It’s all about a bit of convenience for those who can afford it
The buzz-word “uberization” is supposed to be driving the business world today with the entire world hunting for the next industry ripe for Uber-type disruption. And why not?
Without any doubt, Uber has created huge wealth for its founders and investors and employs some really smart people. The company itself is valued at $60 billion even though it continues to lose money – it lost over $6 billion in 2020. This is after over 10 years in operation and after taking in $25 billion in capital investment.
Uber and the likes of it – Lyft, Didichuxing, Careem are ride hailing apps which essentially help to get you from point A to point B – which is exactly what a taxi cab does. They work by converting your smart phone into a tool for dynamic pricing which has disrupted the taxi market. Does it make your travel any faster? Is it more comfortable ? safer? negative to all.
To top it all – are we paying more for the convenience? You bet we are. In a market economy, you always pay for the added service; With everything else being normal (no deals, no surge) Uber cost = taxi fare + Uber commission. It has to be that way or Uber doesn’t have a viable business. Of course, this is so on an overall basis while dynamic pricing allows you to pay less when supply exceeds demand and vice versa.
So exactly what is the benefit for the consumer? and who is the target customer?
Thanks to the ride hailing apps, we can now find a ride to our destination more easily, depending on the location and time of the day. But only if we can afford it and hence the answer to the more important second question is that it is not meant for the masses – it cannot be the replacement of public transport due to the cost.
Yet, the business model still bleeds cash! This is probably due to continuous expansion coupled with attempts to beat competition by buying market share. In all honesty, i cannot make a fair judgement on their inability to be profitable. But the point is that no one seems to care and this is where the danger lies for wannabe Ubers!
Some prominent economists have termed such services “so-so technologies” in the sense that the underlying technology only brings about small improvements in productivity. Most activities which occur in the process of ride hailing were already happening prior to the introduction of ride apps, with the exception of easily finding private cars willing to offer rides.
This is to be compared with game changing technologies such as inventions of motor cars or aeroplanes or even the smart phone itself which created huge industries impacting human lives on a much larger and beneficial scale.
How does this then add up to the younger generations’ fascination with start-ups and attempting to Uberize everything – from ice cream to clothes to internet connections? It’s a fallacy to see so narrowly and have the best of our brains figuring out convenience driven disruption models instead of real innovations required to change the world and move it forward.
Climate change will not be solved by dynamic pricing neither would it help improve health and education or be the game changer for communication that the mobile phone was for much of the human population.
For that to happen, they will need to move away from their starry eyed dreams of being founders of the next Uber and unicorn builders and go back to science and engineering, research and economics and build real game changers. Don’t get me wrong – I am not against start ups. In fact I am strongly in favour of entrepreneurship and encourage people to take risks. I also don’t dislike wealth – up to a point it can be a source for good. But I do just wish that our businesses focus more on collective good. Otherwise it is only about value creation for themselves.