Uber is decimating the Chicago cab industry
Friday, Jun 2, 2017 - Posted by Rich Miller
* A recent NY Magazine feature on Uber discusses the company’s ambition to become a monopoly, which the author concludes is unlikely…
To explain its massive losses, Uber and its investors have often cited Amazon, which didn’t turn a year-end profit for ten years as it built out an infrastructure that made the selling of more and more books — and eventually, of everything — cheaper and more efficient the larger it got. But Amazon’s biggest-ever loss was $1.4 billion, half of Uber’s 2016 deficit, and Jeff Bezos responded by cutting 15 percent of his workforce. Plus, Uber’s economics barely resemble Amazon’s. The taxi business doesn’t scale in the same way, and while Uber’s technology is sophisticated, the barriers to entry are relatively low, and Uber has had to fend off various competitors. So far as Horan could tell, there was only one possible path for Uber to meet that $68 billion valuation: eliminate competition.
Uber’s potential aspirations toward monopoly are a sensitive matter — in discussing how Uber Pool became more efficient the more people used it, McClendon referred to Uber’s ideal state as a “monopoly,” before correcting himself to call it “not a monopoly, but a heavily used service” — and while every company dreams of owning its entire market, the question of whether Uber can do so has become murky.
* Duncan Black, an economist by training and a frequent Uber critic from the left, sums it up this way…
Uber’s fortunes depend on it being a monopoly (multiple local monopolies), which it has no realistic path to achieving.
Which brings me back to my original point, made years ago, that whatever the problem with local cab regulation, there is a reason the market depends on rate regulation and supply restriction.
* But…
Chicago cabdrivers struggling to survive in the Uber era are fighting a losing battle, with 40 percent of all medallions “inactive” and hundreds more either in foreclosure or headed there, a new study shows.
The American Federation of State, County and Municipal Employees Local 2500 represents hundreds of cabdrivers and is continuing to organize the others.
To bolster its case, the union asked statistician James Bradach of Nonprofit Data and Applications to analyze countless pieces of information disjointedly made available in on the city’s data portal.
His report, “Run Off the Road: Chicago’s Taxi Medallion Foreclosure Crisis,” shows a surge in medallion foreclosures and a precipitous drop in both taxicab trips and driver income in the three years since City Hall created an unlevel regulatory playing field between taxis and ride-hailing.
The study’s findings include:
227,033 ride-hailing vehicles registered with the city as of April competing with 6,999 taxi medallions.
The number of “monthly taxi trips” on the streets of Chicago has dropped by 52 percent over the last three years — from 2.3 million to 1.1 million.
774 medallions have been “surrendered to the city at some point,” with 579 more receiving foreclosure notices and 107 lawsuits filed since October.
2,940 taxis or 42 percent of the city’s 6,999 taxi medallions were classified as “inactive” in March after having failed to pick up a single passenger in the previous month. That means those licenses face “imminent foreclosure in the coming months,” the study says. In March, 2014, 16 percent of medallions were inactive.
Average monthly gross income for every one of the city’s active taxicab medallions has fallen over the last three years — from $5,276 to $3,206.
Cabdrivers who were eking out a $19,000 annual living after expenses in 2013 are now operating $4,000 in the red. That’s because their $44,000 in annual expenses have remained the same while business has plummeted.
- Ahoy! - Friday, Jun 2, 17 @ 1:24 pm:
One of the last cab rides I got was someone who did both cab and uber, he said he was doing really well for himself.
It’s a disruptive technology, like the internet, smart phone, assembly line, etc.
- Puddintaine - Friday, Jun 2, 17 @ 1:27 pm:
Now where else have I seen over-regulated, subsidized entities on a downward spiral to oblivion?
Micro of the Macro?
- NIU Grad - Friday, Jun 2, 17 @ 1:28 pm:
Wait, AFSCME represents cab drivers? Are they considering them public employees?
- Ron Burgundy - Friday, Jun 2, 17 @ 1:32 pm:
In some respects, this is an issue of people voting with their (virtual) wallets. The taxi industry had it too good for too long, and more and more folks are opting away from their poor customer service, rudeness, running up fares, and history of discrimination. Evolve to compete, or fail.
- Anonymous - Friday, Jun 2, 17 @ 1:42 pm:
I wonder how much of Uber’s growth comes from serving areas cabs would never visit. Uber saw an industry full of flaws and filled the hole to give consumers what they always wanted. Why should I feel guilty about that? And I love how the taxi industry now is so concerned about their drivers after decades of abusing them. Only thing wrong with Uber is their CEO who is a total loser.
- LINK - Friday, Jun 2, 17 @ 1:58 pm:
A recent aside.
Yesterday my son tried to use UBER, something he has been doing with great regularity over past eight months. However, the APP kept coming back that his credit card had issues, same card on file and active. In fact the bank showed that UBER had charged his card $1, the n credited it back. And then he tried using a GROUPON gift card code and still no go.
Then it gets worse as he tried to contact UBER…thats a nonstarter as they DO NOT have customer service as such. The only way to reach out as I understand it is via the UBER forums or Twitter.
He depends on UBER and has the money in the bank but as of today still cannot use UBER nor contact someone there directly…
- wordslinger - Friday, Jun 2, 17 @ 2:19 pm:
Big Taxi in Chicago has no one to blame but themselves. They redlined more than half the city, for decades.
They didn’t have a leg to stand on to protect the value of their medallions when the new guys came to town.
- Tommydanger - Friday, Jun 2, 17 @ 2:23 pm:
Its almost as if Sears were a taxi company.
- ArchPundit - Friday, Jun 2, 17 @ 3:05 pm:
Taxi companies have brought this on themselves, but left unchecked, Uber will be the new Medallion nightmare. I don’t care much what happens to the medallion owners, but I do care that we don’t trade them in for Uber. Smart regulation can:
1) Require public background checks of all drivers and a licensing requirement for them to meet basic safety standards
2) Ensure competitors can remain and enter the market stopping Uber from becoming a monopoly.
Shouting “It’s disruptive!” doesn’t mean anything if you disrupt the current oligopoly to create a monopoly. The point is to create a system that places consumer protection as the key element of regulation and not protecting the current industry owners.
- Just Observing - Friday, Jun 2, 17 @ 3:26 pm:
Obviously the people have spoken.
- A guy - Friday, Jun 2, 17 @ 3:37 pm:
No matter the effort….no tears.
- Animal Mother - Friday, Jun 2, 17 @ 4:03 pm:
Competition is a MOTHER
- Chicagonk - Friday, Jun 2, 17 @ 4:08 pm:
At least Uber isn’t afraid to drive south of 35th.
- lake county democrat - Friday, Jun 2, 17 @ 4:17 pm:
Couldn’t happen to a nicer industry. 3/4 of the cab rides I’ve taken included one or more of the following: talking on cellphone, reckless driving, stinky vehicles (or worse, cabs so doused in air freshener that your clothes smelled like it for a week or more), TV programs where the mute button didn’t work, or a broken credit card meter. I’ve also seen cabs wait in front of bus stops downtown, not giving a crap if they are slowing down a busload of people so long as it increased their shot at a fare.
Now if only Chicagoans could have the same choice with their public schools.
- What the - Friday, Jun 2, 17 @ 4:26 pm:
To be blunt… who cares??? Uber is a better product. It’s competition leading to innovations leading to better choices for consumers. America!