charge a fee).

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In New York City, where the Uber driver recruiting practice started, there is a system of taxi monopoly that has existed since the 1930s. Rather than providing as many taxis as the city needs, taxi companies have limited the number of medallions (allowing drivers to operate legally) to exactly 13,237. This limit ensures profits for the medallion owners; they have increased in value  more than 1,000 percent since 1980. That’s certainly not about serving riders.

Some sharing economy businesses are more committed to serving their customers or doing something useful for the world, while others are more focused on money. Just like more traditional dollar billbusinesses. People who are shocked about peer to peer companies engaging in standard capitalist business practices are missing the point of these businesses.

My goal is to find peer to peer services that are making travel easier and cheaper for me. For these businesses to continue operating I expect they will be making money off this venture. Of course I’d rather if these companies were also helping the world, but aside from the accidental benefits to the environment and expanding cultural exchange, I don’t expect this. There are exceptions, for instance, mmMule, a peer to peer delivery company, runs a side program they call AngleMule through which they help travelers volunteer to bring supplies to community organizations in need. This is a way for mmMule, a for profit company, to use their platform for some social good.

Relative social good may have an influence on which peer to peer delivery company I use, if I have a choice. But the truth is, many capitalist businesses make large donations to charities, both as tax write offs and to help their image (and sometimes they might even believe in the cause). Information about these donations has rarely impacted my choice of which business to use and I suspect I’m not alone. Wells Fargo was the top corporate donator in America in 2012, but I’ve never heard anyone say this impacted their choice of banks. It’s possible users of the sharing economy will be more demanding about social good than users of the rest of the economy. But in most sectors I don’t think this will be true.

In the end I think competitive/underhanded business practices by Uber and Lyft are not likely to drive many users away. For most people the choice of which ride service to use, as with most other purchases, comes down to price and convenience, with a heavy dose of habit. Sharing economy proponents are setting themselves up for disappointment if they expect peer to peer for-profit enterprises to be significantly different from other for-profit businesses.

 

 

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