
For San Francisco Cab Drivers, Once-Treasured Medallions Now a Burden - shill
http://ww2.kqed.org/news/2015/09/24/for-san-francisco-cab-drivers-once-treasured-medallions-now-a-burden
======
panorama
This is an especially poignant story, and it's hard to not feel bad for this
driver.

On the other hand, people face investment risk all the time, i.e. when
franchising a restaurant. When Chipotle or whoever comes in and devours the
fast food market, I wonder if the local struggling burger franchisee asks the
city for help?

I can't speak on behalf of other cities, but anyone who has lived in SF pre-
Uber has no shortage of nightmare stories from taking cabs. For people who had
to wait years and pay enormous costs for their medallions, many taxi drivers
acted smug, entitled, rude, and sometimes even downright shady. I know you
can't say this about _every_ taxi driver, but there's no doubt that the
current ecosystem treats the consumer many orders of magnitude better.

~~~
qq66
People face investment risk all the time, but medallions are a case of a city
setting explicit expectations when selling the medallions and then changing
the terms of the deal post facto. Chipotle devoured a huge chunk of the fast
food market, but the city didn't collect money from McDonalds for a guarantee
that Chipotle wouldn't be allowed to enter.

Notably, this is illegal by federal law for auto manufacturers and other
franchisors: if you promise a 25-mile exclusivity radius and get a franchisee
to build a dealership, you cannot renege on that without being liable for
damages. Interestingly, it's auto manufacturers who lobbied for these laws,
wanting to kickstart a dealership ecosystem and knowing that franchisees would
not invest money in building and marketing dealerships if they did not have
suitable protections. Taxi drivers are a form of franchisee, and they are
asking for similar protections.

One possible solution is for the city to buy back all the extant medallions at
some fixed price, do away with the system, and finance the purchase with an
excise tax on all types of transportation going forward, whether rideshares,
taxis, etc. You can imagine how Uber feels about that, and how they can
mobilize their vast PR capabilities against such a concept.

~~~
SilasX
Hold on -- there's a big difference between "the government reneged on its
promise to keep squatters off your land" vs "no one wants your land anymore".
If they start turning a blind eye to squatters, it's fair to criticize that
government for reneging. If the other city becomes such a vibrant spot that no
one wants to live near you -- different story entirely.

While local governments are arguably failing to require newer livery services
like Uber and Lyft to meet e.g. higher insurance requirements, they are _not_
reneging on the medallion promise, which still gives holders the exclusive
right to pick up street hails. That right is still enforced, and the
Uber/Lyfts of the world are not infringing on it. The situation is much closer
to "street hail pickup rights aren't valuable anymore" than "governments
enable encroachment on the right to pick up street hails".

And before you dismiss "arranged hire" (livery) vs "street hail" as a
technicality, there are very good reasons to put a cap on the latter but not
the former (and otherwise subject the latter to harsher regulation):

\- By necessity, street hails require clogging of "Schelling points" where
drivers can expect to get line-of-sight to a potential fare, and vice versa.
That doesn't happen with livery, where they go only where requested, not
significantly different from a private car.

\- Street hails create a risk of fighting over fairs, livery doesn't.

\- Street hails enable you to pressure naive passersby/tourists to take your
rate, livery requires you to ask for the fare from a central service.

\- Medallion holders get use of the scarce privileges to use taxi stands and
bus-only lanes, livery doesn't.

\- Livery creates a central, auditable record of the event, while street hails
can rip you off without showing up on an audit.

To be sure, Uber/Lyft _are_ flouting even some of the requirements of livery
services ... but the medallion case looks more like "street hails are becoming
obsolete in the information age, so of course they'll lose value".

~~~
mistermann
Everything you say is technically correct, but when something has been
valuable for a _very_ long time _primarily due to government regulation only_
, and then it suddenly loses most of its value in the span of just a few
years, I don't think it's fair for people who _just recently entered the
market after years of waiting_ to suffer all the loss (while their
predecessors, purely by chance, made their investment back many times over).
At the very least this loss should be spread around in some way - Uber and
Lyft drivers could bear some of the load, recent purchasers of medallions
could be bumped to the front of the sales line, etc. Many different options.

I don't want to live in a society where government regulation leads to
financial disaster for individuals, and the society and government response is
"tough luck".

