
2 Taxi Medallions Sell for $1 Million Each - Flemlord
http://cityroom.blogs.nytimes.com/2011/10/20/2-taxi-medallions-sell-for-1-million-each/
======
lancewiggs
It's incredible to see cities that still do this. It means the investment goes
into the medallion, the cabs can be crappy and the drivers don't get a fair
return (the medallion owner does).

There are plenty of examples of cities that have abandoned the monopoly
approach to supply and price of taxis. One example is every city and town
across New Zealand.

Here's what it looks like: The entry price for a new cab is low - a decent car
that passes muster with regular inspections, a clean sheet for the driver and
so on. There are no huge fees.

There are a lot more cabs than before deregulation (2 to 3 times). The
difference is that even after a major event you can still catch a cab. That in
turn means you are less likely to drive, as you know you can get a cab safely,
and so those extra cabs get used.

There are a large range of cab companies - from unmarked 'limos' to branded
Corporate Cabs, large regional players and then a host of cheap and cheerful
players. My favorite right now is Green Cabs, which has a 100% hybrid fleet
and charges less - as they save 30-70% on gasoline versus the v6 powered
monster cars the traditional cab companies have.

You can pick the car you want when exiting an airport, and there are no
monopoly suppliers at airports, though some pay to have better positions.
There is no mandate to take the one in front, and people don't.

Prices are set by each company and registered with the government. They cannot
change them each day, and they have to apply to all cars. It does mean that
some firms are more expensive (nicer cars, better service) and some are
cheaper. There are also some that are better for short trips (low flag fall,
hugh cost per Km/Mile) and others for longer trips.

We have a market based economy for cabbies, and we as consumers and the
cabbies (by the numbers) are much better off. How can anyone, especially Wall
St, credibly argue for free markets when there are mandated monopolies under
their noses? [edited to remove arbitrary attack on right wing]

~~~
fennecfoxen
How can the right wing argue for free markets when there are mandated
monopolies right under their noses? Uhh... The right wing is _NOT_ who's in
charge of New York City. NYC as a whole is firmly in the camp of the left
wing, democrats, Hilary Clinton and friends. It's not even close.

~~~
hristov
The mayor of New York City was a republican when first elected and is now an
independent. He is a billionaire who has always touted his business expertise
as his biggest advantage. So I think the original poster's claim kind of
stands if he just replaces "right wing" with Bloomberg.

Hillary Clinton used to be a senator for the state of New York and now is the
Secretary of State of the US. Neither of these roles have much to do with New
York City government.

~~~
hugh3
Bloomberg is attempting to clip the wings of the taxi industry, but he's
having a hard time of it.

I'm not sure of the details and precisely why the taxi industry has so much
power. (Maybe they have carefully compiled dossiers on the late-night trips of
every politician in the city...)

~~~
wisty
It's nothing to do with left vs. right. It's people with vested interests. For
most people, getting a taxi is a minor annoyance. They don't know what any
candidates' standing on the issue is, and don't even know how the issue
effects them. Why would they consider it when they go to the polls?

But medallion owners care. If someone says they will end the program, they
will vote like crazy against it. They will also tell the drivers (who might
actually stand to gain if they could get their own medallions at a lower cost)
that margins will drop, cheap competitors will move in, safety standards will
drop, and so on.

The same is true of sugar imports, patent laws, retrospective copyright
extensions, and other issues which have a few people who care about it, and a
lot who don't even understand it.

OK, you could say that deregulation is what the right (or libertarians) stands
for. But sometimes it works the other way - regulations and subsidies can
arguably help the broader community while hurting a few special interest
groups.

------
wisty
[http://en.wikipedia.org/wiki/Taxicabs_of_New_York_City#1930s...](http://en.wikipedia.org/wiki/Taxicabs_of_New_York_City#1930s_-
_Medallion_System_Introduced)

>> Only "medallion taxicabs," those painted in distinctive yellow and
regulated by the TLC, are permitted to pick up passengers in response to a
street hail. The TLC also regulates and licenses for-hire vehicles, known as
“car services” or “livery cabs,” which are prohibited from picking up street
hails (although this rule is less often enforced in the boroughs outside
Manhattan)[44] and are supposed to pick up only those customers who have
called the car service's dispatcher and requested a car.

