In this excerpt from Road to Nowhere, PARIS MARX explains how and why the big tech companies moved into urban transport in the aftermath of the 2008 economic crash. Republished here with permission. See also People & Nature’s review of the book
In the aftermath of the 2008 financial crisis, the tech industry grew substantially and claimed a dominant position not just in the United States, but across the global economy. The internet was firmly established by that point, and it began moving from the desk to the palm of people’s hands as smartphone adoption soared through the 2010s. Cloud computing and other software products made it much cheaper than in the past to launch a start-up and compete for a piece of the rapidly growing industry. Meanwhile, financing was abundant, not just because decades of inequality had caused more wealth to flow to those at the top, but also due to policy choices taken to combat the recession.
The trillions of dollars printed by the Federal Reserve and other central banks through quantitative easing, and the low interest rates that persisted throughout the 2010s, created an environment that boosted the stock market even as most workers’ prospects continued to stagnate, which benefited venture capitalists and made it much easier for new companies in the tech sector to access capital. Such a dynamic granted investors, influential founders, and executives at the dominant companies in the industry a significant degree of power in shaping what the post-recession economy looked like – and who it served.
By 2010, today’s tech giants were continuing their rapid growth, but they were not yet the juggernauts they would become a decade later. Google had a number of popular services in addition to Search, but many people still believed its “do no evil” slogan. Amazon’s positions in ecommerce and cloud computing were growing, but it was not yet seen as such an existential threat to brick-and-mortar retail. Apple was reinventing itself with the iPhone, but it was far from being one of the largest publicly traded companies in the world. Yet, as they expanded, other companies made use of smartphone access, new digital tools, and the excitement around the tech economy, to make their own splash.
Airbnb was founded in 2008, Uber in 2009, and WeWork in 2010. They were part of a business trend that further extended the reach of the tech industry into the physical world. These companies operated under the assumption that taking the mindset of tech into a traditional industry would not only modernise and transform it, but would generate previously unrealisable returns. Many of them also promoted the idea that smartphone apps would allow people to work and monetise their assets in ways that increased their freedom and prosperity, while making consumption more convenient. Yet what they were really doing was taking advantage of – and cementing – the precarity of the post-recession years.
Eric Levitz, an associate editor at New York Magazine, argued that venture capitalists, especially in this period, acted as the United States’ central planners. While the political right criticised government decisions to provide support to particular companies and sectors, they ignored how a powerful group of wealthy men educated at Ivy League institutions were in control of multi-billion-dollar funds that they used to cherry-pick companies that could corner particular market segments, and finance them while they recorded losses over the course of many years, driving out competition.
In the process, they created elaborate public relations campaigns about the broad-based benefits their “disruption” would produce, even as the real gains from those services typically accrued to the same class of well-off men who created them in the first place. Not only is this an extension of the elite projection that Jarrett Walker wrote about [in his book Human Transit], as these founders and venture capitalists backed projects that worked for them but assumed – or at least claimed – they would work for everyone, but it is also a continuation of the history [of the rise of the motor car in the 20th century] discussed in Chapter 2.
In the aftermath of the recession, the same ideas that had been born in the 1970s and 1980s were once again at work; the same ideas that had created the techno-deterministic, free market ideology of Silicon Valley by men who held counter-cultural ideals but used them to justify their participation in the capitalist system. Even as the tech industry became a powerful force in the US economy and spread its influence around the world, while people became dependent on hardware and software produced by American companies, the titans of the industry continued to see themselves as scrappy upstarts; the Davids fighting some increasingly abstract Goliath.
University of California researchers Martin Kenney and John Zysman argued that the dynamic these venture capitalists created had social and economic consequences, and they were not positive. Rather, they funded “a drive towards disruption without social benefit” that not only distorted market fundamentals by pursuing a predatory growth strategy, but actively attacked regulatory structures designed to protect workers and the public.
In his article about this phenomenon, Levitz used the example of WeWork because it was a high-profile case where the model failed. WeWork offered co-working spaces around the world, but instead of positioning itself as a company that rented office space, it claimed it was a tech company, which came with a different set of expectations. While a traditional company would seek sustainable growth and expansion to provide a return on investment within the first few years of operation, a tech company – even one operating in a traditional industry – is expected to deliver the kind of exponential growth that one would expect from digital services, while significantly reducing the marginal cost of expansion. That works well for software products, cloud platforms, and logistics companies, but it does not translate to office space, for-hire vehicles, and many of the other conventional businesses that the post-2008 crop of so-called tech companies sought to disrupt.
In the case of WeWork, its success was less the product of offering superior co-working spaces than it was in the undercutting of its competitors and offering of a slew of perks to members while losing millions of dollars a day. Investors went along with it because, at least for a while, they bought into the vision of CEO Adam Neumann even as he used the company to finance a lavish lifestyle for himself and his family – engaging in self-dealing by personally buying real estate then having WeWork rent it from him – and created a work environment with the misogyny and “bro” culture that is a major problem in the industry.
