Tag Archives: Uber

Capitalism vs. Robots – which is more terrifying?

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In an article that recently resurfaced on Reddit, Famed Astrophysicists Stephen Hawking argues that we should fear capitalism more than robots. I think the timing of this is somewhat interesting, being an election cycle and the two populist candidates are opposites in many regards especially in terms of Democratic Socialism vs. Crony Capitalism (Sanders v Trump). In the broader context of emerging technology this is important as well though, as many other technology leaders have expressed fear of AI, such as Elon Musk, while other leaders are running full steam ahead towards more and more automation.

Hawking isn’t the only person thinking about the economy and technology though. Warren Buffet just released Berkshire Hathaway’s annual report with some pretty stark warnings about the future of capitalism in action at the corporate level. Indicating that innovation does have a darkside. While he’s speaking as a manager, there are economists looking into this and in the book Second Machine age, the authors argue that the best is still to come, because man and machine work best together, not separately.

Unfortunately, this will only push the ceiling up on skills required for jobs, rather than expanding opportunities. A perfect example of this will be Uber. Being an Uber driver isn’t a difficult job because of skill requirements, but because it’s a boring job that is relatively tiring. Uber has been pushing down their prices over a multi-month/year process which will continue through the introduction of “Autonomous” Cars, or RobotCars. At this time a large number of low skilled workers will find themselves out of a job, including people I know and probably people you know. This has been Uber’s plan for a long time as they understand that people are the biggest costs and risk for the company. Especially in light of the mass shooting in Michigan.

Uber isn’t the only major company looking to replace workers like this. In fact, it’s likely that a lot of White Collar jobs are going to go this route as well, including in industries that notoriously relied on people that then made unethical decisions, such as the financial industry.  We’ve heard of High Frequency Trading, which is basically a set of algorithms to make decisions on buying and selling stocks based on microtrends. However, this is going to continue to expand into newer areas. It’s been well remarked that most brokers are no better than a coin flip (Black Swan; Drunkards Walk; Thinking, Fast and Slow; all reference this) so it is highly likely that algorithms will do better than people in picking winners and losers on the stock market. It’s also likely that those algorithms will have access to more data faster than any person could eve analyze and act upon.

This interaction between capitalism and automation creates huge risks for the economy. A few years ago, there was a “flash crash” which was basically caused by those HFT I mentioned above. As more and more portions of the financial industry come under the purview of robo-traders, these sorts of events are going to be more likely. These institutions still have pushed most of the risk to the public, while retaining the bulk of the profits from these robots.

As these trends continue across industries, the local optimization of companies to automate and create more robots is going to gradually push people out of jobs at a more and more rapid pace than new categories of jobs can be opened. I think it likely that will be likely that we’ll see more companies going the route of Uber. Using tools like Amazon’s Mechanical Turk to get processes started before they invest effort and energy into automating processes. Once they are shown to be successful, the effort to remove the human element will continually increase until those workers are out of a job. What we will eventually see is a white collar migratory worker going from one type of tech job to another only to be replaced by automation in the long run.

The impact to the economy in the long run and the human condition in the short term will be catastrophic as our current institutions are not designed to handle this sort of change in labor type. The incentives for this behavior has been in place for decades and have been pushing bad actors to be worse, such as the Turing Pharmaceuticals’ CEO price gouging dying patients, because the market could support it.

Where I See The Sharing Economy Going: AirBnB

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In my last post I talked about where I thought the sharing economy was going to be going. I wrote that I felt that Uber would grow up a little bit and change how they manage working with cities. This prediction has already born fruit in that Uber is taking a 3 month hiatus from Portland to allow the city to create new rules governing how the city licenses Uber and ridesharing. I think that this is an instance where both the city and Uber were acting like adults. Uber forced the issue, a bit like thugs, the city sued, so both flexed their muscle a bit then both backed down and came to the table to figure things out. We’ll see what happens in April whenever the city has completed its rule making to see how Uber responds.

AirBnB behaves in a similar fashion, moving into cities and pretty much breaking how things operate. The legacy industry wants the city to shut down the ability for people to rent out rooms from companies like AirBnB, while the cities want to collect more taxes from this newly created revenue source, and of course people want extra money from their unused rooms/spaces. So pretty much Lose-Win-Win. However, recent data argues that the hotels aren’t losing out on much of anything. Which means that AirBnB might be catering to a wholly different demographic than what typical hotels do, which might be the couch surfing crowd.

