Uber is treated across four episodes of The Bob Zadek Show as the central example of technology reshuffling a regulated marketplace. Bob Zadek describes Uber as technology that is reshuffling the free market, and says the resistance comes from taxi cartels in various cities and from regulators who cannot stand technology getting out in front of their regulation Derek Khanna - What’s Stifling Innovation? (2014). In the same episode he says every user of Uber loves it and the cab companies hate it, and that Republicans have not been strongly in favor of technology creating new marketplaces.
Creative destruction and regulatory capture
Derek Khanna, asked to explain creative destruction, attributes the term to the economist Joseph Schumpeter and describes it as new companies coming in the fore, providing new services, and forcing incumbent firms to innovate or die Derek Khanna - What’s Stifling Innovation? (2014). He says the die part is very critical: if old companies that refuse to innovate are not allowed to die, they hold on to old market models. He cites the Fortune 500 over the past 80 years, saying only about 12 companies are still on it.
Khanna’s account of what happens next is that big companies facing a challenger, particularly disruptive innovation, come to Washington, D.C. and open a lobbying office and lobby Congress for a law or regulation to protect their market model. Bob Zadek frames the same dynamic as companies that cannot compete on the merits running to Washington or to state houses and seeking governmental protection so they are kept on life support artificially, which means everybody in America pays out of their own pocket just so an inferior product can not be competed out of existence.
Khanna says Uber is banned in a number of jurisdictions, specifically cities where Republicans have had difficulty competing historically, and argues Republicans should be championing that issue in every city across the country because nothing else Republicans are doing is resonating with young people Derek Khanna - What’s Stifling Innovation? (2014). He names Austin, Texas as one such city. He pairs Uber with Tesla, saying that in Texas it is illegal for Tesla to sell cars to the consumer through a Tesla dealership and that they cannot even tell you how much the car costs. Bob Zadek adds that Chris Christie was unsympathetic to Tesla and therefore sympathetic to Big Auto because he was protecting the franchise network, and recalls doing an entire show on Tesla and the fight they were having in overcoming archaic franchise laws that protect automobile franchisees.
Khanna says the economy is growing on a good day at just under 2%, which he calls anemic, while the tech sector shows growth at about 7.8% GDP annually Derek Khanna - What’s Stifling Innovation? (2014). He says studies on these type of rules add about 12% to the cost of buying a car, which he calls a 12% tax paid not to the government but to crony capitalists, to people who are getting rent from the economy. He argues those types of laws are the reason there has been almost no innovation in the automobile sector in the United States, measuring innovation by how many new market participants there have been.
The taxi cartels and the Bell System analogy
Bill Frezza, discussing the history of telecom innovation, says the taxi cartels were just like the Bell System: they regulated rates, they controlled entry, and they took it out of the hides of consumers to the benefit of the medallion holders Bill Frezza’s History of Telecom Innovation (and Not) (2015). He says an Uber comes along and upsets the whole thing, and asks whether there will be an Uber of banking and an Uber of healthcare.
Bob Zadek, in the same episode, describes regulatory capture as crony corporatists capturing the governmental system and legislating them protection against any kind of failure, and says it is happening in banking and in healthcare Bill Frezza’s History of Telecom Innovation (and Not) (2015). He says banking is the best example because bankers have made an alliance with government: government says you do our bidding, you make loans to our constituents who do not deserve loans, and in exchange we will give you free money and protection against failure. He says that is the same deal AT&T made with the government 80 years ago, and that AT&T became in many ways an arm of the government carrying out wealth transfers from urban areas to rural areas.
Frezza says the lesson is one we never learn, and that legislation such as Sarbanes-Oxley and Dodd-Frank claims it will keep the financial system from collapsing Bill Frezza’s History of Telecom Innovation (and Not) (2015). He says since Dodd-Frank was passed there have been a total of maybe three bank charters let in the entire United States, and he thinks they were on Indian reservations. He says fintech evolution and innovation are happening at the edges, in the shadow banking business and in startups trying to develop new consumer lending models, and that we will see how far they get before they get crushed by the regulators.
