#DeleteTheDisruptors: Uber Prez Quits After Six Months

[Razer]

> ...Jones felt the current crises facing the firm are not what he
> signed up for.
>

McClatchy: Uber’s president joins the #DeleteUber movement, quitting
after six months on the job

http://www.mcclatchydc.com/news/nation-world/national/article139558078.html

>
> Uber’s financial backers include Goldman Sachs, Google Ventures, and
> four other private equity groups. Perhaps Uber’s biggest financial
> backer is TPG Capital. Co-founder of TPG, David Bonderman, one of the
> wealthiest men on earth, is now on Uber’s board of directors.
> Bonderman’s personal net worth is somewhere in the ballpark of $2.6
> billion. TPG reportedly has $55 billion in funds under management
> making it one of the largest private equity firms in the world.
>
> Uber’s other investors like Menlo Ventures, Benchmark Capital, and
> First Round Capital are pretty typical of Silicon Valley’s private
> equity network. The firms are owned and run by mostly white men with
> Ivy League college pedigrees, places like Stanford, Cornell, Harvard,
> Yale and other bastions of privilege...
>


October 18, 2013

Sharing Rides, Hoarding Profits

by Darwin Bond-Graham

 “Disruption” is the zeitgeist of Silicon Valley’s tech industry,
especially in the realm of startups. The mythos goes like this: small
scrappy hackers with very little capital and a few computers can create
new business models that will topple older fossilized companies, even
whole industries. In the process the economy will become more efficient
and everyone will have more choices. We all win thanks to the new
Internet-enabled economy. That’s not at all what is happening in
reality, however.

The ideology of disruption goes back a long way in the annals theorizing
capitalism, but the current ideology really owes more to Clayton
Christensen, a Harvard Business School professor and devout Mormon who
has built his academic career on case studies of disruptors.
Christensen’s seminal 1998 article in the Harvard Business Review on
disruption tells a story about dominant companies atop their industries
—Firestone, Xerox, IBM— that were caught flat footed, and in several
cases destroyed, by their smaller creative competitors. They failed to
innovate and grow beyond their core markets. They failed to recognize
the potential of a new technology that would make their existing
products and services obsolete. This has fidelity with the actual
history of American business.

Christensen, along with his son Matthew, manages a hedge fund that
purports to bet on disruptors and short the stock of bumbling giants.
Christensen also sponsors a think tank he named after himself, the
Christensen Institute, which, according to its web site is, “dedicated
to improving the world through disruptive innovation.”

California’s tech entrepreneurs have embraced Christensenian disruption.
The big case studies in tech that seem to confirm Christensen’s theory
are well known. Digital cameras destroyed film. Personal computers
displaced mainframes as the core hardware business, and laptops have
since eaten into a huge share of the personal computer market. Now
mobile devices are eroding PC sales. None was ever seen as a threat to
the existing dominant product and producer, but displacement happened
nonetheless. Tapes replaced vinyl, CDs replaced tapes, but MP3s and
iTunes-like services have replaced CDs. Cloud is displacing both the
idea of storing your data on physical drives you own. Software as a
service is chipping away at the idea of buying and owning software. And
so on…

In a lot of cases disruption ends up being a battle of big corporations
for market share. Consumers and employees within the industry aren’t
necessarily better or worse off when the smoke clears and a winner
emerges with a new technology and business model.

But the tech boom today is characterized by a another kind of
disruption. It’s social disruption. New technologies and business models
don’t just attack the existing dominant corporations; they attack social
relations and transform non-business spheres of life into methodical
instances of economic exchange from which the new tech innovators
extract revenue. The tech boom is also characterized by disruption of
smaller competitive markets by emergent tech monopolists backed
ultimately by huge pools of private equity and giant, monopoly-seeking
corporations.

The winners and losers in many cases of disruption are split along
existing racial and class lines of inequality. Those with little
economic or political power to defend themselves from the disruptors are
seeing their livelihoods and communities turned upside down. Their small
businesses are being destroyed. Their communities are becoming
unaffordable. Those with cultural capital, and access to economic
capital have a shot at being disruptive, at skimming some wealth off of
deregulated industry and precarious labor. And the wealthy individuals
and companies that should be disrupted by a clever tech startup —the tax
dodging banks, the Fortune 500, the health care companies and insurance
giants— have the resources to defend themselves, fend off the geeks,
deploy an equally clever response to retain market share, or to just
buyout the scrappy competitor and fold it into their existing empire.