~~~
Camillo
That is really no different from any other investment. If you buy a house, you
are relying on the government to uphold your property rights, otherwise anyone
could come in and take it over. Let's say you buy a house in SF, hoping for a
steady income from rent. Let's say people finally manage to kill the goose
that lays the golden eggs, and the tech industry moves to Utah. You're going
to lose a lot of money, and the government is under no obligation to make you
whole.

I cannot live in a society where profits get concentrated when things go well
and losses get spread around when things don't, because that is not a
sustainable society.

------
matheweis
This isn't unique to San Francisco, the entire industry is in a free fall
nationwide... It is incredible to watch the effects of a little innovation and
(effectively) deregulation.

Chicaco: "Once a sure bet, taxi medallions becoming unsellable"
[https://news.ycombinator.com/item?id=9564478](https://news.ycombinator.com/item?id=9564478)
[http://www.usatoday.com/story/news/2015/05/17/taxi-
medallion...](http://www.usatoday.com/story/news/2015/05/17/taxi-medallion-
values-decline-uber-rideshare/27314735/)

New York: "New York City Taxi Medallion Prices Keep Falling"
[https://news.ycombinator.com/item?id=8856231](https://news.ycombinator.com/item?id=8856231)
[http://www.nytimes.com/2015/01/08/upshot/new-york-city-
taxi-...](http://www.nytimes.com/2015/01/08/upshot/new-york-city-taxi-
medallion-prices-keep-falling-now-down-about-25-percent.html)

Philadelphia: "Philly medallions fetch less than 17% of asking price"
[https://news.ycombinator.com/item?id=9528301](https://news.ycombinator.com/item?id=9528301)
[http://observer.com/2015/05/the-taxi-industry-is-in-total-
co...](http://observer.com/2015/05/the-taxi-industry-is-in-total-collapse/)

~~~
r00fus
Don't forget that the "innovator" is operating illegally in many jurisdictions
and is actively trying to buy protection (i.e., lobbying).

~~~
Scoundreller
In Toronto, it _feels_ like the entire public is on Uber's side. But that
could be good PR as well, since I can only poll my circle of friend-users.

~~~
jonny_eh
Good PR or superior product + service?

~~~
Scoundreller
Possibly all 3. Venture capital can buy a lot of things.

------
rubyn00bie
I had a great professor who specialized in (Economics of) Public Utilities who
made a very important distinction about types of regulation; of which, he said
there are essentially two: economic and "safety and soundness." He said, about
them, economic regulation is strictly* bad. Safety and soundness, is always*
good. Make sure you know which type a regulation is, e.g. Many financial
regulations are for safety and soundness of "the markets"; not economic.

In this case, I think it's key point out, the pain felt is due to economic
regulation. Which was/is putting up barriers for entering and exiting the
market. The government removed competition, it raised prices, and was
generally bad (I.e. State santioned monoplies). When innovation, and change,
eventually moved around those economic barriers it was bad for those protected
by 'em.

I hope going forward any regulations are strictly safety and soundness related
with taxi service. It'll save a lot of pain on all sides.

* If you've taken enough Econ, you'll know strictly and always are going "depend on ..."

~~~
eru
Of course, you can also regulate for more safety than the public needs. (Eg
trains in the rich world are safe enough arguably, but we ask for even more
safety from our planes.)

------
sandworm101
Cab driver /= medallion owner.

For every poor hardworking cab driver who has taken a mortgage out to buy a
medallion, there are a dozen sleazy operators who own piles of them, do not
drive, and have leased them out to cabbies at horrific rates.

~~~
driverdan
> there are a dozen sleazy operators who own piles of them, do not drive, and
> have leased them out to cabbies at horrific rates.

