The Übermorphosis Is Nigh…

As I mentioned in my recent article Über Alles, I have puzzled from the start over how Über could possibly penetrate the absolutely sewn-up transportation markets in New York and San Francisco without some behind-the-scenes power even greater than local politics–a power which is itself quite great in those towns.

The argument has always been that Über was so stealthy it was unstoppable and therefore monopolized the massive under-served ride markets in those over-regulated cities, but that argument doesn’t hold water. Yesterday’s Wall Street Journal reported that using Airbnb can draw fines of up to $7,500.00 in New York–why not do the same to Über? (I’m not advocating that for Heaven’s sake, I’m just making an argument!) It would be much easier than attempting to fine Airbnb, which the article suggests can be hard to trace because addresses are not given over the app. Über on the other hand, by its very nature, records the when, where and how of every single transaction–if it were banned in New York City, authorities could easily fine Über for any rides recorded in the forbidden zone.

My nagging feeling that there was a big power behind Über was thrown for a loop however, when a California judge ruled against Über and found that drivers were employees. Knowing this would bust the gig model Über is famous for, I really had to wonder who had the clout to infiltrate the previously uncrackable New York and San Francisco ride markets but was not able to stop such a questionable legal decision. I had to conclude that if there was Big Power behind this phenomenon, they wanted Über but not the drivers. I discovered (because I looked for it) a big investment in Über by Google, a company famous for being on the cutting edge of driverless cars. I concluded that Über would be the way to roll out driverless cars to what might otherwise be a resistant population.

Well, it’s happening-and at a furious pace. The Wall Street Journal reported last week that Pittsburgh would be trying out driverless Übers this month, and today’s Journal reports that Singapore is already doing it (under the leadership of two MIT grads, by the way). In addition, on the same day as the Pittsburgh story, The Journal reported that a California judge refused to approve a settlement between Über and its drivers–ensuring the drivers work themselves out of the industry, I suspect. To top it all off, according to Bloomberg, yesterday Über reported to its investors unprecedented losses again–staggering losses even by Silicon Valley standards–and blamed them on the fact that drivers are subsidized. This made me wonder if this was ever meant to be a sustainable model. Is the idea that Über will be able significantly to increase its pricing and maintain its market share? Will the market itself shrink if prices rise dramatically? Again I had to conclude that the model is and always has been to reach critical mass and replace the Über we passengers and drivers know and love with driverless Übers–the sooner the better.

Frankly, if free market mechanisms were at work, I wouldn’t object in the slightest to these developments. In a free market, labor and capital engage in a back and forth that allows capital investment and technological advancement to reflect the efficient use of labor in an industry. As the cost of incremental units of labor increase, more capital and technology are employed. As efficient labor employment in an industry is maxed out, that labor goes elsewhere and reduces the cost of labor and increases employment of labor in other industries. The result is that labor tends towards full employment because if there were surplus labor, industry would cut back on investment in capital and labor-saving technology as the price of labor adjusted to the surplus. The result is not a bunch of slaves either–efficient resource allocation and free market pricing is the very foundation of surplus wealth, and labor commands its fair share through the competitive pricing mechanism both in wages and in goods. Prices go down, leisure increases, productivity improves…it’s all good.

In this case, however, the government has got its finger on the scale and is heavily promoting the replacement of labor with capital-intensive technology in several ways:

• Subsidizing the technology. Government subsidies of technology through direct research, including at the Department of Defense; research through universities, corporations or other institutions; direct collaboration and funding; or simply general university funding (even school loan subsidies) freeing up money for university research. (Tax deductions for research also tip the scales. I am not a proponent of corporate taxation at all, so I’m not suggesting research not be tax deductible, I’m just pointing out that tax policy can promote research.)
• Subsidizing regulatory approvals. This headline says it all:
  U.S. Proposes Spending $4 Billion to Encourage Driverless Cars
  Obama administration aims to remove hurdles to making autonomous cars more widespread
• Promoting the switch as a safety measure.
  Here is an article I flagged when it first came out in July:
  Tesla Autopilot Crash Shouldn’t Slow Self-Driving Development, Regulator Says
  Head of National Highway Traffic Safety Administration says main objective is to reduce traffic fatalities.

