Uber is truly a fascinating company. The 8-year-old firm is at once the source of strategy and business model admiration, as well as the source of a growing volley of corporate scandals and negative market reactions. The firm has wrestled with a barrage of setbacks culminating most recently with the ouster of its crestfallen co-founder and CEO, Travis Kalanick. There may yet be more trouble ahead. This time, however, for Uber’s drivers, who may face a decline in demand for their side hustling, as Uber recently announced the purchase of a fleet of 24,000 autonomous vehicles from Volvo.
This purchase marks a radical point of departure in Uber’s business model, which up until now has relied on an asset-light approach, which itself carried certain risks. By owning and operating a fleet, especially one where the driver is an optional accessory, Uber is signaling its bet on an autonomous future. Its drivers, who are generally considered fractional labor, have few rights if any in protecting their interests in this transition. Of course, Uber is not alone in making this very big bet on industrial-scale autonomy, as it joins the ranks of Tesla and many others that are successfully deploying autonomous vehicles. The difficulty for Uber in making this move is that up until now its business model was relatively benign in pooling “stranded assets” and “stranded talent” into use. These stranded assets were a combination of peoples’ downtime and underemployment, or their vehicles, which often idled on the side of the road or in their garages incurring carrying costs.
When your side hustle turns on you, it is certainly bittersweet and the growing risk that autonomous vehicles portend for professional or part-time drivers suggests another wave of turbulence and market adjustment in Uber’s wake. Clearly, the move to autonomy will not occur overnight, but if Uber’s 8-year assent to the global dominance of the ride-sharing market is any guide, this move to autonomy will likely occur rather swiftly. Indeed, the company is already piloting city-scale autonomous livery in cities like Pittsburgh. The advent of driverless technology, along with Uber’s impressive public policy capabilities, means it may soon clear the regulatory and public safety hurdles that stand in the way of its next big bet. This move also continues to chip away at the lucrative logistics and package delivery market, which has long been dominated by a triopoly of FedEx, UPS and national postal services. These entrenched players are being put on notice not only by Uber’s moves into the delivery of food and conveniences in key cities but also by Amazon’s move into drone-based fulfillment and brick and mortar with the acquisition of Whole Foods Market.
One of the main challenges with industrial autonomy is the question of where legal liability resides, as well as lingering ethical dilemmas. In the mature auto insurance market, for example, it is widely understood and globally mandated that the driver or owner of a vehicle carries third-party liability protection, as well as bodily injury and property damage coverage to indemnify others. When the driver is removed from this equation the line of liability is not only blurred, it is completely removed. This creates a new class of liability that many firms racing to enter the autonomous world may not fully appreciate and may come to regret. This new vicarious liability is in effect a product liability issue, whereby the owner, passenger or others who utilize a product or service must be held harmless should an issue arise. Pricing this emerging risk will, of course, change the economic model and the risk-reward trade-off that companies like Uber, Tesla and Volvo must contend with. Sadly, as with many emerging risks of this nature, the biggest lessons and price corrections will come in the context of failures.