Uber  :  Driving  Hard  

 TRAVIS   KALANICK,   Uber’s   hard-­‐nosed   chief  

executive,   seems   to   relish   taking   on   regulators  

and   rivals.   “I   realise   I   can   come   across   as   a  

somewhat  fierce  advocate  for  Uber,”  Mr  Kalanick  

recently   quipped   at   a   celebration   for   the   taxi-­‐

hailing   company’s   fifth   birthday.   “I   also   realise  

some   people   have   used   a   different   ‘a’-­‐word   to  

describe  me.”  Mr  Kalanick’s  brashness  has  helped  

Uber   become   the  most   valuable   American   company   of   its   generation.   If   it   succeeds   in   raising   a   further   $1.5  

billion   from   investors,   as   reports   indicate,   its   implied   valuation   will   soar   to   a   staggering   $50   billion.   That   is  

higher   than  80%  of   the   firms   in   the   S&P  500   index,  many  of  which   are  decades  old.  Uber’s   value  has   grown  

faster  than  those  of  Facebook  and  Twitter  in  their  early  years  (see  chart).    

.

But   Uber   should   also   be   admired   by   strategists   in   other   industries.   It   is   a   case   study   in   how   to   construct   a  

“platform”,  a  Silicon  Valley  buzzword   for  a  digital   service  on  top  of  which  other  businesses  can  be  built.  As   it  

arrives  in  a  city,  it  launches  a  vigorous  recruiting  programme  for  drivers,  offering  them  incentives  to  sign  up.  Its  

fares  are  “dynamic”—they  undercut  conventional  taxis  most  of  the  time,  but  go  up  when  it  rains,  or  when  there  

is  some  other  reason  why  demand  for  rides  is  high.  

This   encourages   more   of   its   drivers   onto   the   roads   when   they   are   most   needed.   This   in   turn   means   that  

customers  can  always  get  a  car  quickly,  even   if   it   sometimes  costs  a  bit  more.  This  encourages   them  to  keep  

using  Uber,   in   turn  providing   lots  of  work   for   its   drivers.   It   soon  becomes  difficult   for   any   rival   to  match   the  

Reading  collection  adapted  from    

 

Uber   now   operates   in   311   cities   in   58   countries,   providing  

more  than  1m  rides  each  day.  Consumers  like  Uber,  and  rival  

services  like  Lyft  in  America,  Didi  Kuaidi  in  China  and  GrabTaxi  

in   South-­‐East   Asia,   because   they   are   cheaper   than  

conventional  taxis,  clean  and  reliable.  Uber’s  freelance  drivers  

(who  typically  pay  it  around  20%  of  their   fares)  enjoy  flexible  

working  hours  and  are  spared  the  formalities  of  qualifying  as  a  

conventional  cabbie.  

liquidity  of  Uber’s  market  in  rides.  And  once  lots  of  people  are  using  it  for  that  purpose,  the  company  can  use  

the   same   app,   the   same   computer   systems   and   the   same   drivers   to   offer   those   customers   a   range   of   other  

services.  

Taxis  are  to  Uber,  therefore,  what  search-­‐related  advertising  is  to  Google:  the  killer  app  that  generates  lots  of  

revenue  and  brings   the   firm   to  everyone’s  attention,  after  which   it   can  broaden   its  horizons  and  enter  other  

businesses.  Both  firms  have  grand  ambitions.  Google’s  mission  is  to  organise  all  the  world’s  information;  Uber’s  

is  to  offer  “transportation  as  reliable  as  running  water,  everywhere  for  everyone”.  And  perhaps  “everything”:  it  

has  begun  experimenting  with  local  delivery  services,  with  the  aim  of  becoming  as  disruptive  in  logistics  as  it  has  

been  in  the  taxi  business.  

Last   month   Toronto   became   the   fifth   city   where   the   firm’s   lunch-­‐delivery   service,   UberEATS   (pictured),   is  

available.   It   is  also  running  in  Chicago,  Los  Angeles,  New  York  and  Barcelona.  New  Yorkers  can  call  up  a  cycle-­‐

courier  service  on  their  Uber  apps;  and  in  Washington,  DC,  they  can  use  it  to  order  household  supplies  for  rapid  

delivery.  The  company   is   reported   to  be   in   talks   to   set  up  same-­‐day  delivery   for  various   retailers   in  America,  

from  Hugo  Boss  to  Cohen’s  Fashion  Optical.  

In   some  cities   there  are  already  a  number  of   smaller   firms   that  offer   rapid  dispatch  via  an  app:   for   instance,  

Instacart  delivers  groceries,  Postmates  brings  hot  meals  and  Shyp  collects  parcels.  None  has  anything   like  the  

scale  and  reach  of  Uber,  and  thus  all  must  fear  it  eating  their  lunch.  “FedEx  and  Hertz  combined”,  is  how  Max  

Levchin,  a  founder  of  PayPal  and  an  investor  in  Uber,  describes  the  future  of  the  firm,  referring  to  two  giants  of  

logistics  and  car  rentals  respectively.  

It  seems  unlikely  that  even  in  the  long  term  Uber  would  want  to  go  into  long-­‐haul  shipping,  but  there  is  huge  

scope   for   consolidating   the   fragmented   and   inefficient   business   of   making   deliveries   in   large   conurbations.  

Postal  services  and  logistics  firms  could  outsource  their  last-­‐mile  deliveries  to  Uber.  But  privately  at  least,  they  

must  also  fear  losing  business  to  it.  

In  March  Fred  Smith,  the  boss  of  FedEx,  dismissed  the  threat  of  Uber,  pointing  out  the  complexity  of  his  firm’s  

business  and  the  high  barriers  to  entry.  However,  Uber  has  an  advantage  that  most  delivery  and  shipping  firms  

lack:  it  does  not  have  to  bear  the  cost  of  maintaining  its  own  fleet  of  vehicles,  since  its  drivers  supply  their  own.  

