47 ms·

Under Pressure from Uber, Taxi Medallion Prices Are Plummeting

107 points by uladzislau 12y ago

ps4fanboy 12y ago
"The crucial question for medallion owners like Mr. Ionescu is, if Uber is that much cheaper than a taxi, why would anyone take a taxi, and therefore why would any driver pay to lease a medallion? Mr. Ionescu says his revenues are down around 25 percent, and he’s having trouble leasing out his whole fleet." Apart for selling the right to operate in a government sanctioned monopoly what service does this man provide? This looks like the worse example of rent seeking I have seen.
- ghshephard 12y ago
  Here are the "non-services" that he provides: o A poorly tracked rider/driver interaction in which it's somewhat obscured which riders I road with in case I have a bad interaction and need to follow up. o A poorly designed hailing system in which I need to physically see the taxi in order to request its service. o A poorly designed (non existent?) tracking system, in which the taxi that I've requested may, in fact, be service another passenger, and have no intention of coming directly to me for the next 30 minutes. Or, never at all. o Almost no feedback, and certainly no "default opt-in" feedback mechanism on the driver, providing no incentives for the drivers to behave professionally or courteously for every ride, resulting in frequent rude or abrasive customer/rider interaction. Without the medallion, of course, he couldn't afford to provide those "non-services", and would therefore have to compete for business. The medallion is what allows him to provide such a horrible level of service - and, such poor service is frequently seen in most monopolistic markets. See Comcast.
  - nodata 12y ago
    You missed out all of the actual services he provides, such as all of the ones the law stipulates.
    - phaemon 12y ago
      So did you.
    - ps4fanboy 12y ago
      I think your conflating the services his customers provide with what he provides, all this man does is lease medallions to other companies/people.
      - corin_ 12y ago
        There's an argument to be made that, given the cost of medallions, men like this are essentially enabling people who couldn't otherwise afford to be taxi drivers to do that job.
        msh 12y ago
        And how is that not a really bad case of rent seeking? If he did not do this the price of the medallion would have to be something the driver could afford.
        corin_ 12y ago
        In the situation that exists, the drivers need him to provide that service. Of course I think the system is absolutely fucked up, but that doesn't mean that he isn't providing a useful service to his drivers currently.
        msh 12y ago
        Dont you think that the prices would be lower if you were not allowed to lease out your medalion? My point was that he is partly responsible for creating a fucked up system and does not provide any value to it but just raises the prices.
        BrainInAJar 12y ago
        I actually think prices would be higher if you weren't allowed to lease out your medallion (or at least availability would be much worse.) You can only work so many hours in the day, for the time you aren't working your medallion is either idle, or being used by someone else.
  - CmonDev 12y ago
    The writing was on the wall, it spelled "GPS and mobile connected apps".
  - furyg3 12y ago
    It's also important to list the proposed services the monopoly provides. Personally I avoid them at all costs... Nevertheless they are historically: * Price reliability: Prices in most taxi systems follow strict rules. Customers can use this knowledge to estimate what they will spend, and drivers what they can earn. * Service dependability: Because medallions are limited and prices are regulated, taxi drivers can make a living, and the service does not boom/bust. This means customers are not gouged in good times and unable to find taxis in bad times. * Non-discrimination: Taxis are usually required to respond to all hails, and to not refuse service because your ride is too short/long. * Driver tracking: because a taxi driver must have a medallion and follow rules about posting information in/on their cabs, passengers can distinguish between 'taxis' and random people offering ride services. While there may be no built-in reputation system, there is incentive and recourse. How do passengers know if a non-taxi is a guy who makes his living from offering rides, or a guy who just stole a car and is going to rob them? A taxi driver is risking a lot by robbing his passenger. Many of these points are matters of preference, or can be solved by technology (reputation). Do we, as a society, want to incentivize a stable transit system by limiting the number of drivers or by paying more than 'market' prices in slow periods, and more in busy periods? Do we want drivers to be able to refuse service? If not, how do we compensate drivers who make short/long trips that have low profitability and high opportunity costs?
    - tomp 12y ago
      > Non-discrimination: Aparently, that's not true in the US - I've read about many times how white people hail cabs for their black friends, because cabs won't stop for black people.
      - e98cuenc 12y ago
        In SF a cab refused to take us (a white guy and girl and a 6 month toddler) to Lombard street because it was "2 blocks away". It was in fact 6 blocks away with awful ups and down. I had a really hard 15 - 20 minutes going up and down trying to don't fall with our baby cart. The 3 times our friend in SF ordered a Uber, it never failed, even though one of these rides was shorter than the one we requested to Lombard St. To me it's clear who is providing the non-discrimination service and who is not.
  - tomp 12y ago
    On the other hand: - I can get a cab even if my phone battery days (or if I don't have the phone) - in theory, they can't say no (apparently, they sometimes do in NY, but haven't had that happen to me in London yet) - they know the city, and don't need to be constantly looking at the GPS while driving. - no surge pricing
    - dantheman 12y ago
      Every taxi I've been in across the US has a GPS that they use.
      - geofft 12y ago