Mark Rosekind, speaking on Friday at a conference in Detroit, said the auto industry “cannot wait for perfect” when it comes to how quickly it deploys technology that makes cars safer.

Mr. Rosekind declined to address the May fatality involving Autopilot because NHTSA is investigating the incident. The agency’s main objective, he said, is to reduce traffic fatalities, which rose to 35,000 in 2015, an increase of 8% compared with 2014.

“We should be desperate for anything we can find to save people’s lives,” Mr. Rosekind said.

Having already flagged this obvious agenda item–anytime you hear “desperate to save lives” check your Bill of Rights (these are our live-free-or-die moments, folks)–I wasn’t surprised to see in the news this week an article playing right into this meme:

U.S. Traffic Fatalities Continued to Surge in First Half of 2016
Deaths rose 9%, extending a trend that began two years ago as the economy improved and travel increased

“Our complacency is killing us,” Deborah A.P. Hersman, president and CEO of the National Safety Council, said in a statement. “One hundred deaths every day should outrage us.”

NB: Google blames 94% of car accidents on human error.

But is the agenda only to reduce jobs and subsidize Big Tech cronies? Perhaps, but I fear the bigger agenda is the “highly controlled society.” One of the hallmarks of the independent American spirit is our attachment to the personal automobile. Using a worldwide addiction to the (apparently falsified) superior economics of misleadingly-dubbed ride-sharing to drive individuals to abandon their cars, then swapping out the ride-share driver and his car with driverless vehicles, means that we will forever after be dependent on the grid. So if your Plan B is the oft-repeated “guns, gold & a getaway,” you might need a Plan C once our wheels are all jacked in to the matrix.

Update (11/21-16): It really breaks my heart that government policy accelerates this.

“Uber Technologies Inc. and others are testing self-driving trucks. That augurs trouble for the 3.5 million truck drivers in the U.S., who hold some of the best-paying jobs that don’t require a college degree,” Mr. Mims writes. “Meanwhile, advances in artificial intelligence are beginning to consume white-collar jobs in fields such as medicine and finance, shifting the debate over the impact of technology.”

For more on how government-subsidized tech is displacing workers, click here.

Update (5/8/17): A twist! Perhaps Uber is getting us addicted to the service but doesn’t get to see it through to its natural conclusion – we shall see!

How Self-Driving Cars Could Wipe Out Uber

Update (7/10/17): In case you think any of this is organic:

Tesla Sales Fall to Zero in Hong Kong After Tax Break Is Slashed
New registrations of company’s vehicles dropped to zero from 2,939

Tesla Inc.’s sales in Hong Kong came to a standstill after authorities slashed a tax break for electric vehicles on April 1, demonstrating how sensitive the company’s performance can be to government incentive programs.

Update (7/17/17): Here in the States…

California Considers a $3 Billion Electric-Car Push
Lawmakers consider $3 billion in rebates to help meet state rules for cuts to greenhouse gas emissions

California lawmakers are considering $3 billion worth of rebates for buyers of electric cars in an effort to power an industry that relies heavily on public subsidies….

A $5,000 tax credit in Georgia helped the state become the second-largest electric vehicles market in the U.S. after California until the state tax credit was eliminated in July 2015, according to Edmunds, a website that tracks automotive sales. After the change, sales in Georgia fell to 2% of all U.S. electric vehicles sold in 2016 from 17% in 2014, according to the site. Georgia sales of Tesla, luxury electric vehicles that typically sell for about $100,000, initially fell but bounced back, according to Edmunds.

Even the “market forces” are a result of policy:

Industry analysts estimate that rising costs of developing combustion engines that meet ever-stricter emissions regulations could make some electric models more affordable as soon as 2025….