That example doesn't seem parallel to me because it lacks a sudden deregulation of a very tightly controlled market (or in this case, a newly exploited loophole or lack of enforcement of law or whatever you want to call this).
I think Uber / Lyft etc should either have to play the medallion game (which obviously wouldn't work) or local govts should just do away with medallions and the cities should buy them back from the people they sold them to ... as it is now, it just seems like selective enforcement of taxi laws on the guys with the yellow cars.
If only a handful of iPhones were sold and those iPhones were the only phones that could make calls in SF, then yes -- I think Apple would need to pay you back $600.
Nope. By issuing a medallion, the city grants the right to participate with known rules of competition in a specific market and it also has the obligation to protect the licensee from unfair competition.
The cities have failed to comply with their duty and so, in my opinion, owe damages to the holders.
How exactly did the city fail to comply with their duty? It was always legal to call a (non medalian) car to your location and be driven somewhere. The medalian merely gives you the right to pick up street hails, and that rule is still enforced. The city is doing exactly what it promised.
It's not a right, it's a privilege. And the competition is in no way unfair, the only thing that makes it "unfair" is that they did not pay to the city for the privilege. There's nothing "fair" in being forced to pay exorbitant sums to the city in order to do business. I could get it if the price was commensurate with the service one gets from the city - after all, roads must be maintained, cops and street cleaners must be paid, street lights must be fixed, etc. - but 250K goes way beyond that and is clearly just made to extract money "because we can" and to limit the access to the market.
If the city has an unfair practice of restricting business and charging for the privilege of doing something that should be a basic right available for everyone, and somebody relied on that unfair practice to extract rent, and it stopped working, I don't see how one has a claim for damages anymore than Mafia racketeer can claim for damages when a racket victim refuses to pay protection money, or one victim could claim damages because the other victim does not pay anymore and thus has "unfair advantage".
SF sold them the medallions with the promise that SF is going to limit the number of cabs and now it isn't doing that. That is different from Apple selling you a piece of electronics with a single year warranty and no promise that it's going to be useful in the future.
If the medallion is the only way you can be a taxi, then enforce it. If Lyft and Uber are legitimate, then lose the medallion and pay this guy back his $250K.
By renting out the medallion from owners, instead of becoming an owner. So you'd pay more for the medallion per unit time, but have the freedom of moving onto other services when they become more popular.
"So many people wanted one that they were hard to get. Drivers used to sit on a waiting list for more than 10 years. When their names finally came up, the city charged them $250,000 to buy one."
This isn't unique to San Francisco, the entire industry is in a free fall nationwide... It is incredible to watch the effects of a little innovation and (effectively) deregulation.
read: don't forget that innovation has been made illegal due to pressure by certain cartels and outsiders must form political alliances to circumvent them.
>Don't forget that the "innovator" is operating illegally in many jurisdictions and is actively trying to buy protection (i.e., lobbying).
Don't forget their most unfair practice of kicking out rude and bad drivers that provide terrible customer service. If the cabs can do that, people would like them too, but that's just a totally ridiculous thought.
In most places it is completely legal. Street hailing is different than dispatch hailing in most jurisdictions.
In others jurisdictions it is gray territory and some govs err on the side of the taxis. But I don't really know of many jurisdictions were it is outright illegal.
Here's the thing I don't understand -- if the main attraction (from a customer point of view) is the app (with everything that comes with it), why haven't the cab companies got in on the same game? Either put out their own app to hail rides (and maybe give their cabs a more luxury look to them), or sign up as Uber/Lyft drivers themselves? Or is there something I'm missing?
I've seen more than a few cabs in Seattle with "Use the APP" on the side. Every cab company has a different app.
Uber did start the shift to using apps instead of hailing or calling cabs. Now, the idea is in the "fragmentation stage" with the early adopters, where everyone and their brother has developed a different app. Once some of the underperfomers fade away, there will hopefully be more centralization when late adopter customers start using this market.
Taxi prices are set by the city https://www.sfmta.com/getting-around/taxi/taxi-rates while Uber/Lyft can set their own prices. Maybe taxis should be able to lower their prices and surge up with demand to even the playing field.
For what it worth, I used that a number of times when I was in Portland, and it worked just fine for me. Can't compare the prices, having no basis to compare with, but I don't remember the prices being outrageous. In general, if Uber drags the taxi industry kicking and screaming into 21st century, it's a win-win.
In my opinion, the major benefit of Uber/Lyft is also the accountability. Having an easily-accessible paper trail of who my drivers were ensures I won't fret about losing things. If I have a poor experience, my rating actually matters and poor drivers are kicked off of the platform. If my Uber driver longhauls me (< 1% chance IME), I can get a refund by complaining to Uber support. Longhauling is more common among cab drivers AND there's no convenient way to get your money back.
No accountability or recourse in traditional cabs.
This probably varies a lot between cities, but the main appeal of Uber in Portland is reliability. I would love to keep it local and all, but the local cab companies (cough Radio Cab cough) would often show up hours late, if at all, even when reservations were booked a day in advance. Without a car and with public transit closed in the wee hours of the morning, cabs were my only incredibly unreliable option for getting to the airport. With Uber and Lyft I have never had issues getting to the airpot at odd hours.
It was a similar story in Seattle. Frequently you'd call both yellow cab and orange cab (the two major cab companies) because you only expected one of them to show up within a reasonable time frame (which of course only exacerbated the problem).
I think when you say "the app" you really mean "the convenience of not having to hail a cab" specifically. The app is a game changer, but not for that reason. Not having to hail is nice, but that's only the tip of the iceberg.
For example, a couple of days ago I took an Uber. The driver that picked me up was a student. I asked him why he was driving, and he said, "Oh, well I came [to this city] to hang out with my friends, but they can't do anything for another hour. So I decided to do a few rides while I wait."
Uber was able to take the unused potential of someone just messing around in a city and use them to pick me up.
