Earlier this year Uber sold its Southeast Asia business to Grab. At the time, it was estimated that Grab had 95% of the ride-hailing market in Southeast Asia. That’s why Uber decided to sell. Instead of continuing to bleed, they figured it would be better to instead merge businesses in exchange for a “sizeable stake in Grab.” This is similar to the deal that it struck in China with Didi.

It’s clear evidence of cultural advantage. Though maybe you could argue it’s first mover advantage. Either way, many, including Wired, have argued that while Uber has dominated in the West, it has often struggled in the developing world. Different markets. When Grab launched you could pay with cash because so many users didn’t have a credit card.

Here is another interesting insight from Bloomberg (see above): Nearly 1 out of every 5 commuters in Manila relies on a ride-hailing service because the public transit situation is allegedly so dire. Grab controls 90% of the market with 35,000 vehicles receiving somewhere around 600,000 requests a day.

When Uber launched it was positioned as “Everyone’s private driver.” It was expensive. It was luxurious. And it was done because they knew they weren’t going to be able to compete on speed and/or price in the early days. But now ride-hailing services are tackling the very opposite end of the spectrum.

Back in 2013, when this blog was in its infancy, I argued that Toronto needs a consistent taxi brand. Since nobody was reading the blog at the time, I am sure that most of you have never read this post. I even forgot about it, until last night when I posted this photo of Hong Kong to Instagram:

It reminded me of the role that taxis play in city branding. This photo is clearly of Hong Kong. But take away the taxis in the foreground and I would really have to think in order to identity it. I would then be searching for street signs and looking to see what side of the road the cars are driving on.

Now, a few things have changed since 2013. Back then I didn’t have the same appreciation for decentralized ride hailing (Uber and Lyft), though I did have the same distaste for the taxi cartel. And I recognize that there is a tension between centralized taxi branding and a decentralized approach to ride fulfillment. 

I’m not exactly sure how to solve this problem, but maybe it gets easier with autonomous vehicles and probable changes to the way consumers own, or don’t own cars. I believe it’s important for places and cities to have specificity. If you have any thoughts, please leave a comment below. 

(I am trying to respond to all comments on this blog, because I’m finding it impossible to respond to all blog related emails. Sorry.)

Last week Travis Kalanick – the cofounder who built Uber into the most highly valued privately held startup in the world – stepped down as chief executive at the request of his investors. This was the culmination of months of controversy related to the company’s toxic corporate culture.

So what’s next? 

Benjamin Edelman, associate professor at Harvard Business School, recently argued that this is it for the company: Uber Can’t be Fixed – It’s Time for Regulators to Shut It Down. I discovered the article through a good friend of mine who has felt similarly since the beginning. Uber’s business model is predicated on illegality and that should not be misconstrued as “innovation”.

I have a few thoughts on this.

But let me start by saying that this post is not a comment on the company’s corporate culture or its internal practices related to lobbying governments. I have not really been following what’s going on internally and I’ll leave other, more informed, people to comment on those matters.

With that said, here are 3 thoughts.

One, shutting down the company feels like an extreme case of throwing out the baby with the bathwater. Lots of companies go through restructuring, assuming that’s needed, without completely capitulating.

Two, before Uber came along it was still challenging to pay for a taxi in Toronto with a credit card. More often than not the driver would tell you that the machine was broken or ask that you instead pay with cash. At that point, I would have accepted a clunky payment machine mounted to the rear of the front seats as an innovation.

To say that Uber’s technological innovations were all banal things that its competitors were already about to introduce is downplaying so much of what the company has done outside of its beneficial cost structure. 

We got perfect information: Where is my car right now? We got full pricing transparency before even accepting a ride: Should I take an Uber or transit or should I drive? We got the ability to get in and out of a taxi without pulling out our wallets: I’ll quickly jump out at this red light. We got dynamic ride pooling and cost sharing: Let’s split this ride 3 ways to bring the fare down. And we got clean cars that didn’t smell.

Why weren’t any of the incumbent taxi companies do this?

Three, I fully agree that Uber (unfairly?) benefited from a meaningful cost advantage by operating in the unregulated side of the market. This was a huge boon for the company because, as the data suggests, the demand for taxis is highly elastic.

But I also believe that the incumbent taxi companies were perpetuating a marketplace that was anything but free enterprise. It ensured that the status quo was maintained and that those who historically benefited from the system continued to benefit from the system.

Because of this, I’m not sure that we would have seen the innovation that we saw without a company like Uber deciding to operate within a gray area and not ask for permission. Protectionism may have stomped it out. This may be why Hailo – which operated in the regulated side of the taxi marketplace here in Toronto – ultimately wasn’t able to survive.

Though I suppose you could argue that Hailo’s failure (at least here in Toronto) strengthens the argument that Uber was only able to thrive because of its illegal cost structure. 

However, it’s important to remember that Uber got its start by actually charging more than traditional taxis. At the outset it didn’t have enough liquidity in its marketplace to compete based on speed and/or price, and so it decided to offer a premium experience. 

UberX didn’t introduce steep discounts until later on and even today many people will gladly accept surge pricing at multiples of a regular taxi fare. Clearly customers are deriving some other benefits from the app.

Edelman ends his piece by referencing Napster as an example of another startup that defied legality and was ultimately forced to shut down. Again, shutting Uber down seems extreme to me, but I do agree with his conclusion. Regardless of what happens, the lawful innovations that Uber introduced are here to stay.

Photo by Carl Joseph on Unsplash