Under Pressure from Uber, Taxi Medallion Prices Are Plummeting
nytimes.com
nytimes.com
Apart for selling the right to operate in a government sanctioned monopoly what service does this man provide? This looks like the worse example of rent seeking I have seen.
o A poorly tracked rider/driver interaction in which it's somewhat obscured which riders I road with in case I have a bad interaction and need to follow up.
o A poorly designed hailing system in which I need to physically see the taxi in order to request its service.
o A poorly designed (non existent?) tracking system, in which the taxi that I've requested may, in fact, be service another passenger, and have no intention of coming directly to me for the next 30 minutes. Or, never at all.
o Almost no feedback, and certainly no "default opt-in" feedback mechanism on the driver, providing no incentives for the drivers to behave professionally or courteously for every ride, resulting in frequent rude or abrasive customer/rider interaction.
Without the medallion, of course, he couldn't afford to provide those "non-services", and would therefore have to compete for business. The medallion is what allows him to provide such a horrible level of service - and, such poor service is frequently seen in most monopolistic markets. See Comcast.
* Price reliability: Prices in most taxi systems follow strict rules. Customers can use this knowledge to estimate what they will spend, and drivers what they can earn.
* Service dependability: Because medallions are limited and prices are regulated, taxi drivers can make a living, and the service does not boom/bust. This means customers are not gouged in good times and unable to find taxis in bad times.
* Non-discrimination: Taxis are usually required to respond to all hails, and to not refuse service because your ride is too short/long.
* Driver tracking: because a taxi driver must have a medallion and follow rules about posting information in/on their cabs, passengers can distinguish between 'taxis' and random people offering ride services. While there may be no built-in reputation system, there is incentive and recourse. How do passengers know if a non-taxi is a guy who makes his living from offering rides, or a guy who just stole a car and is going to rob them? A taxi driver is risking a lot by robbing his passenger.
Many of these points are matters of preference, or can be solved by technology (reputation). Do we, as a society, want to incentivize a stable transit system by limiting the number of drivers or by paying more than 'market' prices in slow periods, and more in busy periods? Do we want drivers to be able to refuse service? If not, how do we compensate drivers who make short/long trips that have low profitability and high opportunity costs?
Aparently, that's not true in the US - I've read about many times how white people hail cabs for their black friends, because cabs won't stop for black people.
The 3 times our friend in SF ordered a Uber, it never failed, even though one of these rides was shorter than the one we requested to Lombard St.
To me it's clear who is providing the non-discrimination service and who is not.
In reality this does happen. I've frequently been refused during 'feeding frenzies' at my local train station based on the fact that I'm not a tourist (and thus know the rules), my trip is too short, etc. In theory by rejecting a legitimate fare a cabbie is risking more than a scab would be risking (historically). Under an Uber/Lyft/etc system this problem is mitigated, probably even better than the medallion system.
Service dependability - I take cabs exclusively, and, while I can't comment on other markets, I have deep knowledge of the bay area taxis. First, it's important to note, that even when they are operating in "normal mode" - you can never, ever quickly get a taxi on the peninsula. Minimum time is always about 15-20 minutes, and frequently 30 minutes. Also, when it's busy, or late - forget it, you will not get a taxi. Compare this to Uber, that works hard to ensure you will always have a ride, regardless of time, level of busy. And yes, basic economics therefore suggests that in order to make that happen, you will have to vary the price. But, I would definitely like to have the choice of taking a more expensive ride, then no ride at all.
Non-Discrimination: You've got it backwards. Taxis discriminate all the time based on every conceivable factor. Uber doesn't even let the driver know where you are going, and the driver is committed to picking you up before he sees if you are young or old, black or white, male or female. About all they can discriminate on is how well you treat them (Drivers rate passengers).
Your Driver tracking thing is a long stretch. A better example would be, "Taxi Drivers in general have been doing their job for a while, there is little churn, so it's unlikely you will get one that will rob or rape you, (though it's not unheard of, particularly with drunk passengers.) as those drivers who do that are probably going to get fired, and it's less common to get new drivers with taxi services than with uber.
Of the 200 or so RideShares, the worst one I got was a Driver who had only been working for Lyft for a week, and used her cellphone to get GPS directions to the airport, and came to a hard stop at a stop sign. Every other one has been excellent, courteous, and clean safe cars. I have no end of horror stories of psychotic taxi drivers driving cars that sometimes wouldn't open from the inside.
But they do rate the passengers after they discover their destination, age, race and gender, so they could discriminate on that if they want to.
Don't Uber give you an estimation? I took a taxi a single time in my life, I can tell you, I had no idea how expensive it would be (and it was) and it took me multiple call and about 45 minutes before getting inside the taxi. I still have no idea how to estimate the price, I'm still not interested in taking a taxi after all that.
> * Service dependability: Because medallions are limited and prices are regulated, taxi drivers can make a living, and the service does not boom/bust. This means customers are not gouged in good times and unable to find taxis in bad times.