        I was surprised the other day to street-hail a taxi in London (near Piccadilly Circus), of all places, and find the driver using a GPS to figure out where we were going and how to get there. "Knowing the city without needing a GPS" is probably a feature I would pick a product on, but it seems to me it's not reliable anywhere any more. Lyft and Uber both let me set my destination in the app and send that to the driver's phone, but regardless of service, these days I'll tend to tell the driver how to get there if it's a city I'm familiar with.
        julian_t 12y ago
        Most London cabbies are very proud of "the knowledge", so I wonder if your driver had a GPS to tell him about traffic conditions rather than the route?
    - judk 12y ago
      In a surge, there are fewer cabs than would-be riders.
  - wheels 12y ago
    That organization isn't intrinsic to Uber or a taxi system though. In Berlin there's a popular app called MyTaxi that's used by taxi drivers and end-users which builds all of that on top of the city's licensed cabs. (It exists in other cities as well, though I can't speak for it there.) You can order, pay, tip, estimate costs, see them approaching, review and make a call to your driver from within the app. From that perspective I think it's just a missed opportunity to have built some of those features on top of existing taxi systems.
    - humanrebar 12y ago
      > From that perspective I think it's just a missed opportunity to have built some of those features on top of existing taxi systems. There's no incentive to implement that sort of innovation. The prices and number of cabs are both more-or-less set. The medallions are fairly well utilized and the revenues have a hard ceiling, so there's not enough incentive to scale up or introduce new business models.
  - yincrash 12y ago
    In New York, where the story takes place: >A poorly designed hailing system in which I need to physically see the taxi in order to request its service. I actually prefer taxis if I'm in Manhattan because it is about 10x faster to hail one of the many taxis rolling by than it is to wait and watch on your phone your Uber driver slowly make its way to you. >A poorly designed (non existent?) tracking system, in which the taxi that I've requested may, in fact, be service another passenger, and have no intention of coming directly to me for the next 30 minutes. Or, never at all. In New York, the cab's center lamp is lit up when vacant and available for hails. >Almost no feedback, and certainly no "default opt-in" feedback mechanism on the driver, providing no incentives for the drivers to behave professionally or courteously for every ride, resulting in frequent rude or abrasive customer/rider interaction. Tipping is the main incentive. Reporting of bad behavior goes through 311 (in New York). If you pay via credit card, the cab's medallion number is even on your receipt, so you don't have to remember it when you're in a huff leaving the cab. I'm not saying the taxi cabs are the best system, but I want to quell misinformation.
    - colinbartlett 12y ago
      It's only 10x faster to hail a cab if you're somewhere in the lower half of Manhattan AND it's not at a peak time. Outside of those conditions, I find Uber much faster. Although yellow cabs in NYC are required to take you where you request, some will break this rule, or just do it begrudgingly. Same with taking a card, they will do it but make a big show and a stink about it. One even said I better give him a "big tip" for taking me to the airport.
    - f3llowtraveler 12y ago
      Try hailing a cab in Manhattan once it starts raining.
      - baddox 12y ago
        In fairness, try calling an Uber in San Francisco when it's raining.
    - humanrebar 12y ago
  - k-mcgrady 12y ago
    Don't points 2 and 3 conflict?
- gutnor 12y ago
  He is a middle-man. He provides flexibility in the medallion scheme (offering scheme that are not provided by the government), take financial risk ( he put the money on the table and need to find some driver ) and so ensure more taxi are on the street than if he wasn't there. You can see all the middle-men in any business as useless if "XYZ" was better. Now in the case of that guy in particular, he is just becoming obsolete, replaced by a better medallion system and a modern/leaner middleman: Uber. He disappears in the name of progress so there is nothing sad about that, but that does not mean he was never useful. Also, I guess somebody will point out that if he wasn't adding flexibility to the medallion system, Government would have been forced to fix it. That's wishful thinking: there is nothing that the government could not provide but Uber does, despite that it does not move at all in that direction. Government is not pressured by the market like people and businesses, this guy is greasing the part where government policies meet people reality.
dmishe 12y ago
I'm not familiar with medallion system, do you have to buy them per-car or per-cab-company? In any case, 1 million is just, wow.
- ghshephard 12y ago
  One per cab.
- ars 12y ago
  Per car, and also they are tied to the car, not the driver. So divers rent them for the day, or by the hour. It's basically a government sanctioned monopoly. It doesn't even have the pretense of being about safety or anything like that.
  - jgh 12y ago
    Does it transfer to a new vehicle? Cabs put on so many hard miles that it seems like a really steep price for something that isn't going to last that long.
    - ars 12y ago
      The medallion itself is physically attached to the cab, but since the medallion does not expire I'm sure there is a transfer process.
    - noer 12y ago
      The medallion is a license to operate a for hire vehicle. IIRC, you can remove and re-attach it to as many different vehicles as you like.
  - baddox 12y ago
    It is exactly a government sanctioned monopoly, but there is definitely a pretense of being about safety. Like pretty much any "progressive" policy, you can find people (even on these frequent HN threads) defending taxi regulations under that pretense.
BillFranklin 12y ago
I'm bored of stories about Uber, they're all paid for, marketing crap.
- colinbartlett 12y ago
  You are suggesting that Uber paid the New York Times to write this piece on medallion prices?
  - BillFranklin 12y ago
