And Just Like That – The Hits Just Keep On Hitting

It wasn’t all that long ago (actually only months) that the idea of invincibility was attached so firmly to the tails of Silicon Valley’s unicorns, questioning their business models, or any other metric, was met with a cloak of invincibility so powerful it would make DARPA jealous.

And then, suddenly, it appeared someone found the off switch, and with it, the vulnerability to everything that was once seen as inevitable (e.g., world domination along with riches beyond this world) not only came to a screeching halt. It seems to be have now assumed a far more ominous tone, as in: It suddenly seems to be all crashing down, along with – all at once.

Today is a revealing day to that notion.

A few weeks ago I opined an article “Is This Uber’s ‘Theranos Moment?'” In it I made the following statement when comparing the current state of Uber with that of the now humiliated thesis of Theranos. To wit:

“Nevertheless – it was over with near immediacy once it was blatantly obvious people once loyal and intimately involved, along with companies using the service publicly began jumping ship.

Suddenly every “news” outlet that once couldn’t get a flattering story out quick enough tripped all over themselves to re-write the now how, and why, for the imminent collapse of the once storied unicorn.”

In a subsequent article I pointed to the fact that this seems to have begun in earnest with none other than The Harvard Business Review™ opining that Uber was a failure and should be shut down – not saved.

I don’t know if the HBR ever wrote a flattering article, but that’s neither here-nor-there. It’s the sudden appearance of articles containing such headlines and reasoning from these well read outlets, that’s the point.

Until recently any questioning of the “disruptor” business model was basically either met with vehement push back, or just tossed out as something along the lines of “they just don’t get tech” analogies. Again – until now. For it seems everyone is beginning to “get” it. The issue now is – the results aren’t what the tech world wants hear, let alone admit.

As of this writing there have been a few additional stories not only about Uber per se, but when put together shows (in my opinion) just how precarious the entire once coveted disruptor narrative, along with its unicorn stable, is rapidly deteriorating. Let me explain.

The first is this: Uber has just relinquished its pursuit of being the #1 dominating cab service in Russia, and announced it has entered a joint venture with its once top rival Yandex.Taxi™. The reason for this was pretty straight forward as explained by Recode™. To wit:

“The why is fairly straightforward: Uber was losing, and badly. The annual run rate of the rides Yandex.Taxi was doing as of June 2017 was more than double that of Uber’s. That’s in spite of Uber’s persistent attempt to undercut Yandex’s prices. Based on data provided by Yandex, Uber did less than 12 million rides in June 2017, while Yandex.Taxi did close to 24 million.

That amounts to $47 million in gross bookings for Uber, while Yandex.Taxi saw $84 million in just that month.”

Again, as I stated, pretty straight forward. But with that a larger question looms and it is this:

Square this circle (other than trying to put the best spin possible) as reported in Tech Crunch™, again, to wit:

As shareholders in our company, all of us should be incredibly excited about this next stage. Over the last three years we have invested around $170 million in the Russian-speaking territories alone to build and expand our business to 21 cities in the region.

“Not only is this partnership good news for our two companies, it’s also great for riders, drivers and cities across the region. This deal is a testament to our exceptional growth in the region and helps Uber continue to build a sustainable global business,” says Pierre-Dimitri Gore-Coty, Head of Uber in Europe, the Middle East and Africa.

I would be of the assumption that the “shareholders” that invested giving this unicorn a valuation $68 BILLION, invested based on the narrative of being the #1, or global dominant hailing app – not – investing as to watch those “dollars” blown out quicker than exhaust through a pipe only to relinquish China, and now Russia. I don’t think “excited” is the term I would use. Especially since that latest valuation is based on the $3.5 BILLION raised from a Saudi fund back in June of last year when that narrative was all but a given and echoed throughout “The Valley.”

And now, as the title implies – the hits just keep coming. And this is one that holds one of the greatest fears to all of the so-called “disruptor” models. e.g., The inherent disregard of current laws, or regulations to become “disruptive” and the now reflexive backlash being put forth by not just regulators, but by workers, as well as the current businesses being disrupted that have no alternative other than having to abide by the rules or regulations. e.g., Adhere to current state, local, or federal laws, etc., etc.

Uber’s bugaboo (all in my opinion) is the employee vs independent contractor regs. And too that – Uber has just received another troubling ruling against their claims that they are not employers of the drivers.

Via The New York Times™ just yesterday “Uber Drivers Win Preliminary Class-Action Status In Labor Case” 

“The ruling today is going to allow drivers across the country to band together to challenge Uber’s misclassification of them,” said Paul B. Maslo, a lawyer for the plaintiffs. “They are employees and should be getting minimum wage and overtime as required by federal law.”

Yes, this is only in the preliminary stages, and is not yet settled. But add this to the backdrop that Uber has lost this same or similar argument in Europe just this past October? Remember what I said in that earlier article. Hint: “But once the term “law suits” and more get thrown across a unicorns saddle? Let’s just say – viewpoints, and valuation metrics begin to change, and change quickly.”

“Quickly” has now morphed into the only thing considered to be worse. e.g., Relentless.

Why do I say such? Easy, because now not only is it just Uber. You’re now beginning to see the same appearing for that other “super-unicorn” (yes, that’s actually a Silicon Valley term) that has, until lately, flown under the radar. However, with the questioning now of Uber’s model? It’s an easy jump to now question Air Bnb™. And they are.

Here’s a story just a few months back from the Chicago Tribune™. To wit:

“Hotel industry group says Airbnb hosts running ‘illegal hotels'”

“The report debunks the story Airbnb likes to tell of themselves as merely a home-sharing platform where hardworking Americans may occasionally rent a room in their home,” Lugar said.

Sound familiar?

Much like Uber’s issue of employee vs independent contractor. Air Bnb’s is – the scofflaw issue. And this is picking up more and more quickly, along with relentless, every passing week.

So pervasive is this issue becoming as reported just today via Axios™ New York city has now developed a cottage industry of sorts to report (as in snitch) on users. Again, to wit:

“NYC’s cottage industry of hunting Airbnb scofflaws”

As the Yale Law & Policy Review puts it, “The short-term rental sector, for example, thrives in the shadow of land-use regulation that . . . restricts supply, drives up costs, and segregates housing from employment and amenities.”

In other words, a company like Airbnb profits by offering suppliers and customers a way to avoid onerous regulation. In some cases, they force a public discussion about the legitimacy of commercial regulations.

And just like that – It’s different this time.

© 2017 Mark St.Cyr