This is something that I never liked and I don't understands how people can be for that. What purpose does it make to have a unique price when you can't even get it at that price. I will sell you a new amazing smartphone for 1$, the best price of the world and I will never change it's price, but I only have 100 of them and I don't plan to make more. It's great for the one that get it but at the end of the day, if you really need it and you can't even get it, it's amazing price won't help.
> * Non-discrimination: Taxis are usually required to respond to all hails, and to not refuse service because your ride is too short/long.
I can't see how you can believe that.
> * Driver tracking: because a taxi driver must have a medallion and follow rules about posting information in/on their cabs, passengers can distinguish between 'taxis' and random people offering ride services. While there may be no built-in reputation system, there is incentive and recourse. How do passengers know if a non-taxi is a guy who makes his living from offering rides, or a guy who just stole a car and is going to rob them? A taxi driver is risking a lot by robbing his passenger.
That's depends of the service. If people require it, if it stop people from taking that service because they are afraid of it, then the offering will change.
With a monopoly it doesn't, it stay the same, it doesn't have to change, I still have no idea what's the price, I have no easy way to make sure I will really get one fast enough. I'm a potential market but they don't freaking care about me. At least, with competition the market can affect how it work, they have an impact on it. If we need more taxi during rush hour, it's possible, if we need less, it's possible, if we need more security, it's possible.
If there's still enough people interested in your monopoly taxi system, they will keep using your monopoly taxi system and it will survive but we both know it's not the case and currently it's subsidized by people who have no other option than taking that crappy service.
- I can get a cab even if my phone battery days (or if I don't have the phone)
- in theory, they can't say no (apparently, they sometimes do in NY, but haven't had that happen to me in London yet)
- they know the city, and don't need to be constantly looking at the GPS while driving.
- no surge pricing
Lyft and Uber both let me set my destination in the app and send that to the driver's phone, but regardless of service, these days I'll tend to tell the driver how to get there if it's a city I'm familiar with.
In Berlin there's a popular app called MyTaxi that's used by taxi drivers and end-users which builds all of that on top of the city's licensed cabs. (It exists in other cities as well, though I can't speak for it there.) You can order, pay, tip, estimate costs, see them approaching, review and make a call to your driver from within the app.
From that perspective I think it's just a missed opportunity to have built some of those features on top of existing taxi systems.
There's no incentive to implement that sort of innovation. The prices and number of cabs are both more-or-less set. The medallions are fairly well utilized and the revenues have a hard ceiling, so there's not enough incentive to scale up or introduce new business models.
I actually prefer taxis if I'm in Manhattan because it is about 10x faster to hail one of the many taxis rolling by than it is to wait and watch on your phone your Uber driver slowly make its way to you.
>A poorly designed (non existent?) tracking system, in which the taxi that I've requested may, in fact, be service another passenger, and have no intention of coming directly to me for the next 30 minutes. Or, never at all.
In New York, the cab's center lamp is lit up when vacant and available for hails.
>Almost no feedback, and certainly no "default opt-in" feedback mechanism on the driver, providing no incentives for the drivers to behave professionally or courteously for every ride, resulting in frequent rude or abrasive customer/rider interaction.
Tipping is the main incentive. Reporting of bad behavior goes through 311 (in New York). If you pay via credit card, the cab's medallion number is even on your receipt, so you don't have to remember it when you're in a huff leaving the cab.
I'm not saying the taxi cabs are the best system, but I want to quell misinformation.
Although yellow cabs in NYC are required to take you where you request, some will break this rule, or just do it begrudgingly. Same with taking a card, they will do it but make a big show and a stink about it. One even said I better give him a "big tip" for taking me to the airport.
Sounds great on paper, but these are abused. They'll leave them on accidentally or want to know where you're going before they let you in the cab. And that's saying nothing of bright, sunny days that render cab lights pointless.
> Reporting of bad behavior goes through 311 (in New York). If you pay via credit card, the cab's medallion number is even on your receipt, so you don't have to remember it when you're in a huff leaving the cab.
311 doesn't care about bad service. I get drivers ranting to themselves because they don't like my destination. It's also hard to snap a pic of a medallion when a cab refuses to pick up you up and drives off.
...that's to say, yes, there are answers, but there is room to innovate here and writing solutions into the legal code is a recipe for poor performance in several dimensions.
You can see all the middle-men in any business as useless if "XYZ" was better.
Now in the case of that guy in particular, he is just becoming obsolete, replaced by a better medallion system and a modern/leaner middleman: Uber. He disappears in the name of progress so there is nothing sad about that, but that does not mean he was never useful.
Also, I guess somebody will point out that if he wasn't adding flexibility to the medallion system, Government would have been forced to fix it. That's wishful thinking: there is nothing that the government could not provide but Uber does, despite that it does not move at all in that direction. Government is not pressured by the market like people and businesses, this guy is greasing the part where government policies meet people reality.
Did anybody read this? My understanding is that green taxi medallions started selling at around $5,000 when they were introduced, and green taxis are now fairly common in the outer boroughs. You also see them quite a bit in lower Manhattan as well (dropping off fares).
