Pando

If self-driving cars really are a decade away, Uber might have to rethink its relationship with drivers

By Sarah Lacy , written on January 22, 2016

From The Travis Shrugged Desk

The always sharp Man/Machine expert John Markoff wrote a must read piece in the New York Times earlier this week about the disconnect between what people think is coming soon to a self-driving car near you and what actually is.

In short: Cars are going to need drivers to operate them for at least the next decade.

From the piece:

What Mr. Musk and Mr. Ghosn are describing — cross-country-driving hyperbole aside — are cars with advanced capabilities that can help drive or even take over in tricky situations like parallel parking on a busy street.

Truly autonomous cars that do all the work, like the bubble-shaped vehicles Google has been testing near its Silicon Valley campus, are still at least a decade away from ferrying people around town, said Xavier Mosquet, a senior partner at the Boston Consulting Group and managing director of the firm’s Detroit office.

“This is going to be a journey, and a reasonably long one,” he said. 

And that’s the optimistic case, if you consider the potential regulatory implications. Also from the piece:

The situation is further complicated by laws and regulations that require cars to be controlled by humans. In Europe, the 1968 Vienna Convention required that “every moving vehicle or combination of vehicles shall have a driver,” and “every driver shall at all times be able to control his vehicle.” Although an amendment has been proposed, no new legislation is yet in place.

In the United States, Google began an extensive lobbying campaign with individual states in 2011. But the company acknowledged a setback last year when the California Department of Motor Vehicles issued draft regulations that required a human driver capable of controlling the car to be in the vehicle. 

Still, for most of us, ten years isn’t that long if you consider a future where you never have to drive again. My kids are four and (almost) three. I may never have to teach them to drive…. something I couldn’t have considered realistically when they were born.

It’s not too long for Google, which has other dominant businesses and has always seen this as a long-term investment. Google wants to make sure it’s ahead of the rest of the market, whenever that market matures. It’s not too long for Apple; we don’t even know the level of Apple’s seriousness in playing here. It’s certainly not too long for Tesla, which has other models in the pipeline and is taking an incrementalists view of putting autonomous features in the cars as it goes along, slowly getting drivers used to them.

There’s one big player the timing could affect in a big way: Uber.

If self-driving cars are in the too-distant future, Uber could have a problem, according to a few people close to the company I’ve spoken to recently. This year, Uber has sought to stem its losses by upping its own take from each ride. But to continue to aggressively bleed out US rivals and try to gain market share elsewhere in the world, it’s still lowering prices. That leaves only one group who is getting considerably less: The drivers.

There’ve been widespread press reports of drivers making less than $.30 a mile in Detroit, earning $5 an hour in California, and even less elsewhere. We’ve reported on this, as has most of the press. Uber itself has responded telling drivers they’ll make it up in volume, if they can gain more riders.

Uber’s hope-- at least in the US-- is clearly twofold. The near term is that Lyft will never meaningfully compete with enough rides to keep drivers busy, so even though most drivers say they make more per ride with Lyft, drivers will still have to drive for both in most markets to have a full shift.

The second is that drivers are temporary, because the future-- as Uber has said repeatedly-- is self driving cars. So you have to prioritize Uber staying in business and having the most riders until that point. After all-- this logic goes-- the riders being used to “pushing a button,” its installed app base and habit, is what Uber has that Google, Apple, Tesla and any other tech pure-plays coming at transportation through self driving cars lack.

But what happens if the revolution takes too long? Drivers who are increasingly stuck in an abusive relationship with Uber could cause two problems. The first is stop driving. Everyone knows the churn on these services are high and Uber has bragged about the fact that for many this is a part time job, where drivers drive less than ten hours a week. Sure some Uber drivers don’t have a lot of other options to make money. But they still have the costs of maintaining their cars. There’s a limit to how far Uber can cut their earnings. Especially because, if Markoff is right, Uber needs them for at least a decade.

The second way human drivers could cause a problem is to force Uber to pay them more through the courts and multiple contractor lawsuits.

One might try to solve this by mollifying the drivers in some way now, settling the lawsuit, or at least pretending to care that drivers in smaller markets are making less than a third-per-mile what they made in the 1970s driving cabs.

But Uber only knows one way to meet threats like lawsuits: As a fight. And self-driving cars don’t fight back. The question is whether human drivers will stick around long enough to get them there. For all the complaining about rates and tactics and benefits, drivers know where the company stands. It’s up to them.