Entrepreneurial Thoughts on the Transportation Industry

Since the 1700's people have been sticking out their hand to flag down the next random hansom cab to come along. In the 1800's in large metropolitan areas this was taken to a high art when the ability to reserve a driver in advance came along. There became a market segmentation. Then in the 1900's, the sixties mainly, sticking out one's thumb for the next random driver willing to share a ride became popular. After that came the bumper stickers that said, "Gas, Grass, or Ass. No one rides free." The reserved cab, the taxi, the rideshare, and the shared ride for pay were all in place and the US economy was primed for the next game changer. Then Uber!

But wait, what changed? Now people swipe to flag down the next random driver that comes along. This harnessing of phone technology was simply a digital return to the 1700's! Uber created a digital wave, an automated thumb, a new and improved electronic way to catch the next random driver. Hailed as an advancement for civilization, it may have been a step backwards. When Uber came about, I had visions of it unleashing an entrepreneurial flood of innovation. Now people with an expensive and idle asset like their car could put it to use earning money for themselves.

What has happened is the development of a system that gives consumers random and sometimes dangerous access to rides and does little for the would-be entrepreneurs that do the driving. Those transportation workers do not in any way get to build a business for themselves. They have no way to brand themselves, demonstrate value, or gain repeat business, the things any self-respecting business person would want to do. Their only option is to work more hours to get more compensation. Customers get no choice in who shows up and that means drivers have no incentive to provide better service. Uber actively attempts to make the driver the least part of the value equation for the customer. Their plan is to have the driverless car replace the faceless driver.

The lack of customer choice has other negative ramifications. Without any real opportunity, and with Uber driving the price through the floor at roughly a third of the cost of a cab, drivers for ride "share" companies generally make less per trip while still covering the entire cost of running and maintaining their vehicles. These drivers have essentially become the working poor of the transportation industry.

I'm not faulting drivers for taking advantage of the opportunity. Poor and working is better than poor and not working. Uber can be a way to ease frictional employment caused by a changing economy, but as a model for improving the transportation industry it falls a bit flat. Rather than encouraging entrepreneurs to build their own business, it simply encourages people without a chauffeur liscense to work in the market to help build Uber's brand name. However, Uber’s brand name is a “value add” that gives little in return to the driver.

It is nice to see that one can now wave a digital thumb and electronically flag down a ride, but there is much room in the transportation industry for improvement. That's my thoughts on the world today, I'd love to read your thoughts on the topic in the comments section.