    Yes, and I don't know why I've been downvoted for it. Read this: http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html Then this: https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#tbm=nws&q=Uber https://www.google.com/webhp?sourceid=chrome-instant&ion=1&e... Uber's PR agencies are Westbourne and FleishmanHillard: http://www.prweek.com/article/1295173/uber-bring-european-pr-taxi-wars-demand-comms-firepower http://www.prweek.com/article/1295173/uber-bring-european-pr...
  - BillFranklin 12y ago
    Also tweets: https://twitter.com/ActuallyNPH/status/528251303794069504 https://twitter.com/ActuallyNPH/status/528251303794069504
- MetaCosm 12y ago
  You nailed it -- I am so sick of the overly cozy backrub style relationship between the media and Uber... Emil Michael and Sarah Lacy are obviously in love!
- noer 12y ago
  I agree. They're almost always clickbait-y and Uber is something that absolutely nobody is ambivalent about. I've found that people either think that they're the savior to outdated transportation needs or that they're using loopholes not available to their competition to create a new monopoly.
  - 12y ago
smcl 12y ago
Stories like this confuse me, they seem to suggest that I should be sympathetic towards previously inflated prices starting to fall. In this case we're talking about taxi medallions but closer to home it's been UK house prices where a decline is reported as "bad" and a rise is "good". In both situations it's seemed pretty obvious to me that there's a crazy overpriced asset that will correct eventually and those who paid over the odds will take a hit.
- k-mcgrady 12y ago
  House prices are always reported as bad. Either too high for new buyers or they're falling and owners don't like it.
  - smcl 12y ago
    Actually it'd make sense* if that was the case, but for some reason I've only ever seen it the way I described. However I am going by the coverage I saw when I lived in the UK ~3 years ago so my recollection may be fuzzy or exaggerated. * = by "make sense" I mean it'd fit within the my cynical view of the media's "hysterically report on things to drum up interest" strategy.
  - _delirium 12y ago
    Falling prices are bad in the current arrangement, unfortunately, for more reasons than the current owners being upset: a bunch of other financial products are also tied to them, so falling house prices cause a mess cascading beyond just the real-estate market. E.g. the 2008 crash produced defaults on housing derivatives worth more than the entirety of the actual real-estate in question, which in turn produced bank failures, etc. (Not a good situation in the first place, but it's why financial news treats falling housing prices as negative news.)
    - humanrebar 12y ago
      > a bunch of other financial products are also tied to them, so falling house prices cause a mess cascading beyond just the real-estate market That's an argument for gradually deflating housing prices, assuming they are overpriced. If people are running businesses and preparing for retirement with faulty price projections in mind, I don't see why others (people who don't own homes, mind you) should be forever penalized because the system is already stacked against them.
raverbashing 12y ago
"“I’m already at peace with the idea that I’m going to go bankrupt,” said Larry Ionescu, who owns 98 Chicago taxi medallions." That's how much again? 30Million? If you manage to go bankrupt with this kind of equity you're bad at business. Like, really bad. The best investors know when it's a good time to go into a business, but also when it's time to disinvest. Looks like the time is now (or maybe, 6 months ago)
- xadhominemx 12y ago
  Well, that's $30M in enterprise value, not equity. We actually have no idea how leveraged he is.
- onion2k 12y ago
  The problem is that pretty much everyone realised the problem at the same time. In order to disinvest there would need to be people willing to buy, but in this case it seems his assets became unsellable pretty much overnight. It's not like Uber was always certain to win; for a long time there were plenty of people who thought Uber would be legislated out of business. Now it's looking like that won't happen. Consequently his position is sensibly pragmatic - his business is failing and he has no way to get back much of his money. The best investors realise that there is always a possibility of that happening.
  - raverbashing 12y ago
    "The best investors realise that there is always a possibility of that happening." Exactly. Especially with things that are very dependent on legislation. This is not a material asset, it's a license. Cities might one day legislate a medallion is not needed anymore, or increase their number, or change the rules in some way.
- steven2012 12y ago
  Even if he owned all 98 medallions outright, once he started selling them en masse, the price would drop just like a stock. Those are extremely illiquid assets so the price for 1 or 2 is different for all 98.
netcan 12y ago
I realize that most people here thin medallions were always a and idea, bad for consumers and should die. But, the fact is that they do exist and were promoted by the municipal government (this is a municipal government system, isn't it?). Even if it was a bad idea, aren't they responsible for it? They sold or issued medallions on the grounds that they are a resellable perpetual license to run a taxi. If i'm not mistaken, the city made money selling them. Unless you consider the whole "contract" void, I can think of only two logical perspective. Either the city is violating that contract by allowing uber to operate or uber is a new kind of service with no bearing on that contract. IE if segways had replaced cabs, tough luck #1 sounds prohibitively expensive to accept & #2 sounds dishonest.
- icebraining 12y ago
  I think that question is perfectly valid; even if the contracts are considered unfair/rent-seeking or whatever, why shouldn't the city be at least partly responsible for issuing such contracts? There's an article on Cato about the issue, which focuses on the economic efficiency of the issue: http://www.cato.org/blog/should-taxi-medallion-owners-be-compensated http://www.cato.org/blog/should-taxi-medallion-owners-be-com...
  - netcan 12y ago
