What is Uber?
Uber is part of the “sharing economy.” It’s an app-based livery service. Folks ask for a ride on their smartphones, and drivers pick them up and drop them off where they ask. Uber drivers are like taxi drivers, except they’re independent. They can share their car—or not, however they wish. The price of the ride is set by an algorithm that takes into account how many people want rides, how many drivers are available, and how long the ride will be. Everything is visible on the app, and it’s a lot cheaper than a taxi.
Sharing is appealing. The average car is driven less than two hours per day. If you need a ride, using your phone to order one seems natural. And a lot of other items can be shared. Airbnb lets people share their homes; Boatbound offers boat rentals; Justpark turns empty driveways into parking spaces. If you can connect people with stuff to people who need that stuff you end up with less wasted stuff all around.
But it’s not so simple. A lot of folks with a lot of resources are committed to the current system. In places with strong cab drivers unions, Uber is being regulated out of business. Airbnb is running afoul of hotel regulations and taxes. But anyone who has had to stay in an execrable room at an exorbitant rate with rude management knows how under-examined and over-taxed hotels can be. A bunch of one-star reviews seem like an easier way to encourage better behavior.
Regulation can slow—but won’t stop—the growth of sharing. We’re just seeing the first fruits of people having a computer in their pockets. It’s going to be quite a ride.
Douglas R. Tengdin, CFA
Chief Investment Officer
Leave a comment if you have any questions—I read them all!