“Uber Has Higher Prices and Worse Service Than the Taxi Industry Had Ten Years Ago”

Following the Uber Files leaks, transportation expert Hubert Horan explains why Uber is “hopelessly uneconomic” and how its engagement with policymakers and academics aided its relentless pursuit of growth.

Earlier this month, The Guardian and the International Consortium of Investigative Journalists (ICIJ) began publishing stories based on 124,000 internal Uber documents leaked by Mark MacGann, Uber’s former chief European lobbyist. The Uber Files showed how Uber “duped” regulators and law enforcement officials, won over politicians (including current French president Emmanuel Macron, who reportedly aided its lobbying efforts when he served as economy minister), and ingratiated itself with top academic researchers, using their clout and research to promote its corporate narratives. 

The leaks, published as Uber users face much more expensive fares after the investor-funded subsidies that kept Uber’s prices artificially low for years have dried up, shed light on Uber’s “ethically questionable” conduct and its success in recruiting prominent figures in politics, media, and business. Yet Hubert Horan, a transportation consultant who in recent years has become Uber’s most vocal and persistent critic, is somewhat disappointed. 

“It was widely known that Uber was willfully violating local laws, and that they had mounted a massive lobbying PR effort—unprecedented even by tech industry standards— to overwhelm any kind of legal or political or media resistance. These reports are useful in reminding people that the narratives that had fed Uber’s growth were all entirely fabricated, but I’m not sure that qualifies as something to stop the presses for,” Horan recently told ProMarket. 

In 2019, Horan wrote a three-part series for ProMarket about Uber’s predatory pricing and reliance on “gigantic” subsidies, the narratives with which it convinced reporters to cover it in glowing terms despite its anticompetitive conduct, and the way it relied on well-regarded academics to present its PR messaging as the product of rigorous research.

Following the Uber Files leaks, we sat down for an interview with Horan to learn how Uber’s conduct, particularly its engagement with academia, aided it in its relentless pursuit of growth and revenues. 

[The following conversation has been edited for length and clarity]

Q: What is the real story about Uber that we should be talking about?

The heart of the story is that Uber has always been hopelessly uneconomic. It could never produce sustainable profits that would justify the investments it got because its business model can’t produce taxi or delivery services at prices the market would be willing to pay. If you scrape out all of their bogus accounting games, they’ve lost $31 billion in their actual ongoing car service and delivery business as of the end of last year and have yet to produce $1 of positive cash flow.

It’s because their business model was always hopelessly uneconomic that they had to create this culture and these massive lobbying efforts. They did these things because it was the only way to drive the rapid volume growth needed to produce a unicorn-type valuation. It’s perfectly appropriate to talk about all these European politicians running to get cash from Uber, but those politicians were serving a hopelessly uneconomic company that was driving out existing workers and companies that were more efficient. They weren’t creating jobs and improving economic welfare in any sense. It was a purely extractive enterprise. 

When you fail to put things in this context, Uber can say—as they are now—that all that stuff was what Travis Kalanick did six years ago, and he’s gone, so all those problems are over and what’s being reported is ancient history.

Q: In February, you published an analysis of Uber and Lyft’s annual reports in Naked Capitalism, claiming that Uber overstated its 2021 profitability by $3.2 billion. Can you explain how it did that?

There are two accounting games they used to deceive the public. First, they’re intermingling untradable equity from businesses that failed and are no longer part of their ongoing business with the results from the business they’re actually operating. 

Uber started a whole lot of activities that failed miserably. Uber China lost billions; their autonomous vehicle operation was shut down. They shut down their operation in Southeast Asia, Russia, several other places. When they shut down those failed operations, they “sold” what they were doing to the incumbent that had driven them out of business. Didi in China is a prime example: in return for letting Didi have a monopoly of the market, Didi gave Uber a bit of its stock. Didi stock wasn’t really tradable for a long period of time—it hadn’t gone public—but Uber would assert, and the first time was right before the IPO, that their true P&L from their ongoing business should include what they thought the untradable Didi stock and other forms of equity would be worth if it was tradable.

The second tactic is that Uber’s public statements to the capital markets about the profitability of their business are based on false metrics. Every public statement Uber has ever made—in quarterly or annual earnings—emphasizes a metric that’s called adjusted EBITDA profitability. The metric they use is neither profitability nor even EBITDA. Over time, they’ve just basically excluded $6 billion in costs.

Q: In previous writings, you described Uber as essentially a propaganda-driven company that promotes corporate narratives through the press and academia to explain away its losses or conceal the unsustainable nature of its business model. What makes these tactics so effective? 