They are able to do that because they can watch everything that happens via the app. If someone tries to screw you over and take a long route if you're new to the city, Uber gives you a refund and the driver doesn't get paid. If the driver is driving like a maniac on bald tires while they talk on their phone, you can give them a low rating. Enough of those and they get kicked off of the service entirely. In other words, instead of an expensive and burdensome network of licensing and regulations, Uber was able to better regulate what was happening using technology.
The first time I ever took an Uber a driver came and picked me up, opened the door for me, gave me a water bottle and some candy, turned on the music I like, and was very safe and professional. And the whole thing cost less than a taxi. I haven't been in a taxi since.
So the app is the main attraction, but not because you can hail a car (though that's nice, especially when you're in underserved areas). It's because the app allows Uber to create a completely different economy around the supply and demand of ridesharing.
I think the parent was talking about supply side. I think you are totally correct but, I find myself not satisfied with the answer. All legitimate cab companies should puf money into hiring a company to build a sinple app to connect them to legal taxis. You pay, you get on the app. Tagline, "as convenient as uber, only legal".
It would be a hell of a lot cheaper than funding lawyers and lobbyists like they have been.
That's exactly the point though, it's the entire system that needs replacing. It's awfully hard to turn a ship around when it's as large as the taxi industry (with lobbies to boot).
Take one element of it - say the taxi companies said, "OK, you're now getting rated, and if you drop below 5 stars you lose your medallion." Drivers would lose their minds.
Imagine them saying, "Also, now your trips are going to cost 50% less" again, would not fly.
Or even, "You can use your own car, because that's way more efficient" (would never happen, because taxi drivers rent their cars for $40,000/month).
The taxi industry has done a hell of a lot to entrench itself and make itself irreplaceable, no matter how awful it is. In doing so, it has created a system completely resistant to change and innovation. The industry was ripe for someone to come along and replace it with a parallel system that was better and more efficient.
in sf, specifically, the taxi companies are utter shit (and evil, to boot).
I badly broke my leg and, because I lived too far from public transportation to crutch over, had to take taxis to work 4-5 times a week, often both ways. No taxi company in sf will reliably come, even if you make it clear that you are going to take a cab at least 4 days a week for most of the next year. Instead, even when you are in the middle of the mission in a relatively dense location and going to soma, dispatch simply lies and says "10 to 15 minutes". A 95% wait time was 3 hours, and a 85% time was 1 hour 15 minutes, for what should be an approximately 15 minute drive. Even simple requests like calling a couple minutes before the taxi arrives so I could get down 2 flights of stairs on crutches without detaining the driver or having the driver leave couldn't be followed. Needless to say, this causes significant disruption to your life when you have to leave 90 minutes plus the length of the drive before going somewhere if you want to have any hope of reliably getting there on time. And god forbid you have to see your surgeon or something else with a hard deadline. The taxi services should be ashamed of themselves, and frankly participated in a violation of my civil rights as done by a quasi-governmental monopoly. And there are other issues: when I would occasionally have to pay with a card, the meter would suddenly be broken until you made it clear drivers had two choices: call the card in or not get paid. A fucking miracle would occur, and the card reader would start working. The taxi system literally shat on their customers.
The advantage of uber is simple: when requested, they either come, or say they won't. That allows you to be an adult and either make alternative arrangements or tell the other party you'll be late. I used uber even when they cost 2x as much as a cab just for this reason.
In conclusion, fuck taxis. Also, fuck sf. Only in sf is "a taxi that comes" a disruptive service.
I love the 'But Uber is illegal!' argument. A government protected industry is forced to face real competition after years of ignoring their customers needs. Boo Hoo.
Maybe I've a rather european perspective on this: But most of the arguments around Uber's services not being entirely legal here are around the kind of driver's license and such. At least in Germany, and I'm fairly certain it's the same in a couple neigbhouring countries, there's two things to driving a cab in a city: 1) Special kind of driver's permit that allows you to transport passengers in a commercial setting. That includes a background check, medical, and some lower limits how many traffic infractions you can have than a normal driver's license 2) A permit to drive a cab in a specific city/area.
To me requiring a special kind of driver's license to transport passengers makes a fair amount of sense iff it's reasonably easy to get.
Uber doesn't require that for UberX, which is the main point of conflict in many of the trials Uber lost over here.
At least in the U.S. states that I've lived in, drivers licenses are segmented by the type of vehicle that you are allowed to drive, rather than the purpose of driving it. So, for instance, in Maine, there are 3 main tiers:
Class A license - certified to drive tractor-trailer trucks.
Class B license - certification to drive non-tractor trailer multi-axle vehicles; kind of an amorphous collection, but think buses, large commercial panel trucks, dump-trucks, highway plow trucks, etc.
Class C license - any kind of normal passenger automobile.
What I find interesting about Uber, and the backlash against it, is that it is largely just a scaling of under-the-table, unregulated behavior people have always indulged in. What, really, is the difference between calling up your circle of friends and acquaintances, asking for a lift somewhere, and throwing them some cash for gas money and their time, versus using Uber? They are evil because they enable you to search a wider network then just your personal circle? Or because they take a cut for providing a reliable, safe, centralized payment service? Or because they have enabled a market that competes with a rent-capturing incumbent, and the product they provide is cheaper, more convenient, and higher quality?
I'm so sorry to hear that! I wish more people heard your story to put things in context, especially regarding the disability access issue.
With that said, I have to nitpick a few things:
1) This is a problem in many U.S. cities besides SF.
2) Uber has also shown a bizarre reluctance to deal with advance, regular booking. One employee even insisted that it would be anathema to Uber and against everything they stand for. Even though it would a) be trivial to implement, b) let them know of hails sooner, and c) give them greater knowledge of request patterns.
This is why I can't be bothered to get worked up in favor of taxi drivers. They made their bed, now they must lie in it.
By law, I still have to use a taxi when returning from the airport here in Seattle (as opposed to Uber). I have had perhaps 2-3 positive experiences, some neutral ones, and many bad experiences with rude taxi drivers on their phones who drove erratically and tried to scam me with overlong routes.