How is that sleazy? If cabbies are willing to pay then it sounds like the
market is working.

~~~
sandworm101
By 'sleazy' I mean this: [http://www.bloomberg.com/features/2015-taxi-
medallion-king/i...](http://www.bloomberg.com/features/2015-taxi-medallion-
king/img/feat_taxi36__05.jpg)

Full article: (heavily discussed on HN a couple weeks ago)
[http://www.bloomberg.com/features/2015-taxi-medallion-
king/](http://www.bloomberg.com/features/2015-taxi-medallion-king/)

Sleazy business operators are those who take advantage of employees, who do
things like allocate risk from the highest earners to the lowest. In taxis,
this is commonly done by charging a fixed rate for a limited asset
(medallion/cab) used in a highly variable business. Individual drivers then
carry the risk rather than the millionaire. Legal, but sleazy.

------
socalnate1
"So many people wanted one that they were hard to get. Drivers used to sit on
a waiting list for more than 10 years. When their names finally came up, the
city charged them $250,000 to buy one."

This is the source of the problem.

------
mehrdada
Let me guess. For every person in this situation, there were probably ten in
his situation a few years back. I suspect if you were to ask him or folks in a
situation similar to him before he got his medallion, they would have
complained about _overregulation_ from the city and definitely wouldn't have
called for more. Perspective.

------
jackvalentine
I feel bad for the guy, but no way I would have made that purchase in 2012.

A basic SWOT analysis would have made me hightail out out of the taxi business
instead of taking on debt to spend $250k committing myself to it.

If he gets his $250k back less the processing fee that feels like justice to
me. He shouldn't have to wait for a buyer to come up though - it should just
automatically be an option now that not regulating Uber seems to have become
policy.

------
JesperRavn
I see a lot of comments suggesting that medallion owners should be
compensated. But the government is not morally obligated to compensate people
whose investments lose money due to changes in regulation. And it would be
prohibitively expensive to do so, because it is a one-sided affair. No one who
made money investing in medallions when they went up in price was arguing
"when we bought medallions, we thought that the number of available medallions
would increase with demand, resulting in a stable price. Instead, prices shot
up, so we feel we should pay back the government some money because their
unexpected policy change benefitted us".

The government might _sometimes_ compensate people, but that would depend on
many factors such as 1) To what extent the person was unable to avoid the
risk, and to what extent they willingly bet on the price of the medallion, and
2) Whether the government did all in its power to keep policies predictable,
given the unpredictable nature of technological change.

------
mkhpalm
It's hard to feel bad for people who chose to invest in rigged markets. Their
frustration should remain squarly with local representation. Show me the
public vote that decided to implement medallions. It's like voting to regulate
the number of restaurants in a given city and leaving half that market to
mcdonalds. (For safety of course) People would laugh at not leaving that up to
supply and demand. The only reason it worked with cabs is because nobody used
to care how it worked keeping it open to political grease balling. Suddenly
people care and now everybody is scrambling trying to explain their positions
on it. And make no doubt about it... Every representative from when it was
implemented to today is responsible for allowing it to continue under their
watch. Once they know you all are going to hold our representitives personally
responsible it will go back to supply and demand faster than anybody can
thrown money at it.

~~~
x5n1
Most, if not all, of the people holding the medallions had nothing to do with
their institution or even maintenance as a monopoly. They are simply
entrepreneurs playing an existing game. A game whose rules have drastically
changed.

~~~
smsm42
That's the risk in the entrepreneurship. And that's exactly why people push
for less restrictive regulations - to reduce this risk coming from regulatory
change. Of course you never can take the risk of change out of
entrepreneurship, but at least you can reduce the risk from regulatory
challenges and changes. What seems to be happening instead is simultaneously
arguing for more regulation and to insulate people from the effects of change
in the regulation - which will only breed more regulation, more people hurt by
it and demand for even more regulation to compensate for it. The only way out
of this vicious circle of regulation to fix regulation is to minimize the
regulation to the minimum necessary to ensure basic equal access to the
market, basic contract enforcement, etc. and then let the market participants
figure it out. That way at least the regulatory component of the risks is
greatly reduced. If you are not forced to pay $250k for the privilege to do
business, there's no way this investment would go bust.

------
Kalium
I don't know what to say. These people made a bet that the future would look
like the past. They were wrong, and it's costing them significantly.

Yet... what are we supposed to do about it?

