Free Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity by Douglas Rushkoff Page B

its sector in a much more complete way than its predecessors, potentially destroying more businesses and opportunities than it creates—certainly in the short term. It’slike big fish swallowing up smaller ones until only a few really big fish remain. And with enough influence, those big fish can change the rules and further disadvantage those who would rise up to eat them.
    Take the toy industry, which grew highly consolidated through the 1980s and 1990s. The top four global companies each have revenues over $4 billion, 21 after which a long tail of much smaller players begins. In 2007, after thousands of toys manufactured in China were recalled for having lead paint, the four industry leaders worked with U.S. government agencies to develop new regulations—all in the name of protecting children. The testing protocols they developed, however, cost over $40,000 per product, which made sense only for high-volume manufacturers. 22 In spite of their protests, independent toy makers were not even invited to the table. Craftspeople making toys by hand or in smaller runs had no way of complying with the testing process and were forced out of business—even though they weren’t the companies outsourcing their production to begin with. Under the guise of consumer protection, the incumbents create regulations to entrench their monopolies.
    Creative destruction accelerates whenever there’s a major new technology capable of fostering entrepreneurial activity, so the fact that we’re seeing so much churn right now shouldn’t surprise us. Nor should it upset us, at least not if we take Schumpeter to heart and accept that without pain in the form of lost employment and social destruction, we won’t get gain in the form of new markets for capital. But the entrepreneurs fomenting today’s upheavals appear more aware than their predecessors of how to create monopolies, leverage networks, and exploit their technological advantages—even without a government to manipulate. The digital difference is that monopoly-favoring regulation needn’t occur at the political level when it can be embedded in the operating systems themselves.
    Uber, as we’ve seen, means to be the creative destroyer of the current taxi industry. It bills itself as a way of connecting drivers and passengers. According to this way of thinking, it is primarily a platform and payment system, not a taxi or limousine service. Passengers register their creditcard with Uber, which sets prices, charges payment, takes its 20 percent cut, and pays the driver. 23
    By calling itself a platform rather than a taxi dispatcher, Uber has been able to work in a regulatory gray area that slashes overhead while inflating revenue. Unlike traditional, regulated livery services, Uber is under no obligation to the public good, freeing the company to implement “surge pricing” during peak use periods, as it did during Hurricane Sandy and other disasters—a practice indistinguishable from price gouging. 24 Uber also claims that its status as a mere platform significantly reduces its responsibilities to its drivers. This issue is still being hashed out in the courts and city councils, but relative to traditional livery services, the difference is clear: Uber drivers take on greater personal liability than any driver working for a legitimate, licensed cab company. When an Uber driver, in between passengers, struck and killed a six-year-old girl, Uber claimed no liability. A traditional livery service must legally assume liability for all on-the-clock drivers, whether they’re currently transporting a passenger or not. 25
    This is how Uber can be valued at over $18 billion while many of its drivers make below minimum wage after expenses. Meanwhile, the company’s path to success involves destroying the dozens or hundreds of independent taxi companies in the markets it serves. On the surface, it’s the creative destruction of centralized taxi commissions and bureaucracy. The result,