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"If I were a taxi driver, I would sell my medallion while it still has some value and start driving for Uber and Lyft, doing deliveries for Prime Now and Grubhu

"If I were a taxi driver, I would sell my medallion while it still has some value and start driving for Uber and Lyft, doing deliveries for Prime Now and Grubhub, etc." You would sell your piece of market share, and then go work for an entity that has absolute power over you, and will drive your surpluses to zero - or even into the negative at the greatest pace they can? When Uber has a monopoly, the 'short term' income of most drivers will be under minimum wage (because there's no income regulation) - and because so many drivers do not properly account for 'wear, tear and insurance' - the 'long term' net may actually be negative. Uber's business is about paying drivers the equivalent of a short-term 'pay day loan' on value of their car as it degrades over usage, after which real income is negligible. Or at least, that's the economic end-game. Uber has demonstrated fanatical adherence to market principles - they leverage their power as hard as they can. The natural thing for them to do in a monopolistic scenario would be to jack up prices massively, jack up margins massively, and make sure drivers earn next to 0, and consumers benefit next to 0 - so that they capture all of the surpluses. If anyone things that Uber will not do this they have not been paying attention. Uber will price at the 'profit maximizing' point for them - which in a monopoly situation is 'very high prices' (i.e. a shade below what you wouldn't be willing to pay) for consumers, and 'lower than minimum wage' for drivers (i.e. a shade above what they can possibly get away with). Travis's comments on his hearing were pretty clear - he's a free market fundamentalist of the 'scary kind' (and by that I mean, economically illiterate, parroting the virtues of the ideology he espouses without actually understanding the scope of them). So long as there is real competition, Uber will be limited by that, but if they ever get de-facto monopoly, the only winner will be them. They will ensure they get all of the surpluses.

jamez1 10y ago
Uber doesn't form monopolies as far as I can see, everywhere there seems to be a competitor or two, so that pricing pressure will keep Uber in check. I'm not sure why you think Uber has the power.. they have a lot of cash and first mover advantage which might obscure the true nature of what they can do. As for the taxi plates.. they're going to be worth 10% of what they are now, it doesn't matter if you make less income with Uber if you have to wear such a huge capital loss. (in the order of 100k+)
- stuaxo 10y ago
  Many small taxi firms have gone out of business. When I came back to the part of London I used to live in, my local small business taxi firm where I knew the guys had disappeared. Small Taxi offices used to be a common sight, there are way less of them now.
  - TheOtherHobbes 10y ago
    Uber have replaced a consumer-hostile oligopoly with a worker-hostile future monopoly. This isn't bad for consumers now, but the future will be less appealing. Undercutting the competition on price is classic monopolist behaviour. I suppose VCs tolerate it because when the competitors are down and out, the rewards will be huge. Unfortunately for Uber I think their technology will become less and less of a differentiator because it will become easier and easier - and cheaper - for a small and scrappy competitor to copy it. If the competitors add extra services - e.e. B2B courier/logistics, or B2C pick-up/delivery - Uber probably won't have the clean run it expects.
    - ensiferum 10y ago
      What the market is really waiting for (and the VCs) are the self driving cars. Uber has to tolerate the human drivers for now (for the next 5-10 years) and just make it work. Once the machinery and the laws are in place they can't wait to cut that human labor out of the equation at which point they'll turn into a massive robot fleets of self driving cars. It'd be ideal to have large customer base at that point and preferably as few competitors as possible. This is where the $60+b market valuation comes from.
    - rubber_duck 10y ago
      >I suppose VCs tolerate it because when the competitors are down and out, the rewards will be huge. That's only remotely possible if the barrier to entry is high. It's not, if Uber hikes prices to the point where they are pulling insane profits over drivers competition will enter easily. The only way burning cash makes sense for Uber is eventually going to self driving car fleets - this is much harder to compete on and you can have efficiency based monopoly trough tech.
clairity 10y ago
you're right that uber's primary market power is over their labor force and that they can extract maximum surplus wrt drivers. however they have no power over riders since they don't have a defensible competitive strategy (they compete primarily on cost rather than on differentiated value). that also means that barriers to entry are relatively low (e.g., uber in china and india). but that isn't even the biggest challenge for uber. they want to own global last mile logistics (not just people delivery) and that puts them in direct competition with large established corporations like fedex, ups, amazon and walmart, who won't simply roll over and let them dominate that space. people like to bring up self-driving cars as a strategy, but that's at least 10 years out, so it's a distraction at best. at worst, it also widens their competitive landscape to include all the global auto makers. uber is by no means a monopoly yet and is in fact still struggling to earn a seat at the big kids' table.
pbhjpbhj 10y ago
>the 'short term' income of most drivers will be under minimum wage (because there's no income regulation) // That sounds like a problem with minimum wage legislation [as well].