AirBnB already has plans to test turning people’s kitchens into restaurants. Which offers a pretty interesting opportunity for all those folks that you always have felt that should make a restaurant, but can’t afford to. I think that this has the unique opportunity to allow more people to eventually start food trucks and then move into a full restaurant after some time and enough demand. However, this venture has even more potential legal issues than renting or replacing cabs. This is because, there are a lot of people that are pretty much slobs and have cockroaches. It doesn’t even have to be your fault that you have them. When I lived in Pittsburgh we had tons of baby cockroaches because our neighbors next door, where we shared a wall, were dirty filthy slobs that didn’t take care of things. Personally, I found it pretty disgusting to be dealing with the roaches, so we had our land lord clean it. However, if you didn’t live there you wouldn’t know about it. My guess is that for this to be successful AirBnB will have to work with local governments to figure out the best way to address these concerns, they are valid after all. I believe that what should happen is that AirBnB either creates its own agency to do the policing or partners to enable policing of homes that want to sign up for this. AirBnB will likely have to develop some sort of background check and methodology for ensuring safety and quality at their “restaurants.”

Once AirBnB conquers the kitchen, it’s likely that they could move into Uber’s space, because after bedrooms and kitchens there’s cars. Other options could be to rent out a home or a space to host parties, where the home owners could act as cooks, wait staff, and/or a combination of both – this could depend on the price and the offer made by the home owners. AirBnB could of course move into more conventional hotelier, however, this drives down their profit margins and makes them liable for a lot more activities. I don’t see this happening in the near future, unless they begin to put the competition out of order. Another space could be managing office spaces or shared spaces, similarly to what a lot of hotels do now.

I think that AirBnB has a lot of options to innovate without pushing up against local governments, however they will still have to figure out how to manage their restaurant idea first. I think they will work with that out with a pilot city first, figure out what works for them (probably NYC), then they can more likely quickly expand into other markets with that approach. I think they will also very likely work with the governments beforehand. I’m imagining that a city like Portland might be a second or third market for them to move into since it’s great for food trucks and already has a great relationship with AirBnB.

I think that AirBnB is going to have an easier time with local governments than Uber because it has a better reputation and seems to have been working with the governments from the start. I’m interested in seeing where they go in the next few years.

Where I See The Sharing Economy Going

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I’ve been beating up pretty harshly on Uber and in some of my past posts I’ve done something similarly to other members of the sharing economy. This is because there’s an attitude of entitlement in some of their behavior, that being said the incumbents pretty much the exact same way and have worked to institute laws to protect themselves. In some cases the laws that are preventing Uber and AirBnB from effectively entering new markets were put in place to protect customers FROM the incumbents. Which means that Uber needs to work to ensure that their drivers meet those same requirements, which I think is a good thing.

So that being said, where will these companies end up in the next few years. Now this, of course, is pure conjecture, but I think it’s somewhat informed. Based on the types of lawsuits we’re seeing from cities like Portland, countries like France and Spain, we’re likely going to see that Uber is going to have to work more with the governments before moving in. These lawsuits are expensive and too many of them will drain the startup’s coffers where it might negatively impact their ability to do business. So instead of just forcing themselves into a given city they will work with community leaders to effect change of policy. They will start to institute their own rules that will lead to inspections of the cars at random intervals, they will begin to add a great deal more of measures that the riders will be able to rate the drivers on. All of these will be analyzed using BIG DATA and will be used to help show that Uber meets the requirements of various governments.

As these companies mature they will begin to look more like incumbents and start to drive policy creation through lobbying while striving to use their data to support their lobbying efforts. They will start to work prevent other competitors moving into their spaces, leverage their monopolies to move into other spaces and generally mature as an organization. Through these missteps they will create internal policies focusing on how to manage their data and implement processes to prevent data abuse in the future. These startups will need to clearly become data stewards as they mature, because they live and breathe data.

I think it’s likely that Uber is going to begin experimenting more and more with other modes of transportation, for example they are partnering with Carpooling to help bring that service to the US for long distance ride sharing. With the amount of money that Uber has in the bank, it’s likely that they’ll look to acquire this company if the partnership is successful. I could see them getting into RV sharing and then potentially trying to compete head on with AirBnB – that last one is a bit of a stretch, but with a huge pocket full of cash they will definitely be able to take a great deal of risks to experiment in new markets once they have operations in major cities across the world. I’d be willing to guess they’ll continue to use the US as an experimental test bed and while deploying more mature offerings across the world.

