How Uber is Uber?

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Uber was born in Paris, France one evening when Travis Kalanick and his friend Garrett Camp were unable to secure a cab (Swisher). They were attending LeWeb, an European technology conference held yearly. Each had just sold their companies, Kalanick, his content company Red Swoosh to Akamai Technologies for $20 million, and Camp, StumbleUpon, a discovery search engine to eBay for $75 million. The pair shared an apartment in Paris referred to as the JamPad, where several prospective entrepreneurs discussed numerous possibilities for a new startup. They talked about many things, including a car service where you simply “push a button and get a car” (Swisher). Those who were there that night said that the car service idea had no more pull than any of the other ideas discussed. In fact, when they returned to California, Kalanick was no longer still thinking about the idea. But, Camp could not get it out of his mind. So absorbed with the concept, he purchased the domain UberCab.com (Swisher).

Camp owns a substantial portion of the company and felt that Kalanick would be a good partner because, he had discovered in Paris, Kalanick was a gutsy guy, and this type of company would require that type of personality (Swisher). Kalanick was not easy to convince at first, more so because he was not happy with the trajectory of his last two start-ups and was concerned about the success of his next steps, but Camp ultimately wore him down and the rest is history. Thus Uber was born in 2010 in San Francisco. The principle was simple, you decide that you need a cab, pull out your mobile phone, pull up the app, enter your credit card number, and Voila! with the press of a button the G.P.S. system could take care of the logistics, the app charged your card for the ride and the tip and you were on your way. Chris Sacca, of Shark Tank and Google faire was an early angel investor and tweeted his excitement about the company while he riding in the cab for the first time. But the company came to the attention of most when it received a cease and desist order in its mailbox. The San Francisco Municipal Transportation Agency, and the California Public Utilities Commission sent legal documents challenging the inclusion of the word cab in their name since they were not properly licensed (Swisher). Kalanick was itching for a fight, but he purchased the Uber.com domain from a music group and changed the name of the company from UberCab to simply Uber, and ignored the orders. Venture capitalist Matt Cohler jumped on board through his company Benchmark, relishing the idea of having a business where the cell phone act like a remote for dialing up real life (Swisher).

A deal with Marc Andreessen, Netscape co-founder, of Andreessen Horowitz imploded (Swisher). But not too long thereafter, Shervin Pishevar, who at the time was at Menlo Ventures, invested $20 million. In addition, he brought in many more millions from his associations with Ashton Kutcher, Jay Z and Ari Emanuel. Jeff Bezos, of Amazon fame, jumped on the Uberwagon, as well. Investment enthusiast continued to pounce on board the money train until Uber reached a $17 billion pre-money valuation in 2014 (Swisher). Today, Uber has a $62.5 billion valuation (Foroohar).

Now Uber provides over three million rides per day in around 66 countries around the world (Foroohar). The company is considered to be the most valuable startup in the world and is considered the fastest growing enterprise ever. The ride-share concept is not all that Uber does, in fact, at headquarters in San Francisco, UberEATS delivers takeout in less than 10 minutes. In France, Uber launched its helicopter taxi service to provide transportation to the Cannes Film Festival for the uber riche (Bajekal). Uber has signed up 50,000 businesses for its Uber for Business model which allows corporations to integrate their accounts into the Uber app which allows the company’s employees to bill their business taxi travel to their employers (Rao). Among some of the shiny new takers are Bank of America and Goldman Sachs. Companies that use Uber for Business are finding great savings, as much as $1,000 per year per employee, because Uber rides are often less expensive than cab rides. Expense-management program provider Certify indicates that Uber is now showing up on corporate expense reports more often than traditional cab services for the first time in Certify’s history. For example, Uber composed 55% of ground transportation reporting, where traditional taxi cabs only made up 43% (Rao).

Uber, along with such service giants as AirBnB, TaskRabbit and more are transforming the way that people are able to work (Foroohar). The traditional 9 to 5 work day is becoming the create your own schedule of availability and work whenever you get the inkling type of employment structure. These companies are the bold creators of the gig economy, where a company forms a partnership with an independent contractor for multiple short engagements. The engagements can be one per day, ten per day, and can be more or even less, and are created at the will and convenience of the contractor. The gig economy will likely change the American economic structure by 2020, where as much as 40% of workers in the U. S. will be partners or independent contractors.