The bold claims of founders like Neumann, even if they have no grounding in reality, are central to the inflated valuations of these companies, along with the hope that they will one day monopolise and produce large returns, as Amazon succeeded in doing. Yet in the case of WeWork, it became increasingly clear that the monopoly would never arrive, so investors tried to keep up the ruse until the company went public. But as the date of its initial public offering (IPO) approached, scandalous stories about Neumann in the press, and documents produced by the company that showed his cult-like influence, caused potential investors to lose confidence. Instead of cashing out, the IPO was cancelled, Neumann was forced out, and there were mass layoffs as employees’ stock options went to zero.
WeWork may have failed, but it was hardly the only company pursuing a model that, in reality, is unlikely ever to succeed. Many of the companies seeking to transform mobility that have been the focus of this book fall within that same category – these companies lose millions, if not billions, of dollars every year as they bid to transform the transportation system in line with how their founders and investors believe it should function, with little to no regard for public benefit, or indeed public need.
Uber is a prime example. Between 2016 and 2020, it lost approximately $25 billion – an eye-watering amount when compared to Amazon, the company held up as the example to emulate, which lost $2.8 billion in its first 17 quarters, before turning itself into the dominant force it is today. In 2018, a decade after its founding, Uber was still losing an average of 58 cents on every ride it delivered, and its prospects have not significantly improved.
Uber promised to transform the tax industry by bringing prices down, increasing convenience and improving the lot of drivers. It transformed the industry by subsidising the cost of the rides with billions of investor dollars; it increased convenience by flooding the streets with cars that had the impact of worsening traffic. But this came at the expense of drivers, who saw their wages fall, at the same time as they were compelled to shoulder more of the risk by using their own cars and buying their own insurance, all while having no control over their work.
After it became a major force, Uber cycled through several bold visions to keep investor money flowing as it failed to profitably deliver its ride-hailing service. It promised to automate drivers. It promised to reduce car use through micromobility and reduce congestion with flying cars. It promised to become the “Amazon for transportation”, making its app the go-to destination for urban mobility. But all these efforts failed, to the degree that in 2020 Uber divested of its autonomous vehicle, micromobility and flying car divisions. It effectively had to pay other companies to take its failed bets off its balance sheet.
At the beginning of 2021, Uber promised to refocus its ride-hailing and food delivery services as its path to profitability, even though Uber Eats had even worse margins than ride-hailing. Uber was able to lose billions of dollars for more than a decade, and while it made it to the IPO stage, its share price plummeted after it went public. But that does not mean it has produced no benefits for the capitalists that funded it.
Over its more than a decade in business, Uber has decimated the taxi industry, the regulations that governed it, and the labour protections of its workers. Even if Uber eventually dies, it spent 2020 fighting to roll back the employment rights of workers in California’s gig economy and committed to fight for similar laws across the United States, Canada and Europe. If it does not produce a profit, investors will have still been able to recoup some of their investment after it went public, and they may yet cement a third category of labour that restricts workers’ protections and bargaining rights that other companies can exploit in the future. That could be a far bigger win in the long term if it is not reversed by government action.
There is no denying that the vast wealth captured by the tech industry is being successfully deployed to transform the society in which we live. But whether one benefits often depends on if they lucked into working in one of the shrinking number of industries that still allow workers to be financially stable. The futures imagined by those in tech are promoted as though they will benefit everyone, but that group is as narrowly defined as their worldview. The truth is that when we look at the world that is actually being created by the tech industry’s interventions, we find that the bold promises are in fact a cover for a society that is both more unequal and one where that inequality is even more fundamentally built into the infrastructure and services we interact with every single day.
After the ascendance of the tech industry, its captains are remaking the physical environment – in the same way they have the digital environment – to benefit themselves. They do not market their ideas that way, as that would generate a backlash that could delay their plans; but in the same way that the automotive industry, and other sectors that were tied to it, promoted a different vision for the city in the early and mid twentieth century that immensely benefited their interests, the tech industry is now doing the same.
The expansion of automobility was paired with the language of freedom, even as it killed millions of people, made communities almost impossible to traverse without a car, and forced drivers to be dependent on a whole range of products and services needed to function in the world of the automobile. There is no reason to believe that the positive language of the tech industry will not give way to another set of inequitable, and even harmful, outcomes.
We can already see this very clearly with many of the companies and visions outlined in this book. Uber promises to reduce congestion, cut car ownership and benefit drivers; it did none of those things, while pulling people from transit and increasing emissions. Google said it would have radically altered urban transportation by now, but instead its Waymo [self-driving car] division runs a small service in a suburb of Phoenix, Arizona, and is slowly establishing limited services in other cities. Elon Musk promised to build a massive network of underground car tunnels to solve traffic congestion, but instead delivered an unimpressive conference attraction and continues to promote the fiction that electrifying automobiles is the solution to climate change, all the while downplaying the environmental damage caused by their production. These ideas not only overestimated the capabilities of the technologies they relied on, but they also ignored the politics and social relations that are key to our mobility.
The founders, executives and venture capitalists that back these initiatives for the future of transportation have a very narrow experience of the city. Their proposed solutions respond to the problems of urban life as they experience them – not as most residents do. That leads to grand plans that are not only naive, but which fail to address the real challenges that people face in getting around their communities, accessing jobs and services, and visiting family and friends.