Uber and the Business that Isn't That Business

Over the past couple of weeks, I've watched as the various Uber scandals have played in the media. Or rather, I should say, the latest big Uber scandal and it's various associated threads. Several times I've felt compelled to write about the it and the various things that we've either learned or had reinforced over the past two weeks. Here are a few highlights for me:

• Pando Daily gets my consistent reading attention because the writing and analysis is worth it.
• Uber's visible, vocal flaunting of legal and ethical frameworks reminds me a lot of that once-vaunted company, Enron. The market loved them and they could do no wrong when the money machine was rolling, but then it wasn't. The blow-back was Sarbanes-Oxley. Remember this part? 'Taken directly from the act, a code of ethics comprises the standards necessary to promote "honest and ethical conduct; full, fair, accurate, timely and understandable disclosure in periodic reports;" and "compliance with applicable governmental rules and regulations.' Can you imagine the incoming congress fixing anything? Perhaps as long as it includes the option to ignore them for personal or religious grounds.
• Ashton Kutcher. Really? Dude.
• And then there's this, one of the more interesting things that I read about why you might want to consider deleting your Uber app. I know. It's Android, but still.
• I think someone out there could write a long and eloquent post about the ludicrousness of a "sensationalistic" press writing about business

All of that being said, there's still a lot of discussion around how much money is sitting on table in this ridesharing market and whether, ultimately, that money supports an "end justifies the means" approach to business. Here's more analysis on "Why Uber Fights."

For me though, one thing that resonates is how Uber tries to play the "We're not THAT business" card. When facing cities and states with regulations governing taxis and limos, Uber says, "those laws don't apply to us. We're not a taxi company or a limo company. We're just facilitating connections between riders and drivers." And then, when it comes to the behavior of it's drivers, background checks, insurance or any of the other things that might cost money, the drivers are "not employees of Uber, we're just facilitating transactions between a driver and a rider."

Of course, this "outside of the lines of THAT business" approach stand in contrast to actual aspects of their business. For example, there's the blurred line between employee and contractor. Clearly, the goal of having employees be contractors is to escape many of the employer/employee relationship requirements. Similarly, while the company doesn't want to be categorized as a transportation company, a chunk of that investment warchest goes to fund a program where drivers can "borrow money" to buy Uber cars and the company can build out their fleet of "not Uber company" cars.

There are aspects of this approach that enable the company to grow faster, but you can rest assured that a significant percentage of their "not THAT business" approach is to skate between the lines and rules that bind the rest of the business world. It's as though they said, "this limit that says that a limo requires an advanced booking to pick up a passenger is wrong, so all rules are wrong". The reality is that there are reasons why many of these regulations and laws have made their way onto the books. And while the limits on booking a limo might have not kept up with the internet age and deserved disruption, that doesn't equate to all business laws, regulations and limitations being unbreakable.

Being a business that is "not THAT business" is a position that businesses take when they want to try and capitalize on a loophole. "Wouldn't it be nice if we didn't have to worry about this rule or that rule". Like ISPs not being liable for the content going through your broadband connection -- we don't have anything to do with what's going through the pipe until we realized we could make money inserting our ads to your content."

It may be that, by espousing a "between the ethical lines" strategy, a business can increase some short term profits. But in the long term, do these kinds of ethical gray areas pay off? Consider something like Silk Road, which probably adopted the notion of "not a drug dealer", instead just facilitating an online marketplace, a place where buyers and sellers could connect". Given enough government interest, it didn't really matter what gray area the people running it claimed, they were still arrested for criminal behavior.

Now it may be that there is not enough will within the government to "crack down" on these gray area definitions for Uber (the regulation bogeyman that conservatives hate), but that's just here in the states. As Uber expands into Europe and other international locations, some European governments are not as regulation-averse.

To date, Uber's approach has been to operate as though the on-demand ride has been an unjust barrier, then hoped that with enough adoption and positive public sentiment, they could overcome any regulatory barriers that were thrown up in their way. That approach is easier to execute upon when you're seen as a positive force, not a threat, a no-harm no-foul concession to technology changing the marketplace. But, as you push the envelope of legitimate business practices and people get threatened, hurt or feel ripped off, the tides can change.

Ethics, Morality, and The Mission Statement
It's one thing to look for exploitable loopholes. It's another thing entirely when that becomes the fabric of your business. Customers can understand and tolerate breaking a rule if that seems part of a bigger mission. Breaking one rule can make you seem principled. Break too many and you just seem slimey.

Ethics matter. Everyone jokes about Google's "Don't Be Evil" value, but consider -- despite many questions raised about aspects of their business, most people recognize that Google does good things with their products, technologies and practices. Or at least they try. Everything from free services to a loftier goal of scanning all of the books so that everyone has access to them -- these aren't things that are born out of a "how can I get leverage over the world" philosophy. And that's probably why people might be more likely worried about how Uber staff like Travis and his Bros might use their private data, where they wouldn't worry about Sergey and Larry in the same way. Sure people worry about what the ubiquitous Google is doing with their data, but it's unlikely that Google would publish their walk of shame/ride of glory.

Ultimately, if you look at the battle for this ride share market, there is this notion that the market is defined and it's just a matter of parsing the customer base. If Uber wins, it will own this market is the prevailing thought. I think what that seems to overestimate is our need for this service. Don't get me wrong, taxis and ride for hire has been around for a long time, but that doesn't necessarily translate to an automatic shift to Uber. While there are aspects of the taxi environment that we all may have encountered -- crazy drivers, unclean vehicles, and selective, sometimes limited support as examples -- there are still aspects of the service, like regulated fares, that have me choosing a taxi over Uber for many in-city rides.

But beyond that, there is this assumption that our need for a ride-share type ride outweighs any ethical limitations that might otherwise drive us to select an alternative. What happens when Uber drivers become like Internet fulfillment warehouse workers, run ragged on a barely minimum wage, indentured servants to the rider class. Will this ethical framework hold? Will there still be joy and enthusiasm in this service? Or will it be like Groupon, with unknowing shop owners leveraged into buy-one-get-one-free deals that drive a momentary customer boost at the expense of their quality, profits and reputation?

At some point, Uber will reach a tipping point, a time when it can no longer play the "not THAT business" card. In order to own it's quality, service and brand, it will need to become THAT business. Taking ownership would also mean taking ownership of it's management and it's ethics. Right now, it doesn't want to own anything -- it's not THAT business. But let's see how long that lasts.

Update: I stopped writing this post over the weekend and then I came across this piece on Pando talking about the differences between Uber and AirBNB. It's totally worth diving into.