And up until Uber and others arrived, they would either try to make me feel like shit for paying with a card, lie to me about it not working, or they would use carbon paper card readers circa 1985. Uber forced them to modernize in that respect, at least.
Some cab companies do have their own apps, or sign up with national "e-hail" app vendors.
In my experience in a number of US cities, these apps get terrible reviews in the App Store/Google Play because they're borderline unusable. They often don't have all the features of Uber and Lyft, like letting you track the cab while it's on its way to you or even handling payment through the app, and they're often poorly designed and even prone to crashing.
My guess is that cab companies want an app that will feed into their existing dispatch workflow, with the limitations that entails. They probably also have no experience picking IT vendors, negotiating with them or evaluating apps.
Also, lots of local cab company owners and medallion holders are probably skeptical that they can compete or profitably do business with a worldwide, hypercompetitive billion-dollar taxi company. It's not easy running a local discount store when Walmart opens across town, but it's not necessarily any easier for a small supplier trying to sell through Walmart.
So the incentive isn't only the app, its also prices. There is a lot of lobbying being done here on the part of Uber and the cab companies have already staged a few demonstrations. Will be interesting to see how this plays out.
The game changer is the uber/lyft drivers are doing in their free time and generally __want__ to do it. So they show up when scheduled, have a pleasant demeanor, and make the whole experience one that isn't uncomfortable.
Cabbies are there for the cash and their attitude and style reflect that. Cab rides are typically reckless, the drivers rude, and the cars uncomfortable.
Of course, these are sweeping generalizations, so take it with a grain of salt.
Regardless, the game changer is the experience from app to to destination. Not just the app.
Right now Uber offers better service in every way which matters to me, and usually has much lower prices to boot.
The cab system is an entrenched monopoly with a lot of inefficiencies and people stealing value along the way.
Being able to lie on the phone and say "the cab is 15 minutes away!" when it's going to be half an hour is a feature, not a bug - for the industry. It's the equivalent of asking reform from the music industry or Hollywood - not going to happen.
Cab companies have done that, at least in SF. I've been using Flywheel [1] for nearly 2 years. I press a button, and a cab turns up in a few minutes. When I'm done, they bill my card. And unlike stories I hear about Uber, these drivers know the city well.
This is an especially poignant story, and it's hard to not feel bad for this driver.
On the other hand, people face investment risk all the time, i.e. when franchising a restaurant. When Chipotle or whoever comes in and devours the fast food market, I wonder if the local struggling burger franchisee asks the city for help?
I can't speak on behalf of other cities, but anyone who has lived in SF pre-Uber has no shortage of nightmare stories from taking cabs. For people who had to wait years and pay enormous costs for their medallions, many taxi drivers acted smug, entitled, rude, and sometimes even downright shady. I know you can't say this about _every_ taxi driver, but there's no doubt that the current ecosystem treats the consumer many orders of magnitude better.
It's not quite the whole story. Medallions used to be almost free, which is why the waitlist was 10 years. They started charging 250k, but you can give them back for 200k.
From the MTA site:
By capping the sale price of medallions, the MTA insulates medallion holders from market fluctuations, either up or down. When drivers want to resell, the price is what they paid, minus a 5 percent transfer fee. The agency said it is unlikely to cut the price. For those cabbies who paid nearly nothing for their medallions, the new sales system is an even better deal; they receive $200,000 when they surrender it for resale."
> For those cabbies who paid nearly nothing for their medallions...
I'd argue they did pay for them, they worked for below-average wages for 10 years in the hopes of a payoff. Long-term drivers tend to see getting a medallion as a retirement plan.
Since cab drivers are bidding against each other for a medallion-car, if they bid more to get a car that shift/day/week, they earn less.
If, after 10 years of driving a cab, one could get a $250k wind-fall, one would be willing to earn less during those 10 years than if the wind-fall did not exist.
People face investment risk all the time, but medallions are a case of a city setting explicit expectations when selling the medallions and then changing the terms of the deal post facto. Chipotle devoured a huge chunk of the fast food market, but the city didn't collect money from McDonalds for a guarantee that Chipotle wouldn't be allowed to enter.
Notably, this is illegal by federal law for auto manufacturers and other franchisors: if you promise a 25-mile exclusivity radius and get a franchisee to build a dealership, you cannot renege on that without being liable for damages. Interestingly, it's auto manufacturers who lobbied for these laws, wanting to kickstart a dealership ecosystem and knowing that franchisees would not invest money in building and marketing dealerships if they did not have suitable protections. Taxi drivers are a form of franchisee, and they are asking for similar protections.
One possible solution is for the city to buy back all the extant medallions at some fixed price, do away with the system, and finance the purchase with an excise tax on all types of transportation going forward, whether rideshares, taxis, etc. You can imagine how Uber feels about that, and how they can mobilize their vast PR capabilities against such a concept.
Hold on -- there's a big difference between "the government reneged on its promise to keep squatters off your land" vs "no one wants your land anymore". If they start turning a blind eye to squatters, it's fair to criticize that government for reneging. If the other city becomes such a vibrant spot that no one wants to live near you -- different story entirely.
While local governments are arguably failing to require newer livery services like Uber and Lyft to meet e.g. higher insurance requirements, they are not reneging on the medallion promise, which still gives holders the exclusive right to pick up street hails. That right is still enforced, and the Uber/Lyfts of the world are not infringing on it. The situation is much closer to "street hail pickup rights aren't valuable anymore" than "governments enable encroachment on the right to pick up street hails".
And before you dismiss "arranged hire" (livery) vs "street hail" as a technicality, there are very good reasons to put a cap on the latter but not the former (and otherwise subject the latter to harsher regulation):
- By necessity, street hails require clogging of "Schelling points" where drivers can expect to get line-of-sight to a potential fare, and vice versa. That doesn't happen with livery, where they go only where requested, not significantly different from a private car.
