Uber May Not Survive Long Term, Speaker Warns

Martin Romjue
Posted on May 19, 2017
Author and speaker Steven Hill (L) is interviewed by Dav El / BostonCoach CEO Scott Solombrino in front of a packed ballroom on Tuesday, March 17, 2017 during the International LCT Show in Las Vegas (LCT photo)

Author and speaker Steven Hill (L) is interviewed by Dav El / BostonCoach CEO Scott Solombrino in front of a packed ballroom on Tuesday, March 17, 2017 during the International LCT Show in Las Vegas (LCT photo)

LAS VEGAS — Uber runs on a money-losing business model and a mudslide of unethical behavior that could eventually grind it down, an Uber critic and author told attendees March 14.

“Uber will be gone in three to five years, but not rideshare technology,” said Steven Hill, the author of “Raw Deal: How The “Uber Economy” And Runaway Capitalism Are Screwing American Workers” and a featured speaker at the Show.

Upon hearing this, a packed room full of attendees applauded. “The company is a ticking time bomb,” said Hill, who was interviewed on stage by Dav El / BostonCoach CEO Scott Solombrino. “They’re not profitable and they subsidize rides.”

Misadventured Capital
Uber is based on a futuristic vision for the transportation industry that draws massive sums of venture capital, Hill said. But they are losing far more money than they are making, such as a $2 billion loss pursuing the Chinese market.

“They wanted to be a global empire,” he said. “Well, they lost big time in China. They’re losing in India. The main company in India, Ola, has 10 times as many cities as Uber. But here in the U.S., they’re not even succeeding as being a taxi company or a black car company for the digital age because they’re subsidizing every ride. So every passenger who gets into an Uber car, they’re paying 40% of the cost of that ride. The other 60% is being subsidized by Uber investors.”

Such practices of “monopoly pricing” would be considered illegal in many other industries because it drives competitors out of business, Hill said. “In city after city, the taxi company businesses are declining, they’re getting smaller. Your industry is being hit big time by this.”

If Uber fails, Silicon Valley faces a disaster, Hill predicts. Subsidized by venture capital, Uber has become too big to fail, so it is propped up. “Seven out of 10 Silicon Valley startups fail and nine out of 10 never make any money. What’s happening with Uber, they are trying to keep that money stoked.” They’re doing several pivots, such as the complementary UberEATS and UberPool services. “Those are not going to stem the holes in the dike of the billions of dollars they are losing right now,” Hill said. “And the drivers don’t like it. The customers have given mixed reviews. Sometimes the burrito shows up, sometimes it doesn’t.”

Gig Wages
On a wider front, gig companies like Uber shred the social labor contract that has sustained America’s middle class in the post-World War II economy, Hill said. Full-time jobs provided health insurance, retirement, unemployment compensation, and workers’ comp, comprising a safety net.

“Well, that’s all being torn to shreds in the Uber economy because everyone is a contractor. You work part-time here, part-time there. You’ll stitch together your financial future through having a number of employers. The safety net was never set up for this.

“I liken it sometimes to Tom Brady as a quarterback. He only gets paid when he throws a touchdown pass. He doesn’t get paid for the other plays. He doesn’t get paid for training off season. He only gets paid when he’s on the field and throws a touchdown pass.”

Two Limo Solutions
Hill advised operators to “embrace algorithm. Get your app because customers really like it. They really see it as a value added benefit to being driven. And you can see the car, you know where it’s going, you can see when it’s getting close to showing up, and it’s a nice feature.”

He also urged operators to stress their high level of professionalism. Because Uber drivers don’t earn enough, often below minimum wage when overhead costs are factored in, the TNC burns through them at the rate of 50% a year, Hill said. With the mutual rating system, many are afraid to turn down unprofitable rides, and may take on rides because they feel intimidated by Uber.

Consumers would be encouraged to know about the industry’s good treatment of chauffeurs with pay and benefits, Hill said. “You guys should do an ad campaign showing your drivers: ‘This is a driver who put his daughter through college driving for my company.’ ‘This is a driver who put the down payment on a mortgage.’ These are middle class people driving for us. They have good jobs. This isn’t an Uber driver who lasts maybe a year and gets tired of putting up with the BS Uber has.”

Why The Big Fuss?
Hill compared the Uber-related conflicts of the U.S. with those in many European nations, whose governments seem to be clearer on how to define and regulate Uber. Uber has succeeded to a greater extent in the U.S. with its claim of being a technology company middleman between driver and rider.

“When taxi cabs put electronic meters into the car, did that make them a technology company because they have an electronic meter now? I mean, you’re providing the same service. It’s only here in the U.S. we’ve said, ‘What is this thing? Is it from Mars? Is it from Venus? How do we regulate this thing?’ Don’t overcomplicate it. They’re providing the same service. Regulate it like you guys are regulated. Here in the U.S. we have just colossally screwed this up, frankly, in terms of getting this right so the good of the app and the technology could be used to benefit the consumer.”  

“It is disturbing because you do see other countries getting this right and letting the power of this technology and the app being used in a constructive way. And here, instead, it’s destroying taxi companies, hurting your industry badly, and creating problems that don’t need to happen.”

Related Topics: gig economy, ILCT 2017, industry education, labor laws, Scott Solombrino, TNCs, Uber

Martin Romjue Editor
Comments ( 2 )
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  • Jay

     | about 3 years ago

    Great article. As a small owner/operator i totally agree Uber is not sustainable.

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