Neelie Kroes responds to taxi protests in Europe
ec.europa.eu
ec.europa.eu
Uber and the other apps provide the same service - you get a car to transport you from A to B and you pay for the service proportional with the distance and time you sit in that car.
The essential difference between Uber and the other apps is that Uber uses unlicensed drivers, while the other apps use licensed drivers. This creates a big handicap for the regulated taxis. Uber skirts around the law to avoid regulation, and the difference in cost of operation enables them to "win".
The playing field is simply not fair and not equal to all players. Either we start regulating Uber drivers as equal to other taxi service providers, requiring expensive licences, or we eliminate regulation for all drivers.
Let's not make a technological poster child out of Uber's skirting of laws.
So why aren't the Tax drivers protesting against the regulation? Their decision to protest tells you where they see more benefit.
You may keep on saying that this is not about their stance against digital innovation, but the fact is that its all about economics.
Taxi cabs in most major cities run on a Medallion system, its an artificial limit on the number of cabs that can exist in the city(sometimes done because of lobbying by the existing cab owners, sometimes to reduce the number of cabs in the city). This restriction causes the price of Medallion to be artificially higher than it should be. For instance in NYC, Medallions are now sold for upto $1 million. http://www.nytimes.com/2013/11/15/nyregion/1-million-medalli...
Why do people pay $1 million to own a cab? Because this is the aggregated value they estimate to be, based on the number of years they will operate the cab for(and the profit they will make from it). This is precisely why most cab owners in the NYC are immigrants who can barely speak English, because only they have the savings to own and operate a cab.
Imagine you having spent $1 million to acquire a cab medallion, would you support any measure to increase the number of cabs in the city? Nope! That's precisely why all measures against increasing this number is heavily resisted by the cab owners. The value of their capital asset goes down if the number of cabs goes up in the city. You'd think that they would be ok with bringing Uber under the same medallion system but that position would be completely contradictory to their economic interest. They have, in past resisted increase in number of medallions, so that makes no sense for them to even remotely support bringing Uber under the same licensing system.
This is also the reason why the slave owners of the south resisted abolition of slavery. A slave stops being a 'labor' input in your profit and loss calculation, and becomes a capital asset. Its value is derived from the total earnings anticipated to be made in the lifetime of the slave. Consider it like this, if you are a programmer who can make $100K a year, and has a working life of 20 years, then a slave owner would be willing to pay you upto $100K*20 = $20M to posses you, of course he wouldn't wanna pay $20M, because then he would make no profit, plus there is a risk potential involved, running away or death, so like $10M. Now if a slave owner pays $10M to acquire you then there is no way he would wanna set you free until he at least recuperates that cost.
The medallion program in NYC was recently expanded with the introduction of green cabs that are official NYC cabs that service outer boroughs. The Bloomberg administration fought a court battle over the medallion expansion and won. Medallion systems are not inherently bad, but they can be used as a way to stifle better service (just like anything).
> Why do people pay $1 million to own a cab? Because this is the aggregated value they estimate to be, based on the number of years they will operate the cab for(and the profit they will make from it). This is precisely why most cab owners in the NYC are immigrants who can barely speak English, because only they have the savings to own and operate a cab.
Prior to the medallion expansion, most medallions were actually owned by firms and not individual cabbies. The reason why most cabbies are immigrants is not because they are loaded and can buy a million dollars of value outright. Also, most cabbies do speak English to some capacity.
> Imagine you having spent $1 million to acquire a cab medallion, would you support any measure to increase the number of cabs in the city? Nope! That's precisely why all measures against increasing this number is heavily resisted by the cab owners.
This is true, firms worried about value loss of their medallions when more would be issued. However, it is important that cab MEDALLION HOLDERS, not cabbies, were most opposed to the change as they had the most to lose. In NYC, cabbies were also opposed, but mostly because they worried the terms of their medallion access would get worse and leave them poorer.
> You'd think that they would be ok with bringing Uber under the same medallion system but that position would be completely contradictory to their economic interest. They have, in past resisted increase in number of medallions, so that makes no sense for them to even remotely support bringing Uber under the same licensing system.
In the case of NYC, Uber would most certainly want to avoid being a part of the medallion system as that would effectively regulate their business and drivers. Uber seeks to avoid regulation while providing private cab service, not to be integrated into regulated cab systems.
> This is also the reason why the slave owners of the south resisted abolition of slavery. A slave stops being a 'labor' input in your profit and loss calculation, and becomes a capital asset. Its value is derived from the total earnings anticipated to be made in the lifetime of the slave. Consider it like this, if you are a programmer who can make $100K a year, and has a working life of 20 years, then a slave owner would be willing to pay you upto $100K*20 = $20M to posses you, of course he wouldn't wanna pay $20M, because then he would make no profit, plus there is a risk potential involved, running away or death, so like $10M. Now if a slave owner pays $10M to acquire you then there is no way he would wanna set you free until he at least recuperates that cost.