- Street hails create a risk of fighting over fairs, livery doesn't.
- Street hails enable you to pressure naive passersby/tourists to take your rate, livery requires you to ask for the fare from a central service.
- Medallion holders get use of the scarce privileges to use taxi stands and bus-only lanes, livery doesn't.
- Livery creates a central, auditable record of the event, while street hails can rip you off without showing up on an audit.
To be sure, Uber/Lyft are flouting even some of the requirements of livery services ... but the medallion case looks more like "street hails are becoming obsolete in the information age, so of course they'll lose value".
Everything you say is technically correct, but when something has been valuable for a very long time primarily due to government regulation only, and then it suddenly loses most of its value in the span of just a few years, I don't think it's fair for people who just recently entered the market after years of waiting to suffer all the loss (while their predecessors, purely by chance, made their investment back many times over). At the very least this loss should be spread around in some way - Uber and Lyft drivers could bear some of the load, recent purchasers of medallions could be bumped to the front of the sales line, etc. Many different options.
I don't want to live in a society where government regulation leads to financial disaster for individuals, and the society and government response is "tough luck".
Why should the loss be spread around? There are a number of rights and privileges you can purchase from the government, which are an investment risk. You go into them with a hope of profit and accept a risk.
For example, if I pay for rights to drill for oil somewhere and oil becomes obsolete, should I be reimbursed by my competitors?
The upside potential of one of these medallions was unlimited. After buying it once, you could use it to make an unbounded amount of money. Part of that is accepting the risk that it might make no money. Otherwise you're asking the rest of society to subsidize a private interest.
The medallions did not have value primarily due to government regulation (in terms of limiting how many). The value was equally due to the regulation and the fact that street hails are so convenient relative to the other options. Just like property value is due equally do to the exclusive usage rights to it, and to utility of using the property itself (and I'd appreciate any feedback regarding how I can better communicate the dynamic in that analogy).
Therefore, it is well known that both a) regular property and b) medallions can lose value from either 1) governments not enforcing exclusivity or 2) legal alternatives becoming better. Governments never made any promise (either for property or medallions) that thy wouldn't lose value from 2). (To extend the analogy further to the car dealership case, the manufacturer makes no promises about eg Chevy demand falling because public transit gets better.)
To be sure, it certainly does suck when you put all your net worth in one asset and it loses value, but it does not thereby follow that your rights were violated or that a promise was broken. Nor does it necessarily make sense for the government to spread out the losses from this, because, well, why stop there? Why not socialize the losses from tepid real estate markets for leveraged homeowners, or for leveraged investors in local industries when their foreign counterparts get better?
There isn't a lot you can do about limiting investment downside risk beyond preventing people from having too much net worth in any one thing ... which maybe they should have done for medallions (or should start doing for homes, for that matter).
That is really no different from any other investment. If you buy a house, you are relying on the government to uphold your property rights, otherwise anyone could come in and take it over. Let's say you buy a house in SF, hoping for a steady income from rent. Let's say people finally manage to kill the goose that lays the golden eggs, and the tech industry moves to Utah. You're going to lose a lot of money, and the government is under no obligation to make you whole.
I cannot live in a society where profits get concentrated when things go well and losses get spread around when things don't, because that is not a sustainable society.
> Taxi drivers are a form of franchisee, and they are asking for similar protections.
You can't make a contract with a legislature. Exchanging anything of value for changes to the law is literally illegal. Imagine what would happen if you could bribe Congress to pass some corrupt legislation granting you untold powers and the next Congress was prohibited from undoing it. The only thing that binds Congress is the constitution.
Obviously that leaves you in a tough spot if you have to rely on the state of the law, but legislatures know that. If they make huge unexpected changes to the law it tends to have a negative effect on the markets, so they try to avoid doing that, and people then rely on them trying to avoid doing that. But sometimes they have to, or sometimes they do it when they don't have to, and you take your lumps (or vote the bums out).
“I thought … there should be proper rules and regulations,” Batth says. “We have a very corrupt society back in India. With money, anything gets done. I never thought it would be the same in this country.”
I found quite a bit of irony in this quote, The taxi industry has historically been very corrupt. Bribes to city officials to artificially keep the prices for medallions going up (not adding new ones) and to prevent competition are common. I do feel bad for this driver but at some point if you're paying $250k for a chunk of metal you have to stop and think that what you're really paying for is a monopoly in performing a specific action I.E picking up passengers that hail you and this is not a guarantee that that business continue to be worth what it was.
For every poor hardworking cab driver who has taken a mortgage out to buy a medallion, there are a dozen sleazy operators who own piles of them, do not drive, and have leased them out to cabbies at horrific rates.
Sleazy business operators are those who take advantage of employees, who do things like allocate risk from the highest earners to the lowest. In taxis, this is commonly done by charging a fixed rate for a limited asset (medallion/cab) used in a highly variable business. Individual drivers then carry the risk rather than the millionaire. Legal, but sleazy.
Sad story but every economic change for the better creates winners and losers. You can't regulate away loss without regulating away improvement.
He is better off forgetting the medallion and finding work somewhere else to repay the loan. He should be able to make a few dollars renting the medallion in the meantime.
As for the government stepping in - live by the fake government market, die by the fake government market. I have no sympathy for people who build businesses behind government firewalls or with government subsidies, and suffer when those rules change. Because plenty of legitimate businesses have engine to the wall when the government arbitrarily creates regulations where previously there were none.
I just don't understand why this guy doesn't start getting uber pickups - if that is the problem, just join them.
>Sad story but every economic change for the better creates winners and losers. You can't regulate away loss without regulating away improvement.
The government isn't a third party here. Compensating him isn't just handing him money for a bad investment. It's compensating him for the fact that SF scammed him out of a quarter million dollars.
The reason why the government should have to compensate here isn't because he lost money and pour him. It's because the government sold him a license and then devalued the license on purpose.
