Consequently, the cost of a ride will approach the level of direct costs like fuel and maintenance. There won't be much left for driver compensation or vehicle depreciation, much less a durable surplus for the network operator.
Paradoxically for the disruptors, the way out of this trap is for Uber and Lyft to lobby for greater regulation, stringent requirements for insurance and liability, background checks, safety inspections and government licenses. They need higher barriers to entry.
They need to carve out a space safe from competition, or it will rapidly devolve into a lowest-common-denominator market.
Companies like Uber and Lyft operating without as stringent regulation as regular taxi companies is their main competitive advantage (AirBnB is in the same group).
Taxi drivers have lobbied for years to build up the kind of economic protections they have from disappearing margins in a competitive marketplace, and consequently being a taxi driver meant you could make a middle class living without tortuous hours.
Uber comes along and operates without the limitations of those protections and drivers earn less. Ultimately without intervention it puts a whole industry of people on a trajectory towards poverty, and this is before we even get to self driving cars.
What are we going to do with everyone who gets forced out of their middle class jobs?
I would argue that it has been a long time in the USA since a taxi driver could earn a middle class income driving. Medallion fees basically make them indentured servants.
Taxi drivers are usually contractors, so it's easier to get a job (sometimes as a sub) and its easy to avoid taxes. Think of it as a waiter job without the need to communicate well. Also, because of the off/hours nature, it's a good second job.
Because you have networks of contractors, you can lever social ties to get a job... This is especially important for immigrant communities.
Surely they want to take the money now and use that to fund being first to market with the self-driving vehicles. Then they retain the customers but drop the drivers and build a new lake in which to swim in their money.
They can ride the transition period then at least before any serious challenger can take the market.
In theory .. I don't see them lasting long enough to meet the new tech before they implode.
Paradoxically for the disruptors, the way out of this trap is for Uber and Lyft to lobby for greater regulation, stringent requirements for insurance and liability, background checks, safety inspections and government licenses. They need higher barriers to entry.
They need to carve out a space safe from competition, or it will rapidly devolve into a lowest-common-denominator market.
Not that there's anything wrong with that.