Uber, the network economy and why we need a system upgrade

Last week, Uber made an interesting remark in a blog post announcing the appointment of the company’s first chief security officer. In the second paragraph of the text it said:

“In many ways we’ve become a critical part of the infrastructure of cities. We are both in cyberspace and on city streets all at once; a bridge between bits and atoms. And as we get into tens of millions of rides a week, we continue to challenge ourselves to do even better when it comes to safety and data security”.

Uber sees itself as a “critical part of the infrastructure of cities”. This might initially sound like a hyperbole. But especially in some North American cities, this claim actually appears close to reality. Consider New York, or consider San Francisco. 162.037 drivers have completed at least four or more trips in the U.S. during December alone. So let’s go with the proposition that Uber (along with its competitor Lyft) indeed has become a critical part of the infrastructure of an increasing number of cities. This marks a milestone.

For possibly the first time, the critical infrastructure of a city is being operated by a network company that makes use of on-demand resources instead of using an employed workforce and fixed operating equipment. With a few exceptions, drivers of Uber are private citizen that use their car and time to participate in the Uber network with the goal to earn some money. Passengers also participate in the network with the goal to get from A to B. Drivers are not employed. They instead act as contract workers, meaning they do not get any social benefits. They neither have any obligations to contribute their time and car to the network if they do not feel like it. Uber itself is providing the technological platform. The people employed at Uber’s offices are mainly concerned with optimizing and improving the technical platform and the company’s apps. They also focus on promoting the platform in numerous ways so that the network of drivers and passengers keeps growing.

Hundreds of articles have been written analyzing the negative consequences of the so called “gig economy”, calling out the hypocrisy behind the “sharing economy” label as well as criticizing Uber’s partly questionable business practices. Thus I do not need to do that right here right now.

My intention is to emphasize the far-reaching shift that happens here, pioneered among others by Uber. A shift that does not come as a surprise for anybody who has been following the rise of the digital economy: The Internet introduced new ways to allocate demand and supply. Throw in the smartphone and the opportunities to efficiently and effectively bring people who seek products and services together with those who offer services and products is being magnified.

Again, these capabilities itself are no news. Neither is the realization that these capabilities are being leveraged by startups and Internet companies which replace human intermediaries with technology platforms, increasing the speed and reducing the costs of the process.

The news (to many) is that this trend won’t just remain a trend. It will eventually replace all previous ways of bringing supply and demand together. And as Uber shows, at least for regions without strong public transport, even critical and/or basic public infrastructure has to face this shift.

What is happening here can lead to good or bad things. Which kind of outcome we’ll get depends on the frameworks that are being created policing and regulating the network economy. The number of giant global technology platforms operating lean on-demand-networks connecting suppliers and consumers will undoubtedly keep growing. For people on the supplier side this means more flexibility but also less social security. Our current economical, legal and social systems originate in a time in which supply and demand were allocated in planned, institutionalized and predictable ways. That obviously makes them ill-equipped for the change that is upon us.

A thorough “upgrade” of the economic, legal, social and even mental framework is needed. For those who still live in denial and believe in continued business as usual, Uber’s growing impact has to be a wake-up call. In the not too distanced future, most of our daily business and commerce errands will happen through networks like Uber (no matter whether Uber itself still will exist or have collapsed). We need to prepare ourselves.

4 comments

    • I’m ambivalent. Sometimes I am concerned, sometimes I am excited. I still think it is in our hands how all this will play out. So overall, I’m still optimistic. It helps to recall that the past never was as smooth, just and great as it might be remembered.

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