    I agree that this is anti-consumer. But I can imagine similar schemes that aren't. Say a city decides to have a market in the park every Sunday. They issue resellable medallions for stalls, food carts, etc. A few years later, they cancel the market or the medallion system or otherwise make the medallions worthless. With uber there is some ambiguity. Maybe uber aren't cabs. If some awesome new public transport system lowered demand for cabs the city wouldn't be responsible. Claiming that they aren't cabs is how/why uber get around the medallion system in the first place. Taxis and medallion issuers are challenging this in someplace. In any case, I think there is a genuine question here. Even if medallions were wrong in the first place, issuing them was the wrong, not buying one. Buying a medallion is the only way to operate a cab. I don't understand the downvote-anger.
    - 12y ago
bluedevil2k 12y ago
The article doesn't touch upon the illiquidity of the taxi medallions in these cities. In most of them, once you buy the taxi medallion, it's difficult or impossible to sell again. Even in cities where you can sell it (San Francisco), you get a fraction of what you paid for it (30% typically). This distorts the market even further, when the buyers need to price in the fact that these are assets that in some cases might depreciate to $0, and not give them the ability to sell them before that happens. Additionally, there's no price feedback, or it happens rarely. As the article points out, NYC publishes the price once a year, and did it incorrectly last year. What type of investment gives you no feedback on its current value? To reduce the price swings, cities need to create an auction system where they allow current owners of medallions to list their current medallions for sale. The auction system would provide price transparency, and allow all the stakeholders involved (medallion holders, buyers, and sellers) to get a clear picture of the market price at any given point.
seliopou 12y ago
> Yellow taxis in New York also face competition from new green “boro taxis,” which may pick up fares only in the boroughs outside Manhattan and in northern Manhattan. That program has been in the works for three years, including during a period when medallion prices were still rising. The vast majority of yellow cab pickups occur in Manhattan below 110th Street or at airports, where yellow cabs face competition from Uber but not from green cabs. Still, the green cab program has faced strong opposition from yellow cab medallion owners, and the start of falling medallion prices coincides with a June 2013 court ruling upholding the green cab program. Did anybody read this? My understanding is that green taxi medallions started selling at around $5,000 when they were introduced, and green taxis are now fairly common in the outer boroughs. You also see them quite a bit in lower Manhattan as well (dropping off fares). Also, did anybody look at that chart? Prices haven't been stable for the entire time span that the chart covers, and the current price isn't even the min for the data set. Uber's been operating in New York since well before 2013. It just so happens that the (three month as indicated by the chart, mind you) decline coincided with a court decision that upheld a city policy that would put more cabs on the streets in areas of the city that are booming right now. On top of that, I wonder if there are any other macroeconomic trends that might be affecting medallion prices and ridership overall. Mind you, if total taxi-like revenue for the last given period is R = T + U, where U is Uber's share of the revenue and T is the rest, and the next period's revenue is R' < R, then it's completely consistent to have T' < T and U' > U. In other words, total taxi-like revenue can be on the decline even as Uber's revenues are increasing. This could be because the Uber service is cheaper, or because people are overall using taxis less. Who knows if this is actually happening? I don't. But it'd be interesting to see the question raised and pursued, even to be quickly dismissed by some obvious fact. Don't mistake this article for economic analysis. It's a puff piece.
- micampe 12y ago
  The last paragraph ruined what until that point I thought was an insightful comment. Don't tell me what to think please.
- netcan 12y ago
  I'm ashamed to say that I didn't. You're right. Medallion prices look pretty close to average for the dataset, which only covers 18 months. The article also mentions problems with the data. Low data, small dataset, questionable outlier removal. "There was only one medallion sale in September, followed by nine in October" This data doesn't really say anything. The remarkable thing here is that medallion values aren't dropping. This really is terrible reporting.
steven2012 12y ago
I'm shocked at how the taxi industry is behaving in the face of this new competition. Uber and lyft have been around for several years and all they are doing is sitting there and then eat their lunch with no attempt to protect themselves. But believe me I have no sympathy for them, especially in the Bay Area. I welcome the idea that they go bankrupt after the years of disservice they have provided this area. The interesting thing is that I'm not sure what options they have at this point. Uber is spending hundreds of millions of VC money, which is a huge advantage over existing taxi companies that don't have this free money that allows them to operate at a massive loss. About the only thing I can think of is taxi companies from several cities across the U.S. have to merge together, and then partner with a smaller company that can raise the same 100M+ in financing and then create an uber competitor that can drive prices even lower. Basically it's a scorched earth policy on taxi fares driven by VC money, similar to the dot com days. Other than that, I have no idea how the taxi industry will survive, unless they can somehow get uber regulated the same way they are.
jsun 12y ago
I'm not sure the math works out. It mentions a weekly lease price of $780 per medallion in Chicago. Assuming 15% tax and 15% cost of insurance that comes out to $600 to the leasing company. Assuming the car costs $25,000 and has a depreciated value of $10,000 after 3 years as a fleet car, that means the weekly "cost" of the car is $113.21 (assuming a 5% financing rate), which prices the medallion at $486.79. A perpetuity of $486.79 per week at an expected 20% gross return only costs $126,566.15, less than a third of the selling price of a medallion in Chicago today. Even at a expected 10% gross return still only comes out to $253,132.20. Am I off on my math somewhere?