You could argue that the city never promised to prevent all sorts of transportation competition. And he took that risk knowing that, for example, people could take limos or whatever. But you at least have to have that debate. You can't just write it off as a bad investment. The government is the cause of his loss. Not the market.
>As for the government stepping in - live by the fake government market, die by the fake government market. I have no sympathy for people who build businesses behind government firewalls or with government subsidies, and suffer when those rules change.
You act like cabs were regulated for the cab drivers benefit, but that's not how or why they were regulated. They were regulated for the benefit of the city and the rides. The medallion system was the other side of a compromise between the city and the taxis. The city would regulate pricing and dictate key parts of their business model, but in exchange they would be protected from competition. It was a quid pro quo.
IF you think the medallions shouldn't have been sold in the first replace, why isn't just returning them for the price paid the best solution?
No, this guy made a bad decision despite plenty of available evidence. Uber started in San Francisco in 2009. By 2012 it had expanded internationally, so it couldn't be regarded as a fly-by-night operation. Yet he still chose to dump a quarter million dollars into a medallion? Well, sorry. He chose poorly.
Cabs might not have been regulated for the cab drivers benefit, but benefit they did. This guy saved for years to get the benefits of the medallion system.
My point is that if you rely on the government to create your business, don't cry when the government takes it away.
Let me guess. For every person in this situation, there were probably ten in his situation a few years back. I suspect if you were to ask him or folks in a situation similar to him before he got his medallion, they would have complained about overregulation from the city and definitely wouldn't have called for more. Perspective.
I had a great professor who specialized in (Economics of) Public Utilities who made a very important distinction about types of regulation; of which, he said there are essentially two: economic and "safety and soundness." He said, about them, economic regulation is strictly* bad. Safety and soundness, is always* good. Make sure you know which type a regulation is, e.g. Many financial regulations are for safety and soundness of "the markets"; not economic.
In this case, I think it's key point out, the pain felt is due to economic regulation. Which was/is putting up barriers for entering and exiting the market. The government removed competition, it raised prices, and was generally bad (I.e. State santioned monoplies). When innovation, and change, eventually moved around those economic barriers it was bad for those protected by 'em.
I hope going forward any regulations are strictly safety and soundness related with taxi service. It'll save a lot of pain on all sides.
* If you've taken enough Econ, you'll know strictly and always are going "depend on ..."
Of course, you can also regulate for more safety than the public needs. (Eg trains in the rich world are safe enough arguably, but we ask for even more safety from our planes.)
I see a lot of comments suggesting that medallion owners should be compensated. But the government is not morally obligated to compensate people whose investments lose money due to changes in regulation. And it would be prohibitively expensive to do so, because it is a one-sided affair. No one who made money investing in medallions when they went up in price was arguing "when we bought medallions, we thought that the number of available medallions would increase with demand, resulting in a stable price. Instead, prices shot up, so we feel we should pay back the government some money because their unexpected policy change benefitted us".
The government might sometimes compensate people, but that would depend on many factors such as
1) To what extent the person was unable to avoid the risk, and to what extent they willingly bet on the price of the medallion, and
2) Whether the government did all in its power to keep policies predictable, given the unpredictable nature of technological change.
It's hard to feel bad for people who chose to invest in rigged markets. Their frustration should remain squarly with local representation. Show me the public vote that decided to implement medallions. It's like voting to regulate the number of restaurants in a given city and leaving half that market to mcdonalds. (For safety of course) People would laugh at not leaving that up to supply and demand. The only reason it worked with cabs is because nobody used to care how it worked keeping it open to political grease balling. Suddenly people care and now everybody is scrambling trying to explain their positions on it. And make no doubt about it... Every representative from when it was implemented to today is responsible for allowing it to continue under their watch. Once they know you all are going to hold our representitives personally responsible it will go back to supply and demand faster than anybody can thrown money at it.
Most, if not all, of the people holding the medallions had nothing to do with their institution or even maintenance as a monopoly. They are simply entrepreneurs playing an existing game. A game whose rules have drastically changed.
That's the risk in the entrepreneurship. And that's exactly why people push for less restrictive regulations - to reduce this risk coming from regulatory change. Of course you never can take the risk of change out of entrepreneurship, but at least you can reduce the risk from regulatory challenges and changes.
What seems to be happening instead is simultaneously arguing for more regulation and to insulate people from the effects of change in the regulation - which will only breed more regulation, more people hurt by it and demand for even more regulation to compensate for it. The only way out of this vicious circle of regulation to fix regulation is to minimize the regulation to the minimum necessary to ensure basic equal access to the market, basic contract enforcement, etc. and then let the market participants figure it out. That way at least the regulatory component of the risks is greatly reduced. If you are not forced to pay $250k for the privilege to do business, there's no way this investment would go bust.
I feel bad for the guy, but no way I would have made that purchase in 2012.
A basic SWOT analysis would have made me hightail out out of the taxi business instead of taking on debt to spend $250k committing myself to it.
If he gets his $250k back less the processing fee that feels like justice to me. He shouldn't have to wait for a buyer to come up though - it should just automatically be an option now that not regulating Uber seems to have become policy.
you know what'd be a good PR move? Uber helping private cab drivers such as those in the stories out by buying out the medallions and letting them drive under Uber. Win win.
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[ 0.24 ms ] story [ 182 ms ] threadYet... what are we supposed to do about it?
He made a bet that value would stay
He was wrong
Sucks
Sad? sure. But not anyone's fault
I think Uber / Lyft etc should either have to play the medallion game (which obviously wouldn't work) or local govts should just do away with medallions and the cities should buy them back from the people they sold them to ... as it is now, it just seems like selective enforcement of taxi laws on the guys with the yellow cars.
The cities have failed to comply with their duty and so, in my opinion, owe damages to the holders.
If the city has an unfair practice of restricting business and charging for the privilege of doing something that should be a basic right available for everyone, and somebody relied on that unfair practice to extract rent, and it stopped working, I don't see how one has a claim for damages anymore than Mafia racketeer can claim for damages when a racket victim refuses to pay protection money, or one victim could claim damages because the other victim does not pay anymore and thus has "unfair advantage".
