[stolio]

> Cataldo said if drivers are smoking, or offering rides in unkempt vehicles, consumers will decide if they want to hire them.

Remember this only works if there's an "arbitrarily large" number of other drivers competing for the same fare. As always, deregulation only works if the markets being deregulated can become healthy and stay that way long term.

[greggyb]

Uber has a pretty good track record of bringing in more and new drivers.

Given that personal automobiles are a large sunk cost that many people have incurred, being able to generate marginal income through ride-sharing seems like it needs a lot of active barriers to entry (like restrictive regulations favoring incumbent taxi services) to really limit the supply of drivers.

[stolio]

Personal automobiles are NOT a sunk cost. You can sell your car, the portion of the cost that is "sunk" is small.

It's really expensive to drive for a living, especially in a nice car. Obviously you can make a ton of money if your parents bought your car and pay for your repairs, if you're not paying for commercial insurance, and if your main competition faces strict regulations that you've cleverly sidestepped.

To this day Uber releases numbers that don't account for wear and tear on your car, anybody who's ever delivered pizzas will tell you that changes the economics of it drastically.[2]

There are also reasons not leave a public good like transportation in the hands of people looking to "generate marginal income".

But the real joke is Uber's brought in about $5 billion in funding in the past five years, their recent valuation came in at over $41 billion[0] and there's still this narrative of Uber being the little guy out there fighting big government. It's a real underdog story!

They're simultaneously taking on "6,300 companies operating 171,000 taxicabs. More than 80% of these companies operate less than 50 vehicles"[1] in America alone. Think about that, they're poised to put about 3,000 small business under in the coming years, but they're out there for the little guy. They're taking the market over and if they have their way it'll go from regulated oligopoly to unregulated oligopoly with them at the top. It's an absolutely huge power play, and like every rational business they're fighting for whatever monopoly power they can get:

> There’s not a lot of earth-shattering IP in the ride-sharing space, but Uber seems to be making a play to own it, having submitted 11 patents that cover every major aspect of its business model. If granted, it could find itself with a technical monopoly not only in ride-sharing but other businesses based on its processes, like general delivery (again, more reason for those rich investors to be excited, right?)[0]

Forgive my rant, Uber's marketing pisses me off. They're not some benign force trying to help people get luxury rides to the airport, they're a rational business making rational business decisions.

[0] - http://www.forbes.com/sites/jonathansalembaskin/2014/12/05/t... [1] - http://www.tlpa.org/about/taxicab.cfm [2] - http://www.washingtonpost.com/blogs/the-switch/wp/2015/01/22... bonus link: http://www.quora.com/How-much-does-an-Uber-driver-make-1

[greggyb]

Regarding sunk costs: in a strictly technical sense, you are correct, but in a practical evaluation a personal vehicle represents a large sunk cost for an individual. How do I justify this? People only sell their car to finance buying a new one. Individual car owners always have a large amount of their capital tied up in a vehicle, even though the specific vehicle will change over the course of years. For those (vast majority) of car owners who do not choose to eschew personal vehicle ownership, it is entirely accurate to consider a vehicle a sunk cost.

That being said, I don't really disagree with most of what you have to say, though I do disagree with your negativity.

It is expensive to drive for a living - so expensive, in fact, that it was not a living until monopoly pricing was forced by government regulation.

The excess capacity of vehicles owned for personal transportation is huge. I don't want to repeat myself, so I'll link to another thread discussing Uber (and friends) where I participated that makes my position very clear[0].

I do not view Uber as an underdog. I agree with you that they are a rational business pursuing their profit. I also believe that in pursuit of their profit they will provide a great amount of value to consumers, and to ride-sharers who can defray some portion of their cost of ownership of a personal vehicle. The point is not to make a living, but to defray costs. The historic trend of jitney services (a combination of ride-sharing and public transit in widespread practice before regulation - history in linked thread) was of a high turnover driver base, with many performing relatively few trips, and some few working "full time" for a short time frame. This is the model that Uber (along with its friends) improves upon.

