Uber has always represented the best and worst of the global economy

All over the map.
All over the map.
Image: Reuters/Adnan Abidi
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During his tenure at Uber, Travis Kalanick turned an American startup into a global behemoth using a simple strategy—just barge in. Don’t ask governments for permission, don’t worry about whether a country is too rich or too poor for Uber, don’t worry about the local taxi lobbies.

That tenure came to an end Tuesday (June 20) with Kalanick resigning as CEO. But he will be remembered as a leader who made as few compromises as possible when it came to adjusting Uber’s business model to the law of any land—in United States and outside of it. His vision of a better way to connect riders and cars served Uber well in the short term. Almost everywhere it launched, people got what it was instantly—and they turned Uber into the world’s largest ride-hailing company, trailed only by a patchwork of regional competitors.

But while Kalanick managed to get Uber up and running on nearly every continent, its run-ins across the world show how governments are dealing with the businesses of the future—and how the businesses of the future will reshape the hard-won victories of the 20th century when it comes to regulating work.

The US: the launching pad

One of Uber’s smartest business decisions had nothing to do with technology, and everything to do with guts. Rather than knocking on the doors of municipal transportation departments to ask if it could launch, it simply barged into the cities of its choosing, signing up drivers and luring in customers without waiting for government approval. Kalanick firmly believed that Uber was more efficient and safer than the existing taxi system in most cities—and for the most part, consumers agreed.

While Uber remains tangled in a number of legal battles in the US (most notably a tussle with Waymo), it has claimed victory over most of the regulatory battles that challenged its right to exist in the first place. And in the process, it demonstrated how the US will likely lead the way in accommodating competition from new types of businesses powered by the internet.

Between 2012 and 2016, local American agencies used a number of tactics to try and throw Uber out of their cities. These included placing limits on UberX vehicles in Seattle, caps on driver numbers in New York City, and sting operations in Washington DC. In nearly all of these cases, Uber fought back by rallying its users, urging them to sign petitions and storm social media.

What happened where Uber got the boot? Residents in Austin, Texas, infamously voted to ban Uber and Lyft from the city. The result? At this year’s South by Southwest thousands of hipsters found themselves unable to hail an Uber, marring the city’s reputation as a bastion of hipness.

The company still hangs in limbo with regard to labor relations. While 18 states have issued rulings suggesting that Uber drivers are not employees, others, like New York, don’t yet agree. And since these rulings don’t serve as legal precedent, this battle could be a very long one.

While Uber’s success in the United States shows how the country will likely remain at the forefront of innovation, it also suggests that economic resentment and income inequality will only increase. If Uber continues to avoid classifying its drivers as employees, more and more gig-economy businesses will follow suit. That means more happy consumers can hail a ride at a moments notice—but also more drivers sleeping out of their cars, struggling to make ends meet.

Europe: even stronger resistance

Kalanick barged into Europe with the same tenacity as in the US, but it has met far more resistance. And its endless legal battles on the continent demonstrate what happens when rules built for a 20th-century economy—and one with a strong sense of obligation to workers—encounter a distinctly 21st-century company.

Many courts in the US ruled that Uber drivers are independent contractors. In Europe and the UK, courts were more likely to find that they were employees entitled to benefits, as a British court did in October. “The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous,” said judges in the UK. Uber had argued the workers were self-employed, working when and where they wanted.

Europe, of any place Uber has gone, has had the most clarity on the question that has dogged the ride-sharing app’s operations: Is it better for there to be many imperfect jobs that spread a shrinking pool of work around—or should only classic jobs be allowed to exist, even if there are necessarily fewer of them? 

The answer was given shape by the taxi drivers of Paris, who—enraged by the latest Uber expansion in 2015—burned tires and attacked cars, accidentally inconveniencing Courtney Love. In other countries, Uber has fared even worse—laws and regulations have forced it out of Barcelona in Spain, Hamburg, Frankfurt and Duesseldorf in Germany, as well as all of Bulgaria, Denmark, and Hungary.

It may be a case of shooting the messenger. Europe was ahead of most other places in bringing into being a better vision of work in the 20th century, entailing set hours, vacation, and benefits. It’s not surprising that it’s been the most resistant to Uber—and what the company foreshadows for the “jobs” of tomorrow.

India: more restrictions could be ahead

Uber stormed into India in 2013, and got a lot more than it bargained for. The company suffered a number of regulatory setbacks and public scandals. It remains a major player in ride hailing. Still, business has been no cakewalk.

In 2014, authorities forced Uber to implement two-factor authentication for credit-card payments, a move that took the ease out of using its app. The company eventually circumvented this by partnering with local payments service Paytm. Later, it faced one of its largest global meltdowns in 2014 when a woman who had taken a late-night Uber ride reported being raped by her driver. The incident brought more government scrutiny, with some states temporarily banning the company.

Since then, Uber has made concerted efforts to take a conciliatory approach to government relations in India, as well as consumers. Facing a low credit-card penetration rate, it introduced cash payments—which let more consumers to pay for rides. It also let users book rides via telephone, another feature it had long shunned in other countries.

But Uber’s future isn’t guaranteed to be bright. Drivers have taken to the streets, protesting low wages and predatory car- lending schemes. The Indian government could place restrictions on labor and licensing that tilt the company’s fortunes more towards Europe’s path than that of the US. More problematically, the competition against domestic rival Ola, coupled with rock-bottom market prices in India in general, might make the foray into India not profitable enough to justify the money it’s spending there.

China: swallowed by the system

Uber’s foray into China demonstrates how foreign companies that fight their best can still come out as losers.

When Uber first launched in China in 2013, many thought Kalanick was foolish for doing so. The government, they wagered, would never let Uber drivers ferry around passengers for cash, especially since its vehicles would compete against state- and city-affiliated taxi companies. Kalanick’s cavalier attitude seemed destined to run afoul of the ever-watchful eyes of China’s rulers.

Yet Kalanick remained committed to cracking China, certain that the scarcity of taxis across the country would bring in passengers—same as everywhere else. And to his credit, he was right. To keep the government at bay and stay relevant to consumers, Uber “localized.”

For a time, it made UberX (known as “The People’s Uber in China”) revenue-free, imposing no percentage take from drivers on trip fares (likely to dodge scrutiny from authorities). It also spun out its China operations as a separate entity and scored funding from Chinese investors, including search giant Baidu. Kalanick, like other foreign CEOs, hit the press circuit and gave lectures at Chinese universities. It let users pay for rides using Alipay, Alibaba’s Paypal-esque payment service. It even urged its drivers and supporters to not stage protests—a complete 180 from its tactics in the US.

By mid-2015, Uber had swept the country, forcing two taxi-centric rivals to merge and launch a clone of Uber’s peer-to-peer model, Didi Chuxing. While local Uber offices periodically faced raids from city authorities, such incidents had no impact on the company’s operations.

Ultimately, the rivalry with Didi Chuxing proved too much for Uber to bear—the company was burning $1 billion annually on subsidies and discounts, and couldn’t compete with Didi’s reach (some 300 cities compared to Uber’s 60-plus) and existing brand familiarity (it had a two-year head start on Uber, pre-merger). In August 2016, Kalanick sold Uber China to Didi, in exchange for a roughly 20% stake in its acquirer.

Uber has arguably fared better in China than its high-profile brethren—Google, eBay, Facebook, Twitter, AirBnB, and Amazon are either bit players in China, or non-existent due to censorship. Not only did it help create China’s homegrown ride-hailing giant, it won a stake in it. But that’s not the same as a victory.