It’s placement in the annual letter came because my granddaughter and her boyfriend are both driving for Uber. It made and still makes business news in the WSJ, my paper of choice. In fact there were three articles within the last week”: one about a French challenge to their operations, another about background checks in San Francisco and New York City, and a third, very interesting one on how Uber has become the “soccer mom” transport for middle-school kids.
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.