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Well, maybe. Nothing Kim is doing is going to directly lessen demand for medallions from the city. In San Francisco, to own a medallion, you must work 800 hou

Well, maybe. Nothing Kim is doing is going to directly lessen demand for medallions from the city. In San Francisco, to own a medallion, you must work 800 hours per year as a taxi driver (source: http://www.economicpolicyjournal.com/2012/07/is-san-francisco-taxi-medallion-good.html http://www.economicpolicyjournal.com/2012/07/is-san-francisc...). So Kim himself is not a medallion holder at all. (I gather that in other cities, this is a whole different story. But in SF, in theory as well as as far as I can tell in practice, medallion holders are themselves pretty committed cab drivers). What Kim owns are the cars and the infrastructure to support the cars, plus a dispatching system. He rents the medallions from their owners, who drive his cars and also allow their medallions to be used by other drivers in the DeSoto fleet when their owners are not using them (this is legal, to be clear). So in the short term, if Kim goes to a livery service, those medallion owners will by-and-large just rent their medallions to other taxi fleets in the city. The city won't lose any business directly from Kim, because he's not a customer of theirs anyway, and in the short term, as the article states, they have a waiting list of cabbies who want to buy medallions. Now, it is true that fleet owners all over the city are reporting that they are having more and more trouble getting their cars to full utilization, as the profits from being a taxi driver decrease. And presumably at some point if current trends continue, there won't be people willing to throw down $100k+ for a medallion, and the city will be hurt by that. But that was a preexisting trend to Kim's hypothetical movement to being a livery fleet, and if he does end up contributing to a lessened demand for medallions, he'll be a pretty small part of the overall trend, which is mainly a result of Uber and Lyft undercutting taxis. Source and disclaimer: I work for Flywheel, mentioned in the original article.

toomuchtodo 12y ago
Is this whole medallion argument over how quickly "at the curb" hails move to smartphone apps? Because I'd put some serious money on the majority of "e-hails" being done via Flywheel, Lyft, Uber, etc in the next ~3 years. Its too bad I can't short medallions as a security.
- rustyconover 12y ago
  Actually, while you can't short SF medallions, I do know that can short a company that primarily finances NYC medallions. Look at the symbol TAXI. http://www.google.com/finance?q=taxi http://www.google.com/finance?q=taxi From their profile: Medallion Financial Corp., through its subsidiaries, operates as a specialty finance company in the United States. The company is engaged in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. So while it was probably hard for you to short subprime mortgages directly in 2008/9, this is the same type of thesis. Short the company that has made loans on an asset that is quite likely going to depreciate in value over time. Just like you could short the banks that made the bad home loans. Given a long enough time horizon, it seems that you'll do well. But check with your own financial advisor.
  - seanp2k2 12y ago
    Sounds like a pretty convoluted form of legal gambling to me.
jonknee 12y ago
> Well, maybe. Nothing Kim is doing is going to directly lessen demand for medallions from the city. Sure he is, if he stops leasing medallions there will be 204 less medallions demanded at the $2,200/month price level. It already mentioned that this rate is going down, it used to be $2,500. Perhaps other cab companies will want to expand at the current pricing, but more likely is that the price will go down further. Whoever is left holding ridiculously inflated medallions at the end of the day is who will be hurt. Which from what you are saying is actually individuals. That's tough, but it's also a risk to lay down $250,000 for a certificate from the city for the purely artificial bureaucratic ability to drive a car.
- aetherson 12y ago
  My post may not make much sense with its parent post being deleted. That poster originally commented that Kim was hitting the city in its pocketbook. I was trying to point out that, while Kim's actions certainly do affect the whole ecosystem of SF rides-for-hire, he's not directly a customer of the city, and also to his contribution to the devaluing of taxi medallions probably pales in comparison to Uber and Lyft's contributions, and those aren't hypothetical in the future but already in the present.
brianbreslin 12y ago
In many cities (Miami, NY) the medallions are held by either mini hedge funds, investor groups, or cab companies that rent them to the drivers. $2200/month is about what they charge here for the medallion rental/car rental. Also this doesn't necessarily hurt the MTA, since they already SOLD those medallions to private individuals. Those individual owners will be left holding the bag so to speak.

toomuchtodo 12y ago

Is this whole medallion argument over how quickly "at the curb" hails move to smartphone apps? Because I'd put some serious money on the majority of "e-hails" being done via Flywheel, Lyft, Uber, etc in the next ~3 years. Its too bad I can't short medallions as a security.

rustyconover 12y ago
Actually, while you can't short SF medallions, I do know that can short a company that primarily finances NYC medallions. Look at the symbol TAXI. http://www.google.com/finance?q=taxi http://www.google.com/finance?q=taxi From their profile: Medallion Financial Corp., through its subsidiaries, operates as a specialty finance company in the United States. The company is engaged in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. So while it was probably hard for you to short subprime mortgages directly in 2008/9, this is the same type of thesis. Short the company that has made loans on an asset that is quite likely going to depreciate in value over time. Just like you could short the banks that made the bad home loans. Given a long enough time horizon, it seems that you'll do well. But check with your own financial advisor.
- seanp2k2 12y ago
  Sounds like a pretty convoluted form of legal gambling to me.

jonknee 12y ago

> Well, maybe. Nothing Kim is doing is going to directly lessen demand for medallions from the city. Sure he is, if he stops leasing medallions there will be 204 less medallions demanded at the $2,200/month price level. It already mentioned that this rate is going down, it used to be $2,500. Perhaps other cab companies will want to expand at the current pricing, but more likely is that the price will go down further. Whoever is left holding ridiculously inflated medallions at the end of the day is who will be hurt. Which from what you are saying is actually individuals. That's tough, but it's also a risk to lay down $250,000 for a certificate from the city for the purely artificial bureaucratic ability to drive a car.

aetherson 12y ago
My post may not make much sense with its parent post being deleted. That poster originally commented that Kim was hitting the city in its pocketbook. I was trying to point out that, while Kim's actions certainly do affect the whole ecosystem of SF rides-for-hire, he's not directly a customer of the city, and also to his contribution to the devaluing of taxi medallions probably pales in comparison to Uber and Lyft's contributions, and those aren't hypothetical in the future but already in the present.

brianbreslin 12y ago

In many cities (Miami, NY) the medallions are held by either mini hedge funds, investor groups, or cab companies that rent them to the drivers. $2200/month is about what they charge here for the medallion rental/car rental. Also this doesn't necessarily hurt the MTA, since they already SOLD those medallions to private individuals. Those individual owners will be left holding the bag so to speak.