With their IPOs at hand, ride-hail leaders Uber and Lyft have been pushing out fresh reports and hints to their long-term plans for investors old and new. However, questions remain about the ever-growing yet unprofitable firms that directly impact their ability to make money. First and foremost: What are you?
Uber and Lyft have always emphasized that they are technology companies, not transportation companies (and therefore not subject to most rules for road-based businesses). But ‘technology’ is a massive category — and anyone who’s observed Silicon Valley in the past 30 years will be aware that tech firms, especially unfocused ones, frequently go bust.
For years, Uber, Lyft, Juno, and others have increasingly been described as transportation network companies (TNCs): the owners and managers of digital platforms that allow millions of willing transportation providers (i.e. drivers) and transportation consumers (i.e. riders) to hook up.
To provide those platforms and rapidly grow their ‘user’ base with below-market fares, the firms have consistently operated at a significant loss, as is widely known. Both companies have expanded their platforms with other services, too, such as carpooling and food delivery, and have openly described their intent to use self-driving fleets ASAP.
As administrators of these networks, Uber and Lyft have also had access to an incalculable stash of data on the behaviors of riders and drivers, the streets they travel on, the businesses they visit, the products they consume, and everything in between.
Based on the companies’ performance so far, it’s clear that maintaining this mass flow of data — and removing any legal barriers — is their actual long-term strategy.
The applications for such data seem endless: in the hands of government or private enterprise, they may be used to map out self-driving cities, to super-target consumers, to detect intoxication, to monitor public activity, or to build a comprehensive profile of a given user, among many other things.
In order to keep this extremely valuable data flowing, Uber and Lyft have worked non-stop to keep drivers on the road under TNCs’ legally preferred terms and conditions (so to speak) as often as possible, for as long as possible — at least until the firms are ready to ditch drivers entirely, one assumes.
To that end, with their IPOs growing nearer, the companies have continued waging various legal battles with regulators and workers around the world. These fights could have a critical impact on everything from Uber and Lyft’s operating costs to the legal definition of their enterprises.
For example, in the matter of whether Uber and Lyft actually qualify as employers (and their drivers as employees, not independent contractors), courts in North America and Europe have returned many different rulings so far.
A California court ruled last year that drivers are still considered contractors and can’t take class action against the company due to the nature of the arbitration clause in their user agreements. Uber previously tried to settle the related suits with $100 million in payments, but after the latest court ruling, an even lower settlement of $20 million was secured this year.
As Paola Loriggio reported for The Globe and Mail, the Court of Appeal for Ontario, Canada ruled in January that Uber drivers can take class action, and that the company’s requirement that all disputes be resolved through arbitration in the Netherlands is intentionally unwieldy, and would cost each driver around $14,500 in fees just to begin the process. The court noted,
I believe that it can be safely concluded that Uber chose this arbitration clause in order to favor itself and thus take advantage of its drivers, who are clearly vulnerable to the market strength of Uber … It is a reasonable inference that Uber did so knowingly and intentionally.
In December, after several years of legal back-and-forth, a British tribunal also rejected Uber’s latest appeal and ruled that drivers should be considered employees, period, and are therefore entitled to a minimum wage and paid holidays.
Meanwhile, in New York City, one of the busiest ride-hail and taxi hubs in the world, Uber and Lyft remain engaged in a fierce battle over local laws and public opinion reaching back years. Recently, Uber withdrew its latest appeal to a court ruling that establishes drivers as employees for the purpose of unemployment payments.
Nicole Salk, an attorney at Brooklyn Legal Services who filed the case, commented in a statement, “Uber drivers who suddenly find themselves out of a job shouldn’t have to jump through countless hoops to get the unemployment benefits they are entitled to.”
Uber and Lyft have also responded to the New York City Council’s first-of-their-kind regulations with two separate lawsuits, introduced shortly before and after the rules took effect. Last week, however, a New York judge denied Lyft’s motion for an injunction blocking the rules temporarily, and said she would issue a written decision within 30 days.
Moira Muntz, spokesperson for the Independent Drivers Guild, commented by email, “It is particularly galling that on the same day Lyft launched its ‘road show’ seeking a $23 billion valuation, the company was in court fighting a minimum wage for the low income drivers who helped build the company.”
That same day, incidentally, an Australian documentary team released their film about Uber’s aggressive efforts to change laws around the globe.
As companies that have shared their plans to adopt robots and self-driving fleets, it may seem strange that Uber and Lyft spend so much time and money trying to change the rules for using human workers.
As data collectors with a vested interest in limiting the individual rights and expectations of contractually bound ‘users,’ and the goal of taking a bite out of every market, it makes perfect sense.
Overall, Uber and Lyft seemingly remain hesitant to pin down their exact purposes and long-term strategies either in courts of law or the financial pages. But for many of us on the sidelines, the companies’ prospects seem pretty plain.
The high-tech firms have never defined themselves as transportation outfits, nor limited their use of investors’ billions to invest in projects outside that sphere. They have thoroughly tracked and experimented on riders and drivers, and formed relationships with many of the largest companies in the world, from Starbucks and Ford Motors to banks in the US, UK, and Ukraine.
For close to a decade, they have been pooling data from any and all sources they touch, and undoubtedly sharing that data with partners. And their next step, if the past is any indication, will be to charge government and private interests for even wider access to that stash.
In her recent and comprehensively researched book The Age of Surveillance Capitalism, Harvard Business School professor Shoshana Zuboff explains that data on people’s behavior and movements is in many ways the last great natural resource that companies are keen to tap into. It’s also invasive and too often nearly invisible, with a history that’s entrenched in modern technology as we know it — and likely to repeat itself.
According to Zuboff, an optimistic, not-yet-giant tech company known as Google once faced a similar moment of reckoning in the late 1990s. After the dot com bubble burst, she found, Google was facing financial peril despite its then-begrudging ad sales until staff realized that all the browsing data they had lying around could be worth something to retailers, and to government.
Uber and Lyft likely won’t end up being as powerful or profitable as Google, even if they and their data end up absorbed by a similarly mighty corporation. But there are important similarities in the companies’ rise to power, and their M.O.s, which investors and privacy-focused consumers should be aware of.
And the fact that — unlike Google (or so the story goes) — Uber and Lyft knew what game they were in from the beginning.