107 points by uladzislau 12y ago

"The crucial question for medallion owners like Mr. Ionescu is, if Uber is that much cheaper than a taxi, why would anyone take a taxi, and therefore why would any driver pay to lease a medallion? Mr. Ionescu says his revenues are down around 25 percent, and he’s having trouble leasing out his whole fleet." Apart for selling the right to operate in a government sanctioned monopoly what service does this man provide? This looks like the worse example of rent seeking I have seen.

ghshephard 12y ago
Here are the "non-services" that he provides: o A poorly tracked rider/driver interaction in which it's somewhat obscured which riders I road with in case I have a bad interaction and need to follow up. o A poorly designed hailing system in which I need to physically see the taxi in order to request its service. o A poorly designed (non existent?) tracking system, in which the taxi that I've requested may, in fact, be service another passenger, and have no intention of coming directly to me for the next 30 minutes. Or, never at all. o Almost no feedback, and certainly no "default opt-in" feedback mechanism on the driver, providing no incentives for the drivers to behave professionally or courteously for every ride, resulting in frequent rude or abrasive customer/rider interaction. Without the medallion, of course, he couldn't afford to provide those "non-services", and would therefore have to compete for business. The medallion is what allows him to provide such a horrible level of service - and, such poor service is frequently seen in most monopolistic markets. See Comcast.
- nodata 12y ago
  You missed out all of the actual services he provides, such as all of the ones the law stipulates.
  - phaemon 12y ago
    So did you.
  - ps4fanboy 12y ago
    I think your conflating the services his customers provide with what he provides, all this man does is lease medallions to other companies/people.
    - corin_ 12y ago
      There's an argument to be made that, given the cost of medallions, men like this are essentially enabling people who couldn't otherwise afford to be taxi drivers to do that job.
      - msh 12y ago
        And how is that not a really bad case of rent seeking? If he did not do this the price of the medallion would have to be something the driver could afford.
        corin_ 12y ago
        In the situation that exists, the drivers need him to provide that service. Of course I think the system is absolutely fucked up, but that doesn't mean that he isn't providing a useful service to his drivers currently.
        msh 12y ago
        Dont you think that the prices would be lower if you were not allowed to lease out your medalion? My point was that he is partly responsible for creating a fucked up system and does not provide any value to it but just raises the prices.
        BrainInAJar 12y ago
        I actually think prices would be higher if you weren't allowed to lease out your medallion (or at least availability would be much worse.) You can only work so many hours in the day, for the time you aren't working your medallion is either idle, or being used by someone else.
- CmonDev 12y ago
  The writing was on the wall, it spelled "GPS and mobile connected apps".
- furyg3 12y ago
  It's also important to list the proposed services the monopoly provides. Personally I avoid them at all costs... Nevertheless they are historically: * Price reliability: Prices in most taxi systems follow strict rules. Customers can use this knowledge to estimate what they will spend, and drivers what they can earn. * Service dependability: Because medallions are limited and prices are regulated, taxi drivers can make a living, and the service does not boom/bust. This means customers are not gouged in good times and unable to find taxis in bad times. * Non-discrimination: Taxis are usually required to respond to all hails, and to not refuse service because your ride is too short/long. * Driver tracking: because a taxi driver must have a medallion and follow rules about posting information in/on their cabs, passengers can distinguish between 'taxis' and random people offering ride services. While there may be no built-in reputation system, there is incentive and recourse. How do passengers know if a non-taxi is a guy who makes his living from offering rides, or a guy who just stole a car and is going to rob them? A taxi driver is risking a lot by robbing his passenger. Many of these points are matters of preference, or can be solved by technology (reputation). Do we, as a society, want to incentivize a stable transit system by limiting the number of drivers or by paying more than 'market' prices in slow periods, and more in busy periods? Do we want drivers to be able to refuse service? If not, how do we compensate drivers who make short/long trips that have low profitability and high opportunity costs?
  - tomp 12y ago
    > Non-discrimination: Aparently, that's not true in the US - I've read about many times how white people hail cabs for their black friends, because cabs won't stop for black people.
    - e98cuenc 12y ago
      In SF a cab refused to take us (a white guy and girl and a 6 month toddler) to Lombard street because it was "2 blocks away". It was in fact 6 blocks away with awful ups and down. I had a really hard 15 - 20 minutes going up and down trying to don't fall with our baby cart. The 3 times our friend in SF ordered a Uber, it never failed, even though one of these rides was shorter than the one we requested to Lombard St. To me it's clear who is providing the non-discrimination service and who is not.