While I do not debate the narrative you have presented as common about Uber (and friends), I have not made arguments that follow it. It is a valid point that does not apply to the discussion I have engaged in. I view as a net positive the dissolution of all 3000 firms you have referenced if Uber (and friends) can provide an analogous service more desirable to consumers and at a lower cost (I do not deny the transitional pain - note I said net positive, not absolute). We can certainly disagree on this point and have a discussion about the merits of industries being displaced and altered with technological and regulatory change, if that is what you'd like.

Even if Uber manages to acquire patent protection over every aspect of its business model and on the terms they have applied for those patents, this is still a superior situation to the stagnant monopoly pricing that has been enforced by medallion systems for nigh on a century. Patents will expire before another century has passed.

That being said, the fact that there are already multiple players in the market for ride-sharing apps indicates that the ideas are, while novel also rather obvious. I would be surprised if they managed to acquire patents that remove their competitors from the market completely.

I agree that Uber is not a benign force trying to help people get luxury rides to the airport. I also agree that they are a rational business making rational business decisions. The way I read the situation, though, is that they are eliminating significant deadweight loss that is a direct result of the status quo they are challenging. They are providing significant competition in an industry which has seen consumer-harming regulation for a century. Forgive me for not being upset that a company pursuing its own self interest is also doing good as a side-effect.

[0]https://news.ycombinator.com/item?id=8874249

[stolio]

> It is expensive to drive for a living - so expensive, in fact, that it was not a living until monopoly pricing was forced by government regulation.

This was done in exchange for stability in price, stability of service and other benefits i.e. we're getting something for our money.

> The excess capacity of vehicles owned for personal transportation is huge. I don't want to repeat myself, so I'll link to another thread discussing Uber (and friends) where I participated that makes my position very clear[0].

I glanced through it, I don't find the argument convincing.

> They are providing significant competition in an industry which has seen consumer-harming regulation for a century.

#1 Is it consumer-harming? #2 if it is, does it harm consumers more than it benefits society at large?

The medallion system has limited the number of cabs on the road which minimizes the pollution and congestion they cause, it also makes sure they pay their fair share for things like road repairs since they're using a public good for commercial use. Because the cars are generally awful shades of yellow or orange pedestrians, cyclists and other cars are safer as well. These are things that benefit society as a whole.

Believe it or not, many people like to know ahead of time how much a cab ride is going to cost so they can plan accordingly.

At the end of the day Uber is going to regulate the market using their market power to whatever extent they can. They simply aren't going to bring an efficient, competitive market place where everybody wins. You don't get valued at $40 billion when all you have are easily substituted assets (it's an app, a brand, and some logistic management software) unless you have a long term angle of somehow making massive profits which according to basic economics are assumed to be impossible in healthy markets.

[greggyb]

>> It is expensive to drive for a living - so expensive, in fact, that it was not a living until monopoly pricing was forced by government regulation.

> This was done in exchange for stability in price, stability of service and other benefits i.e. we're getting something for our money.

If you'd read the history in my linked post, it is clear that these were not salient issues and the regulation was pushed through by municipal carriers and private trolley operators who could not effectively compete in the market. The regulation was not desired by taxi/jitney operators nor requested/supported by the public.

While it is true that regulation can be a general benefit, it is often the case that it is supported, at least in part if not in full, by firms/industries desirous of legal protection and elimination of competition where they cannot effectively compete.

What "we" the consumers got was less regular service, areas that are typically avoided by cab drivers and thus underserved, legally enforced monopoly pricing, "and other benefits."

>> The excess capacity of vehicles owned for personal transportation is huge. I don't want to repeat myself, so I'll link to another thread discussing Uber (and friends) where I participated that makes my position very clear[0].

> I glanced through it, I don't find the argument convincing.

Let's be clear here, the point you are explicitly disagreeing with is that there is a large amount of excess capacity in the vehicles which are currently owned and operated for personal use. To disagree you must claim that there is not much excess capacity in these vehicles. To weakly support this position you would need to argue one of two things:

1) That vehicles owned and operated for personal use are in use for the vast majority of the day (i.e. they don't sit parked for more hours than they spend driving).

OR

2) That vehicles owned and operated for personal use are filled to seating capacity in the vast majority of the trips that they make (i.e. every time someone drives, they have more seats filled than empty).