Logistics  companies  have  invested  heavily  in  algorithms  that  help  them  route  deliveries  efficiently;  but  as  Uber’s  

traffic  grows,  and  as  it  spreads  to  more  places,  it  will  gather  a  wealth  of  data  that  will  let  it  catch  up  with  them.  

It   is   also   reportedly   looking   to   buy   HERE,   a   mapping   application   owned   by   Nokia,   which   could   improve   its  

routing  algorithms  and  reduce  its  reliance  on  Google  for  maps.  

As  with  Google,  Uber’s   data   collection  will  make   it   ever   better   at   understanding   its   customers:   for   example,  

when  a  discount  voucher  might  entice  them  to  use  the  service  again.  As  with  Apple,  Uber  keeps  its  users’  credit  

cards  on  file  for  seamless  payment,  which  also  makes  it  easy  to  sell  new  services  to  them.  

Taking  on  the  likes  of  FedEx  and  UPS  is  not  the  immediate  priority.  In  line  with  its  platform  strategy,  Uber’s  main  

goal   is   achieving   scale.  As  a  private   company,   it  does  not   report   its   revenues,  but  analysts   reckon   that   it  will  

receive  between  $2  billion  and  $4  billion  in  commission  from  drivers  this  year.  Since  it  does  not  own  the  cars  or  

employ  the  drivers,  but  simply  takes  a  cut  of  each  fare,  Uber  is  thought  to  be  generating  significant  free  cash  

flow   within   18   months   of   launching   in   each   new   city.   Nevertheless,   it   is   continuing   to   raise   money   from  

investors   to   fuel   its   global   expansion   and   to   intimidate   rivals   such   as   Lyft,   which   is   Uber’s   main   domestic  

competitor  but  is  valued  at  a  mere  $2.5  billion.  

Over  time,  Uber  hopes  to  become  so  popular  and  ubiquitous  that  many  city  dwellers  give  up  their  cars  and  all  

the  costs  and  hassles  of  parking,  maintenance,  insurance  and  the  like.  In  several  cities  Uber  is  trying  to  entice  

people  to  use  its  carpooling  service  instead  of  public  transport  and  is  subsidising  the  cost  of  it,  to  entice  drivers  

to  join.  Currently,  San  Franciscans  can  use  UberPool  to  go  anywhere  in  the  city  for  a  mere  $7.  Like  Google,  it  is  

taking  an   interest   in  driverless  cars,  hoping  one  day  to  be  able  to  dispense  with  drivers  and  offer   its  services  

even  more  cheaply.  

Uber’s  valuation   is  extremely  high  for  such  a  young  company,  and  there   is  a   long  way  to  fall   if   the  firm  skids.  

The   success   of   its   core   business   is   not   certain.   Later   this   year   courts   in   California  will   consider  whether   the  

drivers   who   work   for   Uber   and   Lyft   (and   other   on-­‐demand   companies)   are   in   fact   freelancers   or   should   be  

categorised   as   employees,   which   would   have   significant   implications   for   their   firms’   lean   cost   structure.  

Investors  may  be  underestimating  that  risk.  

Rivals   with   deep-­‐pocketed   backers   could   yet   stop   Uber   dominating   the   world’s   streets.   In   China   it   has   a  

partnership  with  Baidu,  an  internet  firm,  but  its   local  rival,  Didi  Kuaidi,   is  backed  by  two  online  giants,  Alibaba  

and   Tencent.   The   Chinese   taxi-­‐app   firm   has   announced   its   own   plan   to   spend   1   billion   yuan   ($160m)   on  

incentives  for  drivers  and  passengers  to  use  the  service.  

From  New  Delhi  to  East  Hampton,  Uber  and  its  competitors  are  squaring  up  to  regulators,  which  have  banned  

them.   Some   governments   are   concerned   about   whether   Uber   properly   protects   passengers   by   doing  

background  checks  on  drivers  and  requiring  insurance;  others  are  sympathetic  to  local  taxi  monopolies.  Uber  is  

betting   that   its   popularity   among   both   passengers   and   drivers   will   overcome   such   objections—indeed,   this  

week  Uber  drivers  in  Delhi  protested  over  a  crackdown  against  the  service.  It  cannot  be  taken  for  granted  that  

rules  on  carrying  passengers  will  be  relaxed  all  over  the  world.  Objects,  however,  might  be  a  different  story.  

 

 a)  Vocabulary  Work  :  For  each  of  the  following    either….    

Explain  the  following   in  your  own  words   or  give  a  synonym  or  write  a  sentence  using  the  

word  in  context  

   

1. hard-­‐nosed  

2. relish  

3. brashness  

4. soar    

5. staggering  

6. cabbie  

7. sign  up  

8. fares    

9. undercut  

10. broaden  

11. supplies    

12. retailers  

13. groceries  

14. giants  

15. long-­‐haul  shipping  

16. scope  

17. conurbations  

18. bear  the  cost    

19. fleet  

20. catch  up  

21. voucher    

22. seamless  

23. takes  a  cut  

24. mere  

25. hassles  

26. dispense  with  

27. skids  

28. core  

29. deep-­‐pocketed  backers  

30. overcome    

31. crackdown    

32. taken  for  granted  

     

b)  Written  Work  :  Summary  

Write   a   summary   of   this   article   and   provide   your   reaction   or   connect   the   issue   to   a   larger,  

relevant  context.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

c)  Listening  Work  :  MP3    

Listen  to  the  article  using  the  MP3  provided  and  read  at  the  same  time.  

Try  to  pronounce  the  vocabulary  as  you  read.