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All Uber, Or Uber Alles?

Uber street advertisement (detail)
photo by Jason Newport

I don’t use Uber, but my daughters do - regularly. The younger one, a journalist, often makes her 6 a.m. workday start time by climbing into an Uber car in Brooklyn at around 5:30.

Do I want someone in authority to know something about the person driving her car? You bet I do. And do I want that car to be insured 24/7? Likewise.

This doesn’t make me an old fogey, at least by New York City taxi standards. I’m very much in favor of deregulating the business, a process usually called “disruption” these days. Many cities could stand to have their current taxi systems disrupted.

But not all disruption is equally meritorious. The Mafia does business in a disruptive manner too, but I won’t invest in it if it ever decides to go public.

A lot of high-profile startups these days are taking illegal shortcuts in the name of “disruption.” Airbnb will turn the apartment next door to yours into a hotel - a hotel that doesn't comply with zoning, safety, consumer protection or tax laws, that is. (Do you think most Airbnb apartments have a sign on the door pointing the way to the fire exits? I don’t.) Not only do such arrangements pose hazards to customers, they compete unfairly with businesses that do comply with the law. And the company has faced a host of legal challenges in various cities in consequence. Airbnb will need to either evolve to address these concerns, or it will eventually fold.

Uber, along with its competitors like Lyft, will face a similar challenge in the next few years. Those companies’ success has demonstrated there is a real demand for their services. But as the law begins to catch up, Uber will have to prove that it can meet that demand within the legal framework of the areas where it operates.

Broward County, Florida, struck a sensible balance this spring. The county passed an ordinance allowing Uber to operate as many cars as it pleases, and to charge any fares it wants, in contrast to the regular taxicabs and their regulated meters. But the county also required registration, fingerprinting and background checks for Uber drivers, and 24/7 insurance for their vehicles. It sounds reasonable to me.

Uber disagrees, however, which goes to show how exploitive Uber’s current business model is. The company has threatened to leave Broward County if the laws are not changed. It has already pulled out of locations including San Antonio, Anchorage, and Portland, Oregon due to disputes over its business operation.

In a similar vein, California regulators sided with an Uber driver who said she was really an employee, though the company considered her, like all of its drivers, an independent contractor. Though the ruling only affects the driver in question, it may open the door to other legal complaints by drivers who feel the company is treating them unfairly.

If Uber merely acted as an app-shaped bulletin board for hailing cars, its position might have merit. But since the company also collects all the customer fares (via cellphones), takes its cut and remits payment to the drivers, it acts no differently than the Yellow Cab company I use in Fort Lauderdale when I swipe my card through its in-car machine. While it’s understandable that Uber might prefer to classify its drivers as independent contractors, it cannot simply choose to do so while ignoring the reality of the way in which it requires its workers to operate.

The differences between Uber and traditional cabs are narrowing. I don’t have to wait on the street or call a dispatcher when I want a Yellow Cab in Fort Lauderdale. I can hail a car through an app - just like Uber. But my Yellow Cab will have a registered driver and 24/7 insurance. The only distinction I can see is in the pricing, and I don’t think that makes a difference in determining the driver’s employment status.

I want Uber and its ilk to succeed. I’m not afraid of disruption. But I’m not in favor of cheating or anarchy, either. A business can operate outside the law if it chooses - but not indefinitely. Eventually the law catches up.

So it’s going to boil down to a choice for the would-be disrupters. Either they find ways to bring themselves within a legal framework, or they will be disrupted themselves - by the authorities. It may be Uber Alles, or it might just be All Uber.

Edited to Add: This post was drafted late last week, and so did not originally note that two of Uber's senior executives were taken into custody in Paris, though later released, as part of a French government probe into the company. The Paris prosecutor's office announced on Tuesday that Uber France and the two executives have been ordered to go to trial in late September.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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