Uber is looking to raise more than $2 billion; Lyft, Didi Kuaidi, Ola, and GrabTaxi have formed a global alliance to counter Uber. Where or where is the disruptive scrappy tech savior? Answer: It existed briefly and the next phase is with us. In The New Steam: On Digitization, Decentralization, and Disruption I argued that [T]his era of disruption and decentralization will likely pass and new winners, who will look much like firms of old, will emerge, if they have not already.” I was building on the ideas Gerard Magliocca and I explored in our work on 3D printing. Although some technologies have helped decentralize production and distribution, to think that centralized players would all go away or new ones not emerge is a mistake. I was focused on safety, stability, liability and insights from Douglass North.
As I said in the paper:
Douglass North captures a paradox that goes with transaction costs. Greater specialization, division of labor, and a large market increase transaction costs, because the shift to impersonal transactions demands higher costs to: 1) measure the valuable dimensions of a good or service; 2) protect individual property rights; 3) enforce agreements; and 4) integrate the dispersed knowledge of society.26 Standardized weights and measures, effective laws and enforcement, and institutions and organizations that integrate knowledge emerge, but the “dramatic increase in the overall costs of transacting” is “more than offset by dramatic decreases in production costs.” Digitization forces us to revisit these issues.
Uber’s success and the response of the other players raises another point. Although I think that society will favor centralized players in the long run, because that allows for some regulation; the process of centralization may also occur for simpler reasons. When one big player starts to break away from the pack, the rest may co-operate or consolidate to keep pace. There may be one winer or a handful. Either way, as Seattle now allows Uber and Lyft drivers to unionize and calls for more regulation continue, the former disruptors will be seen as the new centralized power and treated as such. The reasons offered for that treatment are what draw my interest and where legal theory has and will see some action.