- tomp 12y ago
  On the other hand: - I can get a cab even if my phone battery days (or if I don't have the phone) - in theory, they can't say no (apparently, they sometimes do in NY, but haven't had that happen to me in London yet) - they know the city, and don't need to be constantly looking at the GPS while driving. - no surge pricing
  - dantheman 12y ago
    Every taxi I've been in across the US has a GPS that they use.
    - geofft 12y ago
      I was surprised the other day to street-hail a taxi in London (near Piccadilly Circus), of all places, and find the driver using a GPS to figure out where we were going and how to get there. "Knowing the city without needing a GPS" is probably a feature I would pick a product on, but it seems to me it's not reliable anywhere any more. Lyft and Uber both let me set my destination in the app and send that to the driver's phone, but regardless of service, these days I'll tend to tell the driver how to get there if it's a city I'm familiar with.
      - julian_t 12y ago
        Most London cabbies are very proud of "the knowledge", so I wonder if your driver had a GPS to tell him about traffic conditions rather than the route?
  - judk 12y ago
    In a surge, there are fewer cabs than would-be riders.
- wheels 12y ago
  That organization isn't intrinsic to Uber or a taxi system though. In Berlin there's a popular app called MyTaxi that's used by taxi drivers and end-users which builds all of that on top of the city's licensed cabs. (It exists in other cities as well, though I can't speak for it there.) You can order, pay, tip, estimate costs, see them approaching, review and make a call to your driver from within the app. From that perspective I think it's just a missed opportunity to have built some of those features on top of existing taxi systems.
  - humanrebar 12y ago
    > From that perspective I think it's just a missed opportunity to have built some of those features on top of existing taxi systems. There's no incentive to implement that sort of innovation. The prices and number of cabs are both more-or-less set. The medallions are fairly well utilized and the revenues have a hard ceiling, so there's not enough incentive to scale up or introduce new business models.
- yincrash 12y ago
  In New York, where the story takes place: >A poorly designed hailing system in which I need to physically see the taxi in order to request its service. I actually prefer taxis if I'm in Manhattan because it is about 10x faster to hail one of the many taxis rolling by than it is to wait and watch on your phone your Uber driver slowly make its way to you. >A poorly designed (non existent?) tracking system, in which the taxi that I've requested may, in fact, be service another passenger, and have no intention of coming directly to me for the next 30 minutes. Or, never at all. In New York, the cab's center lamp is lit up when vacant and available for hails. >Almost no feedback, and certainly no "default opt-in" feedback mechanism on the driver, providing no incentives for the drivers to behave professionally or courteously for every ride, resulting in frequent rude or abrasive customer/rider interaction. Tipping is the main incentive. Reporting of bad behavior goes through 311 (in New York). If you pay via credit card, the cab's medallion number is even on your receipt, so you don't have to remember it when you're in a huff leaving the cab. I'm not saying the taxi cabs are the best system, but I want to quell misinformation.
  - colinbartlett 12y ago
    It's only 10x faster to hail a cab if you're somewhere in the lower half of Manhattan AND it's not at a peak time. Outside of those conditions, I find Uber much faster. Although yellow cabs in NYC are required to take you where you request, some will break this rule, or just do it begrudgingly. Same with taking a card, they will do it but make a big show and a stink about it. One even said I better give him a "big tip" for taking me to the airport.
  - f3llowtraveler 12y ago
    Try hailing a cab in Manhattan once it starts raining.
    - baddox 12y ago
      In fairness, try calling an Uber in San Francisco when it's raining.
  - humanrebar 12y ago
- k-mcgrady 12y ago
  Don't points 2 and 3 conflict?
gutnor 12y ago
He is a middle-man. He provides flexibility in the medallion scheme (offering scheme that are not provided by the government), take financial risk ( he put the money on the table and need to find some driver ) and so ensure more taxi are on the street than if he wasn't there. You can see all the middle-men in any business as useless if "XYZ" was better. Now in the case of that guy in particular, he is just becoming obsolete, replaced by a better medallion system and a modern/leaner middleman: Uber. He disappears in the name of progress so there is nothing sad about that, but that does not mean he was never useful. Also, I guess somebody will point out that if he wasn't adding flexibility to the medallion system, Government would have been forced to fix it. That's wishful thinking: there is nothing that the government could not provide but Uber does, despite that it does not move at all in that direction. Government is not pressured by the market like people and businesses, this guy is greasing the part where government policies meet people reality.

