The Tesla Disruption: Cab Drivers Beware!

Commentary, Disruption, Lee Harding

The free market economy is beautiful in its simplicity: offer a service people want at a price people will pay for, and you will get your reward. For decades, cab drivers offered what buses could not—a ride on request from any location to anywhere else in a reasonable distance. In the past decade, Uber has leveraged technology to improve on this service. Its location and surge price algorithms often facilitate more prompt and inexpensive service than traditional cabs. But Uber may soon face stiffer competition from Tesla vehicles that not only don’t need fuel to offer rides, but don’t need a driver either.

Capitalism always has and always will have what economist Joseph Schumpeter called, “creative destruction.” As superior inventions and systems are created, old ones lose their place—but often not without a fight. From 1811-16, the bands of English workers known as Luddites destroyed machines they believed threatened their jobs, especially in cotton and woolen mills. But they adjusted and found their way, as have generations since. Ask their descendants today if they would prefer early 1800’s life to that of today and very few would agree.

In 2015, cab drivers in Mexico City used Luddite tactics to call for a ban on app-based car services. Windshields and windows were smashed, eggs and flour were thrown at cars, and at least eight vehicles were damaged near the airport. By then, they had been losing market share to Uber for two years. By December, 2,500 cabbies in Toronto had a twelve-hour protest that left a police officer injured and even had a cabbie hanging off an Uber car.

“We apologize for the inconvenience, but this is what we had to do,” 22-year cab driver Babak Asadi told the Sun. “It’s our last resort.”

The protesters were confronted by one Mark Harrison carrying a foam heart with “Uber” written on it. “How many times have I been denied a cab? Uber love,” Harrison told the Sun. “I used to spend hundreds of dollars a week on cabs and now I use Uber and it’s half that.”

It’s called progress, and it happens so long as Luddites don’t get their way.

Of course, this process has growing pains. New technologies with new possibilities mean changes to government regulations.

Lawsuits and legal injunctions against Uber followed the Toronto protests. Ultimately, Uber was allowed to operate in Toronto with conditions. Taxi cab drivers also enjoyed less regulations thereafter.

If Uber gets superseded, it shouldn’t get special protections either. Recent events present some possibilities as to how that might happen.

Uber lost its license to operate in London on November 25, 2019. Transport for London (TfL) found that “a change to Uber’s systems allowed unauthorized drivers to upload their photos to other Uber driver accounts,” something that left them able to pick up passengers as if they were the booked driver. This meant that more than 14,000 trips had actually been uninsured. “Another failure allowed dismissed or suspended drivers to create an Uber account and carry passengers,” TfL reported.

In London, Uber had 3.5 million users and 45,000 drivers before it lost its license. Did its large place of use and employment mean it should be protected? No. Other ride-sharing companies such as Bolt, Kapten, and ViaVan picked up the ride-sharing market.

Of course, there’s another solution to taking rides with the wrong driver: to ride in an autonomous car with no driver at all. Uber offered rides this way for one year. That stopped in March of 2018 when one of its automated Volvos hit a pedestrian in Tempe, Arizona at 40 miles per hour.

Tesla has its own interesting solution. Its master plan includes vehicles with self-driving ability that are 10 times safer than human-driven cars. In addition to its corporately-owned fleet, individual Tesla owners could loan out their own vehicles for ride-sharing when they don’t need them for their own purposes. This supplemental income would help people get around and also alleviate the cost of owning a Tesla.

Of course, the Tesla runs on electric power and not fuel, which means that both oil companies and humans offering rides could have their jobs jeopardized. These factors alone are not enough to warrant special protections for such industries. Fossil fuels currently deserve to be defended because they offer the best available solution for the needs of people. Should a new technology supersede them, it should not be held back to save antiquated forms of energy and transportation.

Human ingenuity should not be held back to preserve that which deserves to fade. The only way that ingenuity can thrive is if the fruits of it can take their deserved place. For creativity to live long, some creations might have to die.



Lee Harding writes for the Frontier Centre for Public Policy.