Who Will Win in the Sharing Economy?

It had taken me a while to spot my Uber cab. “ Location pey aao” doesn’t work so well at the airport. Then the driver tells me to wait at pick-up point D. No sign of him for the next few minutes.Just when I thought he might have canceled the ride , I spot the white Nissan Micra. A 20 something bearded man confirms my name and begins to drive. He tells me “ I was afraid you would cancel the ride , we have to wait for hours at the airport to get the bookings”.

My quest to understand the sharing economy leads to the following conversation:

Me: So how much did you make today?

Srinivasulu (the driver): Not much sir, I used to make twice as much last year. Today I didn’t even touch 1500. Took a loan for this car and even thought of buying one more during the boom years (2015-16). Now my revenue has dried up, I am getting fewer rides. With 25000k I have to cater to a family of 5. I used to earn 4000 per day last year and then take a day off or two for my personal work and rest.

Me: Do you know Uber and Ola are going through deep losses ? They don’t have funds to keep you happy. Neither I get the discounts I used to enjoy last year.

Srini: Don’t know sir, this is not turning out to be a sustainable proposition for me.

Me : When I inquired at the airport taxi booth, they asked a flat fee of 1200. You are taking me to my destination for 600. Lucky me.

Srini: Government protects their interest and regulates them. Uber and Ola work for their own business objectives.

Me: Look, there is also an oversupply. There are more Uber and Ola drivers on the road now. They compete for getting rides .Also maybe fares don’t surge so often now because of oversupply of drivers. Surge pricing is a good incentive for you guys.

Srini: True, Uber and Ola duped us *expletive* . They shouldn’t have allowed so many drivers to come on-board. And now there are autos and bikes too competing with us. I heard they will launch a fleet of electric cars and employ full time drivers for 25000k. Who doesn’t want a stable cash flow? I am sure all the unemployed youth will jump at the opportunity.

Me: Uber and Ola will be happy as long as they earn for every transaction which happens on their platform. Their ultimate goal is to add maximum number of taxi’s , bikes and auto’s so that more and more people take rides. There is an Ola bus service too.

Srini: The bus service will kill us.

Then we talked about shortest route to my destination . Then Srini got a call from home and he said he will be late. He played some music on low volume. The Micra cruised at 80 kmph cutting the cool November air.

I am sure the story of Srini extends to many such drivers who signed-up for taxi aggregators . Those were the times when we often read news headings like “Uber driver making 1 lac per month”. Investor frenzy lead to heavy discounting. I found Uber convenient , discounts encouraged me to take more rides. Uber became a habit. I started telling friends why owning a car is a bad idea. I embraced the sharing economy. During the boom years the investment on car like Micra may have reached break-even within 6 months.

We are not the customers of Uber, Srini is. He signed-up with them to get good leads so he could utilize the Micra to the fullest and provide for his family. But seems like Uber just signed-up too many Srini’s and there is not enough business for all. But is there anyone who will mitigate the risk drivers like Srini take ? Who is going to protect Srini’s investments and his future cash-flows?

We get a little hint here why Uber is mired in controversies pertaining to labor laws across the world and why governments hate Uber. The sharing economy is a win-win for Uber (explains the colossal valuation).

Nevertheless , the the beauty of a free market is that it will regulate itself. Srini’s who find the Uber proposition unsustainable would quit and add value in some other part of the economy. And then there will be fewer Srini’s and less supply and more surges. And then fewer customers and probably more discounts. Phew*

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