No, Taxis Are Not Doomed, and Here’s Why
Last week, tech news sites were frothing at the mouth over some misconstrued details in a S.F. Examiner article about Yellow Cab filing for bankruptcy, which implied that Uber and Lyft may have have been a contributing factor.
This was cause enough for celebration as most tech writers were pleased as punch to declare Uber the victor in its prolonged battle against the dreaded taxi industry.
Here are some of the catchier headlines:
Forbes: Uber’s First Casualty? San Francisco’s Largest Taxi Company Filing For Bankruptcy
The Verge: Thanks to Uber, San Francisco’s largest yellow cab company is filing for bankruptcy
Quartz: The biggest taxi company in Uber’s hometown is on the verge of bankruptcy
Ars Technica: Uber, Lyft helped facilitate slow death of San Francisco’s largest taxi company
Gizmodo: Uber (and Lyft) Finally Bankrupted San Francisco’s Favorite Taxi Company
According to the actual story, however, Yellow Cab was hit with a multi-million dollar insurance settlement and, now that their coffers are emptied, they are filing for bankruptcy protection to keep their creditors at bay.
This is fairly standard business procedure. Not much to see here…
But the article also included a statement from Yellow Cab claiming they are not able to fill all their available shifts and they’re having a hard time retaining and recruiting good drivers.
The knee-jerk implication being that all the good drivers are going to Uber and Lyft.
Let the doomsday scenarios begin…
Slate’s senior technology writer Will Oremus got all riled up and posted an article with the very provocative title, “The End of the Taxi Era.”
He starts out:
Thanks to Uber, the entire industry is doomed.
Definitely committed to his half-baked thesis, he goes on to write:
It’s a battle the taxi industry appears increasingly certain to lose. The only questions at this point are how long it will take and what will be left standing in the end. It’s beginning to look like the answers will be: “not long” and “not much.”
Those are fighting words, and Mr. Oremus knows it. His entire article is the perfect example of the kind of lazy journalism that defines click bait.
I’m actually loath to comment upon his gaffe-laden drivel because I know it will only validate his bullshit Chicken Little premonition — You see, I pissed off a bunch of cab drivers. I must be on to something! — but his elitist viewpoint is so offensive, I can’t restrain myself.
No, taxi companies are not failing, just your reading skills.
The reasons why Uber and Lyft are having such a major impact on the earning potential of cab companies are real simple:
- Uber and Lyft charge fares that are anywhere from 40-70% less than the regulated cab fares. (Unless it’s surging, of course.)
- They don’t have to worry about buying and maintaining fleets of cars or operating clean energy vehicles.
- Uber and Lyft don’t have to carry comprehensive insurance that covers drivers, passengers, public and private property, as well as any bystanders who may get hurt in the process. What their sketchy, off-shore insurance company will cover is still very much in doubt since they refuse to accept any responsibility for what happens with their “partners,” who are told to use their own insurance first (and commit insurance fraud in the process as personal policies don’t cover commercial activities). Even if they are in a no-fault accident, they are still required to pay high deductibles to file a claim with Uber’s or Lyft’s insurance companies. ($1,000 and $2,500 respectively.)
- Uber and Lyft have no obligation to train their drivers beyond a few short YouTube videos, which emphasize giving out bottled water and snacks to improve ratings, seeing as how their driving skills won’t be doing them any favors.
- Uber and Lyft don’t have to pay for city permits, which allow taxicabs the use of taxi lanes and taxi stands. But their drivers just use them anyway. Why not? They work for a company that encourages breaking any law they don’t agree with, so why not act by example? After all, those taxi lanes are super fucking convenient.
- When it comes to SFO, Uber and Lyft drivers don’t have to queue with hundreds of other cabs in four parking lots, waiting hours to get to the front of the line to pick up fares. They just wait in the cell phone lot for a ping, drive up to departures and get their fares.
- Uber and Lyft also consistently skirt ADA regulations, and by limiting their service to apps, they leave large parts of the population out of the equation.
The playing field between the TNCs and taxi companies is so astronomically uneven it’s criminal. Any sane person can see the lopsided advantage Uber and Lyft have over law-abiding taxi companies. But when you’re a click-hungry journo who only wants to sensationalize an issue, why delve any deeper than the shallow end? Uber is valued at 60 billion and Yellow Cab is in chapter 11. That means Uber automatically wins, right?
