
Taxi Medallions, Once a Safe Investment, Now Drag Owners into Debt - Cbasedlifeform
https://www.nytimes.com/2017/09/10/nyregion/new-york-taxi-medallions-uber.html
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bww
The medallion system pretends to regulate the taxi industry, but in actuality
it’s a scheme that allowed people to buy into a monopoly. This unusual
arrangement has insulated the taxi industry from normal market forces at the
expense of pretty much everyone living in or traveling to New York.

Riding in a New York taxi is unpleasant and expensive, but since it was a
monopoly it had no incentive to do better and there were never any real
consequences for failing to provide decent service – even as it became
increasingly aggressive in soliciting outrageous tips and jamming advertising
down its customers throats.

But it’s not a monopoly anymore and that’s a good thing for New York. I won’t
shed a tear for the taxi industry.

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BurningFrog
> it’s a scheme that allowed people to buy into a monopoly

It is a rather ingenious "free market monopoly hybrid" that I can't think of
existing in other fields.

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kristopolous
sure there is ... any centrally allocated system of real or artificially
scarce resources based on market dynamics works this way. For instance, radio
frequencies, water rights, domain names and ticket scalping. In some
municipalities liquor licenses, mobile network providers, broadband, and now
marijuana licenses work this way too.

I wouldn't be surprised if banks, cosmetologists and realtors were like this
too, but I don't know enough about them.

~~~
adamlett
Not to mention the music industry or really any industry whose business model
is enabled by copyright.

~~~
em3rgent0rdr
More broadly: not just copyright but intellectual-property in general, which
is government-granted monopoly protection.

~~~
adamlett
You're right in principle, and I thought about writing the same. But
trademarks are IP too, and I have a hard time seeing how this applies to them.
I also think copyright is far worse than patents for a few reasons. Firstly,
patents do expire, whereas copyright never seem to. Secondly, patents disputes
are mostly between businesses, which mean the forces are roughly equal on
either side. Copyright disputes are sometimes between businesses, but more
often than not, they are between businesses that hold the copyright on one
side, and consumers on the other. And in those cases, the balance of power is
tilted massively in favor of the right’s holders. Which I am guessing goes a
long way to explain why the copyright period keeps getting extended.

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kstrauser
I feel very badly for the people in the article who lost their life savings on
a failed investment.

I also feel very badly for people who went broke on Beanie Babies and tulip
bulbs, for almost precisely the same reasons.

Edit: I'm serious. Medallion prices peaked in 2014, well after the start of
Uber and Lyft's explosion onto the spotlight. It seems like a bad idea for
someone in 2006 to have invested a life's fortune in an arbitrarily limited
commodity, but fiscal insanity to do the same in 2014. Those things were only
ever valuable because the government issued so few of them, not because of
inherent worth. When the demand for them fell below even their meager supply,
they became (relatively) worthless - as predictable.

I wish the people in the article had sold their medallions to corporations in
2014 when they were still worth a mint. Failing to do so was a tragic
miscalculation.

~~~
bsder
> I feel very badly for the people in the article who lost their life savings
> on a failed investment.

San Diego did a good thing with this. They bought back the medallion at some
price relative to what was paid minus some amount for time owned, interest,
etc. Then when they redistributed those bought back medallions, they slightly
increased the medallion count.

That sequence stopped a lot of the problems. Anybody who got caught out by
medallions collapsing could just get out. Anybody who bought in at this point
knew what they were getting into.

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JamesBarney
Actions like this always seems to weird to me.

Given the limited resources of government and the large number of people who
need help, it seems strange to ration that aid on the basis of previously
making a bad financial investment.

~~~
totalZero
The medallions exist in a government-created market. If the government offers
a buy-in to a regulated business, then ceases to regulate the business in the
same way, it's harming its own partners in the regulated industry. Offering to
buy back the rights that it sold, well that's simply a way to reduce this harm
to its partners.

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jpatokal
Good riddance. I was in New York recently, and hailed a taxi for the ride to
EWR instead of Uber/Lyft because my phone's battery was flat. The same ride
that cost me <$50 on the way in on Uber was _over $100_ the way back,
including effectively mandatory 20% tip -- and this was the lowest of the
"suggested" options of 20%, 25% or 30%! And yellow cabs are a lot less
comfortable as well, you're separated from the driver by a Plexiglass cage
with a TV screen bolted on, attempting to blare ads into your face.

I sympathize with cabbies who spent a lot of money on buying a medallion of
their own in the early 2000s and drove their own cab. I have less sympathy for
the guy who invested $2.6 million in 2013.

~~~
yodsanklai
> including effectively mandatory 20% tip -- and this was the lowest of the
> "suggested" options of 20%, 25% or 30%

I moved to NYC just before you could pay by card in the cab. At the time, my
friends told me to give $1 if the ride was less than $10, and $2 if it was
less then $20 and so on. Most of the time, I think I effectively tipped
between 10% and 20%. I kept with that habit after they introduced card
payement with these insane suggested tips. How is it now? are you really
expected to tip that much?

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epc
The default tip on most machines is $0.00, but there's usually three buttons
for 20%, 25% and 30% (or 20, 25 and custom).

I personally tip 20% most of the time, 25% rarely. If I'm paying cash then
typically $1-2.

~~~
em3rgent0rdr
I feel their use of not providing options between 0% and 20% is deliberate to
guilt you into selecting 20% because they know you want to tip something.

~~~
epc
I have absolutely nothing to back me on this other than gut instinct that the
20% is the base because that's what the IRS assumes for NYC metro area
tippable wages. In reality the TLC probably organized a committee of
accountants and medallion holders and spent a year discussing what the three
options would be.

