By Andrew Tate
It’s easy to forget in 2015 how novel the Internet was 20 years ago, or how novel smartphones were in 2007. Both altered the trajectory of the entire world economy, but they did more than that: they altered our way of life, slowly at first, then more quickly. Then, seemingly, too quickly. Too quickly for us to adapt quickly to them. Too quickly for our parents. Too quickly for our laws.
New ideas didn’t always hurtle at us with such speed. Not even in the Internet era. A decade passed between the founding of Yahoo! — the first major Internet portal and search engine, which started up in 1994 — and Facebook, which went live in 2004. In all those years, we didn’t even know that online social networking was something we should be missing.
YouTube, which for the millennial generation is as compelling a video medium as TV, marked 10 years in operation just last month. Lost in the fog of our memory are those years when videos were short, stuttering and blurry. It has taken a long time for programmers, thinkers and businesspeople to figure out how the power of the Web could be harnessed, that long for computer technology to be able to realize their visions.
Instagram, the photo-sharing social networking site that gained 200 million users between 2012 and 2014, is not yet 5 years old. Neither is Pinterest, which started up around the same time. These sites and apps have come to our lives relatively recently, but have quickly become part of the fabric of our lives. The rate of innovation continues to increase, and with it, our ability to adapt to each new thing has also been on the rise.
When Apple revealed the iPhone in 2007, and competitors like Samsung drafted in with competing products, a much more mature tech sector was ready to respond. At first, few were convinced that users would walk around in zombie fashion, browsing the Internet as they walked the streets. But within a year or two, the race was on — a race that will probably never end.
We’ll never wait decades for a game changer again. New websites and apps come on the market every year, every month, and many developers are setting themselves the goal not of making our life just a little better, but of changing it altogether. Thanks to the always increasing sophisitication of the pocket computers we carry around and call phones, such ambition is more realistic than ever.
Uber, an app-based transportation network, is a disruptive innovation that’s been in the news a lot lately, in Princeton and around the country. Uber is a car service that matches individual drivers with people needing a ride. Using the app, which can be downloaded for free, users can call up local drivers to take them to any local destination. They can even track Uber cars on their phones.
Ordinarily, if you wanted to get a cab from Princeton to Princeton Junction train station, a 12-minute ride, it would cost you $25. First you’ve got to find a cab. There is no central taxi number for the town, so you’d have to know the number for individual taxi drivers and hope someone answers, or you could chance your luck and call the Nassau Street taxi stand, and hope someone answers. Then an old sedan would pull up and take you slowly and sullenly to your destination. Hope you’ve got cash.
Nobody really questioned this though, right? That was how it always worked. Until Uber.
Now, you can grab your smartphone and, in a few clicks and a few minutes, a car you have chosen based on user feedback will be at your door, ready to take you to the train station for $10. Leave your wallet at home: the money will be seamlessly taken out of your bank account. Welcome to Uber, and the start of a whole new world.
Uber is as old as Instagram, although most people would be unlikely to realize it. It started out in 2010 as a San Francisco-only service, and has been expanding city by city across the country. The service is one of a new generation of companies known collectively as the ‘sharing economy’, the idea being that we can all share our own resources and make money at the same time, increasing efficiency (for all) and getting rich (for some) while doing it.
Uber does it with cars (along with rival services such as Lyft and Sidecar), Airbnb does it with homes and rooms, Instacart does it with shopping, and Taskrabbit does it with anything. Anyone can sign up not only to just use these services, but be a provider as well. Drive people around, rent out your home, do someone’s shopping, or pick up their dry cleaning—be a taxi, a hotel, a shopper, or a personal assistant. Sounds great.
But not everyone is ready to usher in this brave new world. In early January, the topic of Uber was brought up at a Princeton council meeting by the owner of Amigo Taxi, a local cab service. He didn’t mention the car service company by name, but instead called on the council to take action against ‘unlicensed taxis’ in the town.
Uber is seen by many as riding roughshod over local laws and regulations put in place to safeguard consumers, and taxi drivers don’t see why they have to play by the rules and Uber doesn’t. They want Princeton to follow the lead of states such as Nevada and cities such as Hoboken, where Uber can no longer operate.
But here’s the thing: Princeton can’t ban Uber, because Uber is already banned.
“Uber is illegal, according to borough ordinances and state laws,” says Jenny Crumiller, a Princeton councilwoman and member of the Taxi Ordinance Committee assigned to bring the borough’s licensing ordinances up-to-date after the consolidation of the borough and township. The company should not be operating a car service in the area without abiding by the local laws.
So how does Uber get away with it?
The answer: Because people are using it, and enjoying it, and telling their friends. Like the downloading of music that disrupted the economy in an earlier Internet era, labor sharing services are an opportunity too good to pass up for consumers, many of whom shrug off the legal implications.
