Is Uber Failing? The downfall of the gig economy is about more than shoddy business models

Is Uber Failing? The downfall of the gig economy is about more than shoddy business models. By Declan Leary.

Any urbanite is likely to have noticed drastic changes in the service provided by Uber recently: a ride that might have been $10 with a 3 minute wait last year is now $20, and you’ll be lucky if the car gets to you in less than a quarter-hour. The change has been noted nationwide.

It wasn’t that long ago that Uber seemed like the next big thing; it was even more recently that its IPO became the second biggest in U.S. history (trailing only Facebook). For workers, it promised a liberation from the strictures of traditional employment. For consumers, it offered the democratization of the chauffeur experience: an easy, affordable way to get around without the commonality of public transit or the dinginess of cabs. And for a while, to a great many people, it seemed like it was going to deliver.

Now, even those typically on the side of big, progressive business, such as Bloomberg columnist and Substack blogger Noah Smith, are ready to call time of death on the rideshare experiment. In a blog post this week on the gig economy’s underwhelming showing — after Uber’s apparent early success left many speculating that its model could spread to any number of other sectors — Smith asks, “Why has the gig economy been a disappointment?” His answer: “Maybe because traditional companies still have a good reason to exist.” …

Gig economy platforms are failing because they can’t minimize transaction costs the way traditional companies can. …

By all appearances, Uber is going to fail socially long before it fails financially. This is not a failure of efficiency — Uber has been woefully inefficient from the outset, and that innate inefficiency is accounted for in the company’s business model and grand strategy … The strategy essentially boils down to “growth at all costs”: relying on regular injections of investor capital combined with predatory business practices, Uber’s intention has always been to achieve market dominance in urban transportation and then to use its artificially achieved market power (obtained at a continuous loss) to finally turn a profit. The problem Uber now faces is deceptively simple: nobody wants to be a part of that.

The company’s core problems …  all boil down to a shortage of drivers. What a surprise that laborers don’t want to collect poverty wages from a company that assumes none of the risk and none of the responsibility of their business and offers nothing meaningful in return to either the laborers themselves or their communities at large. …

If you can’t provide health care for your workers, or you can’t effectively enforce standards on behalf of your consumers, then sooner or later you’re going to lose both your labor force and your customer base.

The golden years of Uber service are over. They were subsidized by shareholders and speculators on the one hand, and underpaid drivers on the other. Eventually the true costs became apparent, and it looks like Uber is not sustainable at anything like the discounts of years gone by.