Uber for X has been the headline of more than four hundred news articles. Thousands of would-be entrepreneurs used the phrase to describe their companies in their pitch decks. On one site alone—AngelList, where startups can court angel investors and employees—526 companies included Uber for in their listings. As a judge for various emerging technology startup competitions, I saw Uber for so many times that at some point, I developed perceptual blindness.
Nearly all the organizations I advised at that time wanted to know about the Uber for of their respective industries. A university wanted to develop an Uber for tutoring; a government agency was hoping to solve an impending transit issue with an Uber for parking. I knew that Uber for had reached critical mass when one large media organization, in need of a sustainable profit center, pitched me their Uber for news strategy.
Were going to be the Uber for news, the news exec told me. Confused, I asked what, exactly, he meant by that.
Lets go back in time and try to see the world as Uber founder Travis Kalanick did. What trend patterns were emerging?
Lets forget what we know about the world today and instead pretend like its January 2010. America was still rebounding from our Great Recession, which had been sparked by the subprime mortgage crisis. The Bureau of Labor Statistics forecast an ongoing decline in the growth of consumer spending. Americas unemployment rate reached 10 percent, and experts offered a bleak outlook for most job seekers.
We hadnt seen unemployment climb above 9 percent since the 1981 recession, in which three-quarters of job losses came from goods-producing sectors, like auto manufacturing. This time around, white-collar and public-sector workers were hit hardest. They were teachers, civil servants, sales department managers, journalists, and postal workers. We reached an inflection point, and almost overnight, there were far more people who needed jobs than positions posted by the relatively few companies able and willing to make new hires.
But unlike those who were laid off in 1981, the people who lost their jobs in 20092010 had lived through a decade-long dot-com boom. The tech bubble may have burst, but even that implosion couldnt dampen Americas renewed sense of entrepreneurial spirit. There may not have been jobs available, but a lot of people still needed assistance getting things done. TaskRabbit emerged as an online marketplace for small jobs and tasks. There were no more buyers for bad second (and third, fourth, and fifth) investment properties, but there were rooms to let. Airbnb soon enabled anyone to make a few bucks off of their empty houses, condos, and rooms as a bed-and-breakfast purveyor. The unemployed no longer had disposable income to buy new power tools or designer handbags, but there were neighbors willing to lend their goodsfor a fee. SnapGoods and NeighborGoods were platforms allowing communities to rent items to each other.
We can begin to see we had reached an inflection point. Something happened to catalyze a great acceleration in emerging research: the job market tanked, and myriad developers got to work thinking about and tinkering with new kinds of sharing-economy platforms.
In 2010, a lot more people were buying smartphones than those economic indicators would lead us to believe. Even in a down economy with so many people out of work, Apple posted record iPhone sales and what had at that point been its highest earnings in company history. Sales of iPhones, at 14.1 million, were up 91 percent year-over-year.
It seemed like a staggering contradiction, one that could favor Uber. Thats because the Uber platform relied on mobile technology. Would-be riders had to mark their location within an app, which would connect them with a nearby driver, who received the notice on her own mobile phone. The riders credit card information was stored in the app, as was the drivers account–Uber was completely cashless. Once a ride was completed, the total amount would be charged to the stored credit card, and a percentage would be posted to the drivers account.
In the taxi market, there are three operators: the taxi driver, a dispatch company that facilitates transactions (as well as other logistics and infrastructure, like fleet maintenance and scheduling), and whats called the medallion holder. Medallions are special permits required to own and operate a taxicab, and theyre a requirement in most US cities. Without the official permit, a local government could impose hefty fines.
By the time the medallion idea originated in the 1930s, cabs had become wildly popular in New York City. But medallions werent free. By 2010, the onetime cost of a single New York City medallion averaged $775,000 to $850,000. It was less in other cities, including Boston and San Francisco, but not by much. That fee trickled down to drivers, who had to pay the medallion owners $100 or more per shift just for the privilege of working. It could take half the day to break even. Medallion owners had to pay down the debt on the permit, and they also had to pay the dispatch companies.
This is why in crowded metropolises, like New York City, its so hard to hail a cab, even in Manhattan, where taxis appear to be everywhere.
By the time Kalanick was pitching Uber to investors, the citys population had increased to 8.2 million. The city was managing an average of 50 million tourists every single year. And lets not forget about the 117 million passengers served at New York Citys three airports. Some are tourists, but many are local residents who use cabs to get to and from their flights.
In 1937, guess how many taxi medallions were issued? 11,787. Now, guess how many medallions are in circulation today? Only 13,270.