“If you were to poll people in Princeton, the majority of cab users who have used both Uber and the local cab would probably prefer Uber,” says Steven Strauss, a visiting professor at Princeton University’s Woodrow Wilson School of Public & International Affairs. Uber offers a much better rider experience than cabs do, for numerous reasons. Quasi-monopolies such as the local taxi system in Princeton, mean cabs and drivers no longer have an incentive to make customer experience any better.
Additionally, Strauss says, “Uber takes what is normally a non-repeating transaction and turns it into a two-way rateable transaction.”
If you get into a cab in New York City, or even Princeton, the likelihood of you ever seeing that driver again, is small, therefore the incentive for the driver to leave you with a good impression is small. With Uber, you rate the driver, and he/she rates you. This means that there is a real incentive for Uber drivers (and Uber passengers) to be polite and helpful.
The other big thing is that Uber is cheaper. Uber’s concept of “surge-pricing,” where price goes up when demand rises, such as on holidays or during bad weather, has riled many, but for most trips, particularly in Princeton, you are going to be paying less in an Uber car than in a regular taxi.
Uber provides a popular service, but many are still uneasy about using this service or services such as Airbnb. Their disregard for local laws, regulations and ultimately companies and councils, annoys a lot of people. The company and its proponents call this a disruption, and say it is a good way to weed out archaic and byzantine regulations that hinder the economy.
It is also the reason Uber can make money: it doesn’t have to sign up to the restrictive licensing systems that taxi drivers do.
The same goes for Airbnb. There are plenty of listings renting out rooms and houses in the Princeton area, directly competing with local hotels and businesses. The places listed on Airbnb do not have to submit to the same safety regulations and fire codes as regular hotels and B&Bs, so they can charge far less.
Because they are not party to the archaic regulatory system, they can provide a service more in tune with what consumers want, and can adjust to demand fluctuations in the market. But those safety regulations and fire codes are there for a reason.
“There are important safety issues and convenience issues with Airbnb that tend to be dismissed too quickly,” Strauss says. Yet Uber and others have chosen to flout those laws.
In an article in the Huffington Post, Strauss said that while a lot of regulation can be seen as superfluous, some laws are still absolutely neccessary. Safety inspections on are as applicable to Uber as they are to taxi companies. Most Uber cars are newer than the town cars taxi companies use, but without specific safety standards you cannot know whether an Uber car is safe to drive.
Instead of providing some type of safety testing, Uber has pushed drivers to lease or buy new cars, at their own cost, and through Uber financing. Uber, et al, are gambling on the idea that with consumers on their side, states, cities and municipalities such as Princeton will choose not to fight back. They have been mostly proved right.
One city that has chosen to fight back is Hoboken. A crackdown on Uber in the city (the closet thing you can get to a ban on an already illegal service) means police in Hoboken will pull over any Uber car and the passenger will not be able to go any further, and the driver will be fined for driving an unlicensed taxi.
This is not something Princeton is keen to consider. Councilwoman Crumiller says that the Princeton Police are not about to start a crackdown on Uber and picking a fight with the company is a lose-lose situation for a town such as Princeton. Uber has already brought their legal heavyweights to bear on cities and towns around the country, and, as Strauss says, it is not a fight that residents really want the council to fight.
For Crumiller though, she feels these companies are keeping money for themselves that should really come into the local economy. “These services are good, but they are not sharing. The corporations make money, but the town doesn’t,” she said.
THE NEW ECONOMY
Importantly, Uber, Airbnb and others have just made what was already available easily accessible. Unlicensed taxis and subletting have been around since these laws were first enacted. Ubiquitous smartphone technology and apps have just significantly lowered the transaction costs of such businesses, allowing them almost limitless access to consumers for little outlay.
Rather than fight to ban companies such as Uber that are competing with them, taxi companies and other traditional providers finding themselves on the wrong end of this new economy should look at the innovations such apps have brought to the marketplace and take them on board. Easy payment systems, rating systems and even surge pricing can help older companies compete properly. They need a change in the regulations as much as Uber.
Another Princeton professor, Alan Krueger, has recently published a joint paper with Uber, looking at who signs up to drive for the company, and how well they do. His findings: Uber drivers are more highly educated and younger than taxi drivers.
They are also more likely to be women. He suggests that what is standing in the way of taxi drivers is also what is standing in the way of Uber. “States and municipalities can make it easier for people to become for-hire drivers. If someone with a driver’s license can drive their friend or a loved one to the airport, why can’t they drive someone who pays them for a ride to the airport?” Krueger said.
He also suggests that states and cities can have ulterior motives for increasing regulation. “One problem with traditional taxi regulation is that the regulation is done to raise fees for cities and airports and prevent entry, rather than improve service and safety for passengers,” he said.
