On why Uber might have no future….

Uber is targeting a valuation of $120bn in 2019…

However this might be totally unrealistic if you follow Nick Srnicek’s argument in ‘Platform Capitalism’ (2015). His perspective on Uber and Airbnb as having no real future struck me as interesting….

Unlike other platform companies such as Google, Amazon and Facebook, today’s lean platforms’ have returned to the ‘growth before profit’ model of the 1990s.  Uber, Airbnb and Mechanical Turk epitomise this business model.

‘lean platforms’ own no assets: Uber owns no cars, and Airbnb owns no property for example, they are truly ‘virtual’ companies. They operate on a ‘hyper-outsourced’ model: initial purchase costs, maintenance, training and insurance costs are all outsourced…. All that remains the platform which charges ‘rent’ in the form of fees for users.

Lean platforms only work because of desperate workers…

In the USA, these firms legally understand their employees not as employees but as ‘independent contractors’ which allows lean platforms to save around 30% costs by not paying pensions contributions, for sick days or overtime, or training.

Workers are paid on a per task basis: a piece-wage.

Here we can actually apply Marx, who argued that the piece-wage is the wage-system most in harmony with the capitalist mode of production.

It’s also worth noting that this trend to outsourcing is nothing new: it’s been going on since the 1970s… it is the same as Nike paying its core workers to brand products and people in Indonesia next to nothing for making them.

Companies like Uber (and it is mainly Uber) are creating a precarious market of day labourers, the closest parallel to which is agricultural workers, who turn up on the day in hope of work, and only find whether they get work on the day.

The number of people in ‘precarious employment’ is on the increase….

In 2005, the percentage of U.S. workers in alternative employment stood at 10%, by 2015 this had grown to almost 16%. Meanwhile in the UK, 2/3rds of jobs created since the 2008 crisis have been self-employed jobs.

It’s difficult to say for certain how many of these people seek employment through Uber and other lean platforms because there is no official data, but what seems to be the case is that all of these people are not choosing to be self-employed, they are forced into it because since the financial crisis of 2008, we have seen a jobless recovery: a bizarre situation where the economy grows, but jobs do not, and lean platforms are basically making the most of this: turning the desperate ‘would be unemployed’ into precariously employed day labourers.

Increasingly lean platforms are cutting into white collar jobs, and here tasks which might once have been done in the UK and US are being outsourced to people in developing countries.

This has long been one of the fundamental contradictions of capitalism….profit being dependent on ever decreasing wages, but since wages are a fundamental part of demand, it simply cannot go on forever.

The profitability of lean platforms remains unproven…

Srnicek argues that even with all of the outsourcing, the profitability of these platforms is not yet proven… they are kept alive by Venture Capital and Tax Evasion, and most of the investment is speculative, hoping that these platforms will eventually gain monopoly status, or possibly evolve into a profitable position… for example, Uber might eventually develop driverless cars.

Uber, Airbnb and Slack all use the cloud logistics system managed by Amazon (AWS), and Uber uses Google maps, so these larger tech companies actually profit from these lean platforms and the precarious employment they exploit. I actually find this extremely interesting….. and this potentially makes ‘lean platforms’ very vulnerable if these larger companies decide to ramp up their fees for these services.

In conclusion, Srnicek argues that if it weren’t for desperate surplus labour and ‘welfare’ venture capital (much based on the massive surpluses generated by larger tech companies) these lean platforms would fold. It isn’t actually the income they generate from users that makes them ‘profitable’.

It all just seems like a bubble.

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https://www.theguardian.com/technology/2018/oct/16/uber-targets-120bn-valuation-2019-flotation-report

 

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