Those $1m medallions are just an iPhone (or mobile web) app away from a crash.
In fact, I think there's already some company that does this.

~~~
pacemkr
Why do I need an app for this? I swear some of these apps are solving problems
that simply don't exist.

I speed dial Eastland Car Service in Brooklyn and call it a night (excuse the
pun.)

    
    
      *Ring*
      "Eastland."
      "Can I have a car to the Moon please?"
      "5 minutes."
      Click.
    

3 minutes later it's waiting for you.

Edit: Funny story, once I was picked up by a brand new Porsche Cayenne. Pretty
good for an $8 cab.

~~~
blhack
>Why do I need an app for this?

You don't, but it makes the entire stack easier for everybody involved.

I don't live in a NYC, I live in Phoenix, but we have our own problems that
necessitate taxicabs (urban sprawl, meaning if I going to beers-with-friends,
I'm paying for a cab).

Sitting in the bar and pressing a button on my phone to hail a cab would be
_awesome_.

The management software on the backend finds the closest 5 available drivers,
lets them bid on me, and whichever one bids the lowest takes me home.

Honestly, you could take it a step further and do AirBNB for car services.
Give me the ability to rate drivers and their cars, and then let drivers bid
on me where _I_ get to choose which one takes me home.

~~~
pacemkr
I've spoken to Eastland drivers -- I've been riding with them for years -- and
thats exactly what they do, minus the complexity. They announce an address
over radio and the closest driver takes it. I don't remember how they enforce
this policy in the company (sorry), but they do and it works.

As a customer, I don't have to muck about in some app, especially while
buzzed, to get a car. I call and get a real person and am done in 5 seconds.
No app can do that.

Admittedly, it works because they have a lot of drivers. I can see how this
becomes a problem when you have many smaller companies and you need to hail
the closest. Thanks for the perspective.

~~~
modeless
Speak for yourself; I find it far faster and easier to open an app and press a
button than call a phone number and try to verbally explain my location to
some guy with a thick accent. When you add in the fact that Uber also takes
care of payment and tip, which is another hassle at the end of the trip, it's
a far better experience.

------
harryh
It would be interesting to see a breakdown of where the money goes when I take
a cab ride. What % goes the the actual guy doing the driving? What % to pay
for the vehicle? What % goes to the amortized cost of the medallion?

------
hncommenter13
You too can own a piece of the taxi medallions in New York (or use them as
collateral for loans, at least). Medallion Financial Corp is publicly traded
(Nasdaq: TAXI).

Company: <http://www.medallionfinancial.com/index.html>

Quote: <http://www.google.com/finance?q=taxi>

~~~
kooshball
Wow they actually pay pretty good dividend.

~~~
salem
For now. Uber won't break their business model alone. They will probably
maintain a premium for quality. But with the precedent set, other 'brands'
will eventually jump in and attempt to duplicate the technology and offer
taxi-like service for similar cost, without the medallions.

~~~
knuthsprotege
By most accounts, Uber has built a great customer experience. However their
technology is not really an exclusive secret sauce. The key in disrupting
taxis will likely be scaling a private operation like Uber to where it costs
as much or less than taxis currently do, at least on average (hard to do), or
to co-opt the current taxi/limo infrastructure to improve the customer's
experience and automate things (also not easy). The technology is not a piece
of cake, but not rocket science either, and is certainly not the key to the
kingdom.

Disclaimer: My startup (RideCell) builds automatic request/dispatch/tracking
technology for fleets.

------
tptacek
Random notes.

The word "medallion" carries an emotional charge (it's archaic), but taxi
medallions aren't all that different from commercial zoning restrictions.

Regardless of why they were introduced, medallions do more than restrict
competition; they also give medallionholders something to lose if they abuse
their license. Were barriers to entry eliminated, unscrupulous companies could
put unsafe cabs on the road and simply fold up shop and reincorporate when
anything bad happened.

Ironically, the sky-high price of NYC medallions is a result of a free-market
spin on taxi licenses: taxi permits in NYC can be freely bought and sold (like
seats on a stock exchange).

Cities have experimented with taxi deregulation and the results have been
mixed; in particular, taxi deregulation has been reported not to improve
driver salaries.

It's also important to remember that street taxi service is not a particularly
efficient market system. In the norms of the taxi market, you cannot in fact
be choosy about what cab picks you up (even if you could, there's virtually no
information available to you when a cab pulls up). It's thus hard to argue
that street taxi competition would be that beneficial to consumers.

On the other hand, because the street taxi market is also characterized by
lots of externalized costs (pollution, traffic, hit-and-run accidents, etc),
one way consumers could conceivably benefit from "competition" among cab
drivers would be to auction permits off, and _increase_ the cost of entry to
the taxi market.

