AB5: "ending" the fungibility of Uber's drivers (plus reads, tweets, and a cool new tool)

Unlocking Potential is a newsletter by me, Francisco H. de Mello, CEO of Qulture.Rocks (YC W18)

Jan 12, 2020

Ola, que tal?

On to our first edition of 2020, and the decade! I have to say I have always hated these decade/centuries things where I have a lot of trouble figuring out if we're in the 21st century or the 20th century or the 2020s and so on. Even with the tricks that my history teacher taught me back in the 1990s (ha) I still can't say it with a lot of confidence. Maybe I'm a bit dumb.

Anyway, some interesting things to go over today.

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Uber and AB5

No, this is not a visa thing.

AB5 is a law that was passed in the state of California that basically makes the life of labor marketplaces (those that connect you with writers, designers, drivers, delivery people, etc.) much harder by, in a nutshell, making it much harder for these companies to sustain that these people are not their employees.

Aside from not understanding why liberals (as in the left) don't give up trying to control how society functions, which is, IMHO, a futile endeavor, it touches on some interesting consequences for Uber, it's strategy and the very reasons why Uber, but ridesharing as a whole, has become such a huge thing.

One big reason behind ridesharing's success (as online marketplaces)

I think one of the key reasons why ridesharing was such a great fit for an online marketplace has to do with the supply-side of these marketplaces, i.e., drivers.

See, drivers, and ridesharing, have a few characteristics that make it a perfect use case.

First of all, drivers are highly fungible. It makes very little difference which driver I get to go from point A to point B, especially relative to my need to do it instantly, or very quickly after I request my ride. Of course, going to the airport with the family may be a bit different, since I may prefer a driver whose car I know can handle all my crew's bags. But for most of the rides ridesharing apps facilitate, timing - the shorter the better - is of the essence, and I'm willing to trade my small amount of driver/car preference for a huge preference for the quickest possible pickup time.

Recursively, marketplaces worked so well as an alternative to what was available before - taxis - because they were able to amass a huge number of drivers that are virtually everywhere, making pickup times really short, and ridesharing apps as an alternative, much better.

By the way, a great tool to evaluate marketplaces was first introduced by my great friend Bill Gurley (just kidding, I don't know him, even though I'd love to) in his post All Marketplaces Are Not Created Equal (sic), but further illustrated in a post announcing Benchmark's investment in DogVacay, a dog-sitting marketplace:

Enter AB5

May California Uber drivers got this notice on their emails this week, with some changes Uber is making to their core offering that, I understand, where concocted by their legal team so that they can better dodge AB5:

The spirit of these changes revolves, I'm guessing, around Uber trying to create the impression that it's more about a bunch of individual snowflake drivers offering their services through Uber, and less about a giant company using faceless, fungible drivers as if they where a proprietary fleet of driverless cars. That's probably what their legal team and external lawyers thought, anyway.

So, Uber is trying to make its drivers less fungible. And as we saw earlier, the fungibility of its supply-side was one of the key reasons Uber was the success it was.

With these changes, Uber will - hopefully for them - give regulators the impression that it's encouraging customers (the demand-side) to develop a relationship with drivers, by allowing them - customers - to pin their favorite drivers and schedule rides with them in advance. (Another change is to stop showing predetermined prices on the app, so as to give the, again, impression, that it's not Uber rendering the transportation services (and thus pricing them) but the drivers.

Again IMHO, it looks like a potential threat to ridesharing marketplaces’ business model, but it probably won't be. See, I'd bet almost nobody will use these features. I think, from my experience, that the big use case is customers calling rides for “immediate consumption.” I don't think customers will trade pickup speed for having their favorite driver take them to a meeting downtown. (I've just never seen somebody bypass the Uber marketplace by getting a driver's phone # and calling them directly in this use case.) All in all, I think Uber will even benefit from a new use case, which is bringing back to the platform a small minority of users who'd bypass the platform for some very specific use cases (like my going to the airport one mentioned earlier).

My idea with discussing this was introducing these interesting references to ridesharing marketplaces (Benchmarks's framework and application to DogVacay), talk about this relevant piece of legislation that's rousing Silicon Valley (AB5), and touch on some interesting strategic considerations for marketplaces (bargaining power with “suppliers,” fungibility, fragmentation).

Readwise.io

I've discovered this incredible app, readwise.io, that goes over my more than 450 books on Kindle, gets what I've highlighted, and sends me five random snippets highlighted every morning via email.

I've always struggled with the fact that I apparently retain very little of what I read. Apparently because, as Paul Graham put it somewhere I just can't find now, what your read subtly changes your mental models and understanding of the world in difficult to pinpoint ways.

Anyway, Readwise makes it much more palpable. Here's a sample of what I got this morning in my inbox:

As you can see, I can keep the highlights (so that they are sent to me again sometime in the future), discard them, or even favorite them, so that they appear more frequently. I can also share these highlights as images, as you can see from this highlight I made in Behind the Cloud (circa 2013):

I know I'm being kind of a fanboy for this product. Bear in mind I'm in no way related to them. I just think reading and rereading and thinking about stuff is a great way for you to unlock your potential, and this seems like a seminal tool to do it.