Uber-tech disruption – a creative challenge

June 16, 2014 by
Filed under: Enterprise 

There are two emergent stories about a new mobile app that allows minicabs to charge on a meter-type basis (though whether it is actually a meter or not is disputed). The first story is one of consumer convenience, smart tech, and market disruption. The creative destructionists like this story. The second is of a traditional trade – the hackney carriage – operating in a highly regulated market suddenly facing aggressive less regulated competition. Whilst London taxi drivers are self-employed, they have a privileged position: the ability to stop anywhere, anytime in return for providing a metered taxi service. Market regulators like this story.

At the core of this dispute is something deeper. Technology such as Uber – the app in question – are disrupting our economy, our public realm and our institutions. Technological disruption tears through social norms, regulatory structures, and adjusts the balance of power between stakeholders. Taxis are the latest but retail, music, book selling, information provision, and the media are already deep into the process. Democracy, education and public services will be next – and soon.

Uber is a handy pantomime villain. It’s a global tech company backed by private equity. It is a tech-driven minicab firm: cue the standard assumptions about the safety of minicabs as expressed by Victoria Coren Mitchell in The Observer yesterday. The company has been portrayed as a cross between a potential sex offender, Wolf of Wall Street, and a modern day slave-owner. The weird thing is though that the people I have spoken to who have used it describe an excellent service, good vehicles, friendly drivers (you get reviewed by your customers), and a thoroughly positive experience. The app headed to the top of the download charts on the back of all the publicity following a taxi driver protest last week. The tech supply, the service model and the consumer demand mean that Uber, like Addison Lee and a whole host of other market disruptors, are likely to be with us for some time to come.

The choice is to try to hold back change – as the taxi drivers quite naturally want to do or shape it in a more broadly beneficial direction. What are the tools as a society that we could deploy in order to help ensure that disruptive change creates more winners? There are three main public interests that are at stake here: consumers (passengers) and workers (drivers) and that of Londoners as citizens of a city with a strong sense of identity of which the black cab is a component.

All of these challenges mean that Transport for London as the regulatory institution will need to be fleet of foot in searching for a way to mediate between these different interests. It may need new powers and to use its power in new ways. The risk for consumers is that tech firms with world-beating technology can capture market power. It seems convenient to begin with but then the costs – to privacy and price – accumulate over time as market power is aggregated. Proactive competition management in the interests of the consumers is essential.

As for the drivers, there are two interests here- the Uber drivers and the London cabbie. The risk to the London cabbie is that their trade and income are competed away. The risk for Uber drivers is poor pay and working conditions, eg long or unsociable hours). If Uber and other market entrants have a model based on lower costs and lower standards then there should be intervention to ensure that their drivers are paid properly, the vehicles are of a certain standard, and safety systems are adequate (this is not to imply that they are not currently). We need intervention to ensure that competition is fair. And remember, wages that are paid in London are not repatriated and they are subject to taxation. There is a broader issue of tax avoidance which needs addressing at a national level.

Finally, there is a question of London’s identity. The tech-driven market change will not eliminate all the black cabs but it will diminish their market share. The black cab is integral to London’s identity but Transport for London needs to consider what this means in practical terms. There are many interventions that TfL can and does take (rightly) to preserve the black cab’s status. These need to be kept under constant review. What is the density of black cab provision needed to be meaningful in London? The emergence of apps such as Hailo should also help preserve this status. Technology can and does fight back.

The big point here is not about the future of taxis, however. It is about the changes that will be driven by tech, new organisational models, and market making. The question for TfL and many other public and regulatory bodies, commercial organisations, and for us all as citizens, is how we can better mediate between interests. How can we reform and create new institutions to ensure that power is distributed and our common interests are safeguarded?

The costs of holding back this tide are too great. But a failure to creatively adapt our institutions to rapid and disruptive change is equally foolhardy. We are faced with creative technologies and creative businesses. By ensuring that we have creative institutions too we can maximise the good and minimise the harm from this change.

Comments

  • George McCarthy

    Black taxi’s aren’t about ‘change’, is all about ‘protectionism’! Here in Liverpool, a black cab plate can set you back £20,000, then the price of the cab on top. This is all down to stop anywhere as opposed to the private hire, that have to be pre ‘booked’ to be insured.
    They are afraid of not being able to recoup this outlay, before being fully over-ran!

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