The Taxi Business & Working for Sellers & Buyers

I am writing this from 30,000 feet on my way to San Francisco.

I have a great car service which I use every week when I travel.  This morning, I ended up having a long conversation with Reda, one of my regular drivers, about Uber and how it’s shaking up the taxi and car service business.

For some reason, I’ve always loved talking to taxi drivers about how the business operates.  It’s a fascinating and often surprising lanscape, consisting of regulators (the city), fleet operators, vendors (for example VeriFone, CMT, and now new entrants like Square and to some extent, Uber), drivers — who are sometimes employees of fleets and sometimes independent entrepreneurs, customers of various stripes, etc.

I think the reason I’m fascinated by taxis is two-fold: 1) it’s a hugely important part of the fabric of cities.  Ubiquitous, reliable cars for hire are a big part of what make dense, urban living possible.  While some urbanists and environmentalists may dislike taxis in favor of other forms of public transit, I have always been a huge fan of taxis as a part of the public transit (i.e., non-private car) ecosystem, for how usable they make the city.  Taxis use can also show us a lot about how our cities work. And 2) taxis have always been a big part of the american dream.  For some reason (and I’m not exactly sure what that is), driving a taxi provides a certain path to employment, and often times to entrepreneurship — maybe in reality this is on par with other careers, and perhaps it’s just a more visible one, I’m not sure.

My dad drove a NYC taxi in the 1970s, and I’ve always been proud of that. My wife’s grandfather represented cab companies in Boston through his whole career as a lawyer and has endless tales of drama from that experience.

So anyway, I think taxis are fascinating, and the industry has seen a lot of change in recent years.  When NYC introduced (mandatory) pay-by-credit-card a few years ago, along w/ GPS tracking I had lots of conversations about how drivers felt about that (initial displeasure w/ both the cards and GPS – but ultimately appreciation for pay-by-card as tips skyrocketed).  When NYC introduced new medallions for hybrid cars, I asked a lot of questions about that.

All of these changes have raised questions about power, control, and opportunity in the industry.  For example, in Boston, the payment processors in taxis take 6% of every transaction — there is some speculation that this fee is artificially high due to coordination among the operators, city and the vendors. By contrast, Square takes 2.7% (plus some flat fees, I think), and many of the livery services use that.  Uber takes a 20% cut, which includes a tip for the driver.

Uber has shaken things up the most, as it blurs the line between “street hails”  &  metered rides (typically the purview of medallioned taxis) and dispatched pickups / fixed-price rides (typically the purview of car services / limos).  Uber also shakes up the role of car service dispatchers, which has traditionally been very local.  If you haven’t been following, the entrance of Uber into American cities has caused a major stir, triggering legislative battles and lawsuits in DC, Boston, NYC, and most recently, in Chicago.  In nearly every case so far, Uber has prevailed — often times enlisting their passionate userbase to come to their defense.  But it’s still the case that Uber operates in a legal gray area, that tests our assumptions and beliefs about the value and necessity of regulation.

Not surprisingly, the tech community is solidly behind Uber in this effort.  When the DC City Council introduces an amendment specifically targeting Uber, TechCrunch (in what seems to be an unusual act of advocacy) prompted readers (worldwide) to contact DC council members. Epic internet investor Paul Graham recently tweeted (with 850 retweets and 250 favorites):


David Alpert, proprietor of Greater Greater Washington, former Googler, and urban & transportation policy wonk, wrote up a great piece  outlining the clash of philosophies at work here, calling it a tension between the “permission model” (regulation and permission to operate in a certain way up front) and the “innovation model” (freedom to operate up front until you cause harm).  His post, in my opinion, totally nails it: if companies like Uber can offer a service that customers and drivers want, and that uses competition to improve the industry overall, then we should encourage that.  Though he points out an important wrinkle:

taxis are a regulated industry today. An innovation model might be better, but most taxis don’t operate on one. It is indeed unfair to put a lot of regulations on one group of businesses in a space (the traditional taxis) and none on others (Uber).

That is a fascinating and somewhat hard problem, at least in the short term.

So anyway, all that is to say: it’s clear that Uber (and similar innovations) are better for customers (more reliable, more convenient service), and that they are threatening to regulators (loss of control / medallion revenue) and to incumbent dispatchers (routing around them).  My big question is still how drivers feel about it.

So this morning, I asked Reda how he felt about Uber — and in particular, how he thinks drivers like it.  His response was that he doesn’t personally use it (he has plenty of business as it is), but his brother (also a driver with his company) uses it and likes it a lot.  And that, in general, he feels like the regulators, fleet owners, and monopoly payment providers are generally involved in a coordinated scam to pad their pockets.  If this is the case (and it’s been supported by other drivers)

My feeling, on the whole, is that we should support solutions that benefit two primary groups: producers and consumers, and get out of the business of protecting the intermediaries of the past.  In the case of Uber, if it works for drivers and it works for riders, great.  Of course, I — like other folks working in tech — are on the side of the intermediaries of the future (internet companies).  But I would of course support a future that was even more disintermediated, open and efficient (for more on this, see Eben Moglen’s great talk on Innovation Under Austerity).

But to make this approach, it’s critical that networks — the intermediaries of the future — take steps to distribute the value they create throughout the community (not just at the center), in order to create long-term, sustainable ecosystems (for instance, the way Etsy has established itself as a B Corporation).  That’s why I’m particularly interested in how the producers — in this case taxi drivers themselves — see the emergence of these new platforms, and why I’ll keep on asking them.

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