(DNA Top 10 in 2014) The Uber-SPAD spat: Be careful what you wish for

By A. Asohan May 5, 2015

Corruption and cronyism

The fact that Malaysian authorities are having trouble reining in Uber’s practices is partly their own fault. There is a lack of transparency over how taxi permits are issued to private companies and the role played by cooperatives.

Indeed, the issue became one of the rallying cries for the Pakatan Rakyat opposition alliance in Malaysia’s 13th general election (GE13) last year.

The Malaysian Insider reported that “the current rent system, where cabbies are required to pay as high as a third of their income to lease taxis from companies often politically-linked, has been described as ‘modern-day slavery.’ ”

This was, not surprisingly, one of the many points that ordinary Malaysians brought up on social media in defence of Uber: That the Government was going to use anti-competitive practices to protect these ‘politically-linked’ companies, and not necessarily the drivers themselves – some of whom, despite their rogue brethren, are just as professional and honest as any Uber driver.

But whatever the motives, laws have to be followed. VentureBeat, quoting a Der Spiegel article, said that in early September, a Frankfurt district court filed an injunction preventing Uber from operating in Germany – after the city of Berlin had lifted an earlier ban. Uber is expected to file an appeal against the injunction.

You don’t need corruption and cronyism – or the world’s worst taxi drivers, as some online travel sites have described Malaysian cabbies – as excuses for using the law against Uber. There are sometimes actual and valid reasons.

The business model … wait, what?

Indeed, even in more developed economies, questions are being asked of how exactly is Uber able to offer such low fares compared with taxis – in just about any city it operates in. It appears to be playing a ‘loss leader’ game.

According to CrunchBase, the Silicon Valley startup founded only in 2009 had already received US$1.5 billion worth of funding before it secured Series D funding of US$1.2 billion in June this year.

And it is using that money to make itself too big to shut down, WIRED magazine accused, saying that “Uber has even more incentive to expand as rapidly as possible. If it gets big enough quickly enough, the political price could become too high for any elected official who tries to pull Uber to the curb.”

“By drastically lowering its prices, Uber is doing more than increasing its customer base. It’s cultivating constituents – the people who will complain when someone in power tries to take away their Uber,” WIRED reported.

Sound familiar? Arun Sundararajan, a professor at New York University’s Stern School of Business, told BusinessWeek, “The more they sort of popularise themselves, the stronger their argument becomes.”

BusinessWeek also said that Uber’s latest US$1.2-billion funding will be used to play the lobbyist game, quoting chief executive officer Travis Kalanick as saying at a tech conference in May that, “We’re in this political campaign, and the candidate is Uber … and the opponent is an a–hole named Taxi.”

What about Rand and Microsoft then?

If that sounds like robber-baron language, it’s hardly surprising, given Uber’s disdain for regulators. Indeed, it’s downright Ayn Rand in nature.

Rand was a Russian-American writer and philosopher best known for her novels The Fountainhead and Atlas Shrugged, which were essentially arguments for the philosophical system she called Objectivism.

It has some fascinating concepts, but has been criticised for some of its core tenets, including her defence of the ‘morality of selfishness.’

In Atlas Shrugged, her Übermensch (Frederick Nietzsche’s ‘Overman’ or superior human being), capitalist protagonist John Galt, says, “By the grace of reality and the nature of life, man – every man – is an end in himself, he exists for his own sake, and the achievement of his own happiness is his highest moral purpose.”

Rand was a favourite of the Republican party, especially during the Nixon years, and it’s easy to see why. She and her proponents, in some of their essays explaining and defending Objectivism, have argued against ‘big government,’ industry regulation, high taxes for the wealthy and anything vaguely ‘socialist.’

The idea seems to be that the wealthy create jobs, give back to society and perhaps even become philanthropists in their later years, so that’s why we should go easy on them.

Remember when it was cool to hate Microsoft Corp because the company’s operating systems were on 95% of the world’s desktop computers, and it was using its near-monopoly to stifle competition with what was described as ruthless business practices?

When this led to the US Department of Justice filing antitrust charges against the software giant, one of Microsoft’s most ardent supporters was the Ayn Rand Institute.

In a lecture at Harvard University in 1999, sponsored by the Ayn Rand Institute and the Harvard Objectivist Club, Richard M. Salsman of the Centre for the Advancement of Capitalism, said that: “America’s biggest, most profitable, most successful, most widely-recognised company – a firm whose products are more widely and more productively used, in every line of business, than any other … this is the firm that’s been the target of a long, vicious and calculated assault – from academia, from the media, from 19 state Attorneys General, and from antitrust prosecutors in Washington.

“The title of my talk tonight refers to a ‘high-tech lynching,” he said, later describing the United States’ antitrust laws as a “codification of Marxism.”

Where has such thinking led us? To the kind of lack of oversight that created the Wall Street and subprime mess.

There are certain essential services we rightfully expect our governments to deliver: Education, healthcare, public transport, and even broadband Internet these days. The reason why these industries are regulated is because they are too important to be left to the devices and Excel (another Microsoft tool) projections of businessmen who, like John Galt, are only looking out for themselves.

Sure, there are a lot of things wrong with the taxi industry in Malaysia. We, as citizens, have every right to demand greater and more effective action by our Government. Laws should be enforced. If there are regulations that are causing more harm than good, we should ask for them to be changed or to be repealed.

The last thing we should ask our Government to do, however, is to ignore the law …. or to not enforce it under certain circumstances, like when we can garner some short-term benefit from it.

And short-term it is. Uber is now providing truly excellent service, but at loss-leading prices. What happens when it drives (no pun intended) the taxi companies out of business, and recruits some of their drivers? What happens when its shareholders and investors start demanding to see black ink on its books?

What happens when there is no viable competition out there? Are we prepared to face the price?

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