Implicit in your question is that despite its $31 billion in losses and the fact that they’ve never generated even $1 of positive cash flow, conventional wisdom still says that this was a wonderfully innovative company that was smart and successful and greatly improved urban transit. It’s currently valued at something north of $40 billion—ostensibly, a viable business that people should invest in based on its future earning potential. 

Focusing on the more egregious stuff in the Kalanick era obscures the fact that none of the fundamental economics of the business has improved since Uber booted Kalanick out. Uber was one of the biggest stories in the business press for years, but no one ever stopped to ask: When are they going to make money? How could they make money?

Q: Well, for one, they raised prices significantly. One study estimates they increased prices by 93 percent between 2018 and 2021. 

Uber is not responsible for Covid, and every urban-oriented business got shellacked by the pandemic. But Uber nowadays has much higher prices and much worse service than the taxi industry had ten years ago when they came in. The whole Uber narrative back then was about the evil taxi cartel being so awful: “they hate their passengers, they don’t like technology, you can’t get a cab on Saturday night or when it rains, and look at all these middle-class and poor neighborhoods that get awful service. We’ve found a solution.” They, in fact, had not found a solution because all of those problems were identical to every other form of urban transport, none of which has attracted $20 billion in funding from capital markets.

People keep asking me, “Why do you spend all this time on this bloody taxi company?” One reason is that Uber really destroyed an important aspect of urban transport. Taxi service in 2009 surely wasn’t great, but it was important. Uber was the first company to adapt these long-standing political propaganda narrative techniques to the development of a company. There are lots of companies that have PR armies after they’re big and established. But this was the very first company where this was a strategic priority from day one. They were the first to use those kinds of techniques to bamboozle politicians and investors from the get-go.

Q: Uber’s close relationships with politicians, its flouting of regulations, its corporate culture, all of those have been the subject of numerous critical news stories, documentaries—even a Showtime series. And yet, as you said, Uber is still largely seen as a $40 billion company, albeit one with a troubled past. How do you explain that? 

I would describe it as a willful refusal to connect the dots. I know lots of people who figured that this was a dubious company years ago. The evidence is all out there. But as we can see in other political and tech industry contexts, when so-called “elite opinion” decides that something is wonderful, they’re never going to go back and say, “God, we screwed that up mightily.” That just does not happen.

Q: What was so innovative about Uber’s narrative techniques? What did it do that no other company has done before? 

People always wrinkle their noses when I use the word “propaganda,” but there are proper academic definitions of this stuff. It’s not just stuff that the other side does, and it’s not stuff I don’t like. It’s converting a subject from something that people can argue about based on evidence and logic to something that is purely emotive—ideally, tribal-identity linked; good guys/bad guys, black and white. 

They knew that their initial target audience was these elite groups. David Plouffe, who was Uber’s head of PR in the US and Barack Obama’s former campaign manager, was the one that had to reach out to the New York Times and The Atlantic and The Washington Post, the outlets that were most willing to publish Uber narratives.

They also knew they had to rush in and just start operating and offer people fantastic fares that were wildly uneconomic and unsustainable. It created a narrative message: “By flouting all the laws, cities get this great service.” That message was targeted against the taxi companies serving big cities and aimed at the liberal East Coast media. They boiled things down to simplistic black and white: Uber vs. the evil taxi cartel. There was no cartel—it was a lie from day one. But people in the media thought, “My friends like this service. I can get a cab on Saturday night. This is great.”

The heart of the overall PR strategy was that there’s only one side to this story. Reporters, tech industry people, Wall Street analysts, they don’t need to talk to anyone who actually knows anything about the taxi industry or urban transport because we—Uber—won this game, and we have tens of billions in financing. So you can either have access to us, or you can play David vs. Goliath. They used those techniques to harass the few journalists who were critical of them.

Q: Beyond political figures like Plouffe or Macron, another crucial aspect of Uber’s outreach effort was its relationship with academic economists. Have we learned anything new about the way Uber interacted with academics? 

I wrote about Uber’s use of academics in their narrative program in the US, and The Guardian dug up examples of that in Europe. In this elite world, Uber would go to mainstream media and senior politicians and say, “Look, these academics have all said that we’re creating jobs, we’re so efficient, we’re increasing consumer welfare.” 