Yes, there is little difference between street hailing and dispatch these days. But the law never guaranteed them immunity from dispatch innovation.
No one was scammed. But you can still feel sorry for the guy.
If there is one thing to learn - DIVERSIFY YOUR INVESTMENTS!
How do you diversity your investment in your employer?
This is the source of the problem.
Chicaco: "Once a sure bet, taxi medallions becoming unsellable" https://news.ycombinator.com/item?id=9564478 http://www.usatoday.com/story/news/2015/05/17/taxi-medallion...
New York: "New York City Taxi Medallion Prices Keep Falling" https://news.ycombinator.com/item?id=8856231 http://www.nytimes.com/2015/01/08/upshot/new-york-city-taxi-...
Philadelphia: "Philly medallions fetch less than 17% of asking price" https://news.ycombinator.com/item?id=9528301 http://observer.com/2015/05/the-taxi-industry-is-in-total-co...
Don't forget their most unfair practice of kicking out rude and bad drivers that provide terrible customer service. If the cabs can do that, people would like them too, but that's just a totally ridiculous thought.
In others jurisdictions it is gray territory and some govs err on the side of the taxis. But I don't really know of many jurisdictions were it is outright illegal.
They've been doing it for a while -- this app used to be Taxi Magic. It's slower to respond than Uber, and more expensive.
Uber did start the shift to using apps instead of hailing or calling cabs. Now, the idea is in the "fragmentation stage" with the early adopters, where everyone and their brother has developed a different app. Once some of the underperfomers fade away, there will hopefully be more centralization when late adopter customers start using this market.
No accountability or recourse in traditional cabs.
For example, a couple of days ago I took an Uber. The driver that picked me up was a student. I asked him why he was driving, and he said, "Oh, well I came [to this city] to hang out with my friends, but they can't do anything for another hour. So I decided to do a few rides while I wait."
Uber was able to take the unused potential of someone just messing around in a city and use them to pick me up.
They are able to do that because they can watch everything that happens via the app. If someone tries to screw you over and take a long route if you're new to the city, Uber gives you a refund and the driver doesn't get paid. If the driver is driving like a maniac on bald tires while they talk on their phone, you can give them a low rating. Enough of those and they get kicked off of the service entirely. In other words, instead of an expensive and burdensome network of licensing and regulations, Uber was able to better regulate what was happening using technology.
The first time I ever took an Uber a driver came and picked me up, opened the door for me, gave me a water bottle and some candy, turned on the music I like, and was very safe and professional. And the whole thing cost less than a taxi. I haven't been in a taxi since.
So the app is the main attraction, but not because you can hail a car (though that's nice, especially when you're in underserved areas). It's because the app allows Uber to create a completely different economy around the supply and demand of ridesharing.
It would be a hell of a lot cheaper than funding lawyers and lobbyists like they have been.
Take one element of it - say the taxi companies said, "OK, you're now getting rated, and if you drop below 5 stars you lose your medallion." Drivers would lose their minds.
Imagine them saying, "Also, now your trips are going to cost 50% less" again, would not fly.
Or even, "You can use your own car, because that's way more efficient" (would never happen, because taxi drivers rent their cars for $40,000/month).
The taxi industry has done a hell of a lot to entrench itself and make itself irreplaceable, no matter how awful it is. In doing so, it has created a system completely resistant to change and innovation. The industry was ripe for someone to come along and replace it with a parallel system that was better and more efficient.
Where is that figure from?
I badly broke my leg and, because I lived too far from public transportation to crutch over, had to take taxis to work 4-5 times a week, often both ways. No taxi company in sf will reliably come, even if you make it clear that you are going to take a cab at least 4 days a week for most of the next year. Instead, even when you are in the middle of the mission in a relatively dense location and going to soma, dispatch simply lies and says "10 to 15 minutes". A 95% wait time was 3 hours, and a 85% time was 1 hour 15 minutes, for what should be an approximately 15 minute drive. Even simple requests like calling a couple minutes before the taxi arrives so I could get down 2 flights of stairs on crutches without detaining the driver or having the driver leave couldn't be followed. Needless to say, this causes significant disruption to your life when you have to leave 90 minutes plus the length of the drive before going somewhere if you want to have any hope of reliably getting there on time. And god forbid you have to see your surgeon or something else with a hard deadline. The taxi services should be ashamed of themselves, and frankly participated in a violation of my civil rights as done by a quasi-governmental monopoly. And there are other issues: when I would occasionally have to pay with a card, the meter would suddenly be broken until you made it clear drivers had two choices: call the card in or not get paid. A fucking miracle would occur, and the card reader would start working. The taxi system literally shat on their customers.
The advantage of uber is simple: when requested, they either come, or say they won't. That allows you to be an adult and either make alternative arrangements or tell the other party you'll be late. I used uber even when they cost 2x as much as a cab just for this reason.
In conclusion, fuck taxis. Also, fuck sf. Only in sf is "a taxi that comes" a disruptive service.
To me requiring a special kind of driver's license to transport passengers makes a fair amount of sense iff it's reasonably easy to get.
Uber doesn't require that for UberX, which is the main point of conflict in many of the trials Uber lost over here.
Class A license - certified to drive tractor-trailer trucks.
Class B license - certification to drive non-tractor trailer multi-axle vehicles; kind of an amorphous collection, but think buses, large commercial panel trucks, dump-trucks, highway plow trucks, etc.
Class C license - any kind of normal passenger automobile.
What I find interesting about Uber, and the backlash against it, is that it is largely just a scaling of under-the-table, unregulated behavior people have always indulged in. What, really, is the difference between calling up your circle of friends and acquaintances, asking for a lift somewhere, and throwing them some cash for gas money and their time, versus using Uber? They are evil because they enable you to search a wider network then just your personal circle? Or because they take a cut for providing a reliable, safe, centralized payment service? Or because they have enabled a market that competes with a rent-capturing incumbent, and the product they provide is cheaper, more convenient, and higher quality?
