The Uber Model from an Ethical Point of View

Without a question, the Uber business model embodies digital disruption. The company has changed how the transportation sector looks, particularly the taxicab hiring industry. Uber uses a smartphone app to deliver on-demand services to its customers by connecting taxi drivers and the passengers, as noted by Cramer and Krueger, in order to guarantee a high level of services at a cheaper cost (2016, p.177). Uber drivers work from their cars while the company receives a 20% commission on each fare. Uber’s business strategy essentially makes the most of convenience by finding idle capacity, pooling it, and then assigning it to consumers ready to pay the price. This intermediation between the drivers and the consumers happens at lower costs thereby allowing the firm to create value-addition to the customers. Besides, it facilitates easy access to a taxicab in addition to providing different levels of services. Customers freely interact with the drives while the app provides information regarding the price and quality of their services. This value addition is channeled at the firm in the form of feedback by the customers, which prods their loyalty and trust. Therefore, Uber’s model can be characterized as an intermediary and technology platform that offers its services through bringing together those willing to sell extra capacity of their vehicles and those willing to pay for the capacity (MacDonald, 2016, p.38).

Nonetheless, despite its outstanding model in the transportation industry, Uber has evoked a range of contrasting emotions throughout the industry. The firm’s ethical conduct has been called to question based on its practices. Traditional taxi drivers, competitors, local governments and even the Uber taxi drivers have strongly opposed some of the practices that the company engages in. From the customer’s perspective, Uber is a godsend based on their clean vehicles, courteous drivers, lower fares and easy electronic payments (Edelman, 2017, p.1), yet, the firm’s mounting scandals demonstrate something is seriously amiss. Certainly, commercial accomplishment and substantial uptake of services by firms such as Uber can elicit many questions for regulators among other stakeholders across the world. Perhaps the concern is whether such web-based applications merit their success exclusively on novelty or if their achievement is as a result of the exploitation of ambiguities in regulatory requirements. For these reasons, it is worth analyzing Uber’s model in light of the ethical theories to discern how the company goes about doing its practices and operations in the industry.

Utilitarianism

As a moral theory, utilitarianism implements impartial choices in attempts to make certain the least amount of detriment is done to the parties involved. The approach necessitates a decision to be made on the course of action to be undertaken together with the evaluation of the outcomes of each action (Gustafson, 2010, p.143). By focusing on the outcomes of the action, the approach demands the course of action be based on the benefits or harms without considering the cost of the action. These requirements are fully described by Uber’s mission which states that it evolves the way the world moves by seamlessly connecting drivers to the riders (Smith and McCormick, 2016, p.7). Uber understands that passengers do not have to stand and wait on the street or call a cab and wait but rather stay inside and watch the progress of the car from wherever they are on their smartphones. Although its technology disrupts the industry, there are substantial benefits for the consumers who do not like to wait, wants to pay less for quality services and the firm alike. Both parties benefit from the functioning market for car hire created and governed by supply and demand.

Uber riders have praised the app for its reliability and the fact that they can conveniently pay using their credit cards. This eradicates the worry about the currency and the need to negotiate for fares with local drivers. Uber, on the other hand, has benefited from expansive market size, loyal customers and ripped billions of dollars from the model. Even so, Uber’s co-founder Kalanick once claimed the company’s model is becoming tremendously popular across the globe and notes that as it grows, it gains efficiency and becomes even more attractive to riders (Smith and McCormick, 2016, p.20). It eliminates traffic congestion and creates tens of thousands of jobs at the same time. Nonetheless, Uber has been accused of frequently adopting aggressive business practices to silence their critics as well as stifle competition. This means the firm’s decision to adopt the model was founded on the ethical grounds of producing the greatest balance of benefits over the harms.

Moreover, Uber’s model also employs a demand-driven policy where it seeks to increase the supply of drivers when the population needing their services are high. This is a utilitarian argument for the reason that it defends the increase in prices on the grounds that it makes people better off. Periods of high demands mean there are chances the demand cannot be met and as a result, many people can miss out on the ride. Surge pricing, therefore, ensures the maximum benefit for all the parties involved. Drivers and the firm benefit from the increased prices while the passengers need for a ride is met. Moreover, the firm gets the chance to develop into the market in addition to the prospect of customer loyalty.

