Uber alles

It’s here to stay

Taxi drivers in many North American cities are feeling the pinch from “uber” competitors. Viewed as unfair competition by some, the “uber” process makes a more efficient use of resources. By increasing the use of underutlised facilities, “uber”, an organizational process – in some ways an innovation, has increased the employment and value of an asset. For example, a car which is used 20 per cent of the time may now be used 40 percent by making it available for hire. The car, a physical asset, can now be used to provide more transportation services by being part of “uber.” An organizational innovation provides a benefit to society.

 

Consider your home and items in it. It may contain unused and/or underutlised rooms. These could be rented out to others on a part- or full-time basis. This is what AirBnB does (Wikipedia)

Airbnb is a website for people to rent out lodging. It has over 800,000 listings in 33,000 cities and 192 countries. Founded in August 2008 and headquartered in San Francisco, California, the company is privately owned and operated by Airbnb, Inc.

Users of the site must register and create a personal online profile before using the site. Every property is associated with a host whose profile includes recommendations by other users, reviews by previous guests, as well as a response rating and private messaging system.

A home has other items such as appliances, clothing, furniture, books, pictures etc., all of which are underutlised to some extent and could be shared, although this would be easier and more practical for certain items than others. Extending this to commercial activities, the modern economy is awash with underutlised assets such as machinery, buildings, laboratories, movie theatres, concert halls, universities, schools, stadiums, the list is lengthy. All look for ways to increase the utilization of their fixed assets and spread these costs. A modern economy incorporates many types of sharing of goods and services and often the amount of sharing could be increased for any of these assets as well as for a car.

 

A taxi service itself is an “uber” type business based on the sharing amongst different users, the customers. Private individuals (uber owners) now do the same thing for money which they previously may have done for free, when they drove their family members or friends to catch a plane. Of course there are safety and liability issues involved but experience will sort these out. Even with official taxi services, passengers have been assaulted and driven a roundabout route to their destination, either deliberately or through driver ignorance.

 

Underutlized assets are a feature of all but especially wealthy economies where consumers are willing to pay for choice as an option, even if they do not use the asset intensively. A similar process occurs in the arts. Take authorship for example. Each year I receive a cheque from the federal government under the Public Lending Right (PLR) program. The cheque gets smaller each year as more writers participate and titles increase, and program funding remains unchanged.

 

Notes on PLR program:

Initiated in 1986

Total Payments made in 2014   $9.7m

Total eligible titles  92,000

Av. payment per author $525.00

 

The logic of the program is to reward authors for use of their work when it is borrowed from libraries, a case of one book shared by many users who use (borrow) this asset at different times. If all readers purchased the book outright, the publisher and author would share the revenues earned, the author’s share being her royalty payments. When a library purchases the book, the same copy is used sequentially by readers who share its use. With the growth of library borrowing, the PLR program was introduced to benefit authors from this form of asset sharing. An automotive company could make a similar case for the purchase and use of its cars as taxis, where the car is bought once and then used by many riders with no direct return to the manufacturer. This has not happened, but another type of asset sharing has evolved with the “uber” arrangement.

 

When viewing economic activities, especially in high income economies, there are numerous examples of underutlized assets which lend themselves to different methods of management, and could often be used more intensively than at present. How that is done depends on the features of the assets and the ingenuity of entrepreneurs to find new ways to use them. The IT revolution has resulted in many organizational changes in the production and distribution of goods and services. Trying to stop “uber” taxis would require putting the genie back in the bottle. Less developed economies, which have fewer assets per capita, already make more intensive use of what they have. Sharing underutilized assets is a way of promoting efficient forms of growth and should appeal to conservationists.

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