Pixel Envy

Written by Nick Heer.

Uber’s Path of Destruction

Hubert Horan, American Affairs Journal:

Above all, Uber argued that its business model and technology were so innovative that it had created an entirely new industry (“ridesharing”) based on entirely new business concepts (the “sharing economy”). It insisted that it was a “tech company” selling sophisticated software, and could not possibly be compared to taxi companies. In fact, however, Uber carries people from point A to point B, just like taxis have for a hundred years. The “tech company” claim was really an attempt to get people to ignore its huge losses, since tech companies like Facebook had quickly grown into profitability. The “software” claim was designed to justify preventing its drivers from getting the labor law protections employees are entitled to, based on the argument that they were totally independent entrepreneurs who had freely chosen to purchase Uber’s superi or software products. Furthermore, nothing in Uber’s business mod el is actually being shared. The only meaningful economic dis tinction between “taxis” and “ridesharing” is that the latter avoids regulations that traditional taxis must still obey and depends on billions in predatory investor subsidies.

Uber’s claim that its growth resulted from customers freely choosing its superior service in competitive markets is fundamentally false. Competitive markets use price and profit signals to help allocate resources to more efficient uses. Uber grew because its years of billion-dollar subsidies totally distorted those signals, and allowed it to drive more efficient producers out of business.

About a year and a half ago, I linked to a couple of pieces arguing that Uber’s most impressive revolutionary gesture would be if the company functioned as a long-term business. They have lost — and I’m going to write this out in full and italicize it — fourteen billion dollars in the last four years. Horan’s analysis of Uber’s performance to date is second-to-none, and he’s reasonably skeptical of attempts to distract from the company’s mismanagement and losses through the invocation of autonomous vehicles.