When I was six years old, my father fell in love with a word. He and my mother had stopped having sex, and this word became a kind of substitute. The more he wanted the sex he couldn’t have any more, the more this word appeared, like a ghost popsicle, coming out of his mouth. The word was entrepreneur.
It’s a French way of saying: here’s a business person with an idea. I think that was the attraction for my father, an immigrant twice over, a man who had tried to dodge war on two continents. He loved the fact that if you could just come up with a good idea, you could make a lot of money. You could stop running for the rest of your life.
But making money wasn’t just about good ideas, it was also about state policy. Brazil, for example, invested profits from raw materials into health and education, while the Congo stocked up on weapons and militias. China accumulated science and engineering expertise from the profits of its manufactured goods, while Bangladesh accumulated the corpses of impoverished workers in crumbling factories.
The industrial revolution changed the way things were made, and then what was made, and then the way people worked. New kinds of work and workers were born. But the new sharing economy isn’t about new ways of making.
Uber for example has not changed transportation technology. Uber’s answer to the question: how will I get home is the same as a taxi. What changed is the way you contact a driver, the distribution of profits, and the ownership structure of the service.
The sharing economy model depends on the fact that the cost of the service to new users – the cost of downloading an app and creating an account – is small, and the cost of entering new markets is low, so it’s unlikely that any new accumulation of money or knowledge will take place.
The number of employees needed to manage a market is small. The company doesn’t own or develop assets or equipment, doesn’t invest in infrastructure. The driver provides the car, the state provides roads and subsidized fuel. When the company makes profits in Egyptian pounds, or Japanese Yen, Uber takes them out of the country in US dollars.
So the only accumulation happens in California: the profits are here, along with the investments and top jobs (in management, design, programming and planning). Since Uber calls itself a software company, rather than a transport company, it pays few taxes. Most big Silicon Valley companies register their headquarters in tax havens, so the US has trouble taxing the world’s richest corporations like Google, Apple and Facebook.
My father told me that every government creates a hole, an opening in the body of the state. The hole has a strange shape, that only big companies can fit into. He took me here, to the parliament building, and told me that whenever you look at the government, you’re also looking at big business.
But no matter where you live, it seems that governments prefer to say yes to big business from California. In the taxi industry for instance, local companies are ignored, or forced to speak in the strange and expensive language of lawyers, but when Uber calls, every door is an open door.
Countries have worked hard to turn themselves into welcome mats for companies like Uber. They’ve built out new cities and neighbourhoods with less investment in public transport. Highways appear without bus lanes. Oil and car companies receive big pay cheques, because the first rule of good government is that welfare must be reserved for the very rich.
These development policies reflect the interests of a ruling class that made their fortunes in real estate. The real estate elite have designed cities and neighbourhoods based on their own lives, where private cars drive big distances between home, work and play.
Ruling class values are not separate from the call of California, the only modern economy where public transportation does not play a significant role.
Fans of the fourth industrial revolution deny there is any belief system or cultural content to these technologies. They all insist: the only thing a business person needs is a good idea. Everyone has the same chance to turn their good idea into money. But this ignores the fact that designing new software and applications requires decades of capital accumulation, and for companies like Apple, Google, Orange and Vodafone to provide infrastructure and remove bureaucratic obstacles.
In theory the only difference between Uber and an Egyptian company is who got there first – as long as the Egyptian company has an idea that solves a problem.
But Uber didn’t invent the sharing economy, and it wasn’t the first to apply these ideas to private cars as an alternative to taxis. Uber came up with nothing that wasn’t already provided by competitors, except for its marketing strategy of drowning the competition by flooding the market.
Even my dad’s idea that good business ideas provide solutions to real problems is a myth. Sorry Dad. Cities like Paris and Tokyo already have fine public transportation. But that didn’t stop Uber from attacking those markets, threatening the ability of taxi drivers to make a living.
If opportunities were equal, successful apps would come from the countries leading the way. But Western Europe’s leadership in developing the Web, Scandinavia’s lead in developing mobile phones, South Korea’s lead in developing networks, or Japan’s leadership in developing electronics, are not reflected in lists of the most-used apps. Even competition from American states other than California is rare.
California’s Silicon Valley model is built on money, a glut of available financing that changes the rules of the market. Companies aren’t expected to make a profit, only to expand their customer base, so that one day down the road, this growth can be turned into profit. In this model, the investor doesn’t benefit from dividend payments, but from holding on until they can make a big sale to a larger company.
The secret behind Uber is the money that allows them, year after year, to swallow big losses. Their backers allow them to flood any market where they encounter competition or resistance, for example by awarding extra bonuses to tempt drivers away from competitors, or by extravagant spending on PR campaigns to influence decision-makers. Most worrying is Uber’s ability to bear the cost of legal challenges from competitors, customers and local governments, dragging out court proceedings to exhaust their rivals before settling out of court without a verdicts that might create bad precedents for them.
Weathering losses at the beginning of your business, or when attempting to gain a foothold in a new market, is normal behaviour for any business. But carrying big losses for an extended period of time in order to achieve market dominance is usually called ‘flooding the market’. Pumping so much capital into a sector that it doesn’t need to be profitable is usually called a ‘hidden subsidy’ and expanding this practice is generally understood to damage competition and distort markets. If a Canadian used a similar strategy to enter a European market – flooding it with subsidized goods in order to crush competition and achieve a monopoly – it would be banned immediately. But Silicon Valley companies continue to cover the cost of Uber’s losses, even after their customer base has grown to hundreds of millions of users.
Given that we probably have no intention of reforming our development policies, upgrading our infrastructure, improving our schools, or encouraging local initiatives, it’s best if you and I stop worrying and learn to love Uber.
Tomorrow will be a happy day, when Uber replaces drivers with self-driving cars, making the trip to university cheaper; and the day after that will be even happier when they abolish the university, so you’re spared the trip and can study from the comfort of your own home. And the day after will be even happier still when they do away with your trip to work and have you doing piecework from home in a flexible, sharing-based labour market, and the day after will be happier when they send you off for early retirement because you’re been replaced by artificial intelligence.
The script is based on essays by Alla Abd El-Fattah.
They were written in El Torah Prison, Egypt in 2016.
He remains a prisoner.