Please don't reduce people who were slaves to value objects, this is extremely problematic and dehumanizing.
I KNEW IT, someone was going to not understand what was written and start objecting to how it was written.
You do understand that I am trying to describe that people are treated like objects under slavery. How do you describe something bad by not describing it like how it is?
A fit analogy - replace "Uber" in your retoric with "low cost airline", and see how happy would you be to fly an airline unregulated by FAA.
The same crowd here, that roots for Uber, screams for net neutrality and want to have the ISPs regulated as common carriers. The cognitive dissonance astounds me.
I find it extremely hard to believe that an immigrant with $1 million in savings (which practically makes someone rich in most parts of the world) would move to NYC and then decide to become a cab driver.
a) It takes $1 million to own a cab medallion http://www.nytimes.com/2013/11/15/nyregion/1-million-medalli...
b) 82% of NYC Cab drivers are foreign born(and that will be your experience in the city). http://usatoday30.usatoday.com/travel/news/2004-07-07-nyc-ca...
So you tell me, how do these immigrants end up being the Cab drivers with such a high barrier to entry?
The problem is that taxis were given a monopoly on metering by time and distance (largely, minicabs are supposed to pre quote, not sure how Uber gets around this), and a monopoly on street hailing. Smartphones make stret hailing much less advantagous.
As to the remarks in the article about entrepreneurialism, taxi drivers are mostly pretty entrepreneurial. The medallion system that run in US cities and some others keeps drivers from operating as freely as they might, so drivers usually need to work for a medallion holder, and it is the medallion holders who are reaping economic rents, not the drivers. And it is precisely these economic rents that Uber hopes to capture; it is not aimed at benefiting the public or the drivers.
Contrary to the medallion system, London has no restriction on the number of taxis allowed to operate. In London, many "black cab" drivers are freelance and own their own vehicle, etc. Very entrepreneurial. They get fares by being the only ones allowed to pick passengers up on the street, and so-called "taxi ranks" but can also use the usual phones, etc. They can also use traffic lanes that are normally restricted to buses, which are less congested. In exchange for these privileges, they have to drive vehicles that are wheelchair accessible, have higher requirements of safety than ordinary passenger vehicles, and must pass more stringent road worthiness tests than required of non-black cabs and private vehicles. They are also restricted in what they can charge, as shown on their meter.
The cars using Uber have none of these restrictions and with the advent of the app, being allowed to collect passengers from the street is no longer such an advantage for black cab drivers, depriving them of fares and income, while proving a lower quality service to passengers on average.
In the end, I imagine that Uber will have to accede to local regulations, at which point their ability to make money becomes more similar to what exists currently, i.e. not such a big deal after all.
Not about innovation per se, but about recognizing that even with all that internet stuff added, Uber basically still runs a taxi service, just like listening to an audio broadcast over the internet is still radio. Uber is not about "sharing rides", it's a regular business.
The essential difference between Uber and the other apps is that Uber uses unlicensed drivers, while the other apps use licensed drivers.
Taxi companies in Germany need two kinds of licenses:
* Each driver must have a drivers license that allows commercial transportation of passengers. The regular drivers license doesn't cover transporting people for profit. If you do it anyways, you're essentially driving without a license, which voids your car insurance. Apparently, passengers don't even have to pay unlicensed drivers, because the license is required for transportation contracts to be valid. According to Wikipedia, the commercial license costs about EUR 400 for 5 years and requires a medical checkup, clean driving and criminal records, and you have to prove your knowledge of the place you're going to drive at. "Uber Black" drivers have such a commercial license. "Uber Pop" drivers don't, they just need a clean criminal record. So they are probably not insured if they drive for profit.
* Each taxi company needs a concession that grants the right to run a taxi service, but also requires the company to fulfill its public role: operate the service day and night, don't decline any passengers (e.g. in order to wait for more profitable destinations), and take the official rate. Yes, prices are regulated, probably to protect both passengers and drivers. To get a concession, you have to prove that you are able to run a taxi / rental car company according to the law, and pay a small fee for each of your cars. It's not expensive, but the number of concessions in each city is limited, which is why there's a "black market" in some places. You can't sell concessions, but you can offer willing drivers a shortcut around the waiting list by selling them shares of your company [1].
Uber doesn't have a concession, they want to be a bit more flexible with regards to privileges and rights. Real markets are inefficient, and "disrupting" them can also mean that customers might be worse off in the future. For instance, when no real taxis are left, and Uber decides that its service should be more expensive in bad weather... [2] Or when Uber doesn't want to pick you up because of your bad rating, but there is no other way for you to get home.