~~~
rsl7
If the medallion is the only way you can be a taxi, then enforce it. If Lyft
and Uber are legitimate, then lose the medallion and pay this guy back his
$250K.

~~~
randyrand
A medallion is not and never was the only way to be a "taxi."

Yes, there is little difference between street hailing and dispatch these
days. But the law never guaranteed them immunity from dispatch innovation.

No one was scammed. But you can still feel sorry for the guy.

If there is one thing to learn - DIVERSIFY YOUR INVESTMENTS!

~~~
ryanobjc
fair enough, but it's often hard to diversify your time and employment.

How do you diversity your investment in your employer?

~~~
anilgulecha
By renting out the medallion from owners, instead of becoming an owner. So
you'd pay more for the medallion per unit time, but have the freedom of moving
onto other services when they become more popular.

------
danielharan
There are 1800 medallions for all of SF (
[https://www.sfmta.com/services/taxi-
industry/medallions/meda...](https://www.sfmta.com/services/taxi-
industry/medallions/medallion-holders) )

At 250k, buying them back would cost $450 million.

The city could tax the new cabbies on a percentage of each fare, while buying
back medallions over the next few years.

------
derekp7
Here's the thing I don't understand -- if the main attraction (from a customer
point of view) is the app (with everything that comes with it), why haven't
the cab companies got in on the same game? Either put out their own app to
hail rides (and maybe give their cabs a more luxury look to them), or sign up
as Uber/Lyft drivers themselves? Or is there something I'm missing?

~~~
x0x0
in sf, specifically, the taxi companies are utter shit (and evil, to boot).

I badly broke my leg and, because I lived too far from public transportation
to crutch over, had to take taxis to work 4-5 times a week, often both ways.
No taxi company in sf will reliably come, even if you make it clear that you
are going to take a cab at least 4 days a week for most of the next year.
Instead, even when you are in the middle of the mission in a relatively dense
location and going to soma, dispatch simply lies and says "10 to 15 minutes".
A 95% wait time was 3 hours, and a 85% time was 1 hour 15 minutes, for what
should be an approximately 15 minute drive. Even simple requests like calling
a couple minutes before the taxi arrives so I could get down 2 flights of
stairs on crutches without detaining the driver or having the driver leave
couldn't be followed. Needless to say, this causes significant disruption to
your life when you have to leave 90 minutes plus the length of the drive
before going somewhere if you want to have any hope of reliably getting there
on time. And god forbid you have to see your surgeon or something else with a
hard deadline. The taxi services should be ashamed of themselves, and frankly
participated in a violation of my civil rights as done by a quasi-governmental
monopoly. And there are other issues: when I would occasionally have to pay
with a card, the meter would suddenly be broken until you made it clear
drivers had two choices: call the card in or not get paid. A fucking miracle
would occur, and the card reader would start working. The taxi system
literally shat on their customers.

The advantage of uber is simple: when requested, they either come, or say they
won't. That allows you to be an adult and either make alternative arrangements
or tell the other party you'll be late. I used uber even when they cost 2x as
much as a cab just for this reason.

In conclusion, fuck taxis. Also, fuck sf. Only in sf is "a taxi that comes" a
disruptive service.

~~~
norikki
I love the 'But Uber is illegal!' argument. A government protected industry is
forced to face real competition after years of ignoring their customers needs.
Boo Hoo.

