The Rise and Demise of the On Demand Economy

The Rise and Demise of the On Demand Economy

Call it the Sharing Economy, the On Demand Economy, the 1099 Economy, the Gig Economy, or maybe most accurately, the Piecemeal Economy (since the work isn’t necessarily always there) or the Participation Economy (since it seems that anyone can share almost anything these days, including your home, your car, your time, even your Significant Other). But take note: according to Fast Company, The Gig Economy Won’t Last Because It’s Being Sued To Death. Worse, where’s the sharing when The Gig Economy Celebrates Working Yourself to Death.

There was a time – and we’re sure that it’s still going on – when startups would present themselves to investors as being the Uber of Whatever, since Uber, an early entrant into this vertical, has long been perceived and touted in the press as the jewel in the crown of the Sharing/On Demand economy. In fact, Handy has been referred to, ad nauseam, as the Uber for Home Cleaning, although, workers pay a price, as the Washington Post reports, since they receive no“workers’ compensation, unemployment insurance, time off or retirement benefits — all the perks and protections of working for a traditional business.” Customer who utilize the service also seem to be paying a price, considering the (latest) lawsuit that the service is facing for not having properly vetted its workers. And theft of property is only one of the issues in the complaint. Alison Griswold of Slate nailed it when she wrote that Almost everything that startups get right—and horribly wrong—happened at home-cleaning service Handy.

The same could be said of Uber, although it’s interesting to note that Uber so successfully initially marketed themselves as Us v the Taxi Cartel/David v Goliath, that they managed to capture mindshare and continue to grab investor dollars (over $5B last year alone) despite the fact that they’re hemorrhaging money; are facing fines for their failure to pay taxes; there are the sexual harassment and sex discrimination issues; founder Travis Kalanick’s unmitigated arrogance; and the company’s covert use of law enforcement-evading software, what to speak of “the continuous onslaught of litigation in the US for stiffing drivers, swindling taxi companies, eschewing traditional insurance obligations, and skirting regulations—or so the drivers, companies, and state or district attorneys say,” according to Wired. More lately, relatively newly appointed president, Jeff Jones, resigned after just six months (all of those scandals do take their toll), and just last week Uber announced that they’re going to Suspend Autonomous Tests After Arizona Accident. Not surprising: Uber’s autonomous cars drove 20,354 miles and had to be taken over at every mile (by a human driver), according to documents, Recode reported.

Oh, and let’s not forget about the patent infringement lawsuit filed by Google’s Self-Driving Car Division, Waymo.

New week, new scandal – an Uber cover-up in the UK: Downing Street accused of withholding emails about its secret campaign to help online taxi firm.  The highest levels of government were involved, including former PM David Cameron and former MP George Osborne, who was recently employed by major Uber investor BlackRock, at a salary of £650,000 to work 48 days a year as an adviser, both of whom are close friends with Uber SVP Rachel Whetstone. Pay to play is nothing new, but according to the Daily Mail, “There were fears the web giant was putting traditional taxis out of business and contributing to congestion, air pollution, illegal parking and accidents… Police figures also showed that rape or assault claims were being made about Uber’s London drivers at a rate of one every 11 days.” The criminality involved (besides the obvious): direct violation of the Freedom of Information Act.

No one can put themselves above the law forever – not even the largest, most successful of companies, if Google et al, with their failure to remove offensive videos in a timely manner, or when requested to do so, are any indication (Google and social media companies could be prosecuted if they show extremist videos and welcome to the world outside of the tech bubble), and have you noticed that, in their decks and pitches, startups never refer to themselves the Facebook or Google of Whatever. Not that we personally don’t have issues with these companies as well, but not that easy to name a successful tech company that’s a household name who doesn’t skirt legal/privacy/ethics issues – or all of the above.

“As tech startups expand from profitless, garage-grown prototypes to billion-dollar, multinational enterprises, they push the boundaries of regulations while gaining attention, customers, and funding. Legal conflict—and, sometimes, rank fortune hunting—are sure to follow,” says the Wired piece. Again, especially if they believe that they’re above the law.

And note to self: you can also put yourself above the laws of economics for just so long, too, in an attempt to muscle out the competition by undercutting their rate (Is the era of cheap Uber rides over?).

Why isn’t unicorn status based on P&L, rather than investment money brought in? There are two answers to that: 1. not as catchy in the press/makes a lot of tech appear much more successful than it really is, and 2. unicorns aren’t real.

For the record, Domino’s (DPZ) stock has outperformed Google (GOOG), Facebook (FB), Apple (AAPL), and Amazon (AMZN) this decade.

Investor Adam Townsend recently wrote an excellent blog post (The confidence game. Uber comes undone) on the subject of Uber’s rise and demise, delineating the company’s brilliant us-v-them marketing approach in coming up against the Taxi Cartel.

Hockey stick growth and exorbitant investments/market valuations have lulled us into believing that a company can become too big to fail, and in many cases, the tech press was very much in collusion in leading many a startup and investors down the wrong path: Uber may well be the company that disproves that too big to fail theory, in the tech space, anyway.

As Townsend writes, “Journalists focused on the wealth and status of Uber’s Silicon Valley investors within the venture capital world. The presumption they must know what they are doing eliminated the need to find evidence that would explain how they had found tens of billions of economic value no one else had ever seen, or whether their interests coincided with any broader economic interests… Since Uber’s narrative provided a fully self-contained explanation of its inevitable success, even journalists without strong tribal tech industry ties had little need to undertake any independent investigation. Given Uber’s overwhelming financial advantage, one could assume the battle had been decided before it started, and thus there was no need to dig into complicated competitive issues. The press treated Lyft (with a mere $2 billion in funding) as an also-ran and the entire incumbent taxi industry as a complete irrelevancy. Given its rapid growth, journalists accepted the Uber narrative implication that it was following the exact model that Amazon and Ebay had followed.”

“The other key component to Uber’s market control strategy was the development of a highly ruthless corporate image. While the PR/propaganda campaign told the world that success was inevitable, Uber’s vicious behavior towards local politicians, competitors and critical journalists told the world that resistance was futile,” writes Townsend.

May be better to display the hubris, or in this case – in an industry that believes it can set itself above and apart by inventing words and names and concepts, Ubris – once you are at least in striking distance of being in the black. Uber may well stay in the lexicon, by perhaps disproving the too-big-to-fail theory and pivoting into the Uber of Whatever in the ever-expanding tech 2.0 deadpool.

Not that Uber would be the first on-demand company to fail. Far from it: CB Insights did a recent post-mortem on a number of on-demand startups that “were in demand … until they weren’t” (The Quick And The Dead: The On-Demand Companies That Went Splat).

There’s no such thing as a free ride.

How often have we heard that it’s all about the team: arrogance and having a singular vision/purpose are two very different concepts and approaches. Have the wrong management team at the wheel, shift into idle and watch them drive that unicorn right into the ground. Onward and forward.

#Uber, #OnDemandEconomy


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