By Don McCurdy
Uber, the non-taxi taxi company, has a small problem and that problem is California. Yes, that’s where they were born, but the same government they bribed, er, lobbied to give them a pass on local regulations by regulating them at the state level is now demanding that they treat their drivers as employees. They argued fiercely, at first, that their drivers were in fact independent contractors.
While I can see Uber’s point, that it doesn’t control the drivers, driver description also has to meet other standards one of which is quoted as stating that the independent contractor performs job functions “outside the usual course of the hiring entity’s business.”
Uh, oops. A huge chunk of Uber’s revenue comes from the drivers doing a reported $9.2 billion in work outside the usual course of the company’s business. Or more plainly stated the largest reported chunk of the company’s usual business, providing rides.
Of course, the entire affair will end up in court, but in California state court and not Federal court. Uber denies the law has anything to do with them. They’re just a platform is their claim. Uber has thumbed their nose at regulators since their inception. Why should they rush to comply now?
When Uber was the darling of the riding public, Uber could count on the public outcry if Uber wasn’t available in their area. Politicians hate it when the public starts looking hard at them, so it was relatively simple for politicians to “lobby” at the state level for the poor, deprived potential voters to get their Uber back.
Lately, however, Uber has lost some of its appeal. Drivers will be drivers and if you don’t police them they will take the attitude of a Houston taxicab driver who once told me that riders were the cattle that he fed off and what they wanted wasn’t important.
I’ve ridden in several of Uber’s “platforms” and wasn’t over impressed. Uber once had an interesting model with a lot of part time drivers making a few extra bucks on the side, however, they, like the taxicab industry before them, went to the model that made the most money for the company and didn’t concern themselves with the driver’s income.
Since Uber was lighter regulated than the taxicab companies and didn’t require the infrastructure taxicab companies require, they could charge less and the race to the bottom was on.
While the best boss I ever had was an accountant, it has been my experience that accountants usually make poor business managers. Uber acts like a company run by accountants.
A recent article from the paper that conclusively impeached President Trump two years ago is trumpeting the start of a federal investigation into the collapse of the New York City taxi medallion market. According to the report, the investigation is being initiated by the United State’s Attorney’s Office for the Southern District of New York.
Along with the feds, the New York State Attorney General is reported to be looking into the matter. The presidential candidate mayor, DeBlasio, was reported to have launched his own review which is political speak for having his staff write up something.
The wannabe press is still ruling out a taxi medallion bailout even though the city’s cut of the medallion sales to the “newest New Yorkers (taxi drivers)” is reported to be 850 million. Sorry, we can’t give you your money back. Your medallion, it’s too expensive. Besides, we spent that money years ago.
As a recovering taxicab driver and manager, the article left out one critical bit of information with the flashy headline of “A $1.7 Million Loan, $30,000 in Income. Prosecutors Are Now Investigating.”
Prior to the introduction of Uber and Lyft into the market, leasing a medallion could cost a driver over $100 a shift. Were a driver able to rent their taxicab out to a relief driver even part time, the vehicle could turn out saving the driver $45,000 in expenses each year. I guess part of the story is okay, as long as it truly started some investigations.
I wouldn’t kiss off New York City taxicab medallions as an investment. The governor is looking hard at California’s new “gig economy” bill that has the potential to seriously damage Uber and Lyft. Should New York institute a similar law, the medallion price might just be on the rise.
I’ll bet there’s some serious “lobbying” going on. While it may be difficult for Uber to get a ruling that their drivers aren’t independent contractors, a medallion owner driving his own vehicle would be hard to pin down as a employee.
Along with Uber’s tribulations in California, they’re also having to deal with their plunging stock price. It appears investors don’t see a way out of Uber’s money losing ways.
There are several articles bemoaning the fate of Uber’s stock, and a few positive ones. One of the most interesting reported that of Uber’s daily stock trades 33% were sold short, selling the stock without owning the stock only to buy back at a lower price. The reverse of buy a stock at a low price to sell at a higher price.
What can Uber do to reverse the unprofitability of the company? The listed choices were to raise prices or pay drivers less. The company is reported to have laid off 435 employees this month after laying off 400 marketing employees in July. What do you suppose 400 marketing people do?
This month’s layoffs are engineers and members of the “product team.” According to an article, Uber has enough cash to last three years if they can reduce their losses to a more manageable level. Unfortunately for Uber, investors autonomous vehicles and the elimination of actual drivers are potentially a lot further down the road than three years.
According to a recent article, a court case in Melbourne, Australia revealed that drivers can fool Uber’s security selfie by using a picture of the registered driver. This flaw allowed an unregistered driver to utilize another driver’s registered vehicle. The flaw allowed the unregistered driver to pick up a female passenger he was eventually convicted of raping.
Unauthorized drivers have long been an issue for the taxicab industry, especially if companies only allow one driver per vehicle. Uber has denied that the flaw has been a problem and is reported to have updated its facial recognition technology and hired regular people to look at the driver ID selfies.
If you have any comments regarding this or any of my articles please feel free to contact me at: don@mcacres.com. – dmc
