The beginning, not the end

Spare a thought for London’s black-cab drivers – they recently took to the streets to protest against Uber, the mobile phone app that has had many a brush with the law since it was founded, five years ago. At the very heart of Uber’s business model lies the answer to a legal question: is the app a taxi meter or not?

The black-cab drivers’ main contention against Uber is not only that the regulators should call a spade a spade, now that a suite of pricing apps – like Hailo or Uber – are here. But it is also that the regulatory bar should be raised across all private hire vehicles to ensure consumer protection and safety, if nothing else. In reality, however, the protest boils down to nothing more than how an industry assaulted by disruption deals with change. Does it sound familiar to those in the legal market?

Change can appear particularly threatening to a market in transition and it always ruffles a few feathers. Taxis and law are one of my favourite analogies and I have written previously on this blog comparing the billing methods in the two sectors, not least because in both cases technology has brought down the barriers to entry.

In truth, protests tend to be the last resort when there is no turn back from change and the liberalisation of a market through de-regulation has started to work. As with the black cabs, the world of legal services has changed fundamentally even though that change has yet to trickle down to the consumer market. With taxis, the impact is more direct, but nonetheless in both cases the transition to lighter regulation reminds me of how countries undergoing economic transition manage change to ensure structural reforms embed. But how do governments faced with structural transformation approach change?

25 years ago, Eastern European countries started to transition from state-controlled to market economies – then, taking to the streets was common place in response to every step toward liberalisation. Governments approached structural change by falling into one of two camps: “shock therapy” evangelists or “gradualists”, usually incumbents from the previous socialist regimes incarnating as “reformists”, puppeteers that use the strings of the past to shape the future.

Shock therapy or big bang apologists claimed that a complete break with the past would jumpstart those underproductive economies with the benefit of raising living standards the quickest by introducing choice on all levels and allowing markets to self-regulate. Their mantra was: “one cannot jump over a chasm in two leaps”.

They are, in the taxi world equivalent, the exponents of black cabs fully embracing Uber and, with it, the opportunities that come with disruption. In the legal sector, they are the new entrants (ABSs or not) that started with a blank sheet of paper and identified and exploited the gaps in the existing landscape – be it human capital, pricing or access. There is an equivalent in macro-economics to these concepts – labour market structural reforms, price liberalisation and self-regulation by professionals rather than governmental bodies. All governments that subscribe to a big bang economic transition through liberalisation, would monitor and carefully intervene to enable structural reforms with an eye on not stalling the transformation.

For the gradualist, the change had to come in steps – with various measures introduced at incremental intervals to soften the landing. For the black cabs, this came in the shape of “Hailo”, the app dedicated to them, which seemed focused on modernising them without breaking their monopoly or links to past practices. All law firms fall in this category. They are moving the pieces on the board rather than breaking with tradition to truly innovate. They ring fence the change rather than challenge it head on. As with the Eastern European countries, all now members of the EU, there is no right or wrong way to approach change but there is no running away from dealing with it. The destination – a successful and sustainable economy (or business, in the case of law or taxis) – is more important than the journey itself. The question is – who can stay the journey to get there the fastest?

“The beginning of the end”, bemoaned a cabbie in the middle of the anti-Uber protest. Perish the thought! It is just the beginning of the journey.