Uber vs. Guilds and Government Regulation
Uber sold its Chinese market to a Chinese ride-sharing company. It will get almost 20% of the Chinese company, plus $1 billion in capital.
At the time of the sale, Uber China was worth $7 billion. The Chinese company was worth $28 billion.
This industry did not exist five years ago.
The Chinese firm has 15 million drivers and 300 million members. This is almost as many members as the USA has people -- men, women, and children. It operates in over 350 cities.
The Chinese firm has local competitors.
Jia Yueting, head of LeEco, the parent of smaller ride-hailing rival Yidao yidao-yongche, said in a social media post the firm would offer steep rebates to attract passengers to help avoid there being a monopoly in the market."Yidao will soon kick off an even more aggressive cash-back campaign," according to a translation of Jia's posting provided by a LeEco spokeswoman.
All across Asia, Uber and rival firms are battling for market share.
This service category has come out of digital nowhere to become an immense force all over the world. Think of this. It's a category that relies on privately owned cars. This is in Asia. The immensity of the market is such that the service category is enormous. It is going to get much larger. Money streams will be immense.
It is the speed of the conquest that astounds me.
The cabbies are doomed. They are regulated. They work for monopolies that pay taxes for the privilege of offering rides: medallions in New York City. They have been eclipsed in less than five years, all over the world. This indicates just how insecure they were. There is no way that they will be a significant guild in a decade -- anywhere.
The replacement of a guild by the decentralized market is a beacon of liberty. Cabbies had controlled the point-to-point ride market for 80 years. Yet overnight, they are visibly doomed as a profession.
No one except cabbies cares. They have no vocal supporters in the general public. There is no emotional commitment to cabbies. There is no loyalty. People with money to spend simply pick up their cell phones and search for a better deal. There are lots of them.
There are $1 million medallions to pay off. They will not be paid off. The banks that lent the money are faced with huge losses. Yet this loan category had seemed almost risk-free five years ago.
A WAKE-UP CALL FOR GUILDS
This is a wake-up call to any guild that maintains its support because of government regulation. The regulation serves as a barrier to entry. But it is useless, once the general public switches to decentralized sources of supply.
This is going to change India's economy. But more important, it will change its caste system. For millennia, some professions have been assigned to specific castes. That system will be gone in 30 years. Then what?
Digital marketing opens up markets to independent contractors. There is no more terrifying phrase to a guild than this one: "independent contractors." Price competition is the strategy that has broken government-created guilds for ten centuries. Price competition is the great gift of the World Wide Web. A Google search can show what the cheapest price is. This process is relentless. There is no escape for most guilds. The public is abandoning its dependence on guilds, search by search.
A Web search is based on an assumption: "I can use on-line evaluations by customers to eliminate high-risk suppliers. I can balance this with price." The public is learning that there is no need for government regulation. The free market can supply the screening out of high-risk, low-quality suppliers. This attitude will spread to every service, every industry, over the next quarter century.
Governments have created fiefdoms through regulation. They have created dependent guilds that rely on regulation and licensing to screen out price-competitive innovators. The general public has accepted this defense of government regulation. But every Web search for a better deal undermines this faith.
The Web is unleashing consumers from the shackles of government regulation. It is doing the same for suppliers. It is therefore breaking the illusion of the need for governments to protect a supposedly helpless citizenry from unscrupulous and incompetent suppliers.
Yelp lets people announce warnings against inefficient suppliers. Web searching is providing a vast, decentralized version of Yelp against government regulation, protected suppliers, and closed markets. This process is relentless. It will spread to every nook and cranny of local markets. The local Good Old Boys and the national Old Boy Networks are facing tidal waves of buyers and sellers who are finding ways to work out mutually beneficial deals -- deals in which government plays little or no part.
The habit of Web searching is the habit of guild evasion. It is undermining a millennium of inside deals, closed markets, and trust in government to protect the public. There is no way for the guilds to reverse this process. Price competition is just too strong a motivation. This offer is irresistible: "I can get it for you cheaper."
Searching, searching uber alles.