Assignment 1: Does having an independent business contractor model have implications for

UBER’s business model? If yes in what ways?

Response: For better or for worse, the independent contractor model of UBER has huge
ramifications for UBER’s current business model. It allows UBER to signup drivers quickly and
without much friction while keeping its operations costs lower, thus giving UBER tremendous
scaling flexibility while at the same time avoiding all the pains associated with managing an
enormous employee base. It essentially shifts the burden of employment onto the drivers, who
operate without job security and do not receive any of the benefits (vacation leaves, disability etc.)
they would receive if they were employees.

On the other hand, UBER is not alone in this regard. Many taxi companies also operate using the
independent contractor model, and as the case points out, these cab companies have not exactly
been models of honorable business behavior either (a number of taxi companies have been also
sued for using independent contractor classification). So, it remains a rather complicated question
as to whether UBER’s model is better or worse than the system it is competing against.

Second, for better or worse, the independent contractor classification has huge ramifications for
UBER’s value proportion to passengers. It keeps prices low and has enabled UBER to build an
enormous drivers based, thereby ensuring a ready supply of drivers. In short, it is one of the reasons
UBER has been able to build such a reliable service in a short period of time.

And yet is also the reason for the hated surge pricing policy. If these drivers were employees rather
than independent contractors, UBER would not have to deploy perhaps surge pricing, it could
simply require its drivers to be on the road during peak times/non peak-times