Does Uber Prove Marx Was Right?

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If Uber were a foreign company selling underpriced goods or services in order to gain market share, it would be considered dumping, and duly punished. Instead, it’s the world’s most valuable tech company.

Did Karl Marx call it?

His math was as much philosophy as political economy (just like Freud’s insights were more poetry than science…it was a thing), but he predicted that the aggregation of capital allowed companies to achieve economies of scale, and thereby become monopolies.

Substitute “data” for “capital,” and his insight becomes very timely.

Uber doesn’t sell something unique; its technology is functionally no different than the other apps that power Sharing Economy transactions. There’s nothing unique about the quality of its service (some would say it’s worse that Lyft), and its behavior at the corporate level isn’t particularly attractive, let alone smart.

It certainly has never made money, losing $2.8 billion last year alone. The latest news is that it only lost $645 million in 2Q17, while increasing bookings, especially in developing markets.

What it does have is an endless supply of VC cash that allows it to spend money acquiring companies that do what it does, while subsidizing its drivers to wait it out until it has put old-fashioned competitors out of business…and, all the while, aggregating data that will let it run things efficiently once it has achieved monopoly status.

Only then will its investors reap their rewards, and history has shown us that monopolies mint money by taking costs out of their supply chains, as evidenced by Uber’s plans for robotic drivers. Or maybe they’ll cash out via the obligatory IPO, which’ll get valued on the promise of that outcome. 

Even Marx theorized that markets were competitive, at least initially, in which lots of small firms would vie for dominance. But the marketplace for ride sharing is anything but: The benefits to riders are as apparent as they are real (ease of use, mostly), while the costs — both current, and once Uber is the only game in town — are as opaque as the company’s finances.

The simplicity and utility of ride sharing apps blinds us to the ways they impact jobs and civic governance, as well as the risks inherent in their use. The data it extracts from its operations are infinitely valuable, yet no customer is empowered to calculate what they’re paying for it.

No market is competitive or free unless there are rules by which everyone must play, and that’s especially true when it comes to transparency and the availability of reliable information. 

I worry that we won’t know if Karl Marx was right or wrong until it’s too late. I suspect that’s Uber’s bet, too.