Redefining barriers to entry; the Uber debate is larger than Uber

The story about Mr. Kalanick and his Uber app is one of America’s latest examples that our country is still the greatest place on earth for entrepreneurial endeavors. One of the newest billionaires on Forbes Magazine’s list of Richest People in America 2014 is 38 year old CEO of Uber, Travis Kalanick. A college dropout, he is ranked #97 on the Forbes list and is estimated to be worth $5.3 billion. According to the March 2015 issue of Forbes Magazine, Kalanick’s company was valued at $3.5 billion in mid-2013, $18.2 billion in June 2014, and $41.2 billion in December 2014.

Sometimes confused for a taxi service, Uber does not own any vehicles. It uses its app via smartphones to connect approved drivers with people needing a ride. Uber is far from your grandfather’s taxi company. Not every person is eligible for an Uber ride; riders must have a debit or credit card and a smartphone, thus excluding those who live in the cash economy. Uber is in essence a technology company with an innovative mobile app that is causing a firestorm across America, including here in Broward and Palm Beach Counties. There’s more at stake than the destiny of one company; however, a close look at Uber will illustrate the issues involved.

An educated electorate can help ensure the people’s representatives in government pass sensible policies that encourage entrepreneurship, innovation and competition. If our elected leaders want South Florida to remain a leading, global metropolis attracting visitors and businesses, they need to follow in the footsteps of over 20 U.S. jurisdictions - from Washington D.C. to Baton Rouge to Chicago - that have adopted smart regulatory frameworks for ridesharing. This will send a message to other technology start-ups that South Florida is open to new ideas.
Mr. Kalanick has been operating in uncharted territory; and like trail blazers such as Charles Lindbergh and Henry Ford before him, Kalanick has had to make up the rules as he went along. Uber, self-proclaiming itself a technology company - not a taxi service – ignores the restrictive regulations imposed on the taxi industry. Uber sets its fares lower than taxi rates, which are regulated. County regulations restrict the number of taxi cabs on the street, while Uber seeks to add as many drivers as the market will bear. If an un-permitted Uber driver receives a violation for picking up a passenger at the airport, Uber simply pays the fine. According to a Sun-Sentinel article (4/14/15) by Brittany Wallman, “Broward County, FL had fined rogue drivers — mostly from Uber — $49,750 as of March 12.” Uber began operating in the county in August 2014. Taxi companies are crying foul and are fighting back.

Curious how a smartphone app could be so popular while also causing such a media controversy, I decided to become an Uber driver for two weeks in January. I registered my Ford Fiesta on Uber’s website, uploaded photos of my headshot, license, car registration and insurance card. I signed all the disclosures electronically, and Uber ran my background check. Less than four hours later, and without talking to a soul, I received an email from Uber that I had been approved. I downloaded the app to my iPhone and I was in business. I was officially an entrepreneur.

One Sunday afternoon after running errands near my home, I decided to turn on my Uber app and pick up a few fares. Within two minutes I received a sonar sounding ping and hit accept. The Uber GPS directed me to the Fort Lauderdale Beach on A1A, and five minutes later I picked up a man, his wife and small child. They hopped inside, the man sat beside me in the passenger seat. We chatted; he informed me that he was an Uber driver and on his days off, tired from driving all week, takes Uber everywhere. Unlike me, who was doing it part-time and as a social experiment, he was doing it full-time to support his family. He said that after being laid off work, Uber has made it possible for him to work for himself. He turns on the app at five o’clock in the morning and works about ten hours a day, earning around $200 to $300 per day. This sounded feasible to me as I was making almost $50 per day driving just two hours per day.

The next weekend I picked up a fare that included a man in his 20’s and his dog. He confided that he was going to a friend’s barbeque party and that he knew he would be drinking. He used Uber instead of driving himself to parties to avoid a costly DUI. He said, “I hate taxis. I’d rather drive myself than take a taxi. Uber is different and it might be saving my life.” What makes the Uber passenger experience so different?

As my research gig was coming to a close, I came to realize that what Uber had accomplished was giving power back to the people to make transportation decisions for themselves rather than being forced to use sub-par taxi cabs. From a passenger perspective the riding experience with Uber does not compare with the experience of taking a traditional taxi. The people who use the Uber service are members of a network who prefer unmarked cars that arrive quickly and that can be tracked on their cell phones. Passengers told me they feel safer with Uber drivers than with taxi drivers. The passengers - residents, business travelers, international and domestic visitors to South Florida - trust the rating system that grades the Uber drivers based on ratings by previous passengers more than they trust a government regulated taxi system to keep them safe. Drivers who are not able to maintain a certain rating for their service area are booted out of the Uber system. This gives the passengers control of what drivers and cars they want in the system rather than government regulations. Sub-par drivers or vehicles in poor condition are naturally removed from the Uber system quickly and probably a lot faster than a similar sub-par licensed taxi driver would be.

Help your elected officials make the right policy decisions by becoming educated yourself. Rather that drive to dinner one weekend, take an Uber ride. The following week, take a taxi. Decide for yourself if Uber is a taxi service or a technology company, or something in between that requires an entirely new set of policies and regulation.

Our local elected leaders need to vote ‘no’ on any legislation that increases barriers to entry for entrepreneurs who wish to drive for ridesharing companies such as Uber.

Start-ups in other industries are watching what happens with the taxi/ridesharing industry. The results of the Uber debate could have ripple effects in other industries, such as lodging and health care, where companies are developing new software and technologies to connect users with services. The implications could have far reaching and unforeseen consequences for America’s competitiveness.