Mark’s personal take on the situation with UBER and how governments should respond
Partner, SATOV Consultants
I respect the rule of law. Perhaps more so now that I am a management consultant and family man than when I was a young punk trying to survive in the construction industry in Montreal, (it isn’t as bad as you read about…it’s worse, but that’s for another article). The rule of law provides a level playing field and helps ensure that people are considerate to one another. Except when it doesn’t. Sometimes the only way to force the issue is to break the law and force society to re-examine if there is indeed a level playing field, and a system that works for the benefit of society. After all, if a few courageous people weren’t ready to break the law, the civil rights movement may never have happened.
But the founders of UBER are not Rosa Parks. Travis Kalanick is worth ~ $6 Billion and he and Garrett Camp started UBER to be disgustingly rich, rather than help the oppressed in the world. What they have done in four short years is nothing short of remarkable – not the dreaming up of the model (they didn’t invent peer to peer), not making the technology work, not getting drivers and customers to sign up and not even managing the legal and public relations mess that is their daily reality. Rather, it’s the speed with which they have built a global enterprise that has disrupted the incumbent model and stolen share that is astounding. Amazon took 15 years to sell as many books as bricks and mortar stores, and Expedia and other online agencies took almost as long to truly disintermediate traditional travel agencies (a much more decisive victory to be sure). To be fair UBER had a giant online penetration advantage compared to those other players.
As you can see from the recent SATOV research report, in the cities where they operate UBER has overtaken traditional taxi usage from a ride volume perspective and won the hearts and minds of a very healthy percentage of the population. A whopping 76% of our respondents said that UBER is good for the city, a figure that includes many people who aren’t themselves ready to use the service. An additional 37% of consumers not using Uber would try it if it became regulated. And of all the people who use UBER today a total of 0% plan to stop using the service while about 1% plan to diminish. How would you feel about stats like that for your service business?
Our taxi system doesn’t work well for most of the players involved. Consumers have to suffer through uncertain arrival times, dirty cars, high-ish prices and inconvenient payment methods. Drivers have it even worse because while consumers spend a small percentage of their lives in these cars, drivers spend their lives in them just to make a living, and they barely do. They barely make a living because the city created a system that drove medallion prices too high, creating a small group of brokers and owners who take advantage of the driver’s inability to get on the road independently. Suddenly UBER arrives and providers of all backgrounds have an easy way to make a living and consumers get a service they love. Our study found a 56% decline in the use of taxis since UBER launched.
And the taxis are furious – “I already can’t make a living and with UBER on the scene I make even less” is essentially what they are saying. But they are saying it to the wrong people. UBER is their friend if they are open to friendship. The city is their enemy, along with the medallion owners who make more per year than they do (average of 25K per year in profit per medallion).
The city of Toronto indicated on September 30th that they intend to regulate UBER and adjust the traditional taxi service regulation to create a more level playing field. They plan to do it by mid-2016. I hope they hurry up. It would have been swell if UBER could have shaken up the world without breaking the law. They could have come into the city and tried to sell the taxi industry on their app. Or they could have lobbied the city to change the system and allow for a peer to peer program to compete. However, I think we all know that if they went that way we would all have to suffer through dirty expensive cabs driven by exasperated hardworking people until about the end of time. Or longer.
The complete SATOV report is available at www.satovconsultants.com/uber/