Uber’s Real Crime Is Giving In to Politics as Usual

So does Uber, the smartphone-enabled ridesharing service, have “an a–hole problem” that threatens the company’s very future? The New York Times warns that “Uber’s hard-charging [corporate] culture…can become a losing proposition faster than you might imagine.”

That seems to be the growing consensus among observers as the company’s list of real and imagined sins starts growing longer by the minute. Some of the complaints are serious and some are frivolous. But there’s one truly anti-competitive move Uber is pulling that it should definitely called out on—and hasn’t been yet.

In just a few years, Uber has gone from being universally praised to being universally dumped on. “Uber is software [that] eats taxis,” enthused Marc Andreessen, the man who invented the first popular web browser and is now a leading venture capitalist in Silicon Valley, back in 2011. “It’s a killer experience.”

Even as Uber has expanded to 45 countries and more than 200 cities and is valued at more than $18 billion, the only press the company seems to get these days is bad press. It’s not a pretty list, to be sure. Uber’s seemingly cavalier attitude toward its customers’ privacy has been a public relations problem pretty much since Day One, and the company has been criticized for trying to steal drivers from rival services and for allegedly tying up competing services with fake ride requests. The latter is churlish and underhanded (management says any such incidents were isolated) but the luring drivers away from other companies by paying them more? Come on, already: That’s called capitalism, and it’s a win for workers.

There have been more serious matters. Earlier this year, when an Uber driver in San Francisco struck and killed a six-year-old girl while between fares, the company first tried to dodge any responsibility but ultimately expanded its insurance coverage for drivers. Another driver not only assaulted a passenger but had somehow managed to pass the company’s background check despite being on probation for battery and having “multiple drug-related felony convictions” under his belt. These and other similar incidents are terrible and need to be dealt with better than they have been, even as the same sorts of complaints happen all the time with traditional taxi services. With Uber and other services at least, you really can pinpoint the malefactors immediately. Try doing that with a traditional cab company.

Much of the media-centric anger at Uber concerns its top management. Uber’s co-founder Travis Kalanick drew ire when he commented to GQ that his newfound wealth and fame had led to something like girlfriends on demand. “We call that Boob-er,” he joked. Both the quality of the joke and the mind-set it reveals are adolescent, but customers aren’t riding with Kalanick. The latest outrage is just a few days old and explains more of the media’s newfound vitriol toward Uber. After a particularly critical article about the company appeared, Senior Vice President of Business Emil Michael talked about spending “a million dollars” to look into critical journalists’ “personal lives” and “families.” He quickly apologized and Kalanick distanced himself from the comments in a 13-tweet-long act of contrition that reads about as sophisticated as his “Boob-er” gag (the main point was the Michael is not in the position to carry out such threats, not the best line of defense).

It’s this sort of not-ready-for-prime-time stupidity that may well end up eating into Uber’s customer base even as the company provides a great and appreciated service. None of us wants to do business with “a–holes,” but we also don’t expect businesses to be run by saints or be our best friends, either. If the company goes too far, people can always vote with their dollars for other ridesharing services, such as Lyft and Sidecar.

What actually troubles me the most about Uber is its newfound willingness to work with local governments to come up with regulations it can live with—but which put its existing and future competitors at a disadvantage. Not long ago, Uber was refreshing in its attitude that it didn’t need any government’s permission as long as it was serving customers’ needs who voluntarily downloaded its app and summoned its cars. That’s exactly how things should be in a free market.

Early Uber investor Ashton Kutcher explained it well on Jimmy Kimmel Live back in January. With “Uber cab or [room-sharing service] airbnb or any of these new peer-to-peer networks,” said Kutcher, “you have old-school monopolies and incumbents, and old-school governments that get kickbacks from various people that don’t want the new guy to come in so they try to kick them out of their city. But the people are going to have what the people want and the people say they want Uber and the people say they want airbnb.” Across the country, Uber faced down taxi commissions and other agencies that tried to shut it down even as residents clamored for alternatives to traditional cabs.

In September, though, the company hired former Barack Obama adviser David Plouffe specifically to work with local governments. “Uber should be regulated,” says Plouffe, who hails the legislation he hammered out in Washington, D.C. as “groundbreaking legislation [that] provides a model going forward.”

That model is one that gives clear advantages to Uber, which has more market share and political clout than its rivals such as Lyft and Sidecar. What the legislation does is establish “burdensome new ridesharing regulations” dictating minimum ages of drivers and other requirements that will make it more difficult for competitors to catch up to Uber or enter new markets in the first place.

In The Myth of the Robber Barons, historian Burton W. Folsom made a distinction between market entrepreneurs, who got rich by providing goods and services to people at cheaply and efficiently, and political entrepreneurs, who maintained and grew their market share by lobbying for regulations and special privileges that gave them an edge. Folsom underscored that it’s common for market entrepreneurs to become political entrepreneurs (think Thomas Edison, who used all sorts of political connections to kneecap market rivals).

Uber’s latest strategy may make sense from a business point of view—Plouffe even calls it “Uber-mentum”—but if you believe in free markets, it’s just as dispiriting as most of the other things that have ginned up anti-Uber fervor. And to the extent that new regulations make it that much harder for the next great disruptive business to come along, it’s worse still.