Bad news for consumers: Uber has lost its license to operate in London.
The development has caused Uber stock to slump by 6% at time of writing, and it might fall more before recovering. This is the problem with having such licenses overseen by the political apparatus — decisions get made on political grounds. This is, from the viewpoint of politicians and the political process, quite lovely, unfortunately, it’s also something of a disaster for the rest of us.
We should note that this is just the first stage in a time-consuming appeal process, during which Uber will be allowed to continue operations. London bureaucrats have not thrown Uber off the roads yet, and my own prediction is that in the end, they probably won’t. It’s also worth pointing out that if they do, this is significant for Uber.
It’s possible, as the Financial Times does, to make jokes about the company having never made much of a profit at all. Therefore if they shrink their sales, they’ll actually shrink their losses, the joke goes. That’s not quite how the finances work, rather, large and established markets make money, and the losses stem from continued investment in expansion. Thus to lose such a mature operation is a blow. And if one large city might do this, others could soon follow.
The real lesson here, though, is that Uber was right to never ask permission to operate in the first place.
Instead of being polite and requesting that they may be able to provide rides, they simply read the regulations and then went ahead and did it. The bet being that they could get large enough, fast enough, that the political opposition to their existence would be overwhelmed by the customer base demanding they be allowed to stay. This denial of the London license underlines the importance of that strategy.
The stated reason for the refusal is a triviality: 45 — identified at least — drivers faked ID to provide rides. Out of a workforce of 45,000 drivers in the city, a failure rate of 0.1% on employee identification isn’t so bad at all.
So why actually deny the license, then?
Because, as is usual in big city politics, the taxi drivers’ union has political clout. They’re organized, they’re a cartel, and they used to make monopoly profits. Uber upset that comfy arrangement. Thus local politicians are against Uber because they’re in favor of those local political heavyweights. The Black Cabs (in American terms, Yellow Cabs) in London support Sadiq Khan, the current London mayor. And Khan has significant influence over Transport for London, which makes the license decision.
Which is why Uber’s base strategy, let’s go do it and dare them to stop us, is so obviously the correct one. For in the absence of millions of London consumers gaining their desired rides from the company, they never would have been granted permission to start the service. Or, if you prefer, the only way to break a politically-imposed monopoly is to appeal to the masses, not the political process.
Now, whether it’s going to work in the end is another matter.
My best guess is that after the national election, Khan will be told to stop being so stupid — assuming the Labour Party and Jeremy Corbyn don’t win — and the license will be granted. On the grounds that Uber here is being held to an impossible standard of perfection, hugely higher than we ask any other non-military organization to live up to. Or, in reality, because Uber is being done over by local politics and the power of the cabbies’ union in that local system.
As to what should happen, this is rather obvious. Millions of people, by their own preference, choose to travel through Uber rather than black cabs, tube trains, or buses. The entire point of our having an economy at all is that we consumers gain more of whatever it is that we want. Which means that the only one who should kill off a ride hailing service is us, by no longer using it. Regulators just need to get out of the way and let the people decide.
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at The Continental Telegraph.
