Uber's Story: Speed Bumps and All

Convershaken Staff
January 4, 2016

In less than seven years, Uber has grown from a couple of cars in San Francisco to enabling 3 million rides a day across 66 countries. A recent profile of 39-year-old founder and chief executive Travis Kalanick in Time's Person of the Year issue chronicles the rise of the ride-hailing app.

Kalanick was born in Los Angeles and studied engineering at UCLA. In true Silicon Valley fashion, he dropped out to found his first company: Scour, a file-sharing service similar to Napster. However, a $250m lawsuit soon forced the business into bankruptcy. Kalanick recovered to launch Red Swoosh, another file-sharing technology company that counted among its customers the same corporations that had driven Scour under. He sold it for $18.7m, despite having just eight employees.

The next stop was Uber, which connects independent drivers with passengers through a smartphone app. The company recently completed its billionth ride and enlists more than 1.1m 'active' drivers, or those who have offered at least one trip in the past week. Its latest valuation was $62.5bn - not far off Volskwagen’s market cap of about $69bn. Asked about his motivation, Kalanick said, “What drives me is a hard problem that hasn’t been solved, that has a really interesting and impactful solution."

As a pioneer of the fast-growing “gig economy” - where people make money from their cars, spare rooms, skills and anything else they can offer - Uber allows drivers to be their own bosses and work their own hours. Moreover, Kalanick claims that rather than replacing full-time work, Uber bolsters stagnant wages: around half of its drivers work no more than 10 hours a week. 

But Uber's ride to the top has been far from smooth. As the company considers its drivers to be independent contractors rather than employees, it doesn't offer them workplace protections, health insurance or a pension. Many disapprove of the practice, as it opens the door to exploitation of workers. Similarly, drivers can be booted if they cancel fares and there's limited transparency regarding their cut from each trip, giving most of the control to Uber.

Kalanick has also ruled out perks such as free massages and subsidised MBAs for his staff as he believes they're typically offered by companies that are too big for employees to learn or be inspired. He has also demurred from promising shares to drivers if Uber goes public, as that would risk acknowledging them as employees. And he remains against tipping, which he claims is mostly used to supplement the wages of underpaid employees.

Uber has also sparked outrage over its 'surge pricing': fares soar when there's high demand, ostensibly to entice more drivers onto the road. Indeed, customers in Miami on New Year's Eve in 2015 faced multiples of 10 times the normal rate. Moreover, several drivers have been accused of sexual assault in India, shining a spotlight on its vetting procedures. And talk-show host Stephen Colbert recently poked holes in the company's commitment to job creation: Uber is currently researching self-driving cars that would render its drivers obsolete.

 

Perhaps the biggest criticism of Uber is its impact on existing cab and taxi services. In New York City, the rise of Uber and competitor Lyft has seen the price of taxi medallions - which are required to operate a taxi in the city - plummet from over $1m to an estimated $800,000. The number of medallions had stayed roughly flat for 20 years, even as the city's population grew sharply. A recent Planet Money podcast revisited the story of the Taxi King, who has run into serious financial troubles since his collection of medallions slumped in value.

In 2014, likely in response to the growing scrutiny, Uber hired David Plouffe - the manager of Barack Obama's presidential campaign in 2008 - to head up its communications and political work. Since his appointment, the company has attracted better lobbyists, benefited from supportive academic research and won support from organisations such as Mothers Against Drunk Driving.

When we've spoken to Uber drivers, they have expressed satisfaction and heaped praise on the service. Several estimated that they could make £200 during an 8-hour shift on the weekend, although one driver lamented that mounting competition had reduced that figure to below £150. Others lauded the low cost, convenience and safety for customers: their card details are stored in the app, meaning they don't have to carry cash, and they can view on their smartphones - and send to friends - a picture of their driver's face and licence plate number. The 'five star' system, which allows drivers and passengers to rate one another, was also lauded for discouraging bad behaviour. And Uber's GPS software and customer service also won approval.

However, our bad experiences include a driver attempting a drop-off in the middle of a junction, miles away from the destination, and eventually giving up and stopping a few blocks away. Moreover, a friend has reported Uber drivers idling a few minutes away in a bid to have passengers cancel their rides and be charged. Fortunately, a phone call tends to resolve that situation as Uber records all calls.

Uber continues to experiment: it partnered with a helicopter company to offer chopper rides from Dubai to Abu Dhabi during the Grand Prix in November 2015. It has also branched out into food delivery, introduced a car-pooling option and is testing a bus-like service that picks up several riders from a certain point. Meanwhile, Kalanick is already working on his next disruptive idea, which could centre on real estate.

Read the full Time feature here.