The gig economy and AB 5
In a 2020 episode, Bob Zadek introduces Kim Kavin as a working journalist, a freelance writer, co-founder of the coalition called Fight for Freelancers New Jersey, and professionally a member of the American Society of Journalists and Authors Terrible New Worker “Protection” Laws Threaten the Gig Economy (2020). He says the story started in its recent history in California and is spreading like wildfire in blue states, with bills in the United States Congress to accomplish the same denial of freedom to earn a living. He names Uber, Lyft, Postmates and TaskRabbit as services that help consumers connect up with people who want to serve them for a price they are happy to receive.
Kavin says the issue came to light in California with AB 5, and that a lot of the media has been about people like Uber drivers and Lyft drivers, but that since the law went into effect in California on January 1st it affects people in more than 300 professions identified so far Terrible New Worker “Protection” Laws Threaten the Gig Economy (2020). She names courtroom interpreters and respiratory therapists, and says a pharmacist with a PhD was thrown out of work because of the law.
Bob Zadek says Uber and Lyft were really the targets, the starting point, and were in the eyes of the legislature the exploiters, although there are hundreds of occupations structured around this model Terrible New Worker “Protection” Laws Threaten the Gig Economy (2020). He says that if you want full-time work and security you can sign up for a cab company as an employee, but if the 40-hour work week and being an employee and not having the freedom is unappealing, you now have freedom, and that all it does is give people an option.
Kavin cites a study released the first week of July from Cornell University, in which researchers got hold of all the data from inside Uber and Lyft and looked at what drivers were actually doing and how much money they were making Terrible New Worker “Protection” Laws Threaten the Gig Economy (2020). She says it was a study of just Seattle but the first time anyone had looked at what they call microdata this way. She reports that nine in 10 of the Uber drivers in Seattle and Lyft drivers were making more on an hourly basis than the taxi drivers, that 92% were earning more than the Seattle minimum wage, that the median driver after costs was earning just shy of $50,000 a year, which she says is way more than taxi drivers and just shy of the median for all Seattle occupations, and that 96% of those drivers were working less than 40 hours a week.
Bob Zadek responds that Uber and Lyft have not made a profit yet, and therefore cannot be exploiting workers and underpaying them and keeping all of the money for themselves Terrible New Worker “Protection” Laws Threaten the Gig Economy (2020). He says the only ones who benefit, and the ones who are always supposed to benefit, are the consumers, who get flexible services available when they want it at a price they are willing to pay. He describes what Uber does as creating an almost perfect marketplace for service, in which the price is dictated by the market rather than the legislature: if drivers do not make enough they will not show up and Uber will fail; if Uber does not pay enough and keeps the profit it will run out of drivers; if the service is too high consumers will not pay and the model will fail.
Driverless cars and the question of scale
In a 2017 episode on artificial intelligence, a caller named Jacob asks whether Congress removing roadway lane marker buttons that warn drivers they are drifting out of their lane is paving the way for machine drivers to displace human drivers, and whether the trend is less autonomy for humans and more autonomy for machines Luis Perez-Breva on Artificial Intelligence Myths (2017). Luis Perez-Breva responds that the technology to make a single car driverless today is incredibly expensive, and that whenever the technology is brought to scale the question will be whether Uber is going to own every single car on earth Luis Perez-Breva on Artificial Intelligence Myths (2017). He poses two possible futures: in one, the evil corporation will replace all drivers and will just make money off cars; in the other, your car will drive on its own and you will make money out of it without you in the car. He says he does not think anything anybody does will completely replace all human drivers, and challenges people to think about how anyone will pay to retrofit every single car to be driving on its own and what will be done with all the other drivers before you revolt.
Across episodes
The topic recurs in 2014, 2015, 2017 and 2020, and the treatment shifts with the argument: Derek Khanna in 2014 and Bill Frezza in 2015 treat Uber as the proof that incumbents protected by regulation can be displaced, while the 2020 episode with Kim Kavin treats Uber and Lyft as the original targets of AB 5 and introduces the Cornell study of Seattle driver earnings as new evidence. The 2017 caller segment raises Uber only as a hypothetical owner of driverless cars at scale.
What the sources do not cover
The excerpts do not state Uber’s founding date, its founders, its corporate history, or the outcome of any litigation involving it. They do not identify the text or holding of AB 5 beyond its effect on independent contractors, nor the name of any federal bill. They do not say how the Cornell study was conducted beyond the use of microdata from inside the apps, and they do not report Uber’s or Lyft’s financial results beyond Bob Zadek’s statement that neither has made a profit.