The ridesharing phenomenon reflects all of this and more.

Ridesharing companies like Lyft, Uber, and Sidecar use the ubiquitous
ownership of smartphones to connect casual drivers and passenger clients
through their proprietary applications. Like any broker they take their
cut of the revenue in these transactions, (Lyft, for example, skims 20
percent off each payment made by a passenger through their smartphone.)
Ridesharing companies encourage unregulated, hyper-privatized
transactions among precarious laborers. Their business model relies on
marketizing formerly non-economic spheres of life, like giving a friend
a ride in your car, and they have aggressively externalized costs like
gas, insurance, payroll, etc. so that profits are maximized and expenses
are as close as possible to nonexistent. In doing so they undermine the
very existence of the taxi industry, but they also undermine public
infrastructure in toto.

Taxis are not just some private sector dinosaur that should be hit from
an innovation meteor. Taxis are an integral part of every major city’s
transportation infrastructure. Taxis have been strictly regulated to
ensure that the industry’s companies and contractor-drivers pay revenue
into the city for the infrastructure they use: roads, signals, bridges,
signs, sidewalks, etc. In San Francisco taxis generate over ten million
dollars each year in revenue for the city to spend on maintaining
transport infrastructure. The funds also pay for the costs of regulating
the industry through the Taxi Commission. Regulators attempt to shape
the industry in important ways to make it more accessible and equitable
and therefore democratic. For example, San Francisco’s taxi fleet is 85
percent hybrid or CNG fueled, reducing the fleet’s carbon emissions and
improving the health of city residents. This environmental standard is
only possible because the industry is regulated, and ridesharing
companies like Uber and Lyft undermine this effort. Taxis are also
required not to discriminate among passengers, and to serve all parts of
the city, among other things that might not be maximally profitable.
It’s this public transportation infrastructure, a big part of which is
comprised of taxis, that is being disrupted by the ridesharing companies
who have inserted themselves as for-profit brokers in the transportation
commons.

The people who will lose the most from the unbridled rise of ridesharing
are those employed by the taxi industry which is seeing profits
disappear. San Francisco’s taxi industry is very decentralized and
highly competitive. There are about 31 cab companies today served by 10
dispatch companies, some quite big and some very small. No single firm
is dominant. There are about 1,500 cabs authorized to drive within the
city. The taxi industry employees several thousand workers. Taxi drivers
are predominantly immigrants and people of color, and the average cabbie
earns a very low yearly income. In 2000 upwards of 57 percent of San
Francisco cab drivers were immigrants, with the largest groups having
arrived from South Asia, East Asia, Russia and Africa. Of the 1,540 taxi
drivers in the San Francisco, San Mateo, Redwood City metro region the
hourly mean wage last year was $14.17, and the annual mean income was a
mere $22,440.

When people say the taxi industry is “ripe for disruption,” what they’re
saying, besides the real inefficiencies and problems affecting most big
city taxi operations, is that it is a decentralized, highly competitive
industry, most of whose owners and operators are low-income people of
color, many of who are immigrants. They are susceptible because they are
marginalized, and because they lack political and economic clout. In San
Francisco the cabbies are definitely a noisy political lobby, but up
against the tech and venture capital bosses and entrepreneurs, who are
most influential in the Mayor’s office, the cab drivers are impotent.

That’s who is being disrupted, a competitive industry that is owned by,
and which employes, working class people of color.

So who’s doing the disrupting? Who benefits from this attack on the taxi
industry, and more generally on the principle of a regulated
transportation sector?

The two biggest ridesharing companies in San Francisco are Uber and
Lyft. Although they virtually didn’t exist until two years ago, between
them they have raised about $390 million over the past 2 years according
to securities filings with the state and SEC. Uber and Lyft are quickly
expanding their ridesharing enterprises to New York, LA, Chicago, and
other cities far beyond the laboratory of San Francisco.

Where is this money coming from?

