
Together they provide an interesting story about this
emerging company that has attracted more than $46 Billion in venture capital,
and in a very short period of time: five years, in fact.
In 2010 Travis Kalanick and Garrett Camp installed their
friend Ryan Graves as CEO of what they called UberBlack, choosing the name because at the time they envisioned
using the black limousines in the city as their sole means of transport. There were several reasons why this seemed a
good business model. For one, the black
cars were under-utilized. My first-hand
experience is that San Francisco is a tough city in which to catch a cab. Unless you are at a major hotel, even a call
from the concierge is likely to result in an extended wait. The limos, which often depend on hotel
personnel to suggest them as an alternative to taxis, tend to wait in queue or
roam, looking for someone looking at their watch.
I have used one to travel about six blocks and, since
they have no meter, paid an agreed-upon price to reach my destination. The non-meter agreed upon-fee model is one of
the things that distinguishes Uber from taxis.
Another is a concept borrowed from the toll-roads and online shopping:
PayPal or credit card on record; both making transactions cashless for the
consumer.
The limos also had something that worked in their
favor: they were considered non-competitive by the taxi companies, since they
were already handling an overflow population, often with trips to the
airport. They also satisfied whatever
regulatory requirements the city had, such as background checks, bonding, and
liability.

When their success exceeded their demand, Uber looked
to expand by increasing its fleet. This
resulted in several policy changes: standards had to be set for drivers and
cars, there needed to be a payment system for drivers and, probably the most
important, recruitment of cars and drivers, many of whom had never driven
commercially before.
What has developed, at least in the United States and
Canada are these: drivers must speak English and have an unblemished, current
driver’s license, cars must seat five or more passengers (including the driver)
and be less than ten years old.
Insurance while “on the move” is provided by Uber and drivers agree to
certain company policies, such as avoiding direct airport access for pickup or
delivery, and no transporting unaccompanied children under the age of sixteen. Other than through complaints or accidents,
enforcement of these policies is difficult to assess.
The major change in moving from UberBlack to UberX was
increased interest and concern from both the taxi industry and City and State
regulators. In fact, if you get to other
countries: such as France and India, entire countries are showing concern. Uber’s reaction has been high-powered legal
action, defending the company on the grounds that it is not a transportation
business, but an internet application industry.
It will be interesting as to how that plays out.
If Uber loses, it won’t be because of
satisfaction. Customers love it, and are
willing to make concessions, such as walking a block to or from our local
airport to use the service or, as the WSJ article mentions, turning a blind-eye
to the under sixteen policy. The drivers
seem to love it also. The flexible
hours, including choosing what hours the driver wants to work seems popular. One of the early San Francisco drivers, who
drives as a full time job averages about $25 an hour and has immediate access
to those funds. He has limited
liability, although some automobile insurances question whether the Uber policy
lessens their liability. There are probably
some tax advantages for those who itemize, but I am sure that is a gray area. And, in a policy borrowed from Tupperware and
Mary Kay, there is a $500 bonus for referring a driver who commits to three
month’s availability.
Drivers have very few restrictions. Fares are set by Uber and vary depending on
vehicle and demand, so customer controversies are with the company rather than
the driver. Drivers also avoid the major
concerns of taxi drivers: company charges for required credit card use,
mandatory hours and location, long waits in airport queues, mandatory GPS systems
and the unevenness of the field now that Uber and Lyft have entered the market.
With the end of the year hovering about, I think I have
received more solicitation letters than Christmas cards. In my next post I’ll question why and how
that happened. I hope you will join me.