Uber Revolution

What was the first smartphone app you ever saw?  For me it was the level.  You know, the one that turned an iPhone into a carpenter’s level?  I remember thinking it was really cool and sort of useful, but ultimately just a gimmick.  In the five years since I first watched that yellow bubble slide up and down the screen, apps have grown from a novelty into a true societal force.  Practical, powerful apps (short for “application”) are changing daily life, upending business models and creating considerable wealth. Uber, which allows users to summon a car and driver with a quick screen touch, is the perfect example of these transformative apps. Uber debuted in 2009 in San Francisco and currently operates in 40 cities worldwide, including Atlanta.

Here’s how it works.  Users set up an Uber account and provide their credit card information.  When they need a lift, they simply open the app and touch the screen to call for a town car or luxury SUV. Independent operators who partner with Uber drive these vehicles.  The app shows the user the location of nearby cars, provides an estimated time of arrival along with a picture of the driver, and allows the user and driver to communicate via text.

The best part?  At the end of the ride, Uber users thank the driver and hop out. No fumbling with a wallet or stumbling over mental tip math.  Why?  Because the ride has already been charged to the on-file credit card.  The gratuity is built in.  Uber, of course, charges a premium for all this convenience.  Uber fares typically run 20 - 30 percent above taxi rates.  Rates spike even higher during peak demand times, such as late Saturday nights and New Years’ Eve.

So far, city dwellers seem unfazed by the cost of Ubering.  The company has enjoyed steady, solid growth over the past 12 months.  It has entered 23 new cities, added 225 employees and seen month-to-month revenue grow 18 percent, according to Inc. magazine.  Livery drivers love Uber because it boosts their operating efficiency.  They are happy to pay Uber a percentage of every fare in exchange for access to customers they would likely have missed while aimlessly driving around downtown or waiting for a roundtrip client to emerge from a two-hour show at the Fox, or five-hour bachelor party at, well, you get the picture.

So, who DOESN’T love Uber?  The old guard:  the taxicab lobby and their allies in local government. Uber fought a bruising battle to win permission to operate in Washington, D.C. and currently faces all sorts of roadblocks in its effort to set-up shop in Miami.  A key issue in the regulatory fights is whether Uber is a transportation company subject to the traditional fare limits, insurance requirements, et cetera.  Uber adamantly refuses that label.  The company argues that it is nothing more than a market maker for transportation services.  It doesn’t own vehicles or employ drivers.  It simply puts together customers and independent businesses.

Uber will no doubt win its fight with the establishment.  Technologies that boost economic efficiency always prevail, even if it takes longer than it should. Who knows?  One day the idea of phoning for a cab or stepping into a busy street to flag down a hack might be a laugh-inducing memory.  “Remember when you had to…”

We’ll no doubt see this app-driven model replicated in other industries dominated by small businesses and independent operators.  Imagine being able to summon a pre-screened chef, plumber, electrician, courier or babysitter with a tap on the screen.  The possibilities are endless and the rewards tremendous for consumers, entrepreneurs, and those investors with enough vision to see an industry not as it is, but as it will be – and enough courage to ride the wild wave of that transformation.