McArdle: Uber, Lyft a study in best, worst of capitalism

By Megan McArdle

The Washington Post

Chances are, if you live in a city, Uber and Lyft have changed your life. Even my 74-year-old mother now semi-frequently uses Uber to get around; this, a woman with whom I once spent 45 minutes on the telephone, trying to coach her through minimizing a window on her desktop.

As advances go, Uber and Lyft aren’t quite up there with indoor plumbing and central heating, but they’re still definitely an improvement over the prior status quo: more reliable, more available and cheaper than taxi services, especially for remote and low-income areas. And, now, they’re offering urban dwellers bikes and electric scooters, as well as cars. Even when they eventually stop burning investor cash to subsidize those services, being able to spontaneously hail a ride from your phone will noticeably improve millions of people’s lives.

Uber and Lyft are everything we love about capitalism. And writ large, theirs is the story of the capitalist revolution that has over the past few centuries raised us from short-lived squalor to lives of comparative peace, wealth and leisure. Just 170 years ago, my ancestors fled a famine that denuded Ireland of roughly a quarter of its population. By contrast, their descendants today fret about advancing avoirdupois, a real estate bubble and the high cost of space-age diagnostic scans.

The journey between 19th-century hardship and today’s abundance was composed of many steps, most of them guided by the invisible hand of the market. Markets funneled resources to promising ideas, many of them bad, some of them pure genius, and then winnowed out the bad ones. That iterative process of incremental improvement has brought us to the here and now. We can reasonably hope that it will propel our grandchildren further still, to something that would seem to us an unimaginable paradise.

But recently, I’ve been thinking that though Uber and Lyft are everything we love about capitalism, they are also everything we hate.

Consider the difference between the corporate cultures of these two firms. Uber’s early chief executive, Travis Kalanick, was a tech-bro outlaw whose desire to disrupt the taxi industry may have started with the time he was forced to jump out of a cab after a heated altercation with the driver. During the company’s turbulent early years, Kalanick staged equally belligerent confrontations with local governments, allegedly tolerated rampant sexual harassment and discrimination within his company, and pitched his services to the affluent as “a convenient, and classy ride.”

Lyft was like Uber’s kindly hippie cousin. Its founders are explicitly idealistic about Lyft’s mission to eliminate the environmental and financial costs of personal car ownership. While Uber initially focused on fancy black cars, Lyft let people drive their modest older-model sedans and initially stuck mustaches on the front of the car to reassure passengers that Lyft was goofily benevolent. They invited passengers to ride up front with the driver, like a friend rather than a customer. They took a conciliatory stance toward regulation.

Uber and Lyft were about as different as two companies in fundamentally the same business could be. But at this point, from the customer perspective, they’re barely different. They offer the same services, for roughly the same price, in many of the same markets. Worse, Uber, the aggressively mercenary firm, has a higher market share than the idealists.

This, too, is the invisible hand of the market, driving everyone in the same direction. As markets like to do, because markets tend to reward scale. Scale, in turn, rewards the lowest common denominator that everyone will accept, which means the homogenous and ubiquitous. And because idealistic values are costly, and decidedly not homogenous across large groups of people, they are rarely rewarded the way storybooks tell us they ought to be.

Which may explain why elements of both left and right are nearing open revolt against the whole idea of markets. Market innovation is highest in a tech sector that tends toward scale even more sharply than its industrial forebears: the efficient number of firms providing the services of a Facebook, a Google or an Amazon — and maybe an Uber or a Lyft — is probably one. (Amazon founder and chief executive Jeff Bezos also owns The Post.)

The obvious rejoinder to this complaint is that “the market” is simply us, collectively. It is failing to reward certain things because we are failing to reward them, at least in sufficiently large numbers. But then, perhaps that’s exactly why they make us so uncomfortable: because markets reflect back to us what we are, instead of what we’d like to be.

Follow Megan McArdle on Twitter @asymmetricinfo.