Uber has actually created the market for new competition to enter. Since they can't stop their drivers from driving for a new competitor, all any new competitor needs to enter the market is an app and a lower price / bigger split with the drivers. Given any new competitor will not be carrying the capital costs of building the network in the first place they will be able to outcompete uber. The eventual winner is going to be the consumer as the market becomes a profitless commodity service.

I have to say that I am surprised that uber didn't use the driver lawsuits to lock up their network. If the drivers were employees then they could have prevented them from driving for other services.

> If the drivers were employees then they could have prevented them from driving for other services.

This. I feel like this doesn't come up often enough in discussions about whether drivers should be considered employees or not. A lot of people seem to think that making drivers employees would be better for the drivers and have no effect on passengers. But as soon as drivers become employees it's game over for Lyft or any future competitor, and Uber's monopoly will let them push driver comp as low as possible. As long as Uber and other companies have to work to attract drivers and passengers they'll take a lower cut for themselves.

Surely Uber's reason to exist is to be ready to take over as soon as robocars are good enough. In a world where taxis are cheaper than owning a car, the winner is the one with the software and userbase that can organise the most journeys efficiently, offering discounts to merge rides, running buses and trains when enough people want to go from the same A to the same B

This explanation presupposes that running a ride share business is a good entry point for running a robocar business. On the face of it the requirements for running these two business appear to not have much in common.

It certainly seems unusual from my perspective to create a network that others can use at no cost to compete against you. The drivers’s lawsuits could have been a great opportunity to negotiate employment contracts with excellent terms for Uber. There must be more to this than I can see, but it does look strange.

The reason they weren't made employees is pretty simple: there'd be a bunch of payroll taxes to pay. Either the already meager driver split would need to go down even more, or they'll have to raise prices that users have to pay...

Knowing Uber, they'd probably push down employee wages and then run into minimum wage issues...

Also, they would be liable for the employee's behavior. Which is terrible, economically.

Aren't they effectively held liable in the court of public opinion which is probably more costly than any legal liability.

No, not in the least. People know Uber is an evil company and don't care.

Aren't the payroll taxes just shifted onto the driver anyway? The wages of the drivers would go down, but their take home pay would stay the same.

I think that's true for the most part, though I bet a lot of people under-report.

But there are things like health insurance which Uber would have to provide (and in the contractor case, are instead subsidised through Obamacare provisions) that I think would end up with take home being less...

> subsidised through Obamacare provisions

Obamacare mandates access to insurance (from a dwindling group of participating insurers), it is not a direct subsidy.

In fact, Obamacare has raised insurance rates for most people, as insurers cancelled most plans because they "were not compatible" with Obamacare, and re-enrolled members at higher rates than before.

It would have to be risky as a driver to under-report as they would be one pull of Uber's data away from an audit by the IRS.

Health insurance might be more of a problem, but this is really only a US issue.

I am wondering if a franchise model (say like McDonald's) might get you to a model where you have the benefits of employees, but without all the associated issues.

It doesn't even require a pull of Uber's data. Unless the driver is making less than $600/yr from Uber, Uber is required to file a 1099-MISC with the IRS for that driver.

If payroll taxes are shifted to the driver, then their take-home pay would go down.

By take home pay I mean after all taxes are paid, not what they get at the end of the week in their bank account.

Given competitors are experiencing lower and lower friction entering the market, the desire to "compete" isn't limited in normal rates. The amount of competition will increase and drive (and break) economies at scale. Bubbles bursting. Markets collapsing. Faster and faster because the compute and network are lowing capital costs to enter market. Think candle vs. LED cost/light output. This is why we must rethink how we build infrastructure software.

I'm guessing that extremely smart people have had this discussion internally and come to the opposite conclusion.

I would love to know what this thinking is. Uber's business model is an enigma - at least to me.

I believe that Ubers ultimate goal is to become a logistics company. They want to move people around. They also want to be the last mile on delivering that express Amazon package to your door, or getting your food order to your house (they're already experimenting with that), and just generally being the company responsible for transporting everything around a city.

From the perspective of managing their drivers, they're not to worried about other folks taking "their" drivers as ultimately they're going to have FAR more work for drivers to do than companies merely in the cab business. As a driver you're going to rely on Uber because the quantity of the work will be so much higher on their network.

That's the long game for them and I suspect that's how they see things right now.

* note: I'm 100% speculating here, I have no real special insight into what they're up to.

They probably don't feel their drivers are valuable assets worth retaining, much like how tech companies treat their telesales staff.

You want to quit? Go nuts, we have 50 people who will work for less ASAP, and we think we can onboard them easily.

We're also developing technology that will let us have robo drivers (or robo sales staff). So we won't really miss you, even if you compete with us.

"extremely smart people" also caused the 2007 mortgage crisis, and 2000 tech bubble

> This rests on the VC assertion that Uber is playing a winner-take-all game.

They certainly seem to be playing a winner-take-all game, by heavily subsidising rides when they first launch in a new city.

But it seems questionable to conclude that taxi services really are a winner-take-all market. Many Uber drivers I see have multiple phones, running multiple taxi apps at the same time. And most people I know have at least two apps in their phone. I usually check three (Uber, an European one, and a local one in my city) before making an order.

There are some network effects to taxi services - customers want a car fast, and drivers want to find fares fast. But there are no switching costs for either side, so these network effects can be distributed over more than one platform.

Yes, I meant to say that the VCs are asserting it's a winner-take-all game. And, yes, Uber is playing a winner-take-all strategy, which I agree is questionable.

Like pretty much everything else in life, most riders and drivers have a preference that gets most of their usage.

True, but with switching costs so low, if your friend told you "I love Uber, but service X costs $1 less and it's the same drivers", most people would switch in a heartbeat.

Yes, if Google and Apple thought it was a winner-take-all game, they would be throwing a lot more money into it.

Yeah I feel like everyone thinks the spoils of the ride sharing fight is a future network of automated vehicles which should be lucrative, but is a long way from now. Yahoo looked like the winner of the search engine war once upon a time.

Yeah, I really think that the treatment of employees, drivers (they are no employees!), partners etc. will crucial for their success. And I see this only partially fulfilled.