What Yglesias gets wrong in his defense of the ride-share app.
In his latest broadside against the left, Matthew Yglesias took aim at longtime critics of Uber’s blatant lawbreaking. In Yglesias’s view, these critics who range from anti-monopoly voices like Lina Khan to anti-corruption experts like our own Jeff Hauser and academics focused on financial regulation like Professor Hillary Allen, constitute a coterie of economics-hating zealots eager to make people’s lives worse.
This is, obviously, nonsense. As is now regularly the case, Yglesias strawmans his opposition’s arguments, falsely portraying progressives who want laws to be enforced as anti-consumer fanatics. Despite the obtuseness of Yglesias’ piece, it is still worth breaking down, if only to understand how truly vacuous it is. Let’s dive in:
1. Taxis were inefficient, Uber’s app fixed this
The main thrust of Yglesias’ argument is very simple. It was inconvenient to flag down a taxi when you needed one in a big city, and downright impossible to do so when you lived somewhere else. By using the GPS function of smartphones to create a ride-hailing app, Uber fixed this issue.
This innovation is genuinely good. But this is not something unique to Uber. In fact, taxi companies in almost every major city have similar apps now, providing the same benefits, and these same services existed before Uber was founded in March 2009. So, what was Uber’s real innovation?
2. It’s good that Uber broke the law
Yglesias is too cowardly to say this openly, but support for Uber’s lawbreaking is apparent throughout the whole piece. In his words, “Uber essentially tore down these barriers to entry by relying on VC financing to operate in legal gray areas and, eventually, to win regulatory and political fights that couldn’t be won without those deep pockets.”
To be clear, Uber’s lawbreaking was not a “gray area.” This is the main issue we at the Revolving Door Project, and others like Hilary Allen, have with Uber’s rise to prominence. Uber’s chief innovation was ignoring existing laws. Uber’s plan of expanding faster than regulators could act –and ignoring regulators when they did act– worked. In the ensuing years, the company has used their market dominance to retroactively re-write rules in their favor. To Yglesias, this was justified because of the supposed unfairness of existing taxi markets. But flouting democratically enacted laws because they threaten your profits is a clear recipe for disaster and undermines the core tenets of democracy.
Yglesias’ ally Herbert Hovenkamp made the claim that Uber’s lawbreaking is comparable to Rosa Parks’ civil disobedience. We firmly disagree, but appreciate Hovenkamp’s forthrightness, and wish Yglesias had the gumption to make this argument as explicitly.
3. Uber is cheaper because it’s more efficient
To Yglesias, Uber outcompeted existing taxi services just by being more efficient than prior business models. But this is not the full story. Uber’s other innovation was the formation of the “gig economy.” While this is now taken for granted, the scale of Uber’s miscategorization of employees as independent contractors was genuinely innovative. By pretending the drivers for its app were independent contractors, Uber avoided employer-side taxes, overtime and healthcare expenses. They also avoided the threat of unionization. Much like Uber’s flouting of existing taxi regulations, the company counted on their open noncompliance of employment law to go unpunished until it was too late.
Take for example California’s AB5, a law that was designed to end Uber’s mischaracterization of employees as independent contractors by enshrining the “ABC test” into law. The law was finally passed in 2019, but immediately was forced to contend with Uber’s growing political might. The company responded by working with other rideshare and food delivery apps to spend $204 million fighting the law via a ballot proposition. The proposition, known as Prop. 22, passed, allowing the company to continue to treat its employees as independent contractors.
(This onslaught of corporate money was organized by none other than Tony West – Kamala Harris’ brother in law, and a high ranking Obama DOJ alum – whom Yglesias complains that RDP “railed against”.)
4. Ignoring Uber’s anticompetitive business practices
A huge part of Uber’s success was having Silicon Valley VCs subsidize ridership until the company gained enough market share to raise prices. Yglesias ignores this reality in his short summary of Uber’s success. Similarly, Uber has engaged in other anticompetitive behavior like locking out drivers at random to avoid cutting into profits and deceiving consumers. Reporting has even shown that the company avoided implementing effective anti-sexual harassment and assault policies, prioritizing their bottom line instead.
5. Campaigns against public transit go unmentioned
The only downside Yglesias acknowledges is increased traffic congestion. This ignores Uber’s sustained campaigns against public transportation in the US. When lawmakers in Illinois attempted to bail out the struggling Chicago Transportation Authority in June, Uber sent a push notification to its users warning of a “secret tax hike” and encouraging users to “act now to stop it.” Studies show that Uber has brought about a decline in public transit use and the company has been open about their goals to attract customers away from using public transit. This is not only harmful to climate goals, local air quality and congestion, but it threatens the few comprehensive public transit systems that exist in the US. As a supposed urbanist, these are real issues Yglesias should be worried about.