In business as in romance, the upper hand in any relationship belongs to the party most willing to walk away from that relationship. That’s often great for consumers — it’s why Walmart and McDonald’s can’t raise the prices to pass costs on to their customers. But it isn’t always great: If you’re trying to get a mortgage without a 20-percent down payment and good credit, the bank is probably going to be more willing to walk away from the deal than you are, and you care a lot more about whether you can buy a house than the bank does about whether it earns one more mortgage-initiation fee this year. The power to walk away from a deal or a relationship is known in politics and economics as the “right of exit,” and Alison Griswold of Slate is scandalized by it.
Griswold’s report on negotiations between Uber, the car-hailing app company, and the city of San Antonio contains a great deal of interesting behind-the-scenes sausage-making detail, but her prim, disapproving account of Uber’s political maneuvering is odd. The short version: Uber didn’t like San Antonio’s proposed regulations very much — it particularly objected to the mandatory fingerprinting and random drug-testing of Uber drivers — and wanted a more liberal approach, like the one in place in Austin. On a number of occasions, Uber made public threats to pull up and quit San Antonio entirely, leaving its tens of thousands of customers cheesed off and stranded. The company was engaged in confidential negotiations with the city, and the city thought that they were near a compromise when Uber made good on its threat to exit. A few months later, San Antonio gave Uber most of what it wanted, and Uber returned.
What bugs progressives about Uber and its ilk is that they are not used to seeing the right of exit and the power that goes with it tilted so heavily in favor of a private firm. The one employer in a one-horse town might push around the town fathers of East Donkey, but San Antonio is the seventh-biggest city in the country. The old warning that “you can’t fight city hall” has always made progressives smile inwardly. For years, financial firms and media companies and big law firms complained about the high taxes in New York, the burdensome regulations and the generally low quality of city governance. But where were they going to go? If you were a big brokerage or investment bank, you had an office on Wall Street, and that was that. Bitch about your taxes or regulation all you like, but you aren’t moving to East Donkey. That has been changing for a while now, but Uber has been driving the reality home with some real force.
From Griswold:
“I think a lot of people come and beg cities for their business,” [San Antonio resident and technology blogger Brad] Parscale says. “Uber is a big company and it’s a moving technology and, honestly? It was up to our city to beg for them to be here. We need that kind of technology.”
Uber, as Griswold points out, has proved itself more than willing to take its ball and go home when it doesn’t like the rules of the game. She calls this a “calculated tantrum,” which is an odd way of characterizing a policy of “No, thanks, not on those terms.” Uber has done the same in Las Vegas and other cities. Whereas cities such as New York and San Francisco are accustomed to imposing high costs on firms for the privilege of operating in their cool urban environs, Uber has turned the table: You want to be cool and modern, you need Uber. No Uber and you may as well be East Donkey. You need us operating in your city more than we need to be operating in your city.
Uber does all the usual political stuff, the lobbyists and consultants and all that. But its main weapon is the power of exit. Boeing can get the federal government to act as its own private banker and make taxpayers pay for the privilege, but Uber just won’t do business on terms it finds unattractive. Yet we’re somehow supposed to think poorly of the company for that.
Compare Uber’s “No, thanks” approach to, say, that of the teachers’ unions, who provide terrible services for our most vulnerable and resource-poor communities, insist that they must have a monopoly and above-market compensation to do it, and expect to be treated as martyrs on top of it all. The teachers’ unions are like that gangster in Goodfellas: “Test scores down? F*** you, pay me. Schools backward, dangerous, and dysfunctional? F*** you, pay me. Teachers engaged in sexual congress with children? F*** you, pay me. Pulled your kids out and sending them to private school? F*** you, pay me.” But Uber’s “No, thanks,” is what scandalizes our progressive friends. Very odd. Between “No, thanks” and “F*** you, pay me,” the choice is to me obvious.
We are at a very interesting historical tipping point. The willingness of states and political agencies to boss people and businesses around and to seize resources for the use of the political class has not abated, but their ability to do so is being challenged. San Antonio is a left-leaning city; its attitude toward business is far from Singaporean. The city authorities would love to be able to dictate terms to Uber — but they can’t. Nationally, we’re starting to figure out that you can’t really regulate marijuana; you can try to, and pretend to, but you can’t really do it. Trying to ban guns in an age when anybody with a 3-D printer can produce a dozen of them in his bedroom is absurd. In twenty years, when anybody with enough money to buy something equivalent in cost to a refrigerator today is going to be able to 3-D print tissue and molecules, the regulatory enterprise is going to be very dicey indeed. It’s not going to be much fun to be the tax man when real financial privacy, enabled by cryptocurrencies and other financial technologies, is available to almost everybody.
We’re going to spend a lot less time talking about whether certain kinds of regulation are desirable and more talking about whether they are possible.
Uber is a very mild, low-stakes test run for developing new models of governance that are genuinely collaborative and consent-driven. If you think that Uber is a big challenge to contemporary political practice, you should think a little about what is coming in the near future.
Since I’m feeling future-y, I’ll make a prediction: In a relatively short period of time, there won’t be any debates about drug-testing and fingerprinting Uber drivers, because there won’t be any.