Myths about the future of ai finance

liu, tempo Date: 2021-09-15 10:47:10
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As science and technology advance by leaps and bounds, the economic outlook for the future is dizzying. This paper aims to debunk common and mysterious illusions about the future of ai finance from a work and technology perspective.


Myth: Uber represents the future of business

The first myth I want to debunk is that Uber is shaping the future of the economy. The argument goes that we will witness the Uberisation of the economy, with more and more companies adopting their business model. We’re seeing a lot of new apps and platforms pitching themselves as the “Uber for X,” all hoping to share some of Uber’s success stories. At the extreme, we’ve even seen the “Uber of toilets” — Airpnp, an App that helps users find publicly shared toilets in private homes.


Economic Uberization also often means that Uber’s special employment relationship with workers will be replicated and replicated across the economy. But the belief that Uberization is unstoppable is a particularly pernicious myth, and I’ll explain why.


First, what is Uber’s business model? They are what I have called “lean platforms” elsewhere. The aim is to be asset-light – to own as few assets as possible. Uber, for example, does not own the cars, does not have to pay for fuel, and is not responsible for things like car insurance or repairs. They don’t have huge computer servers or other equipment even for their core business, though they do rent services from platforms such as Amazon Web Services. In fact, the Uber model has always tried to own as few assets as possible. But what they do have is a technology platform that connects drivers and passengers, and that’s where their value comes from.


The biggest problem for Uber (and its ilk) is that its business model is not very profitable. Lean platforms typically have low margins and are only suitable for certain services, such as those that are heavily used. Taxi services are a good example. In big cities like London, there are lots of people taking taxis at any given time. With high-frequency services, even a small profit on a single transaction can bring in a substantial amount of revenue. The problem is that many services do not have high frequency characteristics. Grocery shopping, for example, is a service that people use only once every few weeks, with the result that uber-based retail companies are struggling to survive. In fact, the uberization of low-frequency services seems to have no hope of success at present.


self-driving cars


Let’s look at the Uberization of high-skilled jobs, where we see a lot of problems. You can imagine a scenario: if you’re in a highly skilled job, you join a platform and start engaging with customers; However, if the platform takes a cut for every service you provide, you’ll probably end up leaving the platform and starting your own business. This is exactly what many companies face after trying to bring highly skilled workers onto the Uberised platform: once workers find other places where they can make more money, they leave the platform and go it alone. Another more prominent example is the Homejoy (this is a SAN francisco-based Uber maid cleaning service platform, was founded in July 2012, announced in July 2015 collapse), when it decided to leave after signing a lot cleaner, platform collapsed, because these cleaner found elsewhere can earn more money.


The sharing economy and these lean platforms tend to grow not with a view to making money today, but with a vision of making money at some point in the future. At present, most of these companies are heavily indebted. This model of first big profit, even deliberately as a part of the strategy of loss. Uber actually started this space. Uber was losing $1 billion a year to fight off Chinese rival Didi, eventually abandoning its China business and leaving the country. Uber lost $2.8 billion in 2016, $4.5 billion in 2017, and $1.8 billion in 2018. Uber lost a staggering $8.5 billion in 2019, even as its revenue soared. It is inconceivable that a company that has lost $17.6 billion in four years and has never made a profit since its inception should be considered a pioneer in the development of capitalism.


Uber’s survival does not depend on profits, but on burning through venture capital — investors keep pouring new money into it. A closer look at Uber’s funding round, however, suggests investors are increasingly sceptical of the company. In a funding round in late 2017, for example, SoftBank, the investment group, demanded that Uber cut its inflated valuation by 30 per cent. Indeed, even with a long-term view, Uber is finding it increasingly difficult to convince investors of its commitment to profitability.


Uber faces many challenges ahead. The first is pressure from regulators. Uber’s special employment relationships (where employees are treated as contract workers rather than employees) and Labour rules have prevailed because regulators have yet to come up with a response. But regulators are now catching up, and London is a case in point. Uber has been the subject of several lawsuits in London over its handling of employees. Uber was in danger of being banned from London for breaching regulatory requirements. So regulators are already clamping down on the Uber model (I doubt uber will be banned in London and see it as more of a bargaining tactic). Nonetheless, it suggests that regulators are preparing to crack down on the business model).


Another challenge for Uber and other lean platforms comes from worker protests. At first, workers did not know how to unite to fight for their rights under this new business model; After initial setbacks, the workers hit back hard. Uber’s drivers, for example, are trying to unionise; Drivers for Deliveroo, a British online food ordering platform, are also trying to unionise; Many lean platform companies are facing lawsuits. Uber had to pay $100m in a settlement; Lyft, the second-largest us ride-hailing platform, was also forced to pay $27m in a separate settlement; Postates, the largest delivery platform in the US, also saw $800m in litigation in 2017. In a lawsuit against Uber, the company will pay $852 million to drivers if the court decides they should be treated as employees rather than independent contractors. Uber argued that it would pay only $429m. The result of such employee boycotts is that already thin businesses will become even less profitable in the future, and their business models are unlikely to spread further.


What is Uber’s plan? What we see is that even Uber doesn’t think the business model they’re creating has a chance to succeed. They just want to get big and end up monopolizing taxi services. Their next goal, though, is to replace drivers with self-driving cars and open a chasm around their businesses that no one can bridge. Eventually there will be a substantial shift in their business, where they will suddenly be saddled with the costs and responsibilities of having lots of fixed assets. This shift can be seen in two passages. One is from 2015:


Uber, the world’s biggest taxi company, has no cars of its own, Facebook, the most hyped medium, does not create any content, Alibaba, the most valuable retailer, has no inventory of its own, and Airbnb, the biggest accommodation provider, has no real estate of its own.


A few years later, however, all of these companies have changed their ways, and it’s worth changing the above gag to the 2018 version:

Uber is buying 24,000 cars, Facebook is spending $1 billion on original TV content, Alibaba is investing $2.6 billion in brick-and-mortar retail, and Airbnb is opening apartment buildings under its own brand.


The companies have come to realize that the standard Uber business model isn’t working and are now moving to a more traditional business model. Thus, the myth that Uber represents the future of the economy, both as a business model and as a employment practice, is unrealistic hype.

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