The cab you hail with Uber or Lyft might take you to the courthouse

US Outlook

Andrew Dewson
Saturday 21 March 2015 01:06
Uber’s offices were raided in France this week, and in South Korea it was charged with running an illegal taxi service
Uber’s offices were raided in France this week, and in South Korea it was charged with running an illegal taxi service

It’s hard to know where to begin with the stinker of a week suffered by the taxi- hailing apps. There’s certainly never a dull moment.

Uber’s offices were raided in France, in South Korea it was charged with running an illegal taxi service, its low-cost service was banned in Germany and it was defeated in a court case in the US. Ouch.

That’s all a far cry from just a couple of months ago when almost nothing seemed like it could go wrong for the hottest start-up on the planet. Uber raised more than a billion dollars at a valuation in excess of $40bn (£27bn) and had big investment names lined up to join the party. Well, they can all afford to lose a few bucks.

The biggest threat to Uber’s long-term business looks like being the court case it lost, even if there is little immediate impact. Lyft, its main rival in the app-based unlicensed cab world, also lost – so at least it has company. Two federal judges decided to allow juries to decide if Uber and Lyft drivers are employees entitled to things like the minimum wage, benefits and so on – or are just contracted freelancers, entitled to virtually nothing.

An employee is also eligible for unemployment insurance and some compensation for the costs of doing the job; Uber and Lyft drivers currently cover all of their own costs, including petrol, vehicle depreciation and insurance.

The latter is a particularly grey and troubling area: at some point an insurer will have to deal with the aftermath of an Uber or Lyft accident involving serious injury to a passenger. If – despite the companies’ requirements that drivers have adequate insurance – it was found that the driver only had cover for private rather than commercial use, there could be an ugly legal fight over the medical bill. American insurers are not known for their generosity of spirit or cheque book.

In Lyft’s case, Judge Vince Chhabria made it pretty clear that the company does far more than just provide a platform, as both apps so often claim. If a jury hears the same, the sensible money is on another defeat for Lyft and Uber, a lengthy appeals process and maybe a taxi ride to the corporation-friendly Supreme Court.

It’s a good job Uber and Lyft raised all of that money. Lawyers don’t come cheap.

On the face of it, there is nothing fundamentally wrong with what Uber and Lyft are trying to do – taking modern technology, making life simpler and pocketing a profit into the bargain. However, doing so by skirting very sensible regulations and avoiding the obligations that come with being an employer is fundamentally wrong.

By way of comparison, the British cab company Addison Lee launched in New York a couple of weeks ago. It owns all of its UK fleet, and all its drivers are trained, licensed and insured employees with all the benefits that come with that. It also has a business model that has worked pretty well for 40 years, as well as the benefits of modern technology.

What’s clear, though, is that despite their legal troubles, Uber and Lyft are making real headway in taking on traditional cab companies. According to the New York Taxi and Limousine Commission, there are now more Uber cars on New York roads than there are yellow cabs, and that’s what investors are willing to ignore fundamentals for.

Perhaps this is the point – there are no fundamentals; you’re either up for the ride or not. Unlike Addison Lee, however, Uber and Lyft are likely to end up with very different business models to the ones they have punted with such success at eager investors so far.

College sport makes a very few very rich: that’s madness

College sport is a multibillion-dollar business but the players are not paid (Getty)

My “home” state, Kentucky, has ground to a halt – as has much of the country. Not because of anything important but because of student basketball. “March Madness” is here, and with it the annual debate over the exploitation of college athletes. That they are exploited is almost beyond debate, it’s just a matter of degrees.

College sport is a multibillion-dollar business, one where men’s gridiron and basketball coaches can and do make millions. Kentucky is one of the poorest states in the country, but our two top basketball coaches make close to $10m a year between them. Our priorities are clear.

Just to illustrate how big a deal it is in this part of the world, on Wednesday 10,000 people skipped work to watch the University of Kentucky men’s team practise. The fans cheered unopposed lay-ups at the arena in downtown Louisville, built to house Kentucky’s arch-rival, the University of Louisville team, at a cost of $238m. The tab was picked up by taxpayers, naturally, and it could still bankrupt the city.

If anyone wanted to set up an industry that was perfect for raising questions over ethics, they would probably choose something like the National Collegiate Athletic Association, the governing body for all American student sports. Billions of dollars flow in and out, millions stay in the hands of a lucky few, and all the while the main attraction, the players, get nothing – at least in cash.

They are “paid” in scholarships, most of which are a complete waste because nowadays so few graduate – at least in gridiron and basketball. There are suspicions that in some cases school grades are inflated to get them into university in the first place, while classes in universities are created to make sure players meet the minimum “academic” standard required to carry on. The players are treated no better than chattels – pawns in a bigger game that makes a very few very rich and leaves the vast majority very poor.

I love sport, but the only honest part of college sport is the endeavour on the field. Outside that, there may be no more corrupt industry on earth.

The head of the Fed does well to remain patient

The coverage of this week’s interest rate decision in the US was nothing short of absurd – focused as it was, almost entirely, on whether or not Janet Yellen, the chair of the Federal Reserve, would use the word “patient” or not.

It was almost surreal reading the coverage before the statement came out; television channels even trotted out statistics gurus to tell viewers that the chances of Ms Yellen continuing to use the word “patient” were just 5 per cent.

A long debate on one of the big financial television channels followed the Fed’s fairly mundane statement – one in which expert economists and crystal ball gazers pondered the significance of dropping the word “patient”.

At the press conference following the statement, Ms Yellen was even asked if it is possible for the Fed to remain patient while dropping the word from its statement – as if by doing so, the Federal Open Market Committee is going to develop a Steve Jobs-level of testiness.

Fed statements are, or were, famously opaque, Alan Greenspan once proclaiming: “If I turn out to be particularly clear, you’ve probably misunderstood what I said.” In her short time at the helm, Ms Yellen has already ushered in a new era of clarity and she is probably as bemused by the focus on one word as I am.

We should have had a woman in charge all along.

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