In my next post I’ll dig into where I think AirBnB will go with their business.

Uber might be crashing back to Earth

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Last Friday Uber decided to start operating in Portland. I know, it’s a little surprising that Uber or any of the other rideshare Taxi apps aren’t already in the city. Portland had told Uber they could not operate in the city, but Uber decided to thumb their nose at that similarly to what they have done in other cities. Even though Uber was recently valued at $40 Billion they have had some serious issues lately, like rape of a woman in Delhi while illegally operating in the city. Furthermore, as I mentioned in my last article, they have smeared women journalists with the data Uber collects.

Portland has decided to sue Uber over their illegal operation within the city. The city is following Nevada in suing the company rather than trying to fine their drivers. Uber has since ceased operations in the state due to an injunction against the company operating in the state. This appears to be the only route that will work effectively as Uber is still operating in Delhi despite the citywide ban of the service. Uber has also been banned in Spain, Thailand, and parts of the Netherlands. I think the biggest blow, however, is the fact that both San Francisco and LA are suing the company for false advertising related to their fees and background check.

These responses should not come as much of a surprise to anyone that has been watching the company over the past few years. The company is part of the Silicon Valley culture of going fast and trying to break things. The problem is that, incumbents are incumbents for a reason and they do have the ear of government. It’s not to say that they should be incumbents or that it makes them something worthy of respect, but you need to understand the cards are stacked against you. In cases where you want to go in and intentionally ruffle feathers, you must have strong safe guards in place to protect your customers and be public about how you protect them. Uber should welcome background check audits, privacy audits, and driver safety audits whenever they go into a new market. These should all be huge features that they brag about and let people under the hood to actually see.

I think it’s time that companies like Uber start treating our data as if it’s Personal Health Information, which is protected by Health Information Portability and Accountability Act (aka that HIPAA agreement you sign at the doctors’ office). The default is to not share personal information about a patient, that if someone is caught looking at the data without just cause, it typically results in a firing and a fine for the organization. Similar action must be taken at Uber to show they are a steward of our data. Now the government won’t be taking that money, but instead they should be donating the funds to a good cause at a similar rate to a HIPAA violation.

In some respect Uber is exhibiting the effects of a company that is growing too large too fast without designing processes to enable their business activities properly. For Uber to be a successful long term company they need to figure out how to both appease city governments through over protecting their users and breaking existing rules. If the company can be trusted then governments will be more willing to accept pushing boundaries.

When we buy something do we control anything?

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In new routers Comcast has decided to enable another WiFi signal that is public, but separate from your network, but still using your data. Initially, you were able to fairly easily turn off the the second network, however, Comcast has started to make it much more difficult. This raises the question in my mind, around if you’re paying for a service, shouldn’t you be able to control what is happening with that service within your house? It also raises the concern in my mind that the second network will use your data cap in the areas that have data caps – and Comcast plans to expand those caps even though we hate them.

Similarly, Uber, has done some pretty horrible things around data privacy of their users. Similarly, Facebook has conducted experiments on their users and what they display. In Uber’s case you buy the service, in Facebook, you pay for it through seeing ads. In each case you do not control anything done with your data once you enter the agreement to use their services.

Apple has been accused, and admitted to, deleting songs added to an iPod by a non-iTunes service. This is even more problematic in my mind than Amazon deleting something from your Kindle, because the iPod is a physical object that you own that was only updated whenever you connected the iPod to your computer. Furthermore, Apple was deleting things you owned without your consent from a product that you own because they didn’t want their competitors content on a product in their ecosystem. It is likely many people didn’t notice because you can have so many songs on the device, but I’m sure some people were confused.

Then there is the “licensing” that happens whenever you buy software, even whenever you buy a physical copy, companies like Autodesk have sued over the right to sell that “license” again. They sued and won over someone selling their physical disks, which is pretty insane, but they wanted to protect their product and claimed that it violate’s their licenses.

In all of these cases, a company is doing something related to a service you purchased without your consent or input into how they use it. Effectively, you don’t really control the stuff you buy. Even though we all feel like we own everything we buy, we really don’t. We don’t have control over the services we purchase and this is going to get worse over time. It will get worse, because software is eating the world, and is now in many more traditional industries like mining equipment manufacturer Joy Mining. Michael Porter wrote a really lengthy article about how software is having serious impact on the future of competition he argues that software will be everywhere and in fact companies need to build the internal capability to create software. As users of these new technologies we need to understand how companies use our data and what control we actually have on the services and products we buy.