Uber in London

European Straits #38

Dear all,

The news that Uber would lose its license to operate in London was welcomed with applause around Europe. It’s a sign of the attention Uber has attracted in recent years. It also reveals the growing mistrust that the tech industry inspires in elite European circles.

Of course, the reports of Uber’s death in London have been greatly exaggerated. Not only does the ride-hailing platform continue to operate (which I appreciate as a Londoner), it’s also likely that they’ll manage to comply with what Transports for London (TfL) demands, regaining their license after all.

As for Mayor Sadiq Khan’s tough stand against Uber, you can very much interpret it as the result of his expected submission to the local taxi industry—which, as in every large city in the world, entertains a privileged (and murky) relationship with the local authorities. (It’s also a typical case of a Labour official seeking the spotlight in case of, say, future cabinet opportunities—perhaps even a leadership challenge against Jeremy Corbyn? It’s not as if the Tories are going to cling to power for much longer.)

However to me it all sounds like another episode in a familiar story: industry incumbents pressuring politicians and ultimately forcing technology-driven new entrants to comply with obsolete regulations. Here are a few thoughts on the matter:

  1. Every technological revolution creates the need to upgrade the rules. We shouldn’t be surprised that tech-driven businesses don’t fit in the existing regulatory frameworks. When confronted with a situation such as Uber’s in London, the stake is not only corporate behavior. It’s also about the relevance of legacy regulations as we’re shifting from one paradigm (the age of the automobile and mass production) to another (the age of ubiquitous computing and networks). The discussion should be about how we upgrade existing rules to account for technological change—not merely Uber’s non-compliance with a rather obsolete framework.

  2. We must change more than the rules that apply to businesses: regulation as a process should change, too. What’s at stake is what Carlota Perez calls the “socio-institutional framework”. Regulation as we know it (based on restricted market access) is part of the Fordist socio-institutional framework. As we shift from the Fordist age to the digital age, the very act of regulating should be reinvented. As explained by Nick Grossman in a landmark article, forward-looking regulators should “replace permission-based rules with information-based rules, granting the freedom to operate in exchange for access to data”.

  3. Legitimacy is an issue. In Uber’s particular case, it’s apparently all about passenger safety—and obviously we’re all in favor of passenger safety. But in the never-ending story of Uber battling the taxi industry, passenger safety is not a genuine concern for the authorities as much as it is an excuse for erecting barriers and preserving incumbents. Indeed there’s a reason why most of our elected officials, including Sadiq Khan, are what I call “startup-busting politicians”. They’ve made most of their career in the old paradigm and they’ve made many promises to the established players, making it politically costly for them to take the side of tech entrepreneurs. Are they legitimate if their primary concern is to serve special interests rather than the public?

  4. Too often we refuse to see that technology brings about solutions as much as it creates problems. Uber and other ride-hailing and ride-sharing startups contribute to creating new problems, among them the rising economic insecurity that affects platform workers. But they also provide solutions to problems that were long inherent to the traditional taxi industry: bad customer experience; exclusive focus on the high end of the market (rich tourists and business people); frequent denial of service (based on ethnicity or destination, among others); tax fraud, cronyism, and in some cases even money laundering. Why don’t we care about those problems instead of Uber’s? For a very simple (bad) reason: better the devil we know!

  5. Finally, I hear a lot of people in Europe who rejoice at the idea of Uber being kicked out of our cities. But I see no reason for rejoicing here. I tend to see the growth of ride-hailing as a first step on the path to making ride-sharing the default way of moving around in dense, modern cities. Indeed there are many conversations going on about how to kick personal cars out of our cities in the future, with Paris somehow leading the way on that front. If we don’t draw the proper conclusions—that is, we need more ride-hailing and ride-sharing, not less—then at some point we in Europe will lag way behind China and other pro-innovation countries. My firm, The Family, was founded precisely to spare Europe that fearful destiny.

I don’t expect things to get better in the short term. In time, what we need are strong elected officials that make a priority out of supporting startups instead of busting them—even if it means letting US companies momentarily gain the advantage over worn-out, rent-seeking incumbents. I think Britain’s David Cameron belonged to that category—but sadly he’s gone. We’ll see very soon if Emmanuel Macron keeps his promises regarding entrepreneurship and innovation.

In the meantime, today’s a big day: Tim O’Reilly’s WTF?: What’s the Future and Why It’s Up to Us is finally out! Based on Tim’s interview here and discussions I had with him earlier this year in Cambridge, I’m guessing there are a few pages in the book about making regulations more startup-friendly. So buy the book, read it, share it, and review it!

Also, read my 2016 take on these issues: Regulating the Trial-and-Error Economy.

Warm regards (from Rotterdam, Netherlands—where I’m participating in a seminar on taxation in the digital age),