I don’t think there is a more important issue for the innovator and small businessman these days than that dramatized by the fierce fight for survival of the Uber mobile app, which allows consumers who want rides to connect with drivers who want fares. We need to pay attention.
The Uber fight has huge implications for what Leigh Buchanan, in her May article in Inc., describes as “the slow death of entrepreneurship.” Uber is fighting the Neo-Luddism of the establishment–the establishment being the forces of the inefficient elites in labor, government, and the crony capitalists of big business.
The term “Luddism” comes from Ned Ludd, who created a broad and violent rebellion of weavers against the use of mechanical looms that were replacing the efficacy of traditional mill workers in early 19th century England. In 1811, Ludd’s followers rampaged through the countryside destroying these looms whereever they could find them. They sought a return to the safe-seeming, inviolability of the status quo ante.
What the current uproar of opposition to Uber (and other disruptive technologies like TaskRabbit, Instacart, Postmates, Homejoy, Lyft, Airbnb, Snapgoods, and many others) boils down to is nothing more than the recrudescence of Luddism. It is Neo-Luddism.
Change is hard. It is distressing to those who prefer the comfort of the go-along, get-along present to the terror of the future. Joseph Schumpeter, the classic capitalist apologist, called this “creative destruction.” Constant creative destruction is the price we pay for a healthy, robust, efficient capitalist process. It is the essence of the why and wherefore of entrepreneurship.
The current controversy swirling around Uber is centered in what is often described as the “gig” economy. (The term “gig” comes out of American jazz to describe the occasional and freelance employment of the musician.) In a June,2015 report, McKinsey & Company describes gig work as “contingent work that is transacted on a digital marketplace.” Uber had over 160,000 of these gig workers under contract at the end of 2014.
Much of the so-called “sharing economy” is based on gig work. Under this model people work for whom they want, when they want, doing what they want. This is very threatening to old line labor unions, government monopolies, and entrenched big business interests. It threatens their control. It challenges the hegemony of the tightly managed, but creatively barren, business normal.
I note with approbation Uber’s victory over the forces of municipal bureaucracy and corruption in New York. The Uber app solves the long-term inefficiency promulgated by the incumbent urban taxi cartel. This inefficiency had taken the forms of driver rudeness, dirty taxis, scarce taxis, and cabbie reluctance to transport riders to NYC’s outer boroughs. It also solves problems of getting a taxi at peak hours. Furthermore, Uber and its entrepreneurial cousins have created well-paying job opportunities among a new breed of independent worker that values vocational self-direction. It is HR for people who prize flexibility and freedom. Over 2,000,000 New Yorkers have now downloaded this magical app, which has conquered classic restraint of trade, governmental red tape, bureaucratic lethargy, institutional corruption, and fear of the New.
Robin Chase, Co-founder of Zipcar, in an article in Harvard Business Review states, “This new way of working [which she calls the ‘collaborative economy’ rather than the ‘sharing economy] rewards the ambitious, the hardworking, and the entrepreneurial, and it moves us closer to a real meritocracy. Our resumes become irrelevant, and we can try our hands at many things and more quickly figure out what we want to do more of.”
Uber has been described as “unfair competition” by taxi owners and drivers simply because it is cheaper, more efficient, and more profitable for drivers, and more user-friendly for riders. Yes, Uber is unquestionably trying to disrupt the for-hire vehicle industry. That’s what entrepreneurs do.
In Paris, the unionized Luddites have slashed the tires and smashed the windshields of Uber drivers. In California, the Labor Commissioner’s Office, a wholely-owned subsidiary of organized labor unions, wants all Uber freelance drivers classified as employees, severely diminishing Uber’s monetary raison d’etre and brand control. These are not good omens for disruptive entrepreneurship based in the gig economy.
However, there is also international recognition of both the consumer popularity and efficiency of Uber. Boris Johnson, the Mayor of London, recently told a group of taxi drivers the following: “You are dealing with a huge economic force which is consumer choice, and the taxi trade needs to understand that. I’m afraid it is a tragic fact that there are now more than a million people in this city that use the Uber app.” When cabbies protested that their prices were being undercut, Johnson replied: “Yes. They are. It’s called the free market.”
Uber’s struggle with government and the powers that be is popular with consumers, but its fight is also a stand-in for the defense of free business itself. And it has important implications for whether the cosseted sinecures of the outmoded Old can tampen the creative fires of the entrepreneurial New.
Joseph Schumpeter said this about the creative destruction of new railroads, but it could just as well be said of all disruptive technologies from Microsoft to Apple to Google to Uber. He said, “A railroad through new country, i.e., country not yet served by railroads, as soon as it gets into working order, upsets all conditions of locations, all cost calculations, all production functions within its radius of influence; and hardly any ‘ways of doing things’ which have been optimal remain so afterward.” Thank you, Joseph Schumpeter.