Benchmark Capital’s Bill Gurley has been at the eye of the storm called Uber, that included cutting the cord with its lightning rod CEO Travis Kalanick, in a public manner. He also has been the service’s biggest champion. In this Uber-long (no pun intended) piece, he makes a case for Uber as a positive force for the drivers. Gurley, like a great analyst that he once was, makes a case for the positive impact of Uber. This one paragraph sums up the entire thesis:
In just a few short years, over 3 million driver-partners have joined the Uber platform. To put that in perspective, Walmart has grown to 2.3 million employees over 55 years. I think it’s safe to say that over the past five years, no industry has created more new jobs and new income opportunities than ride-sharing. And keep in mind that approximately three-fourths of the industry revenue goes straight to the labor provider — which is higher than almost any other industry on the planet. As a result, in just a few short years, global ride-sharing driver-entrepreneurs have taken in approximately $75+ billion dollars (with industry lifetime revenues north of $100 billion dollars). And keep in mind that ride-sharing only represents around 1% of the miles driven in the United States. As more and more people reduce car usage and abandon car ownership — this number will most certainly go higher and higher.
He also argues that Uber’s 3 million driver-partners “all “volunteered” to start driving with Uber” and unlike old days when a steel mill was the only job in town, driving for Uber is a choice. I don’t disagree at all. I also know that Uber investors won’t plow billions into a steel-mill. The reason Uber is valued so highly is because it has been able to attract those drivers, in addition to creating a demand. And so it in short order. Both sides of the table are benefiting.
As an immigrant, in my early days in America, I did all sorts of what some might call shitty and exploitative jobs. It was tough. It was rough. But the choice was mine, and I did make enough to pay the rent and have two meals a day. I had flexible hours. And a lot of freedom. But never did I think of myself as an entrepreneur.
I find economic benefits of Uber welcome and necessary, especially now as our retail industry is collapsing. I am in agreement with Bill that extra $75 billion in payments to the drivers is good. It should also take out grey money from the ecosystem, increase tax receipts. However, where I don’t agree with him is conflating drivers with entrepreneurs. Side hustles and picking up part-time work to get out of thought fiscal reality, doesn’t make you an entrepreneur.
Every time you see a stakeholder make a case for their company and its achievements, you as a reader need to ask yourself why and why now. And then take a wider lens to get the bigger picture. Starting with The New Yorker, and subsequent pieces including the most recent Wired article have been devoid of unknown facts and seem to be articulately stage-managed for having a maximum impact on one thing and one thing only: Uber’s relationship with drivers. And then ask yourself why it all matters?
First, Uber is trying to present itself as a kinder-gentler company. It has made drivers the focus and is on a charm offensive. Look at its CEO Dara Khosrowshahi and it global peace/apology tour, which has seen him publicly atone for the sins of the past Uber administration. And as Jessie Hempel outlines in her long piece for the Wired, there was a lot that was wrong with the company, both on the inside and the outside. That said, unlike others, I don’t buy Dara the saint act. No one is a saint, especially hard-charging CEOs of a penny-pinching airfare company. To put it bluntly, he has $150 million reasons to apologize and get Uber on the path to a public offering.
The driver-partner focus is also an acknowledgment that Uber needs them. And furthermore, Uber is not the only one with cash advantage — its rivals are now better funded, both globally and locally. Sure the recent cash infusion from Softbank helps, but a billion doesn’t go too far in the ride-sharing wars.
There is a general dislike for the brand, and most people prefer to avoid Uber if they can. The drivers too aren’t that much in love with Uber — they drive for both Uber and Lyft. This fungibility of drivers has made even hardcore Uber users like me download Lyft as an option. This brand fungibility is perhaps the biggest threat to Uber. Anyway, in early 2017, it became known that only a quarter of drivers who started with Uber were still driving for the car service, a year later. As much as drivers need Uber, Uber needs them as much or more. Why else, would they keep giving them driving bonuses to keep them on the Uber platform.
The driver focus also dovetails with the incredibly shrinking self-driving ambition. The settlement with Waymo was a public indication of that. Recent exits from the self-driving unit are mere aftershocks. It wouldn’t surprise me if Uber becomes a buyer of future Waymo vehicles.
All this has to be seen in the context of the Uber IPO. Everything the company is doing is marching towards the offering so that investors can cash out. It is pulling out of cash-losing markets. It has given up on a dream of vertical integration. It is entirely focused on growing its revenues, reduce costs, and do what is needed to be ready for the public offering.
That is what all investors in the company want. Including the remaining founders. Startups make money for their investors, who in turn make money for their investors. That’s how the world works. And not just investors — its employees too!
There is no denying about the importance of Uber and Lyft to our mobility future. There is no denying the roles humans play in this future. Now here is a much more sustainable way to reward people who make gig-economy work.
What if Uber created an option grant for Uber driver-partners using a formula based on time driving for Uber, total miles were driven, and total rides were given. These can be kept in a trust, which entitles it to a board seat, taken by an independent board member, who speaks for driver-partners. The drivers get their options vested when they reach their goals. It will be an excellent way to reward those loyal driver-entrepreneurs by giving them enough wealth to change their lives, in addition to providing them a voice in helping build a platform that could one day be worth over $100 billion.