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Comment by JorgeGT | Hacker News Reader

Before feeling bad for the man you see behind the wheel, take into account that in many cases it is not the individual taxi driver who took the loan; some companies and individuals used medallions as a mere financial product, buying them in bulk and renting them to drivers.

For actual numbers and graphs see this NYT article: https://www.washingtonpost.com/news/wonk/wp/2014/06/20/taxi-...

If you don't have time to read it, two important points:

- "In New York today, there are four drivers for every medallion, all but ensuring that an investor who owns one can find drivers to lease it 100 percent of the time."

- "The threat to medallion owners isn’t that they’ll lose passengers to these services. It’s that they’ll lose drivers — who have been aggressively courted by Uber. A taxi driver who doesn’t own a cab and medallion can earn comparable fares driving UberX passengers in his private car, without paying a lease fee."

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To expand, "fifty-eight percent of New York City’s cabs are owned by corporate entities such as Freidman’s. Just a third are owned by the people who drive them. As a result, most taxi drivers and Uber drivers find themselves in the same boat—working as independent contractors, logging brutal hours."

https://www.bloomberg.com/features/2015-taxi-medallion-king/

But they still have a union.

At that got them the same or worse deal than they would get with Uber, which doesn't have a union? That sounds like a great return on union membership fees.

At least in New York, it paid for lots of union leaders, administrators and interns.

Even better! We should unionize everyone and use the mandatory dues to pay for ever more bureaucrats/admins/interns, so that when we reach full-robot, everyone still has a job. :-)

Whose combined salaries barely scratch that of a CEO

The argument would be that the union's negotiations established a wage floor, and uber drivers get a freerider benefit. If uber's funding dried up, and they only paid drivers from what paasengers pay, they would have a lot more pressure to lower rates. Furthermore the union probably makes the wages sticky, rather than able to be lowered if competitors exit the market.

Though hailing cabs is inconvenient there probably is some socal utility to the medallion system beyond just rent seeking for the owners. For example the supply of cabs being steady at odd hours, and better compliance with ruling on serving all areas of a city.

Just a small point of disagreement: Often, in busy parts of NYC, hailing a cab is much more convenient that calling an Uber. Ubers often take awhile to get to you whereas a yellow cab can be hailed within a few seconds.

I am interested in the question you pose though - about the social utility of the medallion system. Perhaps there's some benefit in keeping the number of cabs limited in order to keep the roads emptier and thus more usable?

If a yellow cab can be hailed within a few seconds, it sounds like there are enough cabs to serve the market.

Would more cabs only lower the utilization rate and thus earnings?

>If a yellow cab can be hailed within a few seconds, it sounds like there are enough cabs to serve the market.

That's only true of certain areas and certain times.

The New York Taxi Workers Alliance is a non–profit that acts on behalf of drivers, but is not a union in the traditional sense. There is no "contract" between drivers and owners for example, there is no defined collective bargaining unit.

What amazes me from this Washington Post article is prices were still rising in a steep incline many years past Ubers launch in 2009. You would think 4 years later it was clear for enough people where the market was going, yet medallions doubled in price during this period (almost tripled by 2015).

Maybe that effect was more due to really low interest rates?

I was thinking the same thing but just because people get cheap money doesn't mean you throw it at anything. It still becomes an exercise of analysis and looking to maximise returns. In which case I'm still at 'WTF'

Right! So obviously, perhaps after some bankruptcies, new medallion owners will lease them at prices which are attractive to Uber drivers. And Uber will have more competition.

It'd be nice, but unlikely. They'll probably be snatched up by other companies buying them at a loss. Even if they drop, it probably won't be low enough for individuals to afford.

Then eventually they'll just go out of business. That's how it works. It won't matter what you think the medallion is worth if market prices determine its worth something else.

Considering Uber's financials, it's a good question who risks to get out of business faster.

So the eventual result might be huge gains for new medallion owners ;)

This is true. Although, Uber won't be the last taxi company.

To put it another way, if you think medallions are worth X but their market price is only Y (Y < X) then you should buy them for Y+1. If markets have significantly discounted their true price you'll make a windfall.

Only if Y+1 is likely to turn into X faster than Y+1 earns a normal economic rate of return plus a premium for the added risk.

Opportunity cost, the time value of money, and the price of dealing with risk conspire to make a lot of schemes that look good on paper not really worth it.

I wasn't arguing that drivers could afford them. Just that lease prices for drivers would drop.

They don't have to afford them outright. There could be external financing. It's like how the vast majority of people can't buy a home or car outright but can get a loan to do so. In this case if the price of the item is low enough, the value of the medallion itself would be the collateral.

This would be a good time to increase the number of them.

Odds are decent the majority are held by companies, these things were selling for multiple times what the drivers paid for the cars themselves.

At least in Chicago this is true, there's this data in the article: https://img.washingtonpost.com/blogs/wonkblog/files/2014/06/...

Why would you feel bad for a man selling you bad and overpriced service and demanding a weird monopoly on it anyway?

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