Is the 'Uberization' of the Economy Sustainable?

Although it’s probably too early to offer candidates for Oxford Dictionaries' Word of the Year, I’d like to suggest uberization as the word for 2015.

According to Oxford Dictionaries the Word of the Year should “reflect the ethos, mood or preoccupations of that particular year and to have lasting potential as a word of cultural significance.”

Now, my argument for the Oxford’s selection team is that in 2015 we see a shift from focusing solely on the phenomenon of Uber to a broader discussion about uberization, which could be described as utilizing the Uber business model in different sectors (from healthcare to real estate and food delivery).

I’m not sure if this is a winning argument, but with or without the recognition of Oxford Dictionaries this seems a good time to have a look at uberization and more specifically at the question that is of more interest to this space: Is the Uber innovation model others are so eager to adopt sustainable?

It’s very easy to see why the Uber model is attractive: meshing mobile technology, dynamic pricing and dynamic supply to create a disruptive and delightful user experience. After all, what could be wrong about creating a more dynamic ride-hailing service, taking the friction out of the process? And doesn’t it go hand-in-hand with Saul Kaplan’s definition of innovation -- “a better way to deliver value”? It certainly looks like it does!

Still, it ain’t all perfect in Uberland.

The problem is mainly with one of the main pillars of the Uber model -- “undercutting the higher fixed and marginal costs of conventional businesses.” Now, in fairness, this element could be found in other sharing economy services as well, including Airbnb, Lyft, RelayRides and others. The reason we talk about Uberization and not Airbnb-ization (though others do) is that Uber seems to be the most successful venture in this space, at least in terms of valuation ($40 billion) and fundraising (close to $5 billion). And frankly the company has developed and improved this element into perfection.

When talking about it in economic terms, such as undercutting costs or efficiently allocating human beings and their possessions, the Uber model doesn’t sound that bad. One might get suspicious, though, when thinking about the resemblance to Frederick Taylor’s principles of scientific management, where Taylor argues for breaking the work for tasks (he claims the concept of task is “perhaps the most prominent single element in modern scientific management”) and finding the most cost-effective way to complete them.

I’m mentioning Taylor for two reasons: First, it’s interesting to see how Taylor’s principles -- that were for so many years associated with management of large organizations -- are now echoed in the principles of an advanced innovation model. Second, Taylor was interested in finding the best way to maximize the prosperity of both the employer and the employee.

Now, uberism is not Taylorism even though it aims to create hyper-efficient marketplaces and claims to improve drivers’ financial security and quality of life. The difference is that Taylorism was all about creating better control and predictability and reducing uncertainties for both the employer and the employee, and the Uber model doesn’t seem to do it -- at least not for the employee. Maybe it is because Uber drivers are not employees but independent contractors who ”don't enjoy the security and benefits of traditional jobs.”

As former Secretary of Labor Robert Reich puts it: “This on-demand economy means a work life that is unpredictable, doesn’t pay very well and is terribly insecure.” This is, of course, just one opinion. And we should not forget that the Uber model also provides greater flexibility and apparently an opportunity to make more money per hour of work.

Still, when I go back to Saul Kaplan’s definition of innovation (“a better way to deliver value”), or other definitions of innovations like that of Autodesk’s Carl Bass (a “process by which we change the world, making things better”), I am not sure whether the Uber model really meets these definitions, especially when it comes to service providers: Is it really benefiting them? Is it really making their lives any better?

And let’s not forget the bigger picture: Do we really want to see sector after sector become more uberized, resulting in an on-demand culture that dominates the (gig) economy?

It would probably be great for the consumer, but would it be any different from unsustainable economic activities like fast fashion or fast food? And we could also assume that many consumers will also be on-demand service providers, so would it actually be that great for them? I doubt it.

So, you might wonder if I think that it would be better to ditch the Uber model and go back to hailing taxis. The answer is no. I don’t like hailing taxis and would like to have better and more delightful experiences. At the same time, I believe that sustainability is not just about addressing environmental challenges, but also about addressing social ones.

It means that we need to find an innovation model that is committed to improve not the prosperity of a small number of shareholders, but the prosperity of a large number of stakeholders, including service providers.

We can’t and shouldn’t try to stop progress, but I believe we could find a better innovation model than the Uber model -- one that has a better balance between fairness and flexibility, opportunities and equality. We need a model that, at the end of the day, will create not just disruptive and delightful experiences, but also an eco-system that delivers better value to all of its participants.

Image credit: Yscouts, Flickr Creative Commons

Raz Godelnik is an Assistant Professor of Strategic Design and Management in the School of Design Strategies at Parsons The New School for Design. You can follow him on twitter @ecolibris