Uber's Strategy: Appeal to People, Not Power? By Art Carden

Birmingham is just one of many cities in which Uber is fighting to be able to do business their way; they’ve launched an entire social media campaign centered around it, and local leaders are upset that instead of showing up and asking “please, sirs and madams, may we possibly do business in your fair city,” Uber is going straight for their throats and trying their own case in the public square that is social media.

On Reddit a few days ago, I mentioned that the way cities are handling this might someday be a textbook example of how to frame a problem incorrectly. They’re thinking “how do we update existing regulations to accommodate ride-sharing” when, as Russ Roberts and Mike Munger pointed out recently on EconTalk, the sharing economy has the potential to completely reshape the way we live, work, and play. Cities and states are trying to make marginal adjustments to an obsolete framework. Instead of trying to change codes–even recently-updated codes–they should be scrapping the entire apparatus.

At first glance, their strategy appears to be backfiring. Uber didn’t get what they wanted in Birmingham, and they probably won’t get it elsewhere. They’ve agreed to get rid of surge pricing in New York City during emergencies.

I think co-blogger Alberto is on to something, though, in his discussion of Marcus Wohlsen’s article on the controversy. Uber can operate at a loss in the short run and even take a lot of abuse from travel-heavy cities like New York and San Francisco in order to build brand equity and get people on their side. They’re also enlisting consumers’ preferences in a political battle. They’re willing to “lose” a few battles locally in order to win the larger war. If Birmingham is any indication, politicians are staying on the defensive even though they’re getting what they want in the short run.

In most cities, ride-sharing is a matter of “when,” not “if,” and more people are learning how utterly dysfunctional transportation regulation is in their cities because of these kinds of controversies. Their valuation suggests they know what they’re doing, and people investing in Uber are giving them the resources to do it.