Here are two good buzzwords: sharing economy and on-demand economy. Uber happens to sit comfortably within both. Like all buzzwords, the sharing economy and the on-demand economy deserve some good thunking, exploration, and prodding from all angles to fully understand the concept. I'm probably shin-deep which means I have more homework to do (and would love to see any other material you have on the topic!) but right next to "ball drop" and "disappointment" in the list of New Year's Eve associations is none other than Uber. So I'm jumping the gun with this post for the sake of timeliness.
Proven by the hilarious Uber for X poem that's been breezing across news feeds, there's a large number of tech based startups promising a marketplace that matches people willing to pay for convenience with people seeking flexible work. In the world of Uber that means pairing people willing to pay for drivers with people willing to drive. With dressing, this sounds like something called the sharing economy.
Without dressing, this sounds more like wealth inequality.
1) The market needs to be big enough to scale.
Here are some great examples: food, laundry, taxi rides. According to Quartz: "Without that, it's just a concierge service for the rich rather than a disruptive paradigm shift, as a venture capitalist might say.
2) The labor class needs to be willing to work at low wages.
Also from Quartz: "There needs to be a large enough labor class willing to work at wages that customers consider affordable and that the middlemen consider worthwhile for their profit margins."
Which of course begs the questions, what are Uber's margins, what are their main costs, and what share of profits do they take from drivers?
3) The company responsible for the marketplace needs to contract laborers to forego a percentage of profits and cover a percentage of costs.
As reported by The Dish, Uber takes 20% of all profits from each drive and car maintenance, gas, and insurance costs are covered by the driver. So the answer to the aforementioned begged question: very high. Uber's margins are very high.
I liked Leo Mirani's summary best:
There is no denying the seductive nature of convenience—or the cold logic of businesses that create new jobs, whatever quality they may be. But the notion that brilliant young programmers are forging a newfangled “instant gratification” economy is a falsehood. Instead, it is a rerun of the oldest sort of business: middlemen insinuating themselves between buyers and sellers. All that modern technology has done is make it easier, through omnipresent smartphones, to amass a fleet of increasingly desperate jobseekers eager to take whatever work they can get.