Also, did anybody look at that chart? Prices haven't been stable for the entire time span that the chart covers, and the current price isn't even the min for the data set.
Uber's been operating in New York since well before 2013. It just so happens that the (three month as indicated by the chart, mind you) decline coincided with a court decision that upheld a city policy that would put more cabs on the streets in areas of the city that are booming right now.
On top of that, I wonder if there are any other macroeconomic trends that might be affecting medallion prices and ridership overall. Mind you, if total taxi-like revenue for the last given period is R = T + U, where U is Uber's share of the revenue and T is the rest, and the next period's revenue is R' < R, then it's completely consistent to have T' < T and U' > U. In other words, total taxi-like revenue can be on the decline even as Uber's revenues are increasing. This could be because the Uber service is cheaper, or because people are overall using taxis less. Who knows if this is actually happening? I don't. But it'd be interesting to see the question raised and pursued, even to be quickly dismissed by some obvious fact.
Don't mistake this article for economic analysis. It's a puff piece.
"There was only one medallion sale in September, followed by nine in October"
This data doesn't really say anything. The remarkable thing here is that medallion values aren't dropping. This really is terrible reporting.
* = by "make sense" I mean it'd fit within the my cynical view of the media's "hysterically report on things to drum up interest" strategy.
That's an argument for gradually deflating housing prices, assuming they are overpriced. If people are running businesses and preparing for retirement with faulty price projections in mind, I don't see why others (people who don't own homes, mind you) should be forever penalized because the system is already stacked against them.
That's how much again? 30Million?
If you manage to go bankrupt with this kind of equity you're bad at business. Like, really bad.
The best investors know when it's a good time to go into a business, but also when it's time to disinvest. Looks like the time is now (or maybe, 6 months ago)
The best investors realise that there is always a possibility of that happening.
Exactly. Especially with things that are very dependent on legislation.
This is not a material asset, it's a license. Cities might one day legislate a medallion is not needed anymore, or increase their number, or change the rules in some way.
To reduce the price swings, cities need to create an auction system where they allow current owners of medallions to list their current medallions for sale. The auction system would provide price transparency, and allow all the stakeholders involved (medallion holders, buyers, and sellers) to get a clear picture of the market price at any given point.
Then this: https://www.google.com/webhp?sourceid=chrome-instant&ion=1&e...
Uber's PR agencies are Westbourne and FleishmanHillard: http://www.prweek.com/article/1295173/uber-bring-european-pr...
I would say they're breaking the law and should be indicted under RICO, personally.
The interesting thing is that I'm not sure what options they have at this point. Uber is spending hundreds of millions of VC money, which is a huge advantage over existing taxi companies that don't have this free money that allows them to operate at a massive loss. About the only thing I can think of is taxi companies from several cities across the U.S. have to merge together, and then partner with a smaller company that can raise the same 100M+ in financing and then create an uber competitor that can drive prices even lower. Basically it's a scorched earth policy on taxi fares driven by VC money, similar to the dot com days.
Other than that, I have no idea how the taxi industry will survive, unless they can somehow get uber regulated the same way they are.
In any case, 1 million is just, wow.
It's basically a government sanctioned monopoly. It doesn't even have the pretense of being about safety or anything like that.
But, the fact is that they do exist and were promoted by the municipal government (this is a municipal government system, isn't it?). Even if it was a bad idea, aren't they responsible for it? They sold or issued medallions on the grounds that they are a resellable perpetual license to run a taxi. If i'm not mistaken, the city made money selling them.
Unless you consider the whole "contract" void, I can think of only two logical perspective. Either the city is violating that contract by allowing uber to operate or uber is a new kind of service with no bearing on that contract. IE if segways had replaced cabs, tough luck #1 sounds prohibitively expensive to accept & #2 sounds dishonest.
There's an article on Cato about the issue, which focuses on the economic efficiency of the issue: http://www.cato.org/blog/should-taxi-medallion-owners-be-com...
Say a city decides to have a market in the park every Sunday. They issue resellable medallions for stalls, food carts, etc. A few years later, they cancel the market or the medallion system or otherwise make the medallions worthless.
With uber there is some ambiguity. Maybe uber aren't cabs. If some awesome new public transport system lowered demand for cabs the city wouldn't be responsible. Claiming that they aren't cabs is how/why uber get around the medallion system in the first place. Taxis and medallion issuers are challenging this in someplace.
In any case, I think there is a genuine question here. Even if medallions were wrong in the first place, issuing them was the wrong, not buying one. Buying a medallion is the only way to operate a cab. I don't understand the downvote-anger.
I think it's because they're being sloppy in the reading of your post and assuming "therefore Uber should be banned" somehow.
But netcan's point is exactly about this fight. You and downvoters seem to be assuming something that's not actually in the post.
They can feel free to fight over which of them owes the other
But Bob here is your local government! So the fight necessarily involves you and everyone else who lives in the area. That doesn't mean that Uber should be banned, nor did netcan say that.
Which is why I'm not a fan of contracts between A and B, when one of the terms is that A will take money from me and give it to B.