What ‘ism’ is Uber?

Charging a cut out of drivers’ earnings makes Uber an intermediary, but what is an intermediary doing in a free market that has evolved to the purity of surge pricing?

Uber, the taxi aggregator, defends surge pricing as the child of demand and supply. If you buy that, Uber is a champion of pure market forces. And yet, after what happened in India’s capital Delhi last week, it is anything but.

Last week, @Uber drivers in Delhi went on strike claiming the company was squeezing their earnings. Apparently, Uber has hiked its cut in the price of a ride manifold. It has also stopped paying drivers the bonuses that lured them into buying their own cabs and driving for it.

The fairy tale of engineers and MBAs doing Uber gigs at night to pay off their student loans is over. You won’t find Shakespeare’s admirers in the driver’s seat now. The taxi market is not lush enough anymore.

The question is not why did it happen but why was it allowed to happen. If China dumps cheap steel in India, we get very worried. If a company flush with investor money that is not invested in the taxi business at all, nor involved with the drivers in any way, sets up shop with the sole intent of gaming the market, we sit back and admire it.

If Uber worships the free market, why does it have a cut in drivers’ earnings? The word ‘cut’ makes it an intermediary, and what is an intermediary doing in a free market that has evolved to the purity of surge pricing?

Forget the commission, explain the cashbacks. When in the history of business have sellers paid buyers? A new baker may offer free tasting for a while, even give away free loaves for the first day or two, but he bears the loss to establish himself, not undercut his rivals. Here, you have a business strategy of competitive bleeding in which you bleed till your rivals bleed to death. That’s easy when you are bleeding speculative investments, not earned cash.

The feelgood bonuses to drivers were part of the same game. Who wouldn’t be thrilled to take home more than they really earned in a day?

So it went on, till thousands of semi-literate drivers were lured into the trap, saddled with bank loans they couldn’t run away from. And then, the rude awakening — the benevolent, transformative enabler of a free market decides it is going to take away a much bigger slice of the cake.

Is this holy capitalism? If not, what ‘ism’ is it?

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