With that said, I have to nitpick a few things:
1) This is a problem in many U.S. cities besides SF.
2) Uber has also shown a bizarre reluctance to deal with advance, regular booking. One employee even insisted that it would be anathema to Uber and against everything they stand for. Even though it would a) be trivial to implement, b) let them know of hails sooner, and c) give them greater knowledge of request patterns.
No, not making this up: https://www.quora.com/Why-doesnt-Uber-allow-customers-to-pre...
By law, I still have to use a taxi when returning from the airport here in Seattle (as opposed to Uber). I have had perhaps 2-3 positive experiences, some neutral ones, and many bad experiences with rude taxi drivers on their phones who drove erratically and tried to scam me with overlong routes.
And up until Uber and others arrived, they would either try to make me feel like shit for paying with a card, lie to me about it not working, or they would use carbon paper card readers circa 1985. Uber forced them to modernize in that respect, at least.
In my experience in a number of US cities, these apps get terrible reviews in the App Store/Google Play because they're borderline unusable. They often don't have all the features of Uber and Lyft, like letting you track the cab while it's on its way to you or even handling payment through the app, and they're often poorly designed and even prone to crashing.
My guess is that cab companies want an app that will feed into their existing dispatch workflow, with the limitations that entails. They probably also have no experience picking IT vendors, negotiating with them or evaluating apps.
Also, lots of local cab company owners and medallion holders are probably skeptical that they can compete or profitably do business with a worldwide, hypercompetitive billion-dollar taxi company. It's not easy running a local discount store when Walmart opens across town, but it's not necessarily any easier for a small supplier trying to sell through Walmart.
Looks like an opening for some very profitable startup :)
So the incentive isn't only the app, its also prices. There is a lot of lobbying being done here on the part of Uber and the cab companies have already staged a few demonstrations. Will be interesting to see how this plays out.
Cabbies are there for the cash and their attitude and style reflect that. Cab rides are typically reckless, the drivers rude, and the cars uncomfortable.
Of course, these are sweeping generalizations, so take it with a grain of salt.
Regardless, the game changer is the experience from app to to destination. Not just the app.
The cab system is an entrenched monopoly with a lot of inefficiencies and people stealing value along the way.
Being able to lie on the phone and say "the cab is 15 minutes away!" when it's going to be half an hour is a feature, not a bug - for the industry. It's the equivalent of asking reform from the music industry or Hollywood - not going to happen.
[1] http://flywheel.com/
On the other hand, people face investment risk all the time, i.e. when franchising a restaurant. When Chipotle or whoever comes in and devours the fast food market, I wonder if the local struggling burger franchisee asks the city for help?
I can't speak on behalf of other cities, but anyone who has lived in SF pre-Uber has no shortage of nightmare stories from taking cabs. For people who had to wait years and pay enormous costs for their medallions, many taxi drivers acted smug, entitled, rude, and sometimes even downright shady. I know you can't say this about _every_ taxi driver, but there's no doubt that the current ecosystem treats the consumer many orders of magnitude better.
From the MTA site: By capping the sale price of medallions, the MTA insulates medallion holders from market fluctuations, either up or down. When drivers want to resell, the price is what they paid, minus a 5 percent transfer fee. The agency said it is unlikely to cut the price. For those cabbies who paid nearly nothing for their medallions, the new sales system is an even better deal; they receive $200,000 when they surrender it for resale."
I'd argue they did pay for them, they worked for below-average wages for 10 years in the hopes of a payoff. Long-term drivers tend to see getting a medallion as a retirement plan.
Since cab drivers are bidding against each other for a medallion-car, if they bid more to get a car that shift/day/week, they earn less.
If, after 10 years of driving a cab, one could get a $250k wind-fall, one would be willing to earn less during those 10 years than if the wind-fall did not exist.
I imagine the waitlist was 10 years not because medallions were cheap, but because there wasn't enough of them issued to satisfy the demand.
Notably, this is illegal by federal law for auto manufacturers and other franchisors: if you promise a 25-mile exclusivity radius and get a franchisee to build a dealership, you cannot renege on that without being liable for damages. Interestingly, it's auto manufacturers who lobbied for these laws, wanting to kickstart a dealership ecosystem and knowing that franchisees would not invest money in building and marketing dealerships if they did not have suitable protections. Taxi drivers are a form of franchisee, and they are asking for similar protections.
One possible solution is for the city to buy back all the extant medallions at some fixed price, do away with the system, and finance the purchase with an excise tax on all types of transportation going forward, whether rideshares, taxis, etc. You can imagine how Uber feels about that, and how they can mobilize their vast PR capabilities against such a concept.
While local governments are arguably failing to require newer livery services like Uber and Lyft to meet e.g. higher insurance requirements, they are not reneging on the medallion promise, which still gives holders the exclusive right to pick up street hails. That right is still enforced, and the Uber/Lyfts of the world are not infringing on it. The situation is much closer to "street hail pickup rights aren't valuable anymore" than "governments enable encroachment on the right to pick up street hails".
And before you dismiss "arranged hire" (livery) vs "street hail" as a technicality, there are very good reasons to put a cap on the latter but not the former (and otherwise subject the latter to harsher regulation):
- By necessity, street hails require clogging of "Schelling points" where drivers can expect to get line-of-sight to a potential fare, and vice versa. That doesn't happen with livery, where they go only where requested, not significantly different from a private car.
- Street hails create a risk of fighting over fairs, livery doesn't.
- Street hails enable you to pressure naive passersby/tourists to take your rate, livery requires you to ask for the fare from a central service.
- Medallion holders get use of the scarce privileges to use taxi stands and bus-only lanes, livery doesn't.
- Livery creates a central, auditable record of the event, while street hails can rip you off without showing up on an audit.
To be sure, Uber/Lyft are flouting even some of the requirements of livery services ... but the medallion case looks more like "street hails are becoming obsolete in the information age, so of course they'll lose value".
