Let’s work backwards. Take Checker Cab, Michigan’s largest cab company and the only one to cover all 147 square miles of Detroit. After a strategic planning retreat, the owners, now calling the company Checkmate, decide to:
- Replace dispatch units and meters with an internet-based platform that manages fee calculation and customer billing and provides a faster and more consumer-friendly matching of drivers with riders.
- Change the pricing model to enable the company to earn excessive premiums in peak traffic.
- Eliminate its extensive driver training focused on defensive driving and driver and passenger safety.
- Lower its renowned standard for driver background checks.
- Sell rather than rent its fleet of cabs to drivers, so it no longer needs to pay insurance.
- Create a process to make sure drivers are insured. Whether individual owners’ insurance covers cars used for commercial purposes is unclear, but hey, that’s now the drivers’ issue.
With these changes, Checkmate tells local officials it no longer falls under their regulations. It also attracts town cars to use its platform. The town cars serve the wealthy, who call their city council members and tell them, “Back off regulating Checkmate, or else” (which council members understand). Checkmate drivers rejoice in no longer needing to serve the most dangerous areas of the city. Local government revenues fall. The Checkmate technology leader realizes its platform is scalable and owners take the company global. It even licenses the platform to cab companies. An IPO is imminent.
If a cab company pulled off this transformation – became UBER – I suspect we’d be up in arms. But, because citizens (even highly educated ones) increasingly fail to understand the basic role of government in the provision of public goods and safety, we cheer the disruptor UBER on.
Think about it.
There are good things about UBER.
- It uses technology to create a better customer experience, supposedly without pricing surprises (but see my next list).
- It offers efficiency gains for independent drivers already in the business as they can secure passengers when their own clients do not need them.
- It lowers barriers of entry into an industry where a medallion is beyond the reach of most.
- It replaces dispatchers, creating net efficiency gains.
- Its platform can be expanded into other scheduling markets, creating new markets versus merely disrupting the existing regulated one.
But there are some huge issues with UBER.
- You’ll get surprises on your credit card. My daughter and I used UBER to secure an SUV to transport furniture from a Manhattan store back to her apartment. An unexpected slow down on a bridge changed the pricing formula from distance to time, creating a higher base fee and unexpected surcharge, resulting in an entirely unfair charge for the time involved. When the cab costs more than the furniture, you know someone’s earned excess profits.
- Our nation has another efficiency gain that eliminates what was once a good-paying job. Yes, UBER will create new jobs – managers, marketing people, a lobbying team, etc. But you can be assured that local dispatchers will not fill these slots. This force is nevertheless unstoppable.
- Passengers have less assurance. While UBER states all of its drivers are insured and screened, it offers no secure level of insurance protection because it does not own the cars. And who knows if your driver, because cash was short when his bills came due, decided to forgo his insurance payment.
My greatest concern about UBER however it that it draws high-end payers away from the public commons. UBER joins private schooling, private plane sharing services, concierge medicine, and gated neighborhoods with independent security operations as services that collectively reduce support for public goods. Listen to the puffed-up CEO of UBER speak. His disdain for government flows through him like the venom in a snake.
Our underlying challenge is bringing entrepreneurial spirit and technological innovation to public goods and publicly regulated markets. Would new management models infuse government with this spirit? What if we let innovative government workers retain a share of cost savings as bonuses; or patent their innovations and then license them to other governmental units?
Or do we need a new partnering of government and the private sector that redefines how government goes about the provisioning of public goods? Would veterans be better served through vouchers and private healthcare providers? Sure, we’d still require specialty centers, like one dealing with the loss of limbs. Perhaps we’d need an additional MD board certification for war-related injury and trauma knowledge. Innovations like these would create a smaller, more nimble, stronger and effective government.
Perhaps it’s time for national leaders with business, not political skills. They would face the largest change management roles in the nation. By the by, what’s the ex-CEO of Ford up to?