Uber’s financial backers include Goldman Sachs, Google Ventures, and
four other private equity groups. Perhaps Uber’s biggest financial
backer is TPG Capital. Co-founder of TPG, David Bonderman, one of the
wealthiest men on earth, is now on Uber’s board of directors.
Bonderman’s personal net worth is somewhere in the ballpark of $2.6
billion. TPG reportedly has $55 billion in funds under management making
it one of the largest private equity firms in the world.

Uber’s other investors like Menlo Ventures, Benchmark Capital, and First
Round Capital are pretty typical of Silicon Valley’s private equity
network. The firms are owned and run by mostly white men with Ivy League
college pedigrees, places like Stanford, Cornell, Harvard, Yale and
other bastions of privilege. The partners at these firms are
millionaires, and billionaires are not uncommon. They leverage pension
fund, university endowment, and sovereign wealth dollars to invest in
speculative ventures as well as established companies (and from their
limited partners they extract hefty management fees). To call them
members of the 1% would be inaccurate. Many of Silicon Valley’s private
equity investors quality as bona fide members of the 0.1% due to the
enormous sums of wealth and income at their command. While most are
socially liberal, many of them make political investments with
influential Democratic and Republican members of Congress to ensure the
country’s tax code and business laws allow them maximally build their
fortunes.

Lyft’s financial beneficiaries are similarly elite members of the
economic hierarchy. Earlier this year Zimride, the ridesharing company
that developed Lyft, sold its Zimride ride-sharing application to
Enterprise Holdings for an undisclosed sum. (Zimride was the equivalent
of a combined craigslist ride-sharing bulletin board and Facebook.)
Enterprise Holdings is a giant global corporation that booked $15.4
billion in revenue last year. As a private corporation, Enterprise is
owned and controlled by the Taylor family of St. Louis. Jack Taylor, the
family’s patriarch, is reportedly worth $11 billion. The Enterprise
acquisition of Zimride is an example of how powerful corporate interest
often respond to potential disruptors who might undermine their existing
product; they purchase them and integrate them into their larger
operations. In this case Enterprise, which peddles rental cars it owns,
saw Zimride as something that could disrupt their profit stream, so
Enterprise gobbled up the disruptor. The way Enterprise does business is
changing as a result, but the distribution of economic power isn’t shifting.

Zimride’s Lyft ridesharing product which directly competes with taxi
companies and bigger competitors like Uber received $80 million this
year, mostly from the Andreessen Horowitz private equity firm. Again,
Andreessen Horowitz is about as wealthy and establishment as you can
imagine in American business. Marc Adreesseen, who half the firm is
named for, got rich from developing one of the first web browsers. From
the fortune he obtained doing that he invested in other big tech
companies and became wealthy. Today Andreessen is a director of HP and
Ebay, two Fortune 500 companies, as well as a director of Facebook.

Ben Horowitz (son of the arch-conservative David Horowitz) was a founder
of Opsware, a company Hewlett Packard bought for over a billion dollars
back in 2007. Andreessen was a funder of that company. Opsware was
possibly a disruptor to established tech companies like HP, so HP
devoured it.

Andreessen Horowitz manages probably upwards of $3 billion, and they
have dozens of investments. They’re major backers of other disruptive
tech startups like Airbnb and Udacity, two companies that are similar to
ridesharing in that they are threatening the welfare and livelihoods of
low-income communities.

Look across the other smaller ridesharing startups that are competing
for market share in this gold rush sector and you’ll see similar
stories, fast growing companies with very disruptive business plans
backed by very powerful investors. The people who’s lives will be most
disrupted are going to be the less powerful working class who toil in
the competitive and disorganized taxi and other transit industries. The
public sector will be disrupted as it is partially privatized and as
regulations are undermined in favor of new rules that allow tech
companies to externalize costs as much as possible onto precarious
workers. More and more parts of our lives will be transformed into
relationships of market exchange. As San Francisco’s recent battles over
ridesharing show, this is by no means a “natural” process. It’s
politically determined as to what kind of economy we want, and how the
rules of the economy will distribute wealth and income and provision for
public goods.

http://www.counterpunch.org/2013/10/18/sharing-rides-hording-profits/