Uber Drivers Become Their Own Boss

In addition to providing easier access to cabs and transportation, Uber is creating jobs (MacMillan 1). Uber has over 1.1 million operating drivers in over 361 cities worldwide – the bulk of which signed on in 2015 (Foroohar). It is reported that Uber drivers make over $100,000 in gross sales annually (MacMillan 1). Yet some research indicates that it is much less than that (Fehely). Uber allows its drivers, called partners, to use their own car to share a ride with a ride seeker. They are able to make their own schedule and become self-employed. Once the customer requests a ride, rather than stand on a street corner and hail a cab, the customer can use their cell phone to effectively hail the cab (Johnson). Drivers in the area are notified of the request through the app and once accepted the transaction is completed. The cost of cab rides are often less expensive than that of the traditional cab (Rao). In addition, customer who are traditionally rejected because of their appearance, color or other defining considerations, do not have to suffer the indignities often associated with the experience of the traditional taxi ride, because the app handles the payment transaction seamlessly, so the driver does not have to worry about potential bad players not paying the fare (Belcher).  

Uber: The Regulatory System

Kalanick has a strong sense of regulatory barriers and his personality is that of a fighter, so, in a sense, he is the perfect CEO to barrel through the protectionist system created by the state taxi cab commissions (Foroohar). In addition to being a fighter, Kalanick is a visionary, his idea: “transportation as ubiquitous and reliable as running water, everywhere, for everyone. And as part of that vision, he expects to change the way cities operate” (Foroohar). The best city to analyze regarding regulatory arrested development and Kalanick’s progressive vision is New York City. In an effort to keep car traffic low, the taxi authorities prevented the number of taxi medallions from increasing. A driver had to purchase or rent a medallion in order to drive a cab. This rule has been in existence for over 20 years (Foroohar). Medallion prices were close to one million dollars, who could afford it? Uber changed the landscape. The company waged regulatory battles with New York City and other cities in which it launched. Now, the medallion prices have plummeted, leaving the people who bought medallions with assets that were in decline. Many simply made the switch and began working for Uber.

Uber gets assistance from political lobbyists. In Sacramento, California, Uber’s home state, the company spends more money on lobbyists than Bank of America, Wells Fargo or Wal-Mart (Kirkham and Lien). The company invests in lobbyist because it is facing two new regulatory threats, legislation to change the designation of its drivers from independent contractors to employees and a state level solicitation requiring that it provide information on every Uber ride. Treating its contractors as employees would create extensive new costs in addition to creating more work and regulatory restrictions on the company. There is also the possibility that such a change could impact the company’s flabbergasting valuation (Kirkham and Lien). If the company were forced to turn over its data, it might face new and creative regulatory challenges, such as providing accommodations for those with disabilities, providing duty in underserviced, poorer communities, hour issues for its workers and traffic violation issues.

Uber’s strategy is sheer genius. Its playbook reads like this:  discover new markets and enter them in a hail of glory, taking the new city by storm; create a love relationship with the drivers who appreciate the new work structure and freedom to make money at will; create an additional love relationship with its customers who are thrilled by being able to get a ride at a moment’s notice, inexpensively and with ease; merge the two constituencies, drivers who have their own business, and customers who are blown away by the amazing service, to fight against its competitors and the regulatory commissions (Kirkham and Lien). Their self-description, that they are a technology company, not a taxi company has been a consistent theme in their evolution over the years. They merely make it easy for drivers to hook up with paying customers, consequently the old guard methodologies are irrelevant. Legislators (likely users of Uber themselves) are not lost on the tremendous popularity of the company with its constituency, in fact, customers and drivers are the constituency of the politicians, as well. Many lawmakers understand the need to find a way to work with new world advances in an outdated and often irrelevant regulatory environment. There are clearly two camps, those who feel that ride-hailing vehicles should be treated differently, and those who feel that companies like Uber should receive additional, more stringent regulations. The concern for many politicians is that they are at risk of seeming out of touch with progressive opportunities (Kirkham and Lien).

