I fluffed my lines on a recent BBC Newsnight segment on Uber. As the discussion was wrapping up, I warned that the uberisation of the economy – the ambition to corral the entire cash flow of whole sectors of the global economy into the pockets of a few – is utopian.
I said all this in response to Ms Julie Meyer’s assertion that, and I quote (11.23 minutes into the show):
The world is being driven by networks…and they’re platforms…That’s the future, we can’t stop that from happening. They’re enabling people with excess capacity to leverage their freedom, and that excess capacity, in order to make money. There’s an ability to earn money, to choose to optimise for the platform – (either) In California, or for the driver’s …You can choose to optimise, there’s an optimisation model. To optimise for the platform in California, to optimise for blah blah company in France, or for the driver’s salary. Making more money is an optimisation play!
Uber is the fastest growing company in the history of the planet, in the history of humanity. They have enabled people to become drivers …They have enabled the future infrastructure of the transportation industry. What’s fair is that they are determining the economics of this three-way split between the driver and the consumer and the platform…
..…What is a fact what is interesting as a social trend…as a macro trend, we’re going to see that the winners in any industries whether transportation or hotels, these are going to be the organisations who organise the economics for these ecosystems, and so we’re going to see this in banking, in insurance and in retail and so on…..
The economics of these ecosystems happen to be being organised by Uber by Facebook etc……It could be the banks in the future, it could be retailers, but they have to understand what the problem and the solutions is and they have to work with entrepreneurs in the future…” (My emphases).
What is interesting about Ms Meyer’s comments is how de-personalised they are. She shared a dystopian vision of a world in which companies like Uber will apparently “enable the future infrastructure of the (global) transportation industry”. One in which the owners of a few companies are about to become “the organisations who organise the economics for these ecosystems”.
While not explicit, her vision of the economy concedes immense power to a small, largely invisible group of Californians (defined not as human, but as “a platform”) “determining the economics” of whole sectors of the global economy. These Californians clearly intend to amass historically unprecedented fortunes by optimising “the platform”.
They are doing so by remotely manipulating the software and particular algorithms of smartphones used in 71 countries and 438 cities of the world. They are amassing great wealth by exploiting the labour and assets of low-income drivers in these countries and cities.
“Leverage their freedom”
Like Ayn Rand and many other libertarians, the founders of Uber, AirBnB and other high tech companies would have us believe that they are helping low-income drivers and Air BnB renters) “leverage their freedom….in order to make money.” Actually, in the case of Uber drivers and Air BnB renters, they are doing nothing of the sort. Instead they are leveraging their own assets (their home, cars, petrol and insurance) and their labour, on behalf of the co-owners of these assets and labour – the executives and shareholders of Uber and AirBnB.
Uber’s oligopolistic capitalists developed or adopted existing technology for the Uber app – for which they deserve credit. They set up minimal structures for overseeing the recruitment and management of drivers. They then piggy-backed on a) existing bank payment technology platforms b) existing map providers and c) low-income drivers.
The latter are people with insecure incomes willing to freely make available both their labour and an existing asset to remote Uber executives based in San Francisco, California. Once the driver becomes an Uber ‘partner’ both her labour and her asset becomes a source of ‘rent’ earned almost effortlessly by Uber executives. Simultaneously membership of Uber obliges the driver to give up control over the price of her asset and labour; and instead to accept that the terms and prices for the hire of her car and for her labour are determined remotely, by California-based capitalists. Drivers are then “allowed” to retain 80% of the income they earn from their own assets, but only after covering their expenses (petrol, maintenance, insurance.)
Uber’s revenue stream from these arrangements is considerable: currently estimated to be about $2 billion a year.
Thanks to drivers in 71 countries selflessly leveraging of their “freedoms”- Uber executives are able to effortlessly extract 20-25% in rents from the hectic, often late-night work of car-owners.
Rent-seeking
In today’s deflationary environment, it is really tough for investors to extract rent of 1% – 8% on valuable, safe assets like sovereign or corporate bonds. It is often unprofitable to manage and maintain an asset such as a buy-to-let in London that yields just 4%, if the investor is lucky. Given these conditions, a yield of 20% extracted from assets owned and maintained by someone else can only be a result of the work of robber barons: avaricious capitalists who own a business valued by some at about $62.5 billion .
In all probability, like the hero of Ayn Rand’s novel, Atlas Shrugged, Uber’s executives inhabit “platforms” at the top of remote mountain retreats in California, where they lord it over their expanding economic empires – the “independent free economies” beloved of Ayn Rand. Their ambition is to capture whole sectors (the “ecosystems” Ms Myers mentioned) of the global economy (like transportation or banking or hotels).
