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Picking up on the same theme as the newsletter last week, we have been reading  ‘Road to Nowhere: What Silicon Valley Gets Wrong about the Future of Transportation’, the new book by Paris Marx, host of the Tech Won't Save Us podcast, with interest. You can listen/read our interview with Marx here

'Road to Nowhere' explores Uber's business model in depth, comparing it with Amazon, a company that had shown the 'growth-before-profits' strategy could work. Uber's attempt to pull off the same trick in private car hire came up against a pretty fundamental road block.

"As Amazon grew, it took advantage of economies of scale to ensure that as its business expanded it was able to make its fulfillment and logistics operations more efficient and reduce the costs of picking, packing, and delivering an order," Marx explains. "But Uber cannot replicate those cost savings through growth. As Hubert Horan explained, about 85% of the cost of an urban car service comes from drivers, vehicles, and fuel, and they are not costs that fall as a company grows, especially when Uber requires each driver to maintain their own vehicle instead of managing a vehicle fleet."

While outsourcing the car and the insurance to the driver seems like a winner as far as profitability goes, the problem is that it means the company has no control over costs in what is part of the core unit economics of driving a cab. As we are now seeing with the rising price of fuel, insurance and cars, if the core costs rise enough, it forces drivers to either give up on driving for Uber or alternatively the company has to raise pay, which eats into its returns.

Marx goes on to explain that Uber also had additional expenses relative to a traditional taxi cab firm, including highly-paid executives, expensive HQs all over the world, a big tech team of highly paid engineers, and, until recently, a research and development unit that "burned hundreds of millions of dollars a year on autonomous vehicles, flying cars, and other pie-in-the-sky ideas that brought no returns". When we put this whole picture together, we begin to see why Uber has struggled to reach profitability.

That none of the company's major investors, which included major players in Silicon Valley including Google executives, could foresee these problems is remarkable, but Marx believes that Uber has usefully served another purpose altogether.

"Even if Uber doesn’t turn a profit at the end of the day, there’s a lot of other capitalists who have also benefited from what Uber has done in chipping away at taxi regulations but also labour regulations in many countries and jurisdictions," Marx told us in our interview. "And I’d say it’s not just an Uber thing. If you look at what many of these tech companies have done – Amazon for example – what many of their innovations entail, it really is to find ways to reduce the power of workers, to enhance the role of exploitative management practices, to ensure workers are paid less, and so forth."

While Silicon Valley may promise tech futures for the greater good of all, the real world effects of their ventures in reducing workers' power has a very long history indeed in capitalist economies.

