Entrepreneurship is inherently disruptive in the sense that it challenges old ideas and revolutionises the way we go about our daily lives. To borrow the terms of economist Joseph Schumpeter, its nature is both destructive and creative at the same time. It threatens the old and paves the way for the new. Furthermore, there seems to be an ongoing struggle between progressive and conservative forces, whose outcome determines the level of human progress. With these ideas in mind I would like to pick the recent Uber controversy as an example of the way our society deals with ingenious entrepreneurship.
Ride-sharing companies such as Uber, Lyft and SideCar have developed their own smartphone apps that allow car drivers to connect with people in need of a ride. These innovative companies offer several advantages over traditional taxi services. For once the use is extremely convenient. In contrast to taxis, there is no need to make a phone call or step onto the sidewalk to hail a passing cab. You merely have to log into the app, determine your location, choose a driver and wait for him to arrive. Since the payment occurs through the app, no cash is needed. Through background checks and rating systems, they hold their drivers accountable and ensure that passengers can enjoy a quick, safe and overall pleasurable ride. Uber, the largest firm among them, was founded in 2009 and has since then expanded into more than 200 cities in 45 countries around the globe, but not without significant backlash.
Unquestionably the largest opposition stems from licensed taxi drivers, who have led numerous protests in London, Barcelona, Paris, Berlin and several other major European cities. As a result, Uber has been banned in several cities in the United States and Europe. The local government in Madrid announced fines up to €18000 for drivers and passengers and threatened repeat offenders with car seizures. Meanwhile the company is facing legal hurdles in multiple other places. Last September the French parliament enacted an “anti-Uber law” imposing a number of ridiculous restrictions on Uber and the like. They are, for instance, prohibited from using geolocation services and are obliged to return to their dispatch after each ride. Last year they were even temporarily compelled to wait 15 minutes before picking up a passenger.
Clearly the crackdown has very little to do with the common good, which our public authorities are supposed to promote. Quite to the contrary, the traditional taxi companies have successfully used the political system to protect themselves to the detriment of consumers and competitors. This is not at all surprising given how interest-ridden and regulated the transportation market has always been. Indeed whenever agents of the public and private sector sit at the same table, there is a considerable risk of laws favouring them at the expense of third parties with less political power. As Tacitus warned: “The more corrupt the state, the more numerous the laws.”
Apart from being highly problematic from a moral standpoint there are also practical issues to consider. As long as there are laws in place that protect one or multiple firms from competition, the privileged firms are discouraged from improving the quality of their products or services. Imagine we would have forbidden automobiles to compete with horse carriers or computers with typewriters. Not only would we have crushed the dreams of creative geniuses but we would have brought progress to a halt. No wonder the taxi industry has never come up with the technological advances that have made Uber and other firms popular.
A possible counter-argument might run as follows: “While there are indeed unfair laws that benefit taxi companies at the expense of ride-sharing services, Uber is also engaging in unfair competition by not complying with existing laws regarding taxes, licenses and insurance.” While Uber claims to operate within the law it is certainly true that at least one obvious competitive advantage is due to the fact that its drivers do not pay for expensive licenses. However, this only constitutes a sufficient reason to condemn Uber under the condition that these licenses are just and absolutely necessary. Yet their legitimacy is dubious to the extent that they serve established interests to the disadvantage of newcomers. Moreover, their usefulness has been called into question by thousands of people, who have put their trust into Uber and its particular way of certifying drivers. It could even be argued that Uber and the like have a greater incentive to ensure quality and safety than the bureaucrats who are charged with the distribution of official licenses. After all the former are threatened with financial ruin in the worst-case-scenario whereas the latter are not.
With all that being said, there is a crucial point that must be kept in mind. Uber is no different from other companies in the way it behaves in a corporatist state. Thus it should not come as a surprise that David Plouffe, Obama’s former campaign manager, joined Uber’s team this year. Additionally, as Nick Gillespie writes: “After spending years antagonising would-be regulators, Uber is now working with them to hammer out agreements that will let the company flourish even as less-connected competitors face tougher regulations.” Indeed Uber’s rising popularity is coming hand in hand with a gain in political influence.
To come back to the idea introduced in the first few sentences of this article, the ongoing struggle is not a static one. Consequently there is no reason to believe that its players eternally remain on the same side. Instead a firm is likely to start out as a a force for progress and turn more conservative at a later point in time. So my aim is not so much to defend Uber but rather to stand up for the rights to innovate, to unleash creativity, to realise your potential and to challenge the status quo in order to bring about human progress.