Kantian Ethics

For a majority of the actions undertaken by Uber, they conform to the moral law and are characterized by universality. Uber model is appropriate for everyone and operates in accordance with obligations and responsibility. Besides, in deontology perspective, the position of any act is independent of the consequences that it produces (Dion, 2012, p.4-24). By using its customer-centric approach, the firm gives the consumers the prospect of grabbing a taxi irrespective of their current location. Likewise, the app lets riders know the amount of money they will pay upfront plus it lets them track the whole route of the drive. In the end, they are allowed to make payments conveniently using their credit card. Passengers always want lower fares, clean vehicles, and courteous drivers. Besides, it is worth noting that the firm puts their safety and time aspect above everything.

It is through this understanding that Uber deploys a unique policy when it comes to dealing with government rules and regulation. It is universally acceptable for Uber to launch its business in markets first then seek to respond to questions later. That way, the company offers its convenient services to passengers and creates and contributes positively to the country’s economy as it pursued to address the concerns more appropriately. There have been cries all over that Uber has sidestepped regulations and refused to comply with the demands to cease certain markets. These are certainly genuine concerns from a business point of view. However, Uber’s services are appropriate for everyone and come in handy in saving the day for most drivers and the economy in general. For instance, Smith and McCormick claim that the 2015 Paris protests where drivers presumed to be working for Uber were attacked, were sparked by the refusal to shut down Uberpop service (2016, p.13). The suspension of Uberpop operations was on the grounds that its drivers operated without Chauffer’s license. While the service was suspended by Uber, it still operated UberX that used licensed Chauffers (Smith and McCormick, 2016, p.13). What is more is that the company issued a statement noting that they understood their technology was disruptive but it was obligated to do that especially at a time of high unemployment. Hundreds of taxi drivers resorted to becoming Uber drivers to make a better living with a work schedule suitable to their families. In this case, the moral responsibility was all that mattered and not the irregularities or disruptions caused.

Virtue Ethics

Since it started operations, Uber has barged its way into more than 600 cities and many countries the world. In the process, the firm has notched a valuation of about $69 billion. Nonetheless, Uber has a burgeoning list of events that have tarnished the company’s corporate culture as aggressive, sexist as well as morally sketchy. Presently, the firm may stand to be untenable in ethical and moral consideration. There is no doubt that former CEO and co-founder Travis Kalanick was the seed of the idea to form a car service and that he helped craft it into one of the most valuable private technology start-up and company that it is today. This means as the CEO he had to spring into battle against whatever challenges that came his way (Treviño and Nelson, 2011, p.26). Much of Uber’s business model is characterized by Kalanick reputation and traits. While he is aggressive, it is through his dedication and scrappiness that led to the establishment of Uber. Whereas Kalanick, who is the image of the company is entangled in multiple cases of misdemeanor, the company has faced a backlash from some of its customers and a string of lawsuits pending in the courts of law. Nonetheless, Rae and Wong (2012, p.24) postulates that most executives are frequently compelled, in their own interests or that of the company to practice deceptive actions in their bid to negotiate with customers, dealers, governments or even the departments of their firms. Put differently, Kalanick’s individual traits are a reflection of Uber’s model as can be deduced from his leadership point of view.

It is worth mentioning that the nature of entrepreneurship requires a particular kind strong-headed and ardent trailblazer to bulldoze through the impending hurdles that stand in the firm’s way. After all, it is extremely challenging to start and lead a venture of Uber’s magnitude and growth. The model required a leader with unyielding competitiveness and an equally belligerent character to lead the way. Research of previous great leaders, be it in business or otherwise, reveals that this kind of buoyancy bordering egotism is an indispensable and reliable quality that defines them.

Besides, today’s business era is characterized by reduced traditional forms of command and control. This means that firms opt to create an inclusive and transparent culture and thus being a leader at such a firm can breed a negative perception (Treviño and Nelson, 2011, p.26). This is aptly evident with Uber’s board decision to approve the recommendation to investigate the company corporate culture. Even so, it has much to do with the resignation of CEO Travis Kalanick, who helped the company maneuver through a string of corporate relations disaster he engineered himself. Therefore, it is no doubt that the firm’s meritocratic culture is an embodiment of it leaders such as Kalanick. The fact that major decisions crafted by Kalanick nearly brought the firm to a tipping point demonstrates Uber’s model is founded on its leader’s practical wisdom.

