10 December 2015

This house would nationalise Uber – or not


This speech was given at The Long+Short Christmas Gathering, hosted by Nesta. The motion was “This house proposes we should nationalise Uber”. Izabella Kaminska from the FT argued for the motion, and I argued against. At the end of the debate, two-thirds of the audience voted to keep the government away from Uber, and the rest of the sharing economy.

In 1948, the British government nationalised 55 hotels and a golf course.

This was a consequence of nationalising the rail companies which owned the old railway hotels. Some of these came with luxury tennis courts, wine cellars, and even a golf course, all of which quickly become the property of His Majesty’s Government.

If that seems bizarre, remember that the government also used to operate utilities, telecoms, ship-building, aerospace, and car manufacturing.

Today, the idea of the government deciding what phone you could install or how much it costs to fly to Canada seems ludicrous. But now we are debating giving the government control over something even more mundane: when and how you are permitted to hail a taxi.

In the past, we’ve nationalised industries that affect national security, or which risk bringing down the British economy if they fail. But Uber is a raging success. Over 1 million drivers in 300 cities have jobs that didn’t exist five years ago. Those are people who might otherwise be unemployed, who now have the option of flexible work that fits around childcare, studying, or other part-time jobs.

Meanwhile, 8 million users now have access to cheaper and more accountable taxi travel. If you don’t want to wait 40 minutes for your minicab to get lost on its way to you at 2am, you don’t have to.  If a black cab refuses to take you home because you live too far away, you have an alternative. And if your driver is rude, dangerous or unpleasant, you have a direct way to hold them accountable. All from your phone.

Let’s take a minute to just imagine what an Uber run by the state would look like. You can forget about clean cars maintained to the highest level. The software would never be upgraded in time to keep up with new phones, and would be as glitchy and hard to use as HMRC’s tax filing site. As for direct accountability via twitter and e-mail, try a 14-working-day waiting period before any hope of a response.

The government isn’t deliberately inefficient. It’s just hard to move quickly when you’re employing 5 million people and taking a top-down approach. Sharing economy ventures like Uber have been so successful because they’re customer driven, starting with people on the ground. It’s no surprise that, by the time the Liverpool local authority got round to approving Uber, 25,000 people in the city had already downloaded it.

For anyone who thinks that the ‘sharing economy’ phenomenon that everyone is so excited about is actually not that new an idea, think about it this way. It’s true that industries built on the ideas of sharing risk or capital have been around for years. It has also always been possible to get from Manchester to Mumbai, but that doesn’t mean it was easy.  Aerospace technology shortened a journey that used to take months to a few hours, and in the same way, the internet has radically altered the ways in which information and resources can be shared.

We’re not just sharing things. We’re finding ways to make use of resources we didn’t know we had. Spare rooms, for an example. Power tools you only use a few times a year. Money you’d be prepared to invest in a quirky new project no bank would touch.

This a radical disruption of how we thought the economy worked. The industrial revolution taught us that economies of scale yielded huge productivity gains, that centralised locations with hundreds of people could be more profitable than individuals. Now that’s being reversed. Overheads and start up costs in many industries have fallen so far that individuals can run successful businesses from their bedrooms.

This is, understandably, terrifying, especially if your job or business is at risk. Even if it isn’t, the sheer pace of change is daunting. And with fear, comes the desire to have the government step in and fix everything.

Over the last year, we’ve seen different approaches to this, exemplified by how societies have responded to Uber. In France, for example, taxi drivers decided that setting fire to cars and blockading the city was a good tactic.

New York, meanwhile, is being sued, by the owners of taxi medallions. These were selling for over $1 million a few years ago, but since Uber came on the scene the price has plummeted. Medallion owners are suing the city for allowing competition, and demanding a taxpayer bailout now that their cartels are no longer profitable.

In London, we haven’t faced riots or lawsuits over Uber… yet. But in September we saw ridiculous and impractical “safety” regulations proposed by TFL– a pointless waiting period, restrictions on flexible working, and a ban on showing available cars via an app. What does this have to do with passenger safety? Absolutely nothing. TFL never cared about my safety when I had abusive minicab drivers or the company cancelled my cab and left me stranded. Now that Uber has presented solutions to those problems, they’re rushing in meddle.

What, if anything, do we have to fear from the rise of Uber?

There have been some concerns over the monopoly Uber will have on the taxi market. But this is the opposite of monopoly. This is a service that has liberated a tightly restricted market. The reason black cabs and minicab firms are so angry is that Uber has injected an unwanted dose of competition. If every cab company other than Uber goes out of business, the market has an answer for that: it’s called Lyft. Or Blablacar. Or Liftshare. This isn’t like the railway tracks or telecom lines which required such high upfront costs no competitor could ever get close. The genius of the Uber model is that anyone can set up something similar, so if Uber starts to abuse its power, consumers and drivers will just switch to an operator that offers better. That’s how the market works.

And it isn’t just about Uber. It’s an unfortunate accident that Uber has become the poster child for the sharing economy. There are much more exciting and ground-breaking ventures out there, like M-Pesa, the mobile payments platform in Kenya which is bringing banking services to millions of unbanked across Africa. Or Crowd-funding platforms like Kickstarter which have funded everything from luxury watches to full-length feature films.

What these initiatives prove is that it’s possible to turn an industry on its head, connect consumers to providers directly, make use of spare capacity, all using just a computer.

There are some legitimate concerns, especially about how to retrain people who lose their jobs. And I do have sympathy for taxi drivers who invested in a qualification which is becoming redundant, hotels under threat from Airbnb, people whose salaried jobs are at risk as freelancing becomes the norm.

But all industries must adapt – when was the last time you dictated letters to a typist, or booked a holiday using a travel agent? For that matter, what happened to the men who used to deliver telegrams, or the women who operated telephone switchboards?

We don’t need the state to bring those jobs back, just like we don’t need them to run Britain’s hotels or airlines or telecoms. Nationalising Uber now is as ridiculous as nationalising Gleneagles golf course was in 1948.

It’s a panicked gut-reaction to uncertainty, and it would mean crushing a flourishing new industry that will offer us opportunities we never saw coming.

Rachel Cunliffe is Deputy Editor of CapX.