Tuesday, March 22, 2016

(The Big Disrupt) Uber: Why Uber's relationship with it drivers is about to become poisonous.

A lot of keyboard pressing has been donated to Uber's epic battle with taxis  and with the recent flare up of violence in both Indonesia and Denmark means once again that opposition to Uber disruption national cab hire markets will dominate a news cycle. In However while Uber is able to out compete both taxis and fellow car hailing firms, the company has a ticking time bomb on it's hands in their own fleet of human drivers. 

Uber CEO Travis Kalanic has expressed his intent to add driverless cars to the company fleet of drivers and with the reported order of 100,000 driverless Mercedes  s-class vehicles to the tune of $12 billion, Kalanic's drive for more efficiency in Uber's operation may be realized but almost certainly at the expense of their human drivers. 

Automation full stop is a highly contentious issue as we saw with google's putting Boston Dynamics up for sale partly in response to the highly negative feedback towards the robotics firm's demo of its latest robot. Driverless cars are no less contentious given that fact that driverless cars swings the balance of power between Uber and it's human drivers firmly in Uber's favor. 

Uber already hold most of the cards over their human drivers as drivers can't negotiate terms with Uber directly since they're effectively working for an app. Drivers are also cast as "independent contractors" which means they're not entitled to any health or social security benefits they would have if drivers were classified as employees. Uber and platforms like it have benefited greatly from the sluggish post recession labour market in a number of companies which has made labour markets more flexible but less secure for workers as in this climate, companies are more likely to offer flexible "zero hour" contracts which guarantees no set hours of work. 

This fact alone is partly why Uber has attracted so much bad press along with the company's hyper aggressive marketing strategy which has lead the company to be portrayed as the poster child of the worst excesses of capitalism. With Uber's reported bulk purchase of  driverless cars, this charge is set to be levied against the company ad nauseum but the truth is that Uber are in a marketplace where it has to compete in a field where rival firms are securing key partnerships and bandwagoning against the company in key marketsChina and India in particular. 

To continue its dominance of the car hailing market, Uber has to work on lowering it's cost per ride which is hard to do with human drivers put possible with driverless vehicles. Unlike humans, driverless cars don't have bills, don't get sick, or go on strike when they feel they've been treated unfairly or, most importantly, bank accounts as driverless cars will significantly drive up Uber's margins as drivers are by far the company's biggest expense 

However, human beings do have bills to pay, do get sick, and do go on strike as Uber drivers will almost certainly launch a strike against the company phasing out human drivers for automated vehicles. The recent flare up in Indonesia and Denmark will be nothing compared to the wrath of drivers unable to meet Uber's policy of drivers accepting 80% of fares as Uber will almost definitely prioritize it's driverless fleet over its human operated counterparts. 

In sum, Uber's relationship with its fleet of human drivers has been tenuous at best  but should and competitors go in the direction of adding driverless cars to their fleet and phasing out their human driversthe already strained relationship between Uber and its drivers will be explosive.      


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