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Uber only worked because they found a market that was heavily regulated at the local level. Most industries with this sort of regulation are extremely difficul
by exelius 11y ago
Uber only worked because they found a market that was heavily regulated at the local level.
Most industries with this sort of regulation are extremely difficult to disrupt thanks to regulatory capture. But the taxi industry was almost exclusively regulated at the local level. By starting the service in a city with a real taxi problem (and SF has always had a "unique" black car system in that black cars can answer hails off the street) they were able to prove their system worked and build capital. After they did this in a few friendly cities that just needed a taxi solution, they had enough funding and momentum to simply ignore local taxi regulations, pay off any fines, and let public opinion of the new (and super cheap because it's subsidized by Uber for a while in new markets) taxi service do the work for them.
That model works great if your regulators are far-flung and small. Most of these taxi regulatory agencies have pretty limited budgets and simply aren't equipped to deal with a company like Uber that has an army of corporate lawyers. The worst they ever thought they would have to deal with is a couple of local taxi companies with limited resources themselves, so they weren't prepared. Because Uber could drown their agency in paperwork for years, many regulatory agencies have adopted a "wait and see" approach with Uber.
Try this "ignore the regulators" approach in an industry with centralized national regulation and you're in for a big surprise. Turns out, the federal government has basically infinite money and is not scared by lawyers the way municipal government agencies are. This is exactly how Theranos and 23andme got in trouble -- you ignore the feds at your own peril.
- rm_-rf_slash 11y agoI never thought of how important the distinction between local and federal regulation could be when establishing a market. I think you hit the nail on the head. Regulations made the price high to begin with so there's plenty of profit, even if uber wasn't so expensive. A startup in my town recently launched an app that basically acts as uber for established taxi companies. Interesting to see how that plays out.
- exelius 11y ago> A startup in my town recently launched an app that basically acts as uber for established taxi companies. Interesting to see how that plays out. If it's like any other city, the taxi drivers will cancel the ride as soon as you get in the cab and ask you to pay them in cash (often because it's not really their cab; they're just borrowing their cousin's license/car for the night). Uber works because it's the only option for the cab driver to get paid, and in many cities they fine drivers for canceling fares.
- rm_-rf_slash 11y agoIt's a college town. Small enough for word to get around quick. The companies that work here are pretty good since the majority of their work is taking drunk college students home from the bars.
- SilasX 11y agoI don't think it's fair to attribute all of Uber's success to regulatory flouting. They provided legit enhancements that a) benefit both parties, b) are legal, c) are things taxi companies hadn't bothered with, and d) are things people will pay more than production cost for. For passengers: tracking the car as it approaches, frictionless CC payment, responsive support, reliable rides, accountability and when something goes wrong. For drivers: a steady stream of business, filtering of bad customers, protection against customers that can't pay, less time lost to payment and finding destination address. They solved a very old coordination problem (assign rides from a veil of ignorance) that had historically led taxis to discriminate on passenger and destination. They started pooling similar rides together, thus saving trips, which taxis never even attempted unless you arrange it yourself. And didn't they have a workable enough model just using licensed, insured black car drivers? To be sure, they benefit from flouting some reasonable regulations, but it doesn't account for their entire success.