Taxi in Egypt
This week I have been working in Egypt. Taxi drivers here are notoriously know for ripping off customers, which I thoroughly experienced during my first days of my stay, when I took three taxi rides in Cairo.
On the first ride, the taxi driver said he knew the destination. Then he set off across the Nile for 30 minutes in 180 degree the wrong direction. While we were arguing and he suddenly did not speak English any more, he stopped in the middle of the street and we were hit by another car from behind, driving into us at 50 km per hour.
My colleague Marco Kamiya and I walked away from the crash scene and found another taxi. Same experience. The second taxi driver also took us for a ride, or (which I doubt) did not know the location of the well-known Government building in Garden City which we were going to. Needless to say, we walked the final part to our destination.
The third drive, from my hotel to Ramses train station yesterday morning, was an equally absurd experience. Leaving the hotel with a good time margin for my train, I ended up running to enter the train just before it left for Alexandria. Why? Because my friendly taxi driver had taken me for a rip-off ride.
The Uber Experience
This morning I thought I had enough of Egyptian taxi drivers and decided to try Uber for the first time. I have had the app installed for a couple of years but not got around to use Uber before.
The app is very efficient and it quickly found my location and destination, and summoned a driver. He arrived in two minutes in a brand new black Chevrolet Cruise. The driver spoke excellent English and efficiently took me to my destination for about three euro. I was going to the faculty of architecture at Alexandria University and he even knew which campus entrance was the closest to this building.
In markets like Egypt, the south of France and other locations where taxi drivers have a habit of ripping customers off, Ubers centralised fee quotes and payment system will beat the official taxi drivers anytime, in both reliability and price. If the driver does not behave and the customer complains, then Uber takes him out.
The Battle for the Customer Interface
In the battle for the customer interface, Cairo taxi drivers will not stand a chance against Uber and the competitor Careem. The taxis pick up customers in the street, Uber is available anywhere for anyone who is online. Not surprisingly, A lawsuit is expected to be filed soon by an Egypt lawyer who will be representing taxi drivers against the increasingly popular companies. As Uber gains popularity rapidly in Cairo and Alexandria, I doubt the courts will support an outdated monopoly.
The poster children of the local digital disruption, Uber and Careem, shows how transport and services can be provided just as efficiently by new entrants tapping into privately held idle capacity as by existing providers and at a lower price.
In the time of the smart phone, firms which provides a digital user interface can enter markets with only minor investment in capital equipment. Uber does not need to buy cars, Airbnb does not need to build hotels or apartments, Facebook creates no content. Alibaba, the most valuable retailer, has no inventory, and so on.
Since the Industrial Revolution, the world has developed complex supply chains, from designers to manufacturers, from distributors to importers, wholesalers and retailers. It is what allowed billions of products to be made, shipped, bought and enjoyed in all corners of the world.
Then in recent times the power of the Internet, especially the mobile phone, has unleashed a movement which is rapidly destroying these layers and moving power to new actors.
The balance of power between the different service layers in the digitally disrupted value chain is a battle for control. Price-comparison sites first seemed to provide welcome traffic to airlines before airlines tried and failed to starve them of their business and promoted their own apps and websites as the preferred route.
In this new age of digital disruption, the customer interface is everything.
The new breed of companies is the fastest-growing in history. Uber, Careem, Amazon, Alibaba, Airbnb, Twitter, WhatsApp, Facebook, Google and so on. These companies are independent, thin user interface layers that sit on top of vast and costly third party supply systems, and they interface with a huge number of people, channelling customers’ orders to suppliers for a margin or kick-back at close to zero cost per transaction, and they create large volumes of online payments, ensuring transparent pricing.
In today’s hyper-interconnected world of global competition, if one domino falls, it will topple any number of others. The points of connectivity are so numerous and tangled that literally no-one is able to predict with certainty where digital disruption will take us. As people increasingly look online for low cost options, we continue the internet E-commerce revolution not only by convenience, but also by increasing price concerns.
And this is the nub of digital disruptions connection to slower economic growth, especially in the advanced economies of Europe.
Before Uber, clearly there was spare capacity in privately owned cars, which sat unused for many hours each day. So too with apartments that were empty and unable to be let out by the owners when they were not there.
Uber and Airbnb, and others disrupting asset markets, have tapped this idle capacity without adding to investment, and as they take business away from taxi companies and hoteliers, the rate of economic growth will remain held back. Do you see, dear reader, this unexpected Damocles sword of the e-commerce revolution?
The Economist Joseph Schumpeter taught us about innovation and coined the term “creative destruction” to describe the process of the old being constantly replaced by the new. In fact, he viewed the economy as somewhat like a living organism, constantly growing and changing to maintain its health. Schumpeter’s analysis has proved of lasting impact, and has garnered the respect and attention of many innovation practitioners.
As humankind advances in maturity, overcoming the selfishness that threatens the life of successful economies and democracy, much of Schumpeter’s work continues to inform and support the development of a healthier, prosperous society that satisfies all people. Or, at least, that is the theory.