dmishe 12y ago

I'm not familiar with medallion system, do you have to buy them per-car or per-cab-company? In any case, 1 million is just, wow.

ghshephard 12y ago
One per cab.
ars 12y ago
Per car, and also they are tied to the car, not the driver. So divers rent them for the day, or by the hour. It's basically a government sanctioned monopoly. It doesn't even have the pretense of being about safety or anything like that.
- jgh 12y ago
  Does it transfer to a new vehicle? Cabs put on so many hard miles that it seems like a really steep price for something that isn't going to last that long.
  - ars 12y ago
    The medallion itself is physically attached to the cab, but since the medallion does not expire I'm sure there is a transfer process.
  - noer 12y ago
    The medallion is a license to operate a for hire vehicle. IIRC, you can remove and re-attach it to as many different vehicles as you like.
- baddox 12y ago
  It is exactly a government sanctioned monopoly, but there is definitely a pretense of being about safety. Like pretty much any "progressive" policy, you can find people (even on these frequent HN threads) defending taxi regulations under that pretense.

BillFranklin 12y ago

I'm bored of stories about Uber, they're all paid for, marketing crap.

colinbartlett 12y ago
You are suggesting that Uber paid the New York Times to write this piece on medallion prices?
- BillFranklin 12y ago
  Yes, and I don't know why I've been downvoted for it. Read this: http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html Then this: https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#tbm=nws&q=Uber https://www.google.com/webhp?sourceid=chrome-instant&ion=1&e... Uber's PR agencies are Westbourne and FleishmanHillard: http://www.prweek.com/article/1295173/uber-bring-european-pr-taxi-wars-demand-comms-firepower http://www.prweek.com/article/1295173/uber-bring-european-pr...
- BillFranklin 12y ago
  Also tweets: https://twitter.com/ActuallyNPH/status/528251303794069504 https://twitter.com/ActuallyNPH/status/528251303794069504
MetaCosm 12y ago
You nailed it -- I am so sick of the overly cozy backrub style relationship between the media and Uber... Emil Michael and Sarah Lacy are obviously in love!
noer 12y ago
I agree. They're almost always clickbait-y and Uber is something that absolutely nobody is ambivalent about. I've found that people either think that they're the savior to outdated transportation needs or that they're using loopholes not available to their competition to create a new monopoly.
- 12y ago

smcl 12y ago

Stories like this confuse me, they seem to suggest that I should be sympathetic towards previously inflated prices starting to fall. In this case we're talking about taxi medallions but closer to home it's been UK house prices where a decline is reported as "bad" and a rise is "good". In both situations it's seemed pretty obvious to me that there's a crazy overpriced asset that will correct eventually and those who paid over the odds will take a hit.

k-mcgrady 12y ago
House prices are always reported as bad. Either too high for new buyers or they're falling and owners don't like it.
- smcl 12y ago
  Actually it'd make sense* if that was the case, but for some reason I've only ever seen it the way I described. However I am going by the coverage I saw when I lived in the UK ~3 years ago so my recollection may be fuzzy or exaggerated. * = by "make sense" I mean it'd fit within the my cynical view of the media's "hysterically report on things to drum up interest" strategy.
- _delirium 12y ago
  Falling prices are bad in the current arrangement, unfortunately, for more reasons than the current owners being upset: a bunch of other financial products are also tied to them, so falling house prices cause a mess cascading beyond just the real-estate market. E.g. the 2008 crash produced defaults on housing derivatives worth more than the entirety of the actual real-estate in question, which in turn produced bank failures, etc. (Not a good situation in the first place, but it's why financial news treats falling housing prices as negative news.)
  - humanrebar 12y ago
    > a bunch of other financial products are also tied to them, so falling house prices cause a mess cascading beyond just the real-estate market That's an argument for gradually deflating housing prices, assuming they are overpriced. If people are running businesses and preparing for retirement with faulty price projections in mind, I don't see why others (people who don't own homes, mind you) should be forever penalized because the system is already stacked against them.

raverbashing 12y ago

"“I’m already at peace with the idea that I’m going to go bankrupt,” said Larry Ionescu, who owns 98 Chicago taxi medallions." That's how much again? 30Million? If you manage to go bankrupt with this kind of equity you're bad at business. Like, really bad. The best investors know when it's a good time to go into a business, but also when it's time to disinvest. Looks like the time is now (or maybe, 6 months ago)

xadhominemx 12y ago
Well, that's $30M in enterprise value, not equity. We actually have no idea how leveraged he is.
onion2k 12y ago
The problem is that pretty much everyone realised the problem at the same time. In order to disinvest there would need to be people willing to buy, but in this case it seems his assets became unsellable pretty much overnight. It's not like Uber was always certain to win; for a long time there were plenty of people who thought Uber would be legislated out of business. Now it's looking like that won't happen. Consequently his position is sensibly pragmatic - his business is failing and he has no way to get back much of his money. The best investors realise that there is always a possibility of that happening.
- raverbashing 12y ago
  "The best investors realise that there is always a possibility of that happening." Exactly. Especially with things that are very dependent on legislation. This is not a material asset, it's a license. Cities might one day legislate a medallion is not needed anymore, or increase their number, or change the rules in some way.
steven2012 12y ago
Even if he owned all 98 medallions outright, once he started selling them en masse, the price would drop just like a stock. Those are extremely illiquid assets so the price for 1 or 2 is different for all 98.

netcan 12y ago

I realize that most people here thin medallions were always a and idea, bad for consumers and should die. But, the fact is that they do exist and were promoted by the municipal government (this is a municipal government system, isn't it?). Even if it was a bad idea, aren't they responsible for it? They sold or issued medallions on the grounds that they are a resellable perpetual license to run a taxi. If i'm not mistaken, the city made money selling them. Unless you consider the whole "contract" void, I can think of only two logical perspective. Either the city is violating that contract by allowing uber to operate or uber is a new kind of service with no bearing on that contract. IE if segways had replaced cabs, tough luck #1 sounds prohibitively expensive to accept & #2 sounds dishonest.