[1] http://www.derwesten.de/politik/so-funktioniert-der-betrug-i...
[2] http://www.theverge.com/2013/12/18/5221428/uber-surge-pricin...
"More generally, the job of the law is not to lie to you and tell you that everything will always be comfortable or that tomorrow will be the same as today."
That's possibly the single biggest unstated divide in modern western society, where a significant proportion of the population do think they can legislate complete stability for themselves into existence, and that's one of the first times I've ever seen it so bluntly shot down. A lot of people just want the quiet easy life, and get ferociously angry when they perceive someone else as rocking their boat.
Disrupting markets may be sexy, but you always have to think of the consequences.
I was discussing the idea with a friend about buying a company in order to grab their customer base, which he thought was a fantastic idea until I pointed out that it utterly fucks over the employees of that company. Sure, if his company was good enough, he'd win eventually, but you can coexist and do things in a way that aren't utterly vicious and unethical.
There's a middle way, which is allowing evolution but in an ethical, considerate manner.
This isn't Uber's CEO being evil, it's simply that they found new efficiencies to squeeze out enabled with newer technology.
I'm saying that utterly free markets mean that many people are left behind and suffer, because it takes time to adapt and re-train (and often people are too old to do this).
So, we should facilitate evolution in such a way that accommodates human beings.
Perhaps if we replaced the cars with driverless people and the farmers with automated farms, these people should not have to work, because the work is done for them?
Except in this world, even if every part of our lives was automated, we'd still have to work for pittance (or even compete with the machines), because the machines would be owned by private entities.
This is the nature of exploitation - a job is seen as a gift, and the more we automate, the less jobs there are to do, and it becomes a race to the bottom. When things get automated, we don't allow the people who previously did those jobs rest, because everything has to be "earned".
Whilst technology is amazing and has led to unparalleled productivity and efficiency, the owners are the ones who have benefited massively disproportionately to humanity as a whole - any positives to everyone else are just a side-effect.
Farms are significantly automated, compared to a hundred years ago. And farmers continue to attempt to improve their own efficiency. Cabs are in a sense automated, it's just that the last big group made unemployed by a technological revolution at that point were horses. They just stopped moving forward after that.
Nothing prevented the cab drivers coming up with something like Uber themselves. If you prefer existing taxis to Uber then you're currently free to make that choice with your wallet - but that choice is exactly what protectionists want to take away from people. Ultimately protectionism becomes a giant hidden tax in society, and competing societies with less of it in the long term win.
They will go the way of the buggy-whip makers[0], as once happened when cars (that these taxi drivers now drive) replaced the horse-drawn carriages.
This isn't a mainstream economic viewpoint, and needs acres of citations.
I'd imagine the use of time sensitive tariffs to bankrupt competitors. Sort of like Starbucks saturating a city centre district, bankrupting local independent cafes, then closing down the extra branches.
I have never seen any evidence of this, though I would be interested in reading any material(s) you have supporting this position. The only successful long-term monopolies and oligopolies which keep prices high, or increase them, of which I can find examples are government-supported, either through regulation, subsidy, or protectionism.
Some companies manage to keep their position at the top of a market without government support, by constantly lowering their prices, or improving their product offerings (i.e. Amazon AWS, and Google search), but I would hesitate to call these monopolies, because a new entrant could disrupt them at any time, and these companies do not appear to be 'exploiting' a guaranteed market.
This is an unsupported statement of deep faith. To my mind, it fails along two different axes: I don't think that free markets are the best or even only way to prevent major booms and busts; and more importantly, I don't think that free markets actually even do prevent a substantial boom-bust cycle. In particular, the early capitalist period was made up of nothing but major boom-bust cycles until the markets were regulated, and the deregulation fad that started in the 80s and continues today has certainly seemed to contribute to the fluctuations in the economy.
That's not to say that protectionism is the answer either. But the unfettered free market is the opposite of a solution to our problems.
Actually, many people believe the opposite. Some even argue that high-frequency boom-bust cycles are beneficial, because the short duration of the bust makes it much easier to bear (everyone tries to get as much of the boom as they can, then suffer through the bust with minimal losses).
The previous post is not at odds with what you are saying, as one may "avoid catastrophic booms and busts" by ensuring smaller "high-frequency boom-bust cycles".
Honestly, the only fair way I can see to handle this kind of automation is Universal Basic Income.
Everyone seems to imply as if it is only Uber's CEO who is getting rich by taking away the taxi driver's livelihood, as if the CEO drives all the Uber vehicles himself!