Juha Saarinen: The power to disrupt

Uber is shaking up the taxi industry worldwide.

I was sitting in the back of an Uber last week (mistake, the front seat looked much more comfy but old habits die hard) and talked to the driver about his job, as one does.

The Uber driver was very happy with his job, even though the company had made him buy a new Hyundai in which to ferry people around as his earlier 11-year old car no longer cut the mustard.

That Uber had slashed driver rates 20 per cent didn't matter an iota to the driver, nor the fact that he was an independent contractor paying his own petrol and vehicle expenses. Uber's app is so good that he keeps busy and still earns more than he would as a regular taxi driver, and there's less hassle being an indie as well, apparently.

From a passenger's point of view, Uber is cheaper than taxis and the app is seductively easy to use and provides regular updates as to where the driver is and which route the person takes. You call an Uber, get in, arrive at destination, get out, and that's it. Beautifully simple. You can buy your kids and friends rides very easily this way, all charged to your credit card.

Then the driver told me that thanks to Uber, taxi co-ops in New Zealand are in trouble. Part of the attraction of being a cabbie, just like overseas, is that you could sell your place in the co-op when you got sick of driving a taxi. These used to be worth over a $100,000 each, the driver, an ex-cabbie, said. Now? Nothing much at all, thanks to Uber.

It's that kind of displacement of traditional business by over the top (OTT) operators that use technology to improve service and, more importantly, to work out how to shift costs while still appearing attractive to takers that makes the effect of the internet economy hard to asses.

On the one hand, Uber adds value to the networked infrastructure and the internet without which it wouldn't work, ditto the smartphone business because you need a device to use the service.

On the other, it kills off older businesses in a year or two, because, compared to OTT enterprises, they are costlier to run, rigidly structured and can't offer customers the same easy, frictionless and elegant experience.

Looking at it positively though, if we invest in infrastructure and education that fosters and enables innovation, we could create an almost bulletproof economy.

This is typical of the transformation of the economy that's been happening over the past decade, and it's not going to stop. Someone out there will look at a business process, and think, "I can make that easier/faster/better/cheaper with an app or on the web".

The tech will do that of course, and at the same time cause job losses through automation.

Arguing that people should have seen the transformation coming is pointless. If people were able to do that, we would have a nation of billionaires as they would have managed to do what just a few tech entrepreneurs have and placed themselves on the top of the internet economy food chain.

Does such transformation become a net bonus for a country in the long run, or does it impoverish a nation with mega-scale multinationals squashing local businesses? Don't forget that Uber is valued at $82.3 billion currently

In comparison, Statistics NZ pegs the local economy this year at around the $240b mark. Uber is bigger than our entire, $65b export sector.

Looking at it positively though, if we invest in infrastructure and education that fosters and enables innovation, we could create an almost bulletproof economy. You have an idea and can realise it in New Zealand, a familiar English-speaking market before scaling it globally. What could be better?

That concept has to be shared by everyone though to work, and not just an elite who can afford to take part or we'll just be Silicon Valley writ large with shocking numbers of homeless people who the billionaires don't want to see or think about.

Meanwhile, Uber has eased into deliveries, using the same drivers who move passengers around. There's no reason to think that business expansion will be anything but a success for Uber.

Anyone who can't or doesn't want to open up accounts with courier companies will love Uber deliveries. If I was the boss of a large courier company that I wanted to keep alive over the next year or so, I'd have a quick chat with Uber about co-operation if it isn't too late already.