This is why in crowded metropolises, like New York City, its so hard to hail a cab, even in Manhattan, where taxis appear to be everywhere, a rippling blur of yellow with occasional accents of red flashing lights. If youve ever tried to hail one of those cabs during whats known as shift change—the dreaded 3 p.m. to 6 p.m. block of reduced service as drivers end and begin their shifts—youve no doubt experienced a level of frustration thats difficult to convey without the assistance of expletives. Same goes when its raining in Washington, DC, and youre trying to get a cab outside of Union Station. Or when its snowing in Chicago and you need a ride out of OHare.
Its another contradiction. One would think that a great increased demand would lead to a corresponding supply when it comes to public transit, but that just hasnt been the case.
Uber is also a workaround for a standard practice, threatening the established orthodoxy. It creates instant competition in a field dominated by a singular monopoly in just about every market. Kalanick wasnt just building another car service. His ride-sharing idea was, at its core, about building an advanced, pervasive peer-to-peer network. Instead of circumventing the intermediary to move files, hed get around the medallions, dispatchers, and operatorsas well as those irksome government regulatorsto move people.
In 2010, the taxi owner-driver-dispatch trifecta hadnt evolved at all, even as technology had changed consumer expectations and behaviors. Hundreds of mobile apps had made paying for things easy and seamless, but cabs were stuck in the old cash-based system. Although drivers were required to take credit cards in most cities, the machines were often difficult to use or couldnt make the connection back to the dispatcher. Drivers wanted cash tips, not credit card receiptsand so they would discourage passengers from using the machines.
Uber-style payments started to change the consumer mindset. Why wasnt every transaction that easy?
Uber was a very clever hack for paying with cash. Its payment gatewaythe infrastructure that works securely between the passengers phone and Uber—uses client-side encryption written in a mobile language. Which means that rather than the passenger having to enter her credit card information again and again, or having to load slow web pages onto her mobile device, the entire transaction happened lightning-quick in the background. This and other advanced technology made the Uber transaction invisible—once a ride was finished, the passenger was simply free to leave the car.
No one had ever before launched such a seamless mobile payment interface. This wasnt a simple update to the cash transactionit was a creative solution to an experience that had long frustrated riders throughout the world. It was such a revelation that Uber-style payments started to change the consumer mindset. Why wasnt every transaction that easy?
Uber totally upended established payment practices. And the technology platform was so good that when the company introduced its so-called surge pricing, in which fares can be multiplied anywhere from 1.2 to 10 times the usual price during peak demand, Ubers business actually continued to grow. Think about the practical implications of surge pricing for a moment. If a regular taxicab changed its rates throughout the day, such that a short ride to the airport could range in price from $30 to $300, most people would look for another alternative.
Attendees at the 2016 Consumer Electronics Show in Las Vegas, where regulated taxis are already scarce, railed against Uber on social media. With an estimated 170,000 people in town for the convention, Uber invoked surge pricing of five to six times the usual rate, and it alerted users when they opened the app. Throughout the week, there were hundreds of Tweets, Facebook posts, and Instagrams about how Uber was unfairly charging people. But many of those posts included screenshots of time-stamped, paid receipts.
We embrace Uber even when its bad for us, because the technologyon-demand service, widely available drivers, seamless paymentsis too good to pass up.
Zooming in and out, we can see the pattern emerge. Uber had created a rich, complex pool of opportunities, solving for the customer experience problem and—though they might not recognize it as such—for the taxicab owners outdated technology and the regulators restrictive business model. We didnt dream with [Kalanick] about what it could be, that it could transform transportation, said Alfred Lin, a partner at Sequoia Capital, which funded Uber.
Indeed, it becomes clear that Ubers promise wasnt a well-designed mobile app. Uber had a certain x-factor—a set of qualities that was special and significant. If an x-factor wasnt in play, then the copycat apps launched by the taxicab industry itself, such as Hailo, would have found big, captive audiences. To date, the industry has not been able to replicate Ubers success. It hasnt even come close.
There are too many problems with the Uber for X position for it to survive as a trend. Those 526 companies calling themselves the Uber for makeup, laundry, private jets, ice cream, massages, and flowers will inevitably go the way of Gilt, Zulily, and One Kings Lane during the flash sale for x trend a few years ago. Actually, thats not quite right: few (if any) will ever come close to achieving unicorn status. Most will go under, just as we begin hearing that siren call, tantalizing us with the next buzzy-sounding Tech Thing for X catchphrase.
Reprinted with permission from The Signals Are Talking by Amy Webb. Copyright 2016 by PublicAffairs, an imprint of Perseus Books, LLC, a subsidiary of Hachette Book Group, Inc.