Uh, no.
If all Sir Flub-a-Lot knows about the taxi industry is what he hears in the back of some guy’s Prius or on a tech blog, then yeah, I can see how he could easily read about a cab company filing for bankrupcy and immediately jump to the conclusion that all taxi companies are doomed.
There are so many other factors at play here that Oremus is clearly missing due to his prejudice against taxis, and since I don’t have anything else to do this afternoon, let’s examine a few, shall we?
1. San Francisco has more than one cab company. Besides Yellow, the other two large companies are Luxor, who also has their own app, and Flywheel Taxi (née DeSoto). There are also numerous smaller fleets (Citywide, National/Veterans, Fog City, Super Cab, Union Cab, Town Taxi, Green, etc. etc.), many of which are restructuring on their own, moving into hybrid owner-operator models, downsizing fleets and embracing technology to compete with ride-hail services. Even more taxi-hailing apps are going to enter the market. As someone who writes about tech, you’d think Will would appreciate the myriad developments going on in the industry. But no, Mr. Doomsday only has this to say about cab companies’ apps:
If there were ever a time when taxi companies might have been able to leverage their market position to defeat Uber on its own terms, that time has long passed.
Way to be a bummer, dude. But did you know…
2. Uber and Lyft drivers are getting squeezed so tight, they aren’t making any money. Unless it’s surging, natch. But with so many drivers on the road in San Francisco, it never surges like it does in other cities. On New Year’s Eve, the super bowl of ride-hailing, the surge in San Francisco only went as high as 4x the normal rate, while in other cities it went as high as 8.8x.
And now, with the latest rounds of price cuts, Uber drivers are in open revolt. Many are quitting.
How low can Uber set the rates before only the worst drivers with the worst records will be running the Uber app?
Uber is gunning for the lowest common denominator so they can browbeat them into submission. That can’t be good for business in the long run. Throw in a few predatory leasing programs for good measure and you’re on the way to a new form of indentured servitude. Awesome, right?
Oh, Will:
But the fact remains that its business model is far more convenient and congenial to consumers than that of the taxi companies.
Hmm, so you think proudly gouging one’s customers is a solid business move?
I pick up reformed Uber users in my cab all the time. They are coming back to taxis in droves because they have grown weary of confused tourist drivers, the unscrupulous business practices of the bigwigs, surge pricing and just having to deal with an app when there are plenty of cabs available on the street.
…the forces that drove the [Yellow Cab] company to the brink reveals that the ground may be starting to shift faster than almost anyone expected. And it should be enough to unnerve anyone who’s still banking on taxis to avoid the fate of newspaper classifieds, movie-rental stores, or payphones.
3. Cabs are not horse drawn carriages, VCR players or any other ativistic technology people like to compare them to. They are vehicles for hire, just like Uber and Lyft cars. Sure, somebody’s personal vehicle is going to be much cleaner (at least for the first few months) than a taxicab that’s run 24 hours a day, but other than that, the differences between an Uber car and a taxicab are a paint job, top light and a bunch of permits.
Cab companies have to play by the rules while Uber and Lyft cars do not.
Even our boy Will acknowledges this gaping loophole:
Uber and Lyft enjoy different cost structures, fewer regulations, and advanced data analytics, not to mention billions of dollars of venture-capital money aimed explicitly at helping them corner the market without having to worry too much about the bottom line.
But…
There are very good reasons why cabs are regulated: to protect the drivers, to protect passengers and to protect society at large.
At some point, Uber will have to be regulated to ensure public safety and workers’ rights. The current exploitative system can’t last forever. Eventually, the numerous court cases against them will go in front of juries and Uber will get bitchslapped into submission.
It makes sense that San Francisco is on the leading edge of the market’s upheaval. The Bay Area’s newspapers were also among the first to hit the skids when the Internet began to disrupt the media.
Dude, take your Adderall. Why are you bringing newspapers into this?
Meanwhile, the New York Times reports, medallions are “barely selling at all” in Boston and Chicago.
Nice segue… (wrong).
4. Now that the streets are saturated with cars looking for fares, most Uber and Lyft drivers are starting to realize what cab drivers already knew: the number of available Ubers and Lyft drivers need to be limited.
