Uber faces a problem: Dominating the market and thus driving up prices and profits is proving hard, thanks to a pesky thing called competition.
A former aide to Chuck Schumer and Mike Bloomberg, writing in the liberal outlet Fast Company, has the solution: Crush the competition with burdensome regulation and gain wokeness points in the process.
“Ruthlessly woke,” is the phrase used by Bradley Tusk, the Democratic-staffer-turned-business-strategist. It’s a fitting label.
Tusk, who claims to advise companies how to avoid “Death by Politics,” has written an op-ed telling Uber how to commit Murder by Politics. It’s a strategy not for finding efficiencies or pleasing customers, but for “Stamping out Lyft.”
Uber, Tusk argues, should kill Lyft and any potential future competitors by lobbying for regulations that smaller companies cannot afford. Specifically, it should lobby to mandate that drivers be employees, rather than freelance contractors.
“Dominating ridesharing in every market globally proved impossible,” writes Tusk. Indeed, it is nearly impossible to obtain a monopoly unless government gives it to you. That’s because if you have something that people want, then someone else is likely to compete with you to offer it. In the case of Uber, competition from Lyft and other ride-sharing services has kept profit margins low. If Uber raises prices too much, it loses customers to Lyft and others. If Uber doesn’t pay drivers enough, it loses drivers to Lyft and others.
Roughly speaking, fares minus payments equals profits. Since Uber cannot dictate fares or payments, Uber cannot dominate the market. The answer, Tusk says, is regulation.
Tusk claims this murder-by-woke-politics is “extremely counterintuitive.”
No, it’s not. I’ve been writing about it for decades now. It’s Economics 101 and Government 101. It’s what I call Regulatory Robbery. It’s a specific tactic called “Regulate Me!” Big business constantly lobbies for more regulation of itself in order to crush smaller competitors, advised by people like Tusk that it will win the companies good publicity at the same time.
Phillip Morris and its parent company Altria supported federal regulation of tobacco so much that the bill was known as the “Marlboro Monopoly Act.” H&R Block supported federal regulation of tax preparers, clearly trying to kill its smaller competitors. The largest food processors supported strict federal regulation of food, to the detriment of smaller producers. Mattel and Hasbro pulled the same stunt.
I’ve written dozens of articles and multiple chapters in books about companies lobbying to be regulated in order to crush smaller competitors. There’s nothing new here. But good on Tusk for laying out clearly that this is the intention behind regulation.
Tusk writes:
“Uber, with a market cap six times that of Lyft, can sustain this game far longer. And in the end, Uber won’t have to keep subsidizing fares because Lyft won’t be able to compete on price.”
Tusk goes further and points out how progressivism is an easy path to big business dominance:
As an added “benefit” of killing Lyft, of course, Uber wouldn’t have to compete for drivers, so it could reduce payments to drivers.
Is this prudent in the long run? I don’t think so. Look at General Electric as an example of what happens when a company tries to build its business model on politics.
It’s good business for the revolving-door consultants and advisers, who man the tollbooth at the intersection of business and government. But it often backfires on executives and shareholders.
