in regards to the articles about uber you reblogged recently is there anyway you could explain in laymen's terms the exploitative nature of ubers business model??? only because i have a small amount of knowledge about economics and a lot of the language used in the articles went right over my head
they were… very information-dense, yeah, especially the first one. i’ll try to give a quick run-down of the articles here (here’s the original post, for anyone reading this)
uber’s business model isn’t ‘exploitative’ in a different way from any other capitalist company - they take the surplus labor of their employees and extract it as profit. regular old taxi services do the same thing. uber may be more ‘exploitative’ in that they treat their drivers worse, but that analysis isn’t the point of the article
instead, the author sets out to show that uber just isn’t profitable, nor can it ever - through ‘normal’ capitalist competition - become more profitable than any ordinary taxi service. under ‘normal’ circumstances there are two ways to out-compete the companies that make the same product as you: you can make the same product much more cheaply and efficiently, or you can make a much better version of the product for the same price. either way, everyone starts buying the product from you instead of your competitors, and your profits become much higher than theirs. eventually, your competitors either adopt your methods or go out of business
the problem is that there’s no way to do things more cheaply or efficiently (or better for the same price) than taxi services already do them. amazon successfully out-competed brick-and-mortar bookstores through logistics - through establishing a massive chain of warehouses and an extremely efficient method of finding and shipping products that, when you’re shipping as many books as amazon does, make each book much cheaper to ship to the customer and therefore much cheaper to buy. this is called an economy of scale - it costs a lot less per book to store ten thousand books in a warehouse than it does to store a single book in a warehouse
taxi services have no economy of scale. 85% of the costs associated with taxi services - this is the figure the author cites in the articles - are things like drivers’ wages and gasoline. these don’t work the same as warehousing: you pay each driver the same whether you have one driver or a thousand drivers; you pay the same for each gallon of gasoline whether you’re buying one gallon of gasoline or a thousand gallons of gasoline (at least if you’re not buying it in bulk, which taxi drivers don’t). and taxi services operate on very low profit margins. frankly, if there were a way to improve taxi services enough to get a real competitive advantage, someone besides uber would have done it already
‘but uber is so much cheaper than a normal taxi!’ that’s true. and the reason it’s cheap isn’t because uber pays their drivers less (although they do, by shifting a lot of the cost for things like vehicle maintenance and insurance onto the drivers) - it’s because uber is losing two billion dollars a year. your uber ride is so cheap because uber is taking some of the 13 billion dollars that people have invested for them to grow the company and is paying for about half of your ride
why would they do that? well, the author argues that uber’s executives (and venture capitalists) know uber will never make money under ‘normal’ circumstances. instead, what they’re aiming to do is drive every other taxi service out of business and establish a monopoly on taxi services, in as many cities as possible. once they have a monopoly, they’ll be able to raise prices to whatever they want (and pay drivers whatever they want), and extract profits that way
the average cost of producing a taxi ride will be the exact same as it is today, or was five years ago - unlike the average cost of selling someone a book, which has gone way down since amazon showed up - but uber will at least be able to make money. you’ll probably be paying a lot more for an uber than you do now (at least four times as much, by the author’s calculations), but hey, that’s capitalism
basically uber is gambling that if they spend 2 billion dollars a year they’ll be able to become the Only Existing Taxi Business before they run out of money. it could work, especially now that they’re pushing - with the help of google - sneakier tactics like city-funded ride vouchers designed to increase people’s reliance on uber and undercut both taxi services and public transit at the same time
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