Uber: Customer Excitement and Disappointments

Uber has released a new app with up front pricing attached (MacMillan 2). The new modification will provide more transparency to its customer. The surge pricing icon will no longer be available, but riders will be notified that the prices are higher, if at the time of their hailing request prices are in surge mode. Another new feature will allow riders to schedule rides in advance (MacMillan 2). The new service would allow a person that knows that they have a flight to catch in May, to schedule the ride in April. This would likely be a win/win for both drivers and riders. Riders would feel certain that their most important rides would be taken care of and drives who accept the ride would know that they have a nice fare coming their way and can be available for that fare. One can anticipate problems, for example, what if the person cancels their trip scheduled 30 days ago, and what if the driver gets sick and cannot take the trip, certainly Uber has some kinks that it will have to work out, but overall, it is a great move in the direction of fulfilling the desires of the company’s constituency. In Uber speak the company says: 

We get it. Sometimes you want to schedule a pickup in advance so you can rest assured an Uber will be available when you need it, especially if it’s for a 4am ride to the airport. With Scheduled Rides you can request your Uber 30 days to 30 minutes ahead of time and have the comfort of knowing your Uber will be there when it's time to head out ("Scheduled Rides for extra peace of mind").

Works Cited

Bajekal, Naina . "Uber Launches Helicopter Taxi Service at Cannes Film Festival." Time.com. Time, Inc. 13 May 2015. Web. 24 June 2016. <http://time.com/3856917/uber-helicopter-cannes/>.

Belcher, Cornell. "As a black man, it’s hard to catch a cab. And my research shows even white people know that." The Washington Post. Nash Holdings LLC. 23 July 2015. Web. 24 June 2016. <https://www.washingtonpost.com/posteverything/wp/2015/07/23/as-a-black-man-its-hard-to-catch-a-cab-research-shows-even-white-people-know-that/>.

Fehely, Devin. "Leaked Documents Show Some Uber Drivers Barely Making Ends Meet." CBS SF Bay Area. CBS Local Media. 23 June 2016. Web. 24 June 2016. <http://sanfrancisco.cbslocal.com/2016/06/23/leaked-documents-show-some-uber-drivers-barely-making-ends-meet/>.

Foroohar, Rana. "Person of the Year 2015: The Short List #6 Travis Kalanick." Time.com. Time, Inc. n. d. Web. 24 June 2016. <http://time.com/time-person-of-the-year-2015-runner-up-travis-kalanick/>.

Johnson, Holly. "How to Make Money Driving for Uber." The Simple Dollar. TheSimpleDollar.com. 9 June 2016. Web. 24 June 2016. <http://www.thesimpledollar.com/how-to-make-money-driving-for-uber/>.

Kirkham, Chris and Lien, Tracey. "Facing regulatory roadblocks, Uber ramps up its lobbying in California." Los Angeles Times. Tribune  Publishing. 26 July 2015. Web. 24 June 2016. <http://www.latimes.com/business/la-fi-uber-california-20150726-story.html>.

MacMillan, Douglas 1. "Uber Cuts Deals to Lower Car Costs." The Wall Street Journal. Dow Jones & Co.  25 November 2013. Web. 24 June 2016. <http://blogs.wsj.com/digits/2013/11/25/uber-cuts-deals-to-lower-car-costs/>.

MacMillan, Douglas 2. "Uber Customers Will Get Upfront Pricing in New App Version." The Wall Street Journal. Dow Jones & Co. 23 June 2016. Web. 24 June 2016. <http://www.wsj.com/articles/uber-customers-will-get-upfront-pricing-in-new-app-version-1466731781>.

Rao, Leena. "Uber has signed up thousands of businesses for rides." Fortune. Time, Inc. 2 September 2015. Web. 24 June 2016. <http://fortune.com/2015/09/02/uber-business-accounts-corporate/>.

"Scheduled Rides for extra peace of mind." Uber. Uber Technologies, Inc.  n. d. Web. 24 June 2016. <https://www.uber.com/info/scheduled-rides/>.

Swisher, Kara. "Man and Uber Man." Vanity Fair Hive. Conde Nast. 5 November 2014. Web. 24 June 2016. <http://www.vanityfair.com/news/2014/12/uber-travis-kalanick-controversy>.