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troydavis
> Sohan Gill once saw his medallion as such a good investment — ”better than a
> house”

If something looks like it's an impossibly good investment, it may actually
be.

It's a shame that US city governments let this happen by retaining the
medallion monopoly system. If cities let the taxi supply adjust to demand, a
taxi license would have been worth the same as any other business license.

~~~
api
They do the same thing with housing. If supply adjusted to demand a starter
house would not be 500k to 1m. Nothing about it costs that much.

~~~
djrogers
Nothing except the land it sits on...

~~~
api
Build vertical.

I'm not saying there are no limits but land shortage is only an issue in city
cores.

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pseingatl
I can't feel too sympathetic for the owners--they've been riding high on the
back of their drivers for years. The drivers, who in fact are their employees,
get no benefits of any kind due to a legal fiction that classifies them as
independent contractors. If the drivers--who are actually operating the taxis
--want to take calls from the street, from dispatch, from Uber, from Lyft, it
should be up to them. After all, if a driver wants to simply park his leased
taxi and not drive, he's free to do so--he's an independent contractor. The
medallion owners got themselves into this mess by becoming vehicle lessors,
not taxi operators. Once upon a time driving a cab was a good job with good
benefits. Now it's not a job at all, which is why immigrants rush to drive.

~~~
taxicabjesus
> due to a legal fiction that classifies them as independent contractors.

The taxi industry pioneered the independent contractor model. They provide the
car, I lease it and do whatever I want with it for the duration of my lease.
The company has very little control over what their drivers do - they would
offer bonuses on certain fares to try to get drivers to go get their
contracted fares in outlying areas...

Renting a car is much cheaper than leasing a taxi, so the only reasonable use
for my leased taxi was to try to make some money with it.

I met a few other taxi drivers who thought that ppl like me, who drove for the
biggest taxi company in Phoenix, were getting screwed by Big Taxi. One of
these drivers was a solo owner-operator. He did everything himself: regulatory
compliance (meter certification and whatever else the department of weights
and measures cares about), advertising, etc. The other guys drove for smaller
companies because they didn't like Big Taxi's corporate culture. I thought the
arrangement with Big Taxi was acceptable.

The series of events which forced my retirement from taxi driving were about 2
years ago, and I haven't kept up with the industry news... One of the guys I
used to drive with gave it up when the owner-operator he leased from three in
the towel. He did two or three trips for 'duper, rapidly realized that was a
waste of his friend's new Prius, and got a 7-day-a-week job at a golf course.
Another guy just went back to taxi driving after a year and a half "working
his ass off" for a funeral home that didn't actually appreciate his efforts.
This one said the call volume is significantly down, but call quality is way
up. He recently got to take a fellow from Phoenix to Tucson - the guy had to
be in federal court by 9am... It was a good fare.

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sschueller
Funny how Uber didn't fix that but instead put new drivers in another Debt.,
Uber sub prime car loans.

~~~
toomuchtodo
"Disruption" doesn't eliminate rent seeking; it only creates a new class of
rent seekers.

~~~
eicossa
Don't know why you're being downvoted. Seems like a nice point to debate
about.

~~~
Analemma_
Because Silicon Valley, of which Hacker News and its commentariat are a
subset, really tries to avoid thinking about the fact that “disruption”
usually just means “meet the new boss, same as the old boss”. Posts which
bring this to the surface cause cognitive dissonance and so have to be greyed
so they can be ignored.

~~~
em3rgent0rdr
but at least the new boss (tens of thousands of $ for a new car loan) is
better than the old boss ( _hundreds_ of thousands of $ for a medallion).

~~~
QAPereo
Give the new boss a few more years...

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kamaal
People are missing the point.

Unless companies like Uber and Lyft can continue to raise billions of VC money
almost forever, they eventually have to turn themselves into a medallion
system eventually.

This or, expect drivers to get paid way below minimum wage to sustain their
current pricing model. Which won't happen.

So medallions are here to stay. Uber and Lyft never had a revenue model apart
from _subsidize-until-competition-dies_. The best case scenario is Uber will
be the new medallion system, the worst case will be older system will be back.

The transportation and logistics industry is one of the worst industry to be
in. Its a capital intensive market with very low profit margins. Minus VC
money Uber and Lyft won't go too far.

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molteanu
I'm reminded of the 2005' Man Push Cart movie about a Pakistani immigrant that
sells coffee from a rented push cart in New York. His only dream is to save
enough to buy his own cart one day.

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chx
This only happened because Uber broke the law, actually undermined the rule of
law and they got away with it. Think of what would happen if every corporation
could pick at will which legislation they ignore.

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firefoxd
Think about this, a business is disrupted to the point where they can't make
any money at all. Yet, no customer is hurt in the process. In fact the
customer is happier because now at least, he has a choice. I would break a
monopolist law for that.

~~~
chx
_Of course_ a lot of customers are hurt in the process, actually the entire
society is: by weakening the rule of law and by rolling back most advances
organized labor made in the last 100+ years. You have been bamboozled by
calling this the "sharing economy".

All you see is a cheap ride -- sponsored by VC money and you gladly take it.

Edit: thanks for the downvotes. Care to educate me where I am wrong?

~~~
geon
Progress is made by breaking laws. The founders of your country committed
treason against England. Strikes used to be illegal. Fredom of assembly,
speech, religion and press used to be severely restricted.

~~~
chx
Those were organized moves by various people not by a company for profit. They
have proven to be advantageous to society. I utterly fail to see what
advantages are made here.

