Can Uber fail?
Any corporation can fail. Companies with valuations far greater than Uber’s $18.2 billion have blinked out of existence. But more likely at this point is that, at least in terms of transportation infrastructure, we’re looking at what was at first a sea change of some significance in Los Angeles, San Francisco, and New York turning into a global paradigm shift. At the end of 2013, New York’s Kevin Roose laid out an argument for why Uber could soon outpace Facebook. Eight months later, his prediction looks prescient.
Uber’s Career Listings page offers a clear-eyed glimpse of a business with no concept of borders to its expansion, both geographically and theoretically. It has openings for managerial, entry-level, and government-liaison employees that span all six of the world’s developed continents. This is in addition to its already established presence in 160 cities internationally. And with the Verge’s revelation of a nuanced, cutthroat, and comprehensive battle plan to strike down Lyft, its biggest perceived competitor, Uber looks more and more like the titan its valuation pegs it as, rather than just another quirky and innovative start-up.
"My hunch is that Uber’s going to be least successful in places where there's already significant informal systems, like Rio de Janeiro, São Paulo, or cities in India, where there's a significant informal economy that is already providing some of that flexibility."
Expansion into physical cities involves more than theory and seed funding, though. Every city has its own demands, challenges, and idiosyncrasies, all of which play a role in how its transportation infrastructure has developed. Yet Uber offers the possibility of the first global transportation tool—a uniform way (through the app) to move within space no matter where you are, without any need to understand or comprehend your individual location.
“There’s always been an informal economy of ridesharing, in other parts of the world especially,” says Mark Hamin, the director of the Master of Regional Planning Program at the University of Massachusetts-Amherst. “Uber isn't at that level of informality, but it's much more flexible and much less regulated than the transportation infrastructure we’re used to here.”
This is part of why Uber feels like such a balm in the most urban parts of the United States. For me, living in Los Angeles, the service’s appeal doesn’t just come from the fact that I can summon a car using an app on my phone: it’s more the reliability, consistency, accessibility, and speed, all virtues that are hard to find in the city’s taxi companies. As a New York expat, it feels like having the ubiquity of New York City’s yellow-cab system with you in any city you visit.
This is also what could make Uber far less appealing and remarkable in other parts of the world. “My hunch is that Uber’s going to be least successful in places where there's already significant informal systems,” Hamin says, “like Rio de Janeiro, São Paulo, or cities in India, where there's a significant informal economy that is already providing some of that flexibility.”
INDIA IS UBER'S SECOND-BIGGEST market behind the United States in terms of number of cities established, and it’s also, per Hamin’s suggestion, becoming one of the most resistant to the company’s intrusion. Urged on by the strong network of local taxi operators, the Reserve Bank of India has dictated that Uber must comply with a new mandate on credit-card transactions by October 31 or cease operations. Even though the huge levels of demand that exist in India have allowed Uber a foothold despite the heavy presence of local transportation options, that heavy presence has also meant a greater opponent to its intrusion.*
This particular scenario encompasses both the first and second types of friction Hamin sees Uber running into internationally: resistance from local drivers, and the problematic involvement of government regulators.
“I think there's a recognition that services like Uber are meeting a need that isn't currently being met,” Hamin says. “The flip side of that is I think Uber and similar services have been strongly advocating against being subjected to what they think of as excessive regulation. But by the same token, they see a better business environment if they can interact more cooperatively or symbiotically with existing transportation infrastructure.”
Uber’s greatest virtue so far has been its operational fluidity: no matter the type of urban environment it is trying to penetrate—auto-congested or not, subway-equipped or -unequipped, bike-friendly or -repellent—it can adapt by virtue of utilizing local drivers, who are already familiar with the transportation infrastructure. That’s why, even though a city like Rio might have less use for Uber than, say, Austin, Texas, Uber can still seed itself there and hope to grow, fighting individual battles with local taxi operators like the macro one it’s waging against Lyft. I once rode in an L.A. Uber with a driver who insisted that he was the target of an Armenian taxi mob. Claiming he’d recently been robbed at gunpoint, he’d rigged his car up with cameras to monitor everything inside and out, and he showed me his can of pepper spray. If the stories he was telling me were true, Uber’s getting plenty of practice at facing down competitors.
THE LACK OF PRACTICAL and tangible obstacles to Uber means that the major hurdle left to clear is regulation. This is why Uber needs so many new employees in so many different locations: every new city means a new crop of regulations, and regulators, to persuade and appease. When a metropolis like Berlin can ban the service, you get some sense of the potential problems. And it isn’t just an issue of the company’s own welfare.
“Uber's significance in my view is that Uber has built its success on a model that is part of a broader shift away from regulation and protections, for workers and consumers alike,” Rachel Brahinsky, an assistant professor and the faculty director of the graduate program in Urban Affairs at the University of San Francisco, says in an email. “This Uber business model pushes the risk onto the workers and consumers, rather than the company (i.e. insurance in case of accidents, etc.). This is not unlike the rising model in other fields, where temporary and contingent labor structures have become dominant.”
Rather than affect the physical infrastructure of cities, then, Uber is causing its reverberations among the service workers and customers who utilize its infrastructure, redistributing them from government-controlled services and into a private, and privately managed, economy. As Uber continues to expand throughout the world, this could be its greatest challenge: convincing bureaucrats as well as potential employees that it does more good than harm. And if persuasion isn’t enough, the company will have to decide whether its willing to concede certain territory—or if the tools of capitalism provide a more appealing alternative.
*UPDATE — September 15, 2014: We originally wrote that the Royal Bank of India has dictated that Uber comply with a new mandate on credit-card transactions. It is the Reserve Bank of India, not the Royal Bank of India.