~~~
anarazel
Maybe I've a rather european perspective on this: But most of the arguments
around Uber's services not being entirely legal here are around the kind of
driver's license and such. At least in Germany, and I'm fairly certain it's
the same in a couple neigbhouring countries, there's two things to driving a
cab in a city: 1) Special kind of driver's permit that allows you to transport
passengers in a commercial setting. That includes a background check, medical,
and some lower limits how many traffic infractions you can have than a normal
driver's license 2) A permit to drive a cab in a specific city/area.

To me requiring a special kind of driver's license to transport passengers
makes a fair amount of sense iff it's reasonably easy to get.

Uber doesn't require that for UberX, which is the main point of conflict in
many of the trials Uber lost over here.

~~~
douche
At least in the U.S. states that I've lived in, drivers licenses are segmented
by the type of vehicle that you are allowed to drive, rather than the purpose
of driving it. So, for instance, in Maine, there are 3 main tiers:

Class A license - certified to drive tractor-trailer trucks.

Class B license - certification to drive non-tractor trailer multi-axle
vehicles; kind of an amorphous collection, but think buses, large commercial
panel trucks, dump-trucks, highway plow trucks, etc.

Class C license - any kind of normal passenger automobile.

What I find interesting about Uber, and the backlash against it, is that it is
largely just a scaling of under-the-table, unregulated behavior people have
always indulged in. What, really, is the difference between calling up your
circle of friends and acquaintances, asking for a lift somewhere, and throwing
them some cash for gas money and their time, versus using Uber? They are evil
because they enable you to search a wider network then just your personal
circle? Or because they take a cut for providing a reliable, safe, centralized
payment service? Or because they have enabled a market that competes with a
rent-capturing incumbent, and the product they provide is cheaper, more
convenient, and higher quality?

------
brc
Sad story but every economic change for the better creates winners and losers.
You can't regulate away loss without regulating away improvement.

He is better off forgetting the medallion and finding work somewhere else to
repay the loan. He should be able to make a few dollars renting the medallion
in the meantime.

As for the government stepping in - live by the fake government market, die by
the fake government market. I have no sympathy for people who build businesses
behind government firewalls or with government subsidies, and suffer when
those rules change. Because plenty of legitimate businesses have engine to the
wall when the government arbitrarily creates regulations where previously
there were none.

I just don't understand why this guy doesn't start getting uber pickups - if
that is the problem, just join them.

~~~
rhino369
>Sad story but every economic change for the better creates winners and
losers. You can't regulate away loss without regulating away improvement.

The government isn't a third party here. Compensating him isn't just handing
him money for a bad investment. It's compensating him for the fact that SF
scammed him out of a quarter million dollars.

The reason why the government should have to compensate here isn't because he
lost money and pour him. It's because the government sold him a license and
then devalued the license on purpose.

You could argue that the city never promised to prevent all sorts of
transportation competition. And he took that risk knowing that, for example,
people could take limos or whatever. But you at least have to have that
debate. You can't just write it off as a bad investment. The government is the
cause of his loss. Not the market.

>As for the government stepping in - live by the fake government market, die
by the fake government market. I have no sympathy for people who build
businesses behind government firewalls or with government subsidies, and
suffer when those rules change.

You act like cabs were regulated for the cab drivers benefit, but that's not
how or why they were regulated. They were regulated for the benefit of the
city and the rides. The medallion system was the other side of a compromise
between the city and the taxis. The city would regulate pricing and dictate
key parts of their business model, but in exchange they would be protected
from competition. It was a quid pro quo.

IF you think the medallions shouldn't have been sold in the first replace, why
isn't just returning them for the price paid the best solution?

~~~
mratzloff
No, this guy made a bad decision despite plenty of available evidence. Uber
started in San Francisco in 2009. By 2012 it had expanded internationally, so
it couldn't be regarded as a fly-by-night operation. Yet he still chose to
dump a quarter million dollars into a medallion? Well, sorry. He chose poorly.

------
pxue
you know what'd be a good PR move? Uber helping private cab drivers such as
those in the stories out by buying out the medallions and letting them drive
under Uber. Win win.