jamez1 10y ago

Uber doesn't form monopolies as far as I can see, everywhere there seems to be a competitor or two, so that pricing pressure will keep Uber in check. I'm not sure why you think Uber has the power.. they have a lot of cash and first mover advantage which might obscure the true nature of what they can do. As for the taxi plates.. they're going to be worth 10% of what they are now, it doesn't matter if you make less income with Uber if you have to wear such a huge capital loss. (in the order of 100k+)

stuaxo 10y ago
Many small taxi firms have gone out of business. When I came back to the part of London I used to live in, my local small business taxi firm where I knew the guys had disappeared. Small Taxi offices used to be a common sight, there are way less of them now.
- TheOtherHobbes 10y ago
  Uber have replaced a consumer-hostile oligopoly with a worker-hostile future monopoly. This isn't bad for consumers now, but the future will be less appealing. Undercutting the competition on price is classic monopolist behaviour. I suppose VCs tolerate it because when the competitors are down and out, the rewards will be huge. Unfortunately for Uber I think their technology will become less and less of a differentiator because it will become easier and easier - and cheaper - for a small and scrappy competitor to copy it. If the competitors add extra services - e.e. B2B courier/logistics, or B2C pick-up/delivery - Uber probably won't have the clean run it expects.
  - ensiferum 10y ago
    What the market is really waiting for (and the VCs) are the self driving cars. Uber has to tolerate the human drivers for now (for the next 5-10 years) and just make it work. Once the machinery and the laws are in place they can't wait to cut that human labor out of the equation at which point they'll turn into a massive robot fleets of self driving cars. It'd be ideal to have large customer base at that point and preferably as few competitors as possible. This is where the $60+b market valuation comes from.
  - rubber_duck 10y ago
    >I suppose VCs tolerate it because when the competitors are down and out, the rewards will be huge. That's only remotely possible if the barrier to entry is high. It's not, if Uber hikes prices to the point where they are pulling insane profits over drivers competition will enter easily. The only way burning cash makes sense for Uber is eventually going to self driving car fleets - this is much harder to compete on and you can have efficiency based monopoly trough tech.

clairity 10y ago

you're right that uber's primary market power is over their labor force and that they can extract maximum surplus wrt drivers. however they have no power over riders since they don't have a defensible competitive strategy (they compete primarily on cost rather than on differentiated value). that also means that barriers to entry are relatively low (e.g., uber in china and india). but that isn't even the biggest challenge for uber. they want to own global last mile logistics (not just people delivery) and that puts them in direct competition with large established corporations like fedex, ups, amazon and walmart, who won't simply roll over and let them dominate that space. people like to bring up self-driving cars as a strategy, but that's at least 10 years out, so it's a distraction at best. at worst, it also widens their competitive landscape to include all the global auto makers. uber is by no means a monopoly yet and is in fact still struggling to earn a seat at the big kids' table.

pbhjpbhj 10y ago

>the 'short term' income of most drivers will be under minimum wage (because there's no income regulation) // That sounds like a problem with minimum wage legislation [as well].