Rather than running Uber out of town, as Hoboken has tried, the state and local municipalities in New Jersey would be better off looking at what they have done to tie the hands of the taxi industry and provide a level playing field for all.
SCARING THE HORSES
What is true, though, is that we have been here before, and we will be here again. Taxi regulations and licences have been around for almost 400 years, when the first licensing restrictions for horse-drawn carriages were introduced in London. In the industrial revolution, as mechanization changed production methods, riots occurred and machinery was smashed by workers suddenly out of a job.
When cars were first seen on the streets in the 19th century, horse-drawn carriage owners and locomotive companies lobbied governments for draconian speed limits and weight restrictions to stop the car getting the upper hand. Vermont went so far as to require a man waving a red flag to precede any large vehicles on the road, lest it scare the horses.
Scare stories about Uber are already prevalent in the media — dangerous drivers, bad insurance, crazy fares — the 21st century equivalent of scaring the horses. But even with all the bad press, Uber is incredibly popular and continues to grow.
Even those who are not happy with how Uber operates like the concept.
“The Uber app is really good. But I resent them calling themselves the ‘sharing economy,’” Crumiller said.
Beyond the problems with their treatment of local laws, a significant problem with the sharing economy is that it is a bit of a misnomer. “Sharing” sounds like we are all helping each other out, but the main thing that gets shared with these jobs, critics say, is risk.
For example, it is entirely up to drivers, homeowners, or any other type of micro-entrepreneurs to make the money, while the parent company sits back and creams their profit off the top. There are no guarantees that work will be there to be done, no one to limit competition. The jobs come with no stability, and often require a lot of work of workers to build a portfolio and market themselves.
The main bonus for individuals participating in this new economy is flexibility. Krueger’s Uber study cites the ability to smooth out income fluctuations as a reason people signed up for Uber, and flexibility is something that has been sorely missing from the U.S. job market.
“The labor force participation rate of women peaked in the U.S. around 2000, in part because the workplace does not offer enough flexibility.” says Krueger. “I hope that in the future employers provide workers more flexibility to take care of their children and aging parents.”
A DRIVERLESS FUTURE
One thing is for sure, Uber has the ability to dramatically change the shape of how cars and transport are used, not only in large cities, but out here in the suburbs and small towns such as Princeton.
In Princeton, most people need a car. Buses run infrequently and in few places, and as we have seen, cabs are expensive. Households normally need at least one car to get around, and larger families may have two, three or four cars so everyone can get to work, school, practice, and shops.
But ride-sharing could make travelling around suburban areas far more efficient. For families that run more than one car, in particular, the extra car or cars spend most of their time obsolete (this is also an issue with taxis in the area – they have significant ‘dead time’ where they are just waiting around).
Choosing to use an inexpensive car-sharing service such as Uber could be far more economical than paying for a car, and the requisite insurance, to sit on the driveway.
Soon though, even the driver may be obsolete. Uber is already starting to look into driverless technology, following Google down the road of cars that can get from A to B without any human input. Uber drivers may replace taxi drivers, but they in turn may be replaced by lasers, GPS and machine learning algorithms.
In fact, the urban landscape of an area such as Princeton may look dramatically different come 2030, as might the economy. A driverless Uber of 15 years hence may be all you need to take you to work — as long as a robot hasn’t replaced you at your job.
Think: a car turns up outside your home when you request it, and take you wherever you need to go, dropping you off and picking up the next passenger, the whole ballet choreographed by algorithms that assure maximum efficiency – no ‘dead time’, no sullen drivers, no missed pick-ups.
Even if that is not the exact right picture of the future, we can be sure that the future holds great uncertainty in terms of innovation. The dawn of the Internet, viewed from the future, looks now like the end of a dark age. Most of us probably don’t even remember the people we were before we had smartphones.
Will we look back on each new technology and service that we came to adopt, and wonder why we ever resisted them? And will we feel, on the inevitable day down the road when Uber is made obsolete by a company with an even grander vision, that Uber should be protected from the encroachment of new competition, because by then it or something like it will be what we have come to know?
The apps that change our lives these days don’t just bring us free videos and cheap tunes. They make our lives easier and more efficient. There are concerns, of course. We have yet to see what the true impact of the sharing economy will be. Could it mean the end of regular employment for all? Everyone fighting for scraps as rich corporations count their skim?
Uber and the other services will surely need to be calibrated to provide the fairest opportunities for businesses and for consumers. They are flawed each in their own ways, just as the Internet was, just as early model smartphones were.
But there’s little debate that the question we’re asking when it comes to each new life changer is when, not if, these new features will be absorbed into the zeitgeist. Which is why towns like Princeton, Hoboken, Austin and San Francisco are, more often than not, looking for ways to work with, and not against, the apps of the future.