These papers were egregious. If somebody submitted them as freshmen economics papers, they would have been politely told they should consider a different major. They’d make claims about workers using data cherry-picked from a time period just prior to Uber cutting driver salaries by 30 percent. They would cherry-pick stuff from the wealthiest sections of Chicago and Los Angeles as evidence of demand elasticity. They would claim that drivers really vastly prefer working for lower wages because of the massive increase in flexibility, based on a survey that was totally biased. 

I think a bunch of these academics bought the Uber PR Kool-Aid because they were ideological fellow travelers on the side of “all regulation is bad.” And then they see a company that believes what they believe? “My god, I can’t wait to help them! I’d do it for free!” 

Q: Beyond money or ideological affinity, though, the real selling point seems to be the access to Uber’s proprietary data. In economics, after all, data is everything. 

Right. These papers were based on data that no other researcher could go in and replicate to see whether their findings were valid or not. 

Again, the point was not to convince people within the economics profession. The point was to tell the media and the politicians that Uber is endorsed throughout that elite world. “All the people you like and who pay for your campaigns, your friends and neighbors, think we’re great. The only people opposed to us are dyed-in-the-wool socialists who want to return us back to the strikes of the 1920s.” 

They would take one of these papers and then reach out to ideological sympathizers who would then write pieces that basically simplified what the academic paper had said, distorting it, making it sound much broader, much more solid, much more rigorous than the author would have ever claimed. The academic could still say, “If you look at the footnote on page 42, I didn’t really exactly say that.” Yeah, but your introduction and conclusion say that, and you didn’t lift a finger when the people who publicized your article misrepresented it as universal truth. 

The job of the guy who leaked the emails to The Guardian was to go to politicians in Brussels and other European capitals and say, “Look at these papers. These learned tenured experts in the economics profession fully support our claims about producing huge benefits.” That’s a classic PR tactic—none of those politicians or their staff are going to bother to read those papers, for obvious reasons.

Q: Why criticize the economists then? They’re not responsible for how Uber’s PR used their papers, aren’t they? 

Nonsense. Of course they knew. Why did they employ you? Why did they give you all this data? Why did they put an Uber executive as one of your co-authors? “I work with Raytheon and I write papers saying we need to increase the defense budget, but I had no idea they were going to use it.” This is how the game works. 

They were making arguments about driver benefits and consumer benefits and general economic benefits and they based those arguments on a company that in 2015 was losing buckets and buckets of money, and in 2022 is still losing money. You can’t use current Uber data and make any broad generalizations about efficiency or service. It was all subsidies. And economists knew that, or willfully ignored it. Uber didn’t create this game, but it exploited it. 

Q: Why is it so important for you to focus so much on Uber’s financial viability, especially given the social costs you described as the result of their relentless pursuit of profits? 

The problem with a lot of what’s been written about Uber, including the recent Guardian pieces, is that it’s a big elephant, and people are touching different parts of it. People can point to this bit of labor exploitation, this bit of law-breaking, and this bit of political corruption. All these are relevant points, but not in isolation. The first question you got to ask is: Is this a company that, at the end of the day, will increase or decrease overall economic welfare? Because if it doesn’t, then you can see how all the other pieces, including the toleration of systemic sexual harassment, fit into the puzzle. But the root is the awful economics. 

Q: Which brings us back to the question of why spend so much time writing and thinking about, as you said, “one taxi company.” Is it because you see Uber as indicative of something larger? 

Exactly. Are Facebook or Amazon good companies? It’s complicated. You can claim that both developed very useful innovations and really did solve some problems or created something that didn’t exist before, but then started using these egregious anticompetitive tactics to protect their market power, and so on.

But with Uber, it’s 100 percent negative. There’s nothing positive in it for anyone—not workers, consumers, cities. They used massive subsidies to eliminate competition and deceive people that they were getting a better service. Those tactics can be used elsewhere. If you look at Web3 and crypto, you see that the propaganda narrative techniques that Uber showed everyone have become more widespread, and that hasn’t benefited the public or the economy at all.

If Uber shut down next week, you’d get new entrants, but of course, it’s not going away. No one ever says, “We thought we had an idea, but it didn’t work. We’re never going to make money. Let’s just shut down next week.” They have billions in the bank and can go years just raising fares and cutting back service.

But the bigger problem is that now that Uber has stopped subsidizing all that stuff, we’re left with something far worse. Uber destroyed what was there before. Rubble. So all the people that depended on taxis to visit grandma in the hospital, or get to that warehouse job on the late shift after the transit system is shut down, they’re plum out of luck. Taxis actually provided an important urban transport service. It wasn’t the biggest thing in the world, but it was important. 

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