Uber provides the smartphone-era, gig-economy version of a taxi service. In order to get a ride in the “10,000+ cities worldwide” where Uber operates, all you need to do is download its smartphone app, enter some payment information, and tap in your destination. An offer is made to an available driver nearby; she accepts, arrives, and you are on your way. It’s easy, quick, and cheap. Of course, the driver who picks you up will not be an employee of Uber, or at least that is the legal arrangement that Uber and its allies have secured in California. Uber does have over 22,000 conventional employees, who build and service its “technology booking platform.” But on the company’s official view, rather than working for Uber, your driver works through Uber’s app but ultimately works for you, the passenger. Uber serves as a middleman, for a 20-30% cut, contracting temporarily with a driver only for the duration of the ride she provides. The number of drivers and riders on the road is controlled by market forces of supply and demand, with a little help from Uber’s algorithms, which dangle incentives in front of passengers or drivers when one side is lacking.
In many ways, the scheme has worked enviably well as a business proposition. Though Uber did not turn its first profit until 2023, fourteen years into its life, its market valuation a year after its 2019 IPO was more than $50 billion. It has become the paradigm of digital disruption, inspiring a legion of gig-economy imitators that seek to become the “Uber for X” in their own industry. For that matter, what is Uber’s own industry? The company insists that it is only a technology firm, not a transportation business, in keeping with the notion that its 3.9 million “driver-partners” are contractors (or even clients, i.e. end-users of its software). The image of a humble dispatching tool is essential to Uber’s public narrative. Behind the scenes, matters look rather different, since Uber sets the terms of when, how, and for what pay drivers shall work. The massive asymmetries between driver and dispatcher create a potent form of power that is hardly consistent with free and equal bargaining on the market. The complexities of market-mediated power give rise to the distinctive moral and theoretical puzzle that I have dubbed the “Uber problem.”
The realities of app-based driving suggest that drivers are not really within the structure of authority that is the firm as we usually understand it, but neither do they have full-fledged market relations to Uber. In the USA, Uber’s drivers are generally solo operators who furnish their own vehicles, fuel, and maintenance. They can log into the Uber app, provide as many rides as they like, and log out whenever they want. Flexibility and responsibility are the heart of Uber’s recruiting pitch to potential drivers: “Be your own boss.” Yet the “turnkey entrepreneurship” offered by a ride-hailing app is not quite as independent as Uber’s marketing arm makes it out to be. Fares are set unilaterally by Uber’s ever-changing algorithms, and then offered to drivers on take-it-or-leave-it basis. A driver has only 15 seconds to decide, and neither the destination nor the total price are specified until after the driver accepts. Furthermore, drivers who accept less than a threshold level of the rides proposed to them, generally 85 or 90%, are liable to be suspended or barred from driving for Uber. A GPS mapping program prescribes a route, and drivers can have their pay docked if a rider complains about any deviation onto a path deemed “inefficient.” And the app attempts to dissuade drivers from logging off, using perky encouragement (“Your next rider is going to be awesome”) or monetary incentives (“Demand is very high in your area. Make more money, don’t stop now!”). All of these features bespeak ongoing involvement rather than arm’s-length contracts, which would leave drivers free to carry on business in their own way. By deploying a combination of autonomy and oversight, Uber keeps drivers close enough to control, but far enough to avoid responsibility.
As a creature of the smartphone era, Uber seems like something new under the sun, but its basic business model was established among conventional taxi companies decades before Uber was born. For much of the 20th century, US taxi drivers were unionized and so enjoyed the labor protections of employees, such as wage floors, hour limits, and benefits. A major shift occurred in the 1970s, when taxi companies around the country first began to re-classify their drivers as “independent contractors” rather than employees. The taxi companies were trying to exploit a loophole established by the Taft-Hartley Act, an anti-New Deal measure of 1947, which exempted independent contractors from the right to bargain collectively. The core of the revised taxi arrangement was that the company, which owned permits issued by the local government, would lease medallion cabs to drivers at a flat rate for a fixed time period (ranging from several months to a single day). By reframing drivers as “entrepreneurs” in business for themselves, the cab companies could avoid many of the liabilities that employers usually bear, such as paying for idle workers or sick leave. Uber relies on digital technology to push the same logic further, controlling an even larger workforce while owning even fewer assets. Dispersed local taxi dispatchers are replaced by a centralized app under a powerful global brand, while transportation “entrepreneurship” is made available to nearly anyone with a car, often in defiance of local laws, thus removing the need for Uber to own and maintain a fleet of vehicles.
Uber and its forebears in the taxi world are pursuing a strategy of hyper-specialization that has become ubiquitous: do only that part of the work that you do best, and let others do the rest. This approach leads to strangely hollow brands: Apple is a computer company that makes no computers; Nike is a shoe company that makes no shoes. Both firms focus on design and marketing, leaving production and distribution — which are less profitable and easier to standardize — to others. Similarly, Uber and its yellow cab rivals are transport companies that do not transport anyone. What they do best is not rides but reputation; they offer the promise of a quick ride at a fair price, symbolized by a global tech brand or by local taxi medallions. Once the promise is made, the actual delivery of passengers is done by temporary contractors who are not integral members of the firm. Of course, in all these cases—from Apple to Nike to Uber—the lead firm exercises a degree of oversight to ensure the integrity of its all-important brand.
(excerpted from chapter 4)