~~~
ericdykstra
The benefit for consumers is that there are enough taxis to go around. If I
need to get somewhere in SF I have these choices:

\- Call in a taxi (long wait time, high chance of a no-show)

\- Hail a taxi (sometimes impossible, wait times can be close to 20 minutes in
some parts of town)

\- Use homobiles (might get picked up by a smoker's car or someone carrying a
dog, wait times can exceed 45 minutes)

\- Use Uber (more expensive, but very low wait time)

Uber is the clear choice almost every time now, but if there were enough taxis
there would be a reason for them to show up when you called, and a reason for
the cab companies to invest in an app as good as Uber's.

~~~
reeses
Go to a hotel. It's the only reliable way to catch a cab in SF. Choose nicer
hotels and if the pickings are still slim, $5 to the doorman will resolve the
problem pretty quickly.

Even less-nice hotels are good for cabs if they have a notable bar. E.g., the
W usually has very quick service, but it's a hike from anywhere good.

After your first few months in SF, you develop a skill for sniffing out cabs.
Good luck outside FiDi, Union Square, Market Street, Fisherman's Wharf and the
feeder streets through North Beach, and the top of Nob Hill. There are a lot
of cabs in the Castro, the Mission, and Cow Hollow, but you need to be
ruthless in leapfrogging other parties.

That said, just use Uber. Don't bother with Cabulous and the like, because the
inbound driver will flake if he's hailed and can drop the meter sooner.

------
nivertech
The price appreciation is artificial. It's disconnected from economic reality.
All it takes for the new Mayor of NYC to decide to issue thousands of new
medallions and the price will fall.

This is what happend in Israel, when government issued many new taxi licenses
and price fell from ~ $75K to ~ $25K.

~~~
hugh3
It's hard to say that's "all it takes" when the actual Mayor of New York City
had a huge fight on his hands just to wrench a tiny amount of power away from
the medallion owners: [http://www.nytimes.com/2011/06/25/nyregion/bloomberg-
plan-to...](http://www.nytimes.com/2011/06/25/nyregion/bloomberg-plan-to-
expand-reach-of-livery-cabs-passes-in-albany.html)

I don't understand it. The taxi industry is a huge and powerful lobby which
manages to twist the law in its favour in just about every first-world city on
Earth. I don't know how they do it, but they do.

~~~
vacri
Melbourne Airport is on the outer fringe of the city and there's always a push
to get public transport to the airport, in the form of light rail - a taxi to
the CBD is north of $30, from memory. The land is there, the public support is
there, but the taxi lobby keeps killing it every time. I've never understood
where they get their power from.

~~~
salem
Now you know. From Medallion holders.

~~~
vacri
They use custom license plates instead of medallions, but the effect is the
same. I think a set of Melbourne taxi plates goes for around $500k these days
- a quick search just found "a bargain - 485k!".

I really don't see where _that much_ value is, beyond blocking potential
competitors from the market.

------
kooshball
With the super high cost of these Medallions, it seems like services like Uber
should be able to compete on price, yet some how they're always more expensive
than cabs.

Does anyone know why that's the case? Do Uber drivers consistently make more
than cab drivers? Where does the money go?

------
salem
The internet is great at killing business models where middlemen make the lion
share of profit. Like Taxi medallion holders. Über and services like it will
destroy their margins eventually, and thus push down the price of medallions.