Ben Wray, Gig Economy Project co-ordinator

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Gig economy news round-up

  • UBER FAIL IN BID TO HAVE DISCRIMINATION CLAIM STRUCK OUT: A former Uber Eats rider who is suing the company over his dismissal claims its facial recognition software is racially biased. Pa Edrissa Manjang's claim, which is being supported by the App Drivers and Couriers Union (ADCU), received a boost on Wednesday [27 July] when an East London Employment Tribunal rejected Uber's application to have a discrimination claim struck out, meaning the case will be heard. Manjang, who worked for Uber Eats between 2019 to 2021, said the firm treats workers like "numbers rather than humans", adding: “Anyone can tell you that working for the company isn’t good. They don’t respect or value the people they work with." Yaseen Aslam, President of the ADCU union, claims that Manjang was "profiled for heightened and excessive checks because of his ethnicity". Uber Eats stated: “Automated facial verification was not the reason for Mr Manjang’s temporary loss of access to his courier account." Read more here.
  • BERLIN LIEFERANDO COURIERS TO ELECT WORKERS' COUNCIL: 1,400 couriers in Berlin at Lieferando, the German brand for Just Eat Takeaway, will vote in August to elect a Workers' Council (WC). On Monday [25 July], a Labour court rejected a bid by some Lieferando employees to block the election from going ahead. The WC Electoral Board believe that management were behind the attempt to block the election. The dispute was over whether office employees should have a vote and be part of the WC. Speaking after the verdict, a member of the Electoral Board, said: "Today's negotiation is part of management's attempts at harassment around the Works Council election." Berlin has become a centre for food delivery courier organising via WCs, which is an instrument under German industrial relations law which gives workers official rights of representation in the company. Read more here
  • FOOD DELIVERY GROWTH IN SPAIN AS HOT WEATHER ATTRACTS CUSTOMERS: The app-based food delivery sector continues to grow in Spain despite surging inflation, according to experts consulted by 'El Español-Invertia'. Inflation has reached 9.8% in Spain but Cristian Castillo, professor of Economics and Business Studies at the UOC and expert in logistics, said that the macroeconomic circumstances "are not affecting the dynamics" of food delivery, which "continues to have more activity than in previous months". Internal data also supports this analysis, with figures suggesting sales are up 13.3% so far this summer on the same period last year. Castillo said that in heatwaves customers are "more likely to buy" online. Riders in Spain have complained of the difficulty of riding during heatwaves, and the lack of care of food delivery platforms about the problems they are facing. Read more here
  • ANDALUSIAN TAXI DRIVERS PROTEST OVER UBER FILES: Over 200 taxi drivers protested on Thursday [28 July] across Spain's largest region, Andalusia, to make their disgust clear over the revelations about Uber in the Uber Files. The leak of 124,000 documents revealed law-breaking and political corruption between 2013 and 2017. The taxi drivers protested in the Andalusian cities of Seville, Malaga, Córdoba and Granada, with Miguel Ruano, President of the Andalusian Federation of Self-Employed Taxi (FAAT), stating that the Uber Files only showed them "what was evident": "Some light is shed on something we already knew". Banners at the protest read "No to the control of the taxi by multinationals" and "Game Uber". The FAAT were also drawing attention to the fact that the Ábalos decree, which permits private hire platforms to operate across Spain, expires at the end of September, with each region required to bring in their own laws to replace it, with no new law currently in place in Spain's southernmost region. Read more here.
  • GORILLAS SET FOR NEW FUNDING AT REDUCED VALUATION: The crisis-ridden grocery delivery platform Gorillas is about to strike a much-needed funding deal with its current investors, according to Business Insider. The company's new financing round is set to bring in €245 million at a reduced valuation, in a bid to ensure the Berlin-based firm's financial viability. Gorillas sacked half its office staff and exited four European markets at the end of May as its sales growth slowed and new financial investment stopped coming in. The company, which was valued at €3 billion as late as October, is thought to have been burning through €75 million a month and had €300 million left in the bank as of May, with one source telling Business Insider that they would run out of cash by November, before this new cash deal. Gorillas had been working with US bank JP Morgan on possible merger or sales options, but that relationship has reportedly ended. Read more here.

On GEP this week

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Why Uber failed and what's next: Interview with Paris Marx

The Gig Economy Project speaks to Paris Marx, host of the Tech Won’t Save Us podcast and author of new book ‘Road to Nowhere: What Silicon Valley Gets Wrong about the Future of Transportation’, about the Uber Files and why the company’s vision for transforming transport for the greater good has not come to fruition. This interview is available as a podcast and in text form.

From around the web

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The Uber Files Revealed a corrosive system of US lobbying

Ryan Zicgraf writes for Jacobin on Uber's lobbying power in the US.

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“We, The Ants Of This World, Have Common Goals.” – Workers In Greece Take On Gig Economy Bosses

Veronika Merkova writes for Voice Wales on the fight for unionisation and workers rights in the Greek gig economy.

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The super fast delivery game is over

Khan Lan writes in the Saigon Times on the struggles of grocery delivery platforms around the globe (in Vietnamese).

Upcoming events

- Fair Work will hold an online summit on 14th of September titled 'Fair Work on Digital Platforms'. For full details and to register click here.

- The 2022 Re-Shaping Work Conference will be held in Amsterdam on the 13-14 October. Read more here.

Know of more events we should be highlighting? Let us know at [email protected].

Get Involved

The Gig Economy Project is a media network for gig workers and we welcome contributions from workers, writers, academics, activists - anyone who wants to stand up for gig workers' rights.

If you would like to write for the site, discuss arranging an interview with GEP, or simply have information about developments in the gig economy in Europe you think we should be aware of, get in touch.

Contact project co-ordinator Ben Wray at [email protected] or send a direct message to the Twitter @project_gig.

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