These captured “ecosystems” are, and will be so designed as to circumvent the hurly burly of a regulatory democracy, designed over centuries to protect societies from the predations of “robber barons”. The purpose? To harness the entire cash flow of for example, the Premier League; the global private transportation sector; the global hospitality sector, and to do so by annihilating the legal, political and cultural arrangements/regulations put in place by societies to protect their interests.
Apparently, according to Ms Meyer, “That’s the future. We can’t stop that happening”,
That belief is delusional, utopian even, as I tried to explain on Newsnight. The basic human needs for security, status and protection have no place in the new “ecosystems” and “optimising platforms” of Uber and other companies. They follow the requirements of the capital market for limitless expansion and domination of markets. However, the human requirement is to be sustained by mutually supportive social relations.
Uber and Trump
Even as we discussed these issues last Thursday, one Silicon Valley Republican strategist was explaining to the New York Times that “the era of Silicon Valley exceptionalism is over” Mr Trump, the Republican Presidential candidate, is, it seems
revealing Silicon Valley’s vulnerability. In recent years, technology companies have extended their enormous reach while becoming ever wealthier and more powerful. Yet Mr. Trump has paid no political price for attacking them, with broadsides in recent months against Jeff Bezos at Amazon, Mark Zuckerberg at Facebook and Timothy D. Cook at Apple.
Mr Trump has won the political prize of the Republican nomination in large part because he he has voiced the anger of Americans, many of whom are victims of the “fastest growing company on the planet” and of other Silicon Valley companies.
Trump is unlikely to win the American Presidency, and even if he did, he is unlikely to reverse the libertarian activities of his wealthy peers. Nevertheless, his candidacy is a stark representation of an American uprising – one that could take ugly, reactionary form.
We cannot say we have not been warned. In the midst of the catastrophe that was the Second World War, Karl Polanyi wrote a book, The Great Transformation, that helped explain the rise of fascism in Europe. He argued that:
The self-regulating market could not exist for any length of time without annihilating the human and natural susbstance of society; it would have physically destroyed man and transformed his surroundings into a wilderness. Inevitably society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market. …. [1]
The measures taken then by societies included fascism – as societies looked to “strong men” to protect them from the predations of market fundamentalism.
The rise of Donald Trump and Marine Le Pen are signs that we may have to prepare for another such reaction, and it may not be pretty.
Footnote:
[1] Cited by Kari Polanyi Levitt: p. 16. From the Great Transformation to the Great Financialisation: On Karl Polanyi and Other Essays.
Correction: Apologies – this article has been amended to correct Ms Meyer’s name (wrongly called Ms Myers’ in the original).
A really though provoking article Ann. Unfortunately, in the short term I think the Uber-isation of many industries will continue. In Australia, we see it with Uber and also the proliferation of sham contracting in all sorts of industries from building to office admin. In essence , what is happening is individuals here (and no doubt everywhere else in due course) are just supplying a tax file number and working in a completely unregulated environment where they offer their services at what the market will pay. There seems an endless supply of foreign workers now who are exploited by the market under the guise of all sorts of dodgy work visa arrangements. The days of regulated hours, wages and conditions are rapidly ending. Of course many services such as IT can be provided from overseas in places like India where the rates are a fraction of what they are in Australia, the US or UK. It is leading to lower living standards, longer hours and a race to the bottom. There seems little interest in regulating it as the people with the money love it as it lowers costs. I think what is happening in the US is an expression of anger that Donald Trump is manipulating for his advantage but has no intention of changing. Eventually though I suppose the anger will change into unrest and violence. we cant say we werent warned. At a personal level, while I use these services, I also make sure I pay fair rates to the workers. However, when these shonky sham contracting practices like Uber become the norm in industries like the building industry and transport, ethical companies can go out of business by being noncompetitive, so it is a difficult dilemma. The other argument could be that it provides opportunities for the small person to operate their own business if they are prepared to work long and hard and then get others to do the same for them if they want to grow. Its very much the model the multi level marketing companies have used for decades. There are a few Amway millionaires but a hell of a lot of vulnerable broke bottom level distributors who made them rich. I dont have an answer other than do everything possible to make sure you have skills that are hard to duplicate and not subject to international competition.
Have to agree with John’s analysis. One aspect of the Über and AirBnb phenomenon that annoys me is the idea that they represent the ‘sharing economy’. I’d like to think that a ride-sharing service that didn’t involve money changing hands was feasible. One where reciprocity formed the basis of exchange, rather than cash. A genuine sharing economy. A kind of dynamic car pooling, if you like. Where are the social entrepreneurs promoting such ideas?