To strongly support your position you'd have to argue both of the above. I am not trying to artificially box you into a corner, but I can truly think of no other arguments to support the premise that there is not a large amount of excess capacity in vehicles owned and operated for personal use.

>> They are providing significant competition in an industry which has seen consumer-harming regulation for a century.

> #1 Is it consumer-harming?

I argue yes for the simple fact that the supply is artificially constricted. Fares are higher than they would otherwise be and there are fewer suppliers of rides-for-hire, thus underserving geographic areas or limiting capacity at peak hours.

> The medallion system has limited the number of cabs on the road which minimizes the pollution and congestion they cause, it also makes sure they pay their fair share for things like road repairs since they're using a public good for commercial use.

I will not divert this into an argument as to the size or costs of these effects. If pollution, congestion, or fair-share-of-costs are concerns, then the appropriate way to address this is to address the actual concerns - use costs, congestion fees, gas taxes, or any other similar policies address these concerns while also providing revenue that could (in an ideal world) be used to pay directly back into road maintenance.

That being said, medallions are privately owned, and the rents accrue to the holders of the medallions. Thus one of your benefits, namely "makes sure that they pay their fair share for things...." is not even true. The medallion system does literally nothing but reduce the number of cabs and increases the fare.

> Because the cars are generally awful shades of yellow or orange pedestrians, cyclists and other cars are safer as well. These are things that benefit society as a whole.

Citation needed. Seriously. You are claiming that the color of a car impacts the rate of accidents they are involved in. Besides this being fairly absurd, you are conflating cab coloring with regulation of taxi services. If the color of cars providing a taxi service is of such public concern, then it would be much easier (and less costly) to require enhanced visibility modifications to such cars, for example reflective sections or only allowing yellow cabs (which are not even the norm in many areas - not everywhere with cabs is NYC). Why should we resort to a consumer harming medallion system to make sure cabs are garish? What should we do about the widespread black car industry of other cars for hire that have been around since long before Uber and compatriots?

> #2 if it is, does it harm consumers more than it benefits society at large?

> Believe it or not, many people like to know ahead of time how much a cab ride is going to cost so they can plan accordingly.

You can easily check the fare before the ride with the Uber app, so I'm not entirely sure about the argument here.

> At the end of the day Uber is going to regulate the market using their market power to whatever extent they can. They simply aren't going to bring an efficient, competitive market place where everybody wins.

They are not going to devote their efforts to doing so, this is correct. But the actions they are taking are moving the market in that direction anyway - for example in the parent article, it is leading to moves which will allow enhanced competition in the Portsmouth market. Even where taxi regulation change not a whit, UberX and similar (ride-sharing version, not taxi-dispatch version) will allow price competition against incumbent taxi services, and excess capacity at peak times and in underserved areas. Even if the price they can charge is restricted, the latter two benefits remain.

> You don't get valued at $40 billion when all you have are easily substituted assets (it's an app, a brand, and some logistic management software) unless you have a long term angle of somehow making massive profits which according to basic economics are assumed to be impossible in healthy markets.

Well, as covered extensively above, the market for taxi services is far from healthy, so there's a large immediate opportunity for Uber in soaking up the excess demand that current taxi services simply do not fill.

That being said, even if Uber and similar move the taxi service and ride sharing industries toward more health, there is a huge difference between economic profit (revenue > opportunity cost) and accounting profit (revenue > outlays). Consumer electronics are a good example - there are commodity parts and labor easily available, but there are many firms in this market with healthy profit margins and prices have been tumbling for consumers for decades.

I am not saying that Uber and similar are identical to consumer electronics, but there is obviously a significant network effect and first mover effect which contribute to the valuations we see.

I read your posts as seeming to assume that I am naively painting some panglossian image of Uber as the champion of the everyman, providing cheap and wonderful transport for all. This is not the view that I hold. If my understanding of your tone is incorrect, I apologize. I would like to engage only on the salient points of the issue. I have identified several I find important and supported them above. I will summarize below.

1) The current regulatory regime was implemented primarily for the benefit of incumbent and municipal public transit providers.

