In a podcast interview Wednesday, Uber CEO Dara Khosrowshahi denied the idea that his company is capable of using all of its drivers in California, as a state judge has ordered it.
“We can not hire 50,000 people overnight,” Khosrowshahi said on the Pivot School podcast hosted by Kara Swisher and Scott Galloway. ‘Everything we’ve built is based on this platform that … brings people who want transportation or delivery. You can not do that overnight. ”
Last week, California Superior Court Judge Ethan Schulman ordered Uber and Lyft to comply with AB5, the state law that makes it more difficult for companies to use independent contractors. In his statement, Schulman dismissed Uber’s argument that it was a technology platform and that drivers were not at the core of their business. “To put it bluntly, drivers are central, not tangential, to the entire Uber and Lyft business,” Schulman wrote.
But the companies claim they will have to close operations in California completely to re-register their businesses to comply with the law.
Khosrowshahi said the closure would probably not be permanent. “It will take time, but we will find out what it’s like in California,” he said. “We want to be in California.”
Khosrowshahi confirmed reports that Uber was looking for other models, such as a franchise-style system in which the company would license its brand to fleet operators in California. “There’s a black car service we have based on fleets,” he said. “And we’re just trying to figure out what we’re doing going forward.”
Similarly, Khosrowshahi said Uber’s response would be to limit the number of drivers allowed on its platform and increase customer prices after it finally reboots in the state. He predicted that up to 80 percent of those drivers who only sign up for the app 5-10 a week would no longer be able to earn on the platform. Trip prices in dense city centers like San Francisco will go up about 20 percent, he said, while rates would be even higher in smaller, less dense cities.
But the interview also got to the heart of Uber’s position in the U.S. economy. The company helped create both the so-called gig and sharing economies, and helped popularize the idea that anyone with a car or a house could earn extra money by renting one of these things. But services were soon professionalized, with drivers earning a stable income and finding it difficult to find under the yoke of Uber’s algorithm.
It’s also an unsustainable business model – at least so far. Uber has never been profitable, losing a quarter of a billion dollars every quarter. And the company has long been accused of increasing income inequality in the country by helping to popularize a system in which it uses independent contractors who are not eligible for traditional employee benefits.
Galloway, who in addition to podcasting also serves as a professor of marketing at the New York University Stern School of Business, asked if Uber “is ground zero for inequality income,” noting the gap between Uber’s regular employees who receive six-figure salaries earn and above, and the millions of drivers, some of whom live below the poverty line.
Khosrowshahi said the question starts with a ‘false premise’s that drivers and couriers using our system are employees. They are not employees … they can decide when they will work, etc. This idea that, oh, you can have flexibility with employment at the same time, it’s just false on the face. “
Uber critics note that there is nothing stopping Uber from continuing to give drivers the flexibility to set up their own schedules under AB5. But the company rejects this idea, claiming that no company in California or anywhere else lets employees set their own hours.
Uber has proposed a “third way” through the voting measure it supports in California called Proposition 22. The measure could allow the company to sidestep AB5 and continue to classify drivers as self-employed while also adding some provide benefits such as a minimum wage and access to health insurance. Together with Lyft and DoorDash, it has promised to spend more than $ 100 million, while union-backed driver groups have only $ 866,000 to lobby for it.
“We will absolutely be overwhelmed by astronomical proportions,” said Vanessa Bain, co-founder of Gig Workers Collective, Swisher and Galloway prior to Khosrowshahi’s interview. “We do not have the capital, we do not have the resources to be able to anywhere near what these companies spend to get Prop 22.”
Swisher proposed adding a board representative to Uber’s board to make drivers better responsible for the company. Khosrowshahi seemed to suggest that it was possible, citing German companies that have an employee representative on their boards, which he called ‘cool’. But such a thing would only be possible “in another world,” he said.
“I think we have the system that is optimized … it’s called capitalism,” Khosrowshahi said. ‘It’s not called labor ism. It is not called socialism. It is capitalism and it is a system built to maximize maximum share value and capital. And if that’s the only input, you’ll get the same results going forward that you went backwards. That these kinds of systemic changes, you know, I’m a game for. I do not want the capitalism of yesterday 20 years ago 20 years ago to be the same. ”