Ethical Egoism

One significant area of moral consciousness concerns the intrinsic egocentricity of humans. Dion (2012) asserts that much of ethical egoism is as well experienced in the corporate world where business-oriented interests ultimately motivate company actions and models. In 2014, several investigative reports outlined steps undertaken by Uber to undermine its competitors in the industry. Lyft claimed Uber employees made bogus calls to order thousands of Lyfts ride then canceled them just to jam the efficiency of its services. Whereas Uber termed the accusations ‘patently false,’ it acknowledged running incentive programs with the intention to recruit Lyft’s drivers and riders (Smith and McCormick, 2016, p.16). Furthermore, Kalanick admitted to journalists that he approached potential Lyft’s investors before a Lyft fundraising just to get them to Uber instead. For these reasons, it is without a doubt that the company demonstrated inherent selfishness to its competitors regarding its intention to outperform them.

Another ethical concern of Uber’s model relates to surge pricing in periods of demand. Surge pricing can be defined as the charging of high prices when demand is high and relatively low prices in periods of limited supply. In other words, it is a demand driven pricing strategy that seeks to avail its services whenever it is needed (Smith, 2016, p.384). The point is whether surge pricing is ethical considering that Uber’s price is set by an algorithm. The company has previously stated that the surge in prices increases the supply of drivers at such periods and thus more people get a ride. However, the move is for the firm’s interest regarding the returns they get out of it. Besides, it is unethical to simply force Uber drivers to work at busiest or most inconvenient times. They are enticed to work at periods where they would rather be probably partying instead of ferrying passengers.

What is more is that the company engages in behind the scenes psychological tricks to manipulate their drivers in the service of their continued growth. The company overly seeks to ensure a perfectly efficient system that balances between driver supply and rider demand at the lowest costs to both passengers and the company. Thus, Uber employs video games techniques, noncash rewards, and graphics to prod drivers into working long hours and at places not convenient and lucrative for them. All these moves are intended to satisfy their growth-oriented strategies at the expense of the drivers.

Conclusion

Uber’s business model has certainly expanded to include other services and in many countries around the world. Nonetheless, its business model remains and continue to flourish with many passengers considering it a godsend. While the company’s mounting scandals demonstrate that something is seriously a miss, its approach to industry dynamics and stakeholders trigger questions of ethical consideration. As discussed above, various actions taken by the firm have not just been aggressive but also gone contrary to its moral obligation time and again. Although some of the missteps experienced by Uber can be attributed to the personality of its co-founder Kalanick, other business decisions were taken based on the utmost benefits they produced. Hence, from an ethical perspective, its model and many of its decisions whether beneficial or not, have an ethical and moral standpoint to it. Overall, the conventional cynical view concerning the ethics of Uber’s model has been a source of money making opportunity and a basis of competitive benefit.

References

Cramer, J. and Krueger, A. (2016). Disruptive Change in the Taxi Business: The Case of Uber. American Economic Review, 106(5), pp.177-182.

Dion, M. (2012). Are ethical theories relevant for ethical leadership?. Leadership & Organization Development Journal, 33(1), pp.4-24.

Edelman, B. (2017). Uber Can’t be Fixed - Its Time for Regulators to Shut it Down. Havard Business Review, (June), pp.1-6.

Forschler, S. (2013). Kantian and Consequentialist Ethics: The Gap Can Be Bridged. Metaphilosophy, 44(1-2), pp.88-104.

Gustafson, A. (2010). Rorty, Caputo and business ethics without metaphysics: ethical theories as normative narratives. Business Ethics: A European Review, 19(2), pp.140-153.

MacDonald, C. (2016). Uber Is Built on Trust [Ethics Opinion]. IEEE Technology and Society Magazine, 35(2), pp.38-39.

Rae, S. and Wong, K. (2012). Beyond integrity: A Judeo-Christian Approach to Business Ethics. Grand Rapids, Mich.: Zondervan, p.496 pages.

Schneider, A. (2015). Uber Takes the Passing Lane: Disruptive Competition and Taxi-Livery Service Regulations. Elements, 11(2).

Schneider, A. (2015). Uber Takes the Passing Lane: Disruptive Competition and Taxi-Livery Service Regulations. Elements, 11(2).

Smith, N.C. and McCormick, E., 2016. Uber and the Ethics of Sharing: Exploring the Societal Promises and Responsibilities of the Sharing Economy. INSEAD case study.

Smith, W. (2016). The uber-All economy of the Future. Independent Review, 20(3), pp.383-390.

Treviño, L. and Nelson, K. (2011). Managing business ethics: Straight Talk about How to Do It Right. Hoboken, NJ: Wiley.