2) There is excess capacity and some level of sunk cost in vehicles owned and operated for personal transportation (they are not constantly utilized or filled to capacity, but a single owner bears significant fixed costs that are not adjusted for this fact).

3) Medallions artificially restrict the supply and raise the price of cab services, without significant benefit to consumers.

4) Uber and its competitors (whom you repeatedly do not acknowledge) are providing a service that is of objective value to consumers.

5) Uber and its competitors are, in so doing, providing competition at a level unseen for nigh on a century to the incumbent taxi service industry.

[stolio]

Fine.

> 1) The current regulatory regime was implemented primarily for the benefit of incumbent and municipal public transit providers.

Without buying into free-market libertarianism I don't see how to convince myself of this. Do companies try to purchase favorable regulation? Of course, it's exactly what Uber is doing right now. But I don't believe people go to engineering school for 4+ years, then work 5+ years for their PE licenses just so they can take kickbacks. Traffic systems and roads must be engineered, it's why they work, and at the end of the day limiting the number of cabs on the road seems like a pretty obvious thing to do.

> 2) There is excess capacity and some level of sunk cost in vehicles owned and operated for personal transportation (they are not constantly utilized or filled to capacity, but a single owner bears significant fixed costs that are not adjusted for this fact).

Sunk costs? No. You're making up a new definition of a well defined term. Excess capacity? 95% No. Lyft Line is the only place I've seen where that argument makes sense. Maybe Uber has a similar set-up, but when people are driving 20-80 hours a week that's just another 3,500 lbs of metal on the road. Cars don't depreciate that much while sitting in garages.

> 3) Medallions artificially restrict the supply and raise the price of cab services, without significant benefit to consumers.

Medallions are just part of a comprehensive regulatory system designed over many decades. They do decrease the number of cabs on the road. Every cab increases congestion, increases everybody's insurance rates, increases pollution, increases the risks faced by pedestrians, etc.

> 4) Uber and its competitors (whom you repeatedly do not acknowledge) are providing a service that is of objective value to consumers.

I never said they weren't. What, am I the Grinch trying to deprive people of value because I don't buy into Uber's PR?

> 5) Uber and its competitors are, in so doing, providing competition at a level unseen for nigh on a century to the incumbent taxi service industry.

I never said they weren't. It's useless to compare the long-term steady-state of the regulated cab industry to the brief period of competition that will occur if barriers to entry are removed. Of course that increases competition. In the short term. Then new barriers to entry are erected and the market concentrates again. The long term picture of "deregulation" is a probable Uber/Lyft duopoly that thanks to their size will likely have as much or more regulatory power than the current cab companies.

Investors don't believe this will be a long term competitive market, that's why Uber's valued at $40 billion. I don't believe it's going to be a long term competitive market, I think it has oligopoly written all over it. Uber certainly doesn't think it's going to be a long term competitive market, in fact it's probably one of their greatest fears. The only people who actually believe that Uber marks a return to free-market economics are the libertarians, and this I attribute to the genius of Uber.

edit: > Let's be clear here, the point you are explicitly disagreeing with is that there is a large amount of excess capacity in the vehicles which are currently owned and operated for personal use. To disagree you must claim that there is not much excess capacity in these vehicles. To weakly support this position you would need to argue one of two things:

> 1) That vehicles owned and operated for personal use are in use for the vast majority of the day (i.e. they don't sit parked for more hours than they spend driving).

> OR

> 2) That vehicles owned and operated for personal use are filled to seating capacity in the vast majority of the trips that they make (i.e. every time someone drives, they have more seats filled than empty).

> To strongly support your position you'd have to argue both of the above. I am not trying to artificially box you into a corner, but I can truly think of no other arguments to support the premise that there is not a large amount of excess capacity in vehicles owned and operated for personal use.*

I really have no idea why you're going on about this. Uber isn't a car-pooling service, it isn't car-sharing. It doesn't even solve this supposed problem of "excess capacity" because what's the average number of occupants in an Uber car on the road? I suspect it's less than 2. I'm not disagreeing with the argument so much as saying it's just too bizarre to disagree with.