Friday, May 13, 2016

Uber and Lyft in Austin: Have We Seen the Sharing Economy’s Peak?

Over the past year, as I wrote last month, there has been a backlash against the two largest areas of the sharing economy, namely room rentals, mainly provided by Airbnb, and car rides from Lyft and Uber.  Some cities, such as Barcelona and Berlin, will not tolerate Airbnb rentals at all, and others, such as San Francisco and Santa Monica, now limit and regulate them to the point where their supply is much reduced.  Even more places have contested these unlicensed taxi services, and some, including Spain, Romania, and the city of New Delhi, have banned them altogether.  In April, Uber agreed to pay up to $100 million to settle a class-action lawsuit about the company’s questionable-at-best categorizing of drivers as independent contractors; Lyft settled a similar complaint for $27 million earlier this week.  Only three days ago, the 35,000 New York City Uber workers formed a group described in the New York Times as “short of a union,” the Independent Drivers Guild, giving them a formal say in much of what their employer does.    

Last weekend, though, saw the clearest and most publicized American defeat for the unlicensed taxi companies.  Austin, Texas had a Saturday referendum proposing that Uber and Lyft be exempt from the city’s current cab-company regulations, including fingerprinting drivers for background checks.  The two firms spent $8 million toward convincing people to vote for the measure, which did not succeed, as 56 percent of Austinites voted to regulate all taxi providers equally.  Uber and Lyft responded by saying they would no longer offer their services in that city, effective almost immediately.

Austin is large, with a 1.25 million metropolitan population, and is hardly known as anti-technology, with 51,000-student University of Texas and as much connected private research and development as one might expect.  Views there on taxi regulations have no reason to be extreme.  That is why, then, that many more cities will follow.  They will not allow these companies to, as two Austin commentators put it, “arrogantly confuse a convenience for a few as a necessity for the many” and try to “take out city government” as if it were only another competing business.  The trend will probably move on to unregulated hotel rooms, which after all disturb local residents rather more than do unfingerprinted cabdrivers.  

So the two largest ride-sharing companies can’t tolerate being treated the same as those successfully offering taxis for decades?  That is telling.  I wrote last March that “the income achieved by Uber, similar Lyft, and room-renting facilitator Airbnb service providers is inflated by a temporary lack of regulation,” and predicted an end to the flowering of such companies by 2019 or earlier.  Indeed, the Austin outcome and the company’s reaction show that, despite estimated values as high as $62.5 billion for Uber, these businesses are remarkably fragile and transitory.

Not all what these companies are doing, though, is endangered.  Lyft has joined forces with General Motors on driverless taxis, which, given the state of and effort going into that technology, are almost certain to become the norm within 20 years or so.  Uber would do well to move in the same direction.  In the meantime, though, the idea that anyone can provide taxi or hotel services in the United States without meeting legal standards has, as of Saturday, become obsolescent. 

As for jobs in this sharing-economy center, they are still there.  Anyone wanting to make money doing these things is welcome to try, but they would be – and many already have been – fools for not properly assessing what it really costs them.  The same goes for opportunities sharing other resources, though none have emerged as being as widespread as Uber or Airbnb.  If it’s worthwhile to you, do it – but don’t count on it lasting for long.             

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