I don't want to live in a society where government regulation leads to financial disaster for individuals, and the society and government response is "tough luck".
For example, if I pay for rights to drill for oil somewhere and oil becomes obsolete, should I be reimbursed by my competitors?
The upside potential of one of these medallions was unlimited. After buying it once, you could use it to make an unbounded amount of money. Part of that is accepting the risk that it might make no money. Otherwise you're asking the rest of society to subsidize a private interest.
Therefore, it is well known that both a) regular property and b) medallions can lose value from either 1) governments not enforcing exclusivity or 2) legal alternatives becoming better. Governments never made any promise (either for property or medallions) that thy wouldn't lose value from 2). (To extend the analogy further to the car dealership case, the manufacturer makes no promises about eg Chevy demand falling because public transit gets better.)
To be sure, it certainly does suck when you put all your net worth in one asset and it loses value, but it does not thereby follow that your rights were violated or that a promise was broken. Nor does it necessarily make sense for the government to spread out the losses from this, because, well, why stop there? Why not socialize the losses from tepid real estate markets for leveraged homeowners, or for leveraged investors in local industries when their foreign counterparts get better?
There isn't a lot you can do about limiting investment downside risk beyond preventing people from having too much net worth in any one thing ... which maybe they should have done for medallions (or should start doing for homes, for that matter).
I cannot live in a society where profits get concentrated when things go well and losses get spread around when things don't, because that is not a sustainable society.
You can't make a contract with a legislature. Exchanging anything of value for changes to the law is literally illegal. Imagine what would happen if you could bribe Congress to pass some corrupt legislation granting you untold powers and the next Congress was prohibited from undoing it. The only thing that binds Congress is the constitution.
Obviously that leaves you in a tough spot if you have to rely on the state of the law, but legislatures know that. If they make huge unexpected changes to the law it tends to have a negative effect on the markets, so they try to avoid doing that, and people then rely on them trying to avoid doing that. But sometimes they have to, or sometimes they do it when they don't have to, and you take your lumps (or vote the bums out).
I found quite a bit of irony in this quote, The taxi industry has historically been very corrupt. Bribes to city officials to artificially keep the prices for medallions going up (not adding new ones) and to prevent competition are common. I do feel bad for this driver but at some point if you're paying $250k for a chunk of metal you have to stop and think that what you're really paying for is a monopoly in performing a specific action I.E picking up passengers that hail you and this is not a guarantee that that business continue to be worth what it was.
For every poor hardworking cab driver who has taken a mortgage out to buy a medallion, there are a dozen sleazy operators who own piles of them, do not drive, and have leased them out to cabbies at horrific rates.
How is that sleazy? If cabbies are willing to pay then it sounds like the market is working.
Full article: (heavily discussed on HN a couple weeks ago) http://www.bloomberg.com/features/2015-taxi-medallion-king/
Sleazy business operators are those who take advantage of employees, who do things like allocate risk from the highest earners to the lowest. In taxis, this is commonly done by charging a fixed rate for a limited asset (medallion/cab) used in a highly variable business. Individual drivers then carry the risk rather than the millionaire. Legal, but sleazy.
He is better off forgetting the medallion and finding work somewhere else to repay the loan. He should be able to make a few dollars renting the medallion in the meantime.
As for the government stepping in - live by the fake government market, die by the fake government market. I have no sympathy for people who build businesses behind government firewalls or with government subsidies, and suffer when those rules change. Because plenty of legitimate businesses have engine to the wall when the government arbitrarily creates regulations where previously there were none.
I just don't understand why this guy doesn't start getting uber pickups - if that is the problem, just join them.
The government isn't a third party here. Compensating him isn't just handing him money for a bad investment. It's compensating him for the fact that SF scammed him out of a quarter million dollars.
The reason why the government should have to compensate here isn't because he lost money and pour him. It's because the government sold him a license and then devalued the license on purpose.
You could argue that the city never promised to prevent all sorts of transportation competition. And he took that risk knowing that, for example, people could take limos or whatever. But you at least have to have that debate. You can't just write it off as a bad investment. The government is the cause of his loss. Not the market.
>As for the government stepping in - live by the fake government market, die by the fake government market. I have no sympathy for people who build businesses behind government firewalls or with government subsidies, and suffer when those rules change.
You act like cabs were regulated for the cab drivers benefit, but that's not how or why they were regulated. They were regulated for the benefit of the city and the rides. The medallion system was the other side of a compromise between the city and the taxis. The city would regulate pricing and dictate key parts of their business model, but in exchange they would be protected from competition. It was a quid pro quo.
IF you think the medallions shouldn't have been sold in the first replace, why isn't just returning them for the price paid the best solution?
My point is that if you rely on the government to create your business, don't cry when the government takes it away.
In this case, I think it's key point out, the pain felt is due to economic regulation. Which was/is putting up barriers for entering and exiting the market. The government removed competition, it raised prices, and was generally bad (I.e. State santioned monoplies). When innovation, and change, eventually moved around those economic barriers it was bad for those protected by 'em.
I hope going forward any regulations are strictly safety and soundness related with taxi service. It'll save a lot of pain on all sides.
* If you've taken enough Econ, you'll know strictly and always are going "depend on ..."
The government might sometimes compensate people, but that would depend on many factors such as 1) To what extent the person was unable to avoid the risk, and to what extent they willingly bet on the price of the medallion, and 2) Whether the government did all in its power to keep policies predictable, given the unpredictable nature of technological change.
At 250k, buying them back would cost $450 million.
The city could tax the new cabbies on a percentage of each fare, while buying back medallions over the next few years.
A basic SWOT analysis would have made me hightail out out of the taxi business instead of taking on debt to spend $250k committing myself to it.
If he gets his $250k back less the processing fee that feels like justice to me. He shouldn't have to wait for a buyer to come up though - it should just automatically be an option now that not regulating Uber seems to have become policy.