Tuesday, January 12, 2016

Alphaville's Izabella Kaminska Banned-

-Banned that is from a half-dozen Sand Hill Road venture capitalist's offices after they read this FTAV piece.*

From FT Alphaville:

If and when Uber drivers unionise…
What makes Uber such a disruptive force in the taxi market?

Is it its app technology?

Or is it the fact that its business model transfers the ball and chain costs of capital, vehicle rental and maintenance, risk, tax and insurance costs over to taxi drivers, who often don’t appreciate the all-in operating costs until they’re far too invested in the scheme?

Perhaps, alternatively, it’s because the notoriously “asset light” taxi company pays scant attention to local licensing and regulatory rules relating to its market, and sometimes even likes to spy on where its customers are going.

Or maybe it’s because Uber disregards the laws of supply and demand by having an entirely open-ended policy with regards to the size of its driver network. 
Or perhaps still it’s because the app removes awkward cash transactions from the process and in the same instant removes the potential for a tip or a “keep the change” additional earnings opportunity for the driver.

What we do know is that thus far, in the push back against Uber, all the attention has focused on protests from the licensed and regulated market who understandably feel undercut by a company which has decided to ignore market rules and regulations unilaterally.

Nowhere near as much discussion, however, has befallen the topic of whether the Uber drivers themselves are being shrewdly exploited.

And yet, word reaches us, that Uber drivers in London are finally beginning to wise up to how they’ve been duped. 
Discussions in the back of taxi cabs and across the community are finally focusing on how the job in many cases amounts to minimum-wage or barely break-even work. We also hear about how ruthless things are getting on account of market saturation in the expensive-to-run executive saloon and Toyota hybrids segments, which customers are mostly not bothered to pay more for.

The London airport hubs are the best example of the increasingly cut-throat practices in play. As supply grows, hours worked — i.e. circulating and being plugged into the “on-demand” app — are having to increase for drivers to cover their costs. But the more they circulate the more petrol they burn, the more it eats into their overall profits but also the tireder they get. It is in many cases a vicious circle.

For many, a guaranteed job from one of the major airports is the best way to secure a minimum £50-100. But airports happen to be among the strictest taxi jurisdictions in the country, with regular taxis — which have to join a complex and lengthy holding system to get a job — understandably up in arms over Uber drivers’ ability to bulldoze their way straight to departure drop-off points for instant pickups.

Uber has been rightly told off about how it operates in these areas. As a consequence the company now runs its own airport catchment system which plugs drivers into a virtual queue for airport-related pickups. Drivers simply have to enter the relatively wide catchment area, circle/rest somewhere within these boundaries, and wait their turn for a job to be autonomously dispatched to them by the app.

Problem is… it can take anywhere between 3-6 hours to get a job, according to drivers. An Uber spokesman told us that the company believes the average wait time is closer to one hour. Either way, the extended wait times appear to be breaking down the effectiveness of the app — which is supposed to send drivers to clients on a no questions asked basis. But drivers, who naturally want to cherry pick the longest and most profitable routes to ensure the wait has been worth their while, attempt to game the system by screening passengers via private calls to ascertain just how far they’re going. Local jobs are dropped or in personal experience long-routed “accidentally” on purpose. And while Uber bans this practice, there’s nothing much it can do. The drivers are desperate because they have no way of knowing how big the virtual queue is ahead of time. It’s pot luck....

*I apologize if I mislead anyone with that headline, I actually try to avoid being cutesy and wasting readers' time.
My excuse is: as I was typing I was thinking of the Karl Marx credit card and the wording of one of the taglines offered for it.
We first linked to this oddity in "UPDATED--'The Karl Marx Credit Card – When You’re Short of Kapital'":
It had a few ad slogans for the card, which actually is real, good yuks.

It was in the follow-up, "Okay, The Second Time Is Farce: Some Additional Taglines for the Karl Marx Credit Card" that we saw true advertising genius:
Alrighty. Now that I've flushed that mental detritus out of the system, back to Uber.
A few of our posts that tried to touch on what Ms. Kaminska is writing about:

Seattle is first city in nation to give Uber, other contract drivers ability to unionize
What Uber Hath Wrought: The Coming Digital Labor Movement 
As Chicago Prepares an App For Taxis to Compete With Uber, Giant Union AFSCME is Organizing Cab Drivers
Watch Out Uber: National Labor Relations Board Interpretation Could Allow Many Taxi Drivers to Unionize
Dear Teamsters, United Auto Workers: Google Is Trying To Crush Your Unions and Your Members (GOOG)
"Avis and Hertz should launch their own Uber"
Why Upfront Ventures Invested in Disruptive Rental Car Startup Skurt