icebraining 12y ago
I think that question is perfectly valid; even if the contracts are considered unfair/rent-seeking or whatever, why shouldn't the city be at least partly responsible for issuing such contracts? There's an article on Cato about the issue, which focuses on the economic efficiency of the issue: http://www.cato.org/blog/should-taxi-medallion-owners-be-compensated http://www.cato.org/blog/should-taxi-medallion-owners-be-com...
- netcan 12y ago
  I agree that this is anti-consumer. But I can imagine similar schemes that aren't. Say a city decides to have a market in the park every Sunday. They issue resellable medallions for stalls, food carts, etc. A few years later, they cancel the market or the medallion system or otherwise make the medallions worthless. With uber there is some ambiguity. Maybe uber aren't cabs. If some awesome new public transport system lowered demand for cabs the city wouldn't be responsible. Claiming that they aren't cabs is how/why uber get around the medallion system in the first place. Taxis and medallion issuers are challenging this in someplace. In any case, I think there is a genuine question here. Even if medallions were wrong in the first place, issuing them was the wrong, not buying one. Buying a medallion is the only way to operate a cab. I don't understand the downvote-anger.
  - 12y ago

bluedevil2k 12y ago

The article doesn't touch upon the illiquidity of the taxi medallions in these cities. In most of them, once you buy the taxi medallion, it's difficult or impossible to sell again. Even in cities where you can sell it (San Francisco), you get a fraction of what you paid for it (30% typically). This distorts the market even further, when the buyers need to price in the fact that these are assets that in some cases might depreciate to $0, and not give them the ability to sell them before that happens. Additionally, there's no price feedback, or it happens rarely. As the article points out, NYC publishes the price once a year, and did it incorrectly last year. What type of investment gives you no feedback on its current value? To reduce the price swings, cities need to create an auction system where they allow current owners of medallions to list their current medallions for sale. The auction system would provide price transparency, and allow all the stakeholders involved (medallion holders, buyers, and sellers) to get a clear picture of the market price at any given point.

seliopou 12y ago

> Yellow taxis in New York also face competition from new green “boro taxis,” which may pick up fares only in the boroughs outside Manhattan and in northern Manhattan. That program has been in the works for three years, including during a period when medallion prices were still rising. The vast majority of yellow cab pickups occur in Manhattan below 110th Street or at airports, where yellow cabs face competition from Uber but not from green cabs. Still, the green cab program has faced strong opposition from yellow cab medallion owners, and the start of falling medallion prices coincides with a June 2013 court ruling upholding the green cab program. Did anybody read this? My understanding is that green taxi medallions started selling at around $5,000 when they were introduced, and green taxis are now fairly common in the outer boroughs. You also see them quite a bit in lower Manhattan as well (dropping off fares). Also, did anybody look at that chart? Prices haven't been stable for the entire time span that the chart covers, and the current price isn't even the min for the data set. Uber's been operating in New York since well before 2013. It just so happens that the (three month as indicated by the chart, mind you) decline coincided with a court decision that upheld a city policy that would put more cabs on the streets in areas of the city that are booming right now. On top of that, I wonder if there are any other macroeconomic trends that might be affecting medallion prices and ridership overall. Mind you, if total taxi-like revenue for the last given period is R = T + U, where U is Uber's share of the revenue and T is the rest, and the next period's revenue is R' < R, then it's completely consistent to have T' < T and U' > U. In other words, total taxi-like revenue can be on the decline even as Uber's revenues are increasing. This could be because the Uber service is cheaper, or because people are overall using taxis less. Who knows if this is actually happening? I don't. But it'd be interesting to see the question raised and pursued, even to be quickly dismissed by some obvious fact. Don't mistake this article for economic analysis. It's a puff piece.

micampe 12y ago
The last paragraph ruined what until that point I thought was an insightful comment. Don't tell me what to think please.
netcan 12y ago
I'm ashamed to say that I didn't. You're right. Medallion prices look pretty close to average for the dataset, which only covers 18 months. The article also mentions problems with the data. Low data, small dataset, questionable outlier removal. "There was only one medallion sale in September, followed by nine in October" This data doesn't really say anything. The remarkable thing here is that medallion values aren't dropping. This really is terrible reporting.

steven2012 12y ago

I'm shocked at how the taxi industry is behaving in the face of this new competition. Uber and lyft have been around for several years and all they are doing is sitting there and then eat their lunch with no attempt to protect themselves. But believe me I have no sympathy for them, especially in the Bay Area. I welcome the idea that they go bankrupt after the years of disservice they have provided this area. The interesting thing is that I'm not sure what options they have at this point. Uber is spending hundreds of millions of VC money, which is a huge advantage over existing taxi companies that don't have this free money that allows them to operate at a massive loss. About the only thing I can think of is taxi companies from several cities across the U.S. have to merge together, and then partner with a smaller company that can raise the same 100M+ in financing and then create an uber competitor that can drive prices even lower. Basically it's a scorched earth policy on taxi fares driven by VC money, similar to the dot com days. Other than that, I have no idea how the taxi industry will survive, unless they can somehow get uber regulated the same way they are.

jsun 12y ago

I'm not sure the math works out. It mentions a weekly lease price of $780 per medallion in Chicago. Assuming 15% tax and 15% cost of insurance that comes out to $600 to the leasing company. Assuming the car costs $25,000 and has a depreciated value of $10,000 after 3 years as a fleet car, that means the weekly "cost" of the car is $113.21 (assuming a 5% financing rate), which prices the medallion at $486.79. A perpetuity of $486.79 per week at an expected 20% gross return only costs $126,566.15, less than a third of the selling price of a medallion in Chicago today. Even at a expected 10% gross return still only comes out to $253,132.20. Am I off on my math somewhere?