The massive influx of Uber and Lyft drivers into the city creates epic gridlock and congestion well past the normal rush hours. On the weekend, it doesn’t end until the bars let out.
One way cities limit the numbers of vehicles for hire on the road is through a medallion system, which are essentially permits to operate taxicabs. This system helps avoid the chaos of too many cars searching for fares at any given time. It also ensures drivers are able to survive during lean times.
Of course, the medallion system is confusing to those who want to peceive it as a corrupt aspect of taxi companies, investor greed or worse…
Mr. Oremus shares in this confusion, based on this statement:
If you’re going to bet on an asset that requires substantial capital outlay, a shiny black car with a leather interior certainly looks more attractive at this point than a little tin plate with a number and an expiration date.
It’s always cute when people who know nothing about the medallion system make grand declarations about it.
But let’s not forget to keep bashing on cab companies:
…they make their money from drivers, who pay them to take shifts. Those drivers are highly sensitive to changes in the marketplace, making them prone to bolt en masse as it becomes clear which way the wind is blowing.
5. Nobody is making very good money on the streets these days. Experienced cab drivers, however, those who have been at this 20+ years, have a better shot at navigating the storm, but for most Uber and Lyft drivers, the situation is very grim.
This race to the bottom is great for the consumers, but horrible for the workers. Realizing this, many Uber and Lyft drivers are signing up to drive cabs.
Can you believe it, Will?
Yes, Uber and Lyft drivers are turning into cabbies.
Crazy, right?
There is much to dislike about the way Uber does business. It has been ruthless and at times unscrupulous in its bid to overthrow taxis and crush would-be rivals as the dominant provider of on-demand rides.
6. Uber’s endgame isn’t the disruption of taxis. They are looking to become the non-virtual Google, where passengers are marketed to while they’re in cars, as well as through the app. Uber is collecting a goldmine of data from users, which they are already using against passengers, though not as blatantly yet.
There are some decent reporters out there who are aware of these developments. Unfortunately, the senior technology writer for Slate is not one of them. He’s still caught up in that whole driverless car smoke screen:
It treats its own drivers as commodities and is actively working to replace them with robots.
7. Self-driving cars are not part of Uber’s business model. Uber has managed to become the world’s largest taxi company without owning a single vehicle, all the while maintaining absolutely no liability for what goes on in those cars. After all, they just connect drivers with riders.
Well, if they invest in buying driverless cars, they will own all the capital, and the corresponding liability. That’s not their business model. In fact, that’s a lousy business model and — ahem — not much different from the current taxi model. I seriously doubt any VC with half a brain would want to invest in a company that plans to replace the current UberX model, which is their most profitable model, with something that would be a strategic nightmare.
At this point, any regulatory crackdowns will only serve to define the contours of Uber’s dominance.
8. So you say, but the day when an elderly couple from Missouri, who’ve saved up for decades to afford vacations to places like San Francisco, arrive at SFO and are required to purchase a smart phone and download an app in order to get into the city is the day we can officially say we have lost all touch with humanity.
There are plenty of people who rue that day. But not writers like Will Oremus, who seemingly loves Uber because it fits into his elistist worldview: like so many people in tech, he wants to force his perspective on the rest of us. Even if his perspective is skewed and fundamentally wrong.
If he can’t see that Uber and Lyft have a temporarily unfair advantage over taxis, which is why they are able to take up so much of the transportation market, then he is either stupid or an asshole. Either way, twisting the facts to meet one’s agenda is akin to the talking heads at Fox News.
Despite what millennials, those who have grudges against taxis and misguided pundits may say, the Uber/Lyft phenomenon is a novelty. It’s based on hype and hype alone, not profit.
Bloggers like Will Oremus play right into this hype machine. He and his ilk are like flies buzzing in our ears. They only want page clicks.
Like the Uber and Lyft feedback system they idolize, they’re after gold stars and high page counts to validate their self-entitled mentalities.
So, in this spirit, I’m sorry to say, I must rate Big Bad Willy’s ability to comprehend the complex world of public transportation one star.
In the Uber and Lyft world, this means we’d never be matched up again.
Oh, I can only hope to never have to encounter more piffle by this click-driven scribe ever again.
— January 14, 2016
(with editorial assistance by Colin, Juneaux and Mr. Johnson)
