Uber and its Destructive Revolution is Bad for the Consumer

Creative destruction is a process through which something new brings about the demise of whatever existed before it.  The process of creative destruction stems from competition and innovation, which drive changes in the market. The success of Netflix is an excellent example of “creative destruction. Netflix has driven the video tape/disc rental business, along with companies like Blockbuster, into extinction. Federal Express created the overnight delivery industry and all but decimated the U.S. Postal Service. Kodak was an iconic American company synonymous with photography. But long entrenched in film manufacture, it did not see the shift to digital photography, one that required no film. But the iconic exemplar of creative destruction was Apple. Its story needs no re telling as it is the stuff of culture and legend. Apple unified the worlds of computers, internet, phone, photography and music by bringing them all together in a single device.  Last, but not last, there probably has not been a better example of creative destruction than the ascendance of Uber.

In New York City, the taxi industry continues to collapse under the forces of Uber’s disruption. Traditional taxi drivers and medallion owners, after being protected from competition by government regulations for many generations, are the obvious losers from the “Uber effect”. Some people believe that consumers are the winners from Uber’s creative destruction in the transportation industry, as we now have more choice, better and faster service, friendlier drivers, cleaner cars, and most importantly — lower prices. Competition is said to breed competition as it forces business to rethink their methods of doing business and to devise methods of doing business in a better and more efficient fashion. At the very least, competition often causes businesses to maximize their responsiveness to consumers. But for competition to be beneficial to the consumer, competition must be fair. In New York City, Uber can hardly be said to have been competing fairly. They burst into the market claiming they were not a transportation company subject to regulation by the New York City Taxi and Limousine Commission (“TLC”), but were a technology company. Their business model was the same as the traditional car services, yet they refused to abide by the rules of the TLC, which all other car services that provide identical services must play by. Compliance with government regulation is very costly, but by the time the TLC got around to regulating Uber, it was too late. The damage had already been done. Uber’s methodology was to break the law, and obtain absolution from the TLC by eventually agreeing to submit to the rules that all other car services in NYC had to play by. Misclassifying its drivers as independent contractors is just another example of how Uber not only continues to take advantage of their drivers, who in my opinion are employees and not independent contractors, but also avoids having to pay the massive costs associated with paying employees (e.g. health insurance, payroll tax, time and a half for overtime, compliance with labor laws). Of course, there are the stories of Uber engaging in a concerted effort of calling other car services for transportation and then eventually cancelling the trip at the last minute, thus upsetting the driver who lost a fare. All this causing the driver to reconsider working with Uber rather than staying with the traditional law abiding traditional car service. And we should not forget about Uber’s massive subsidies of each trip for its drivers and Uber’s obscene subsidization of “sign on bonuses” given to for-hire vehicle drivers to lure them away from the local community car service. With a $65 Billion dollar valuation, Uber can afford to provide subsidies to drivers to lure them away and even to prospective customers to get them to become customers. The list of unfair business practices can go on and on. All of this may seem like legitimate business operations, but in my opinion, it is not only not legitimate but it is destructive to the for-hire vehicle industry in an extremely negative fashion.

Uber did do one good thing in its creative destruction. It caused the for-hire transportation industry to modernize. The yellow taxis had a government backed monopoly for years with no end in sight. As such, there was no incentive for them to modernize or pay more attention to customer service. Car services were forced to modernize by obtaining smartphone applications to allow its customers to book a trip or summons a car, just like one may do with Uber. If a company is forced out of business because it refuses to modernize and adapt to the times, just like Blockbuster and Kodak, then that is the forces of the market that caused their demise. But by engaging in unfair business practices, Uber is forcing the competition out of business for reasons other than market forces. This is patently unfair and should not be condoned.

The City of New York turned its backs on the yellow taxis and is also turning its backs on community car services. Many of these small car services are mom and pop shops, mostly minority owned and operate a legitimate business that have served the transportation needs of the local communities in the outer boroughs of NYC for decades. They provided a service to the City in the 80’s and 90’s in areas of the city that most people did not want to travel to. These small businesses are being forced out of business not just because of Uber’s unfair competition, but also due to the onslaught of new, burdensome and irrational government regulations. The cost to comply with most of the irrational government regulations are so high that small car services cannot afford it. When government regulations serve a genuine purpose, and are rationally related to a legitimate goal, then compliance is required, regardless of the cost. But for the past 6 years, the TLC has been engaging in a pattern of creating new regulations that serve no legitimate goal. Most importantly, government regulation, while sometimes mandatory, is not a market force, but is a governmental requirement.

Most of the governmental leaders of the City of New York have allowed Uber to grow and grow at an unchecked rate. This has caused many unfortunate circumstances. First, it has caused the demise of the yellow taxi industry. Medallions that were worth 1 million dollars a few years ago are worth about half of that now. Even with the plummeting values, medallion owners are still unable to meet their loan obligations because the unchecked rise of Uber has shifted the actions of consumer base from hailing a cab to summonsing a car on demand from Uber. Taxi and car service drivers were once able to make a legitimate and decent living. Now, most can hardly afford to make their car payments. Full time professional drivers are a thing of the past. Uber and the actions and inactions of the TLC have created a market filled with part time unskilled drivers. So what happens to the full time drivers….they become unemployed, unable to pay their bills, unable to feed their families and eventually bankrupt.

I believe in the free market. So if all of this destruction was caused by market forces, then I would have no problem. But when the government turns its back on long standing, law abiding businesses and allows a super-rich and super powerful entity like Uber to operate outside of the law, then the end result will be another government backed monopoly…..all in the form of Uber. So back to the consumer, because that is really what matters here. Right now, the consumer is happy. No more stinky yellow cabs. No need to wait for a car service to pick you up. No need to be concerned about costs because the cost of an Uber trip is the same as a trip with a yellow cab or a traditional car service. But the public usually does not realize the inherent problem until it is too late….and that problem is that non-market forces in the form of unfair completion from Uber along with irrational and needless regulations from the TLC are all combining to cause all other car services to go out of business and make the yellow taxi extinct. So the typical question from the consumer is this….what is wrong with that ultimate scenario since Uber will be left standing the consumer can always use Uber’s app to get transportation? The problem is that the end game of Uber’s creative revolution is a destructive revolution where only one company is left standing….and when Uber is left to be the only company in town, they will be free to jack up their prices because there will be no competition to keep their prices in check. It also reduces their willingness to serve the public interest or provide top customer service. All of this surely make us all worse off. This is why the government is supposed to prevent monopolies from being created or from continuing to operate. Since the late 1800’s monopolies have been largely outlawed. But in the meantime, Uber continues to make massive “donations” to politicians’ campaigns, all to get them the lawmaker to see it the “Uber way”.    

If the history of transportation in NYC has taught us anything it has taught that we need to move away from the ubiquitous crony capitalism that protects well-organized, well-funded, concentrated companies like Uber. In the long run, it will only lead us down the same vicious cycle of high prices and poor service. Think about what I am saying here. Look at the dynamics of the industry. Take a thoughtful view of the future and decide if creating another government created and government backed monopoly is in the best interest of the public. I think you know that my opinion is a resounding “NO”.

The Uber Monopoly- Don't Let It Happen

It is obvious (or should be) that Uber's long term objective is to create a monopoly and to undermine all traditional legal/regulatory obstacles to exploiting anti-competitive market power. Again, please realize that Uber's game plan is to hold out until they have a strong enough market dominance, so that many of the risks go away, and the IPO price is inflated by all the monopoly power it can readily exploit....and if Uber gets to monopoly power