Businesses need to make money to provide the services consumers want: New York Times
If you do not subscribe to the New York Times, it will be well worth your time to quickly sign up for the limited free articles to read the June 8th blockbuster piece by Kevin Roose, titled “Farewell, Millennial Lifestyle Subsidy.”
So, as it turns out, every experienced business person – taxi, hotel, delivery – who protested that no legitimate business could compete with venture-capital subsidized services which were not compelled to obey the law was right all along.
Roose refers to the collective delusion that it was normal to have things like Starbucks coffee delivered by Uber as the “golden era of the Millennial Lifestyle Subsidy, which is what I like to call the period from roughly 2012 through early 2020, when many of the daily activities of big-city 20- and 30-somethings were being quietly underwritten by Silicon Valley venture capitalists.
“For years, these subsidies allowed us to live Balenciaga lifestyles on Banana Republic budgets. Collectively, we took millions of cheap Uber and Lyft rides, shuttling ourselves around like bourgeois royalty while splitting the bill with those companies’ investors…we filled graveyards with the carcasses of food delivery start-ups — Maple, Sprig, SpoonRocket, Munchery — just by accepting their offers of underpriced gourmet meals,” Roose writes.
The current media flurry around intelligent human beings suddenly realizing you can’t get something for nothing appears to have been triggered, at least in part, by a May 26th tweet by Sunny Madra, vice president at Ford X in Palo Alto, California. Madra complained that his Uber from the airport cost more than his flight to New York:
“It took approximately 10 years for the bubble to burst,” Marc Andre Way, president of the Canadian Taxi Association told Road Warrior News.
“Big Tech aggressively subsidized trips, destroyed an industry and is now trying to reform the labour laws to their advantage, allowing them to take advantage of drivers and promote false expectations. Regulators around the world have allowed the Tech lobby to promote the shiny new toy, a trojan horse.
“Young adults just learning how much things cost may have had no idea that this party could not last. Now, they will need to rethink their spending habits, because this lifestyle is unaffordable without Big Tech picking up part of the bill,” Way points out.
In the NYT article, Roose outlines price increases, market failures and bankruptcies in areas including ride hail like Uber and Lyft; accommodation, like AirBnB; and the myriad of food delivery services which have gone under. He pays particular attention to scooter companies like Lime and Bird.
“The average Uber and Lyft ride costs 40 percent more than it did a year ago, according to Rakuten Intelligence, and food delivery apps like DoorDash and Grubhub have been steadily increasing their fees over the past year. The average daily rate of an Airbnb rental increased 35 percent in the first quarter of 2021, compared with the same quarter the year before, according to the company’s financial filings,” Roose points out.
Roose’s article is well-researched and enjoyable to read. Simply the fact that a member of the media has noticed and is writing about the irrationalities involved these wild “get something for almost nothing” schemes will be incredibly satisfying to observers who have watched aghast for years as the insanity played out.
“As a small family taxi business that was subjected to strict city regulations for decades, it was surreal to watch a big US taxi company, masquarading as a tech company, being allowed to operate by our Toronto regulators, under totally substandard regulations compared to the way taxis were regulated. It was and still is a completely unlevel playing field,” says family business owner Joel Barr. Barr was a second-generation taxi operator with 10 cars on the road when Uber was illegally allowed to enter the Toronto taxi market in 2014, decimating local and family-owned businesses.
For business owners like Barr and other readers of Roose’s work, the real satisfaction will be in reading the Comments Section. At the time of this posting, there were more than 1300 of them. Here are just a few samples:
“Finally someone admits it. All those years we were told that the low costs of Uber, Airbnb, etc. were the result of technological magic driven by their special talents for innovation; that these silicon valley companies all had lightning in a bottle. Now we can all see the emperor never had any clothes, that it wasn’t magic. It was just wildly wasteful and inefficient cash burn. The only real “disruption” these companies managed to effect was the evasion of labor laws, anti-monopoly laws, and consumer protection.”–James
“I’ve noticed Uber’s and Lyft getting a lot more expensive in the last 2 years. It was fun while it lasted. I’ll just stick to yellow cabs again as I’m starting to find them cheaper again, especially when Uber surcharges during rush hour.” —Frank
“Can we generally agree now to stop looking to unprofitable Silicon Valley for business and management wisdom? The unabashed greed, empty “scale” performance ethos and naïveté of the leaders in this sector rarely pans out, and yet the rest of corporate America eats it up with a spoon like magical insight. There’s little magic to greedily gaming the system…unless….that’s what the system was all about at its core. No wonder corporate America is so dazzled.”—Midtown East
“The fact that some high-end services are no longer easily affordable by the merely semi-affluent may seem like a worrying development, but maybe it’s a sign of progress.” Or maybe it’s a sign that the whole idea of app-driven businesses was stupid all along. At first, I thought maybe they were all just scams, making up the losses by harvesting all that freely-given personal information. But as they piled up, it became clear this newly abundant ID resource couldn’t be worth the expense, either. So now I figure they’re mostly another kind of scam, just ways for the insiders who start them to make some easy big money for a while and leave investors holding the bag. Since the gains are concentrated and the pain spread, it’s a grift you can keep going for a while. And it has the bonus that investors can feel like they’re on the cool cutting edge of something. Too bad it’s all wrecking more durable business models along the way.” –Keith
“It was so clear to me that this was vulture capitalism. Swamp the market, chase out all competitors with artificially low (subsidized) fares, etc. and once you have a monopoly, or once the investors have their pay day, you raise the price to what it naturally should be. I refused to partake of the near freebees. Call me a fool. I didn’t want any part of driving good people out of business. I’m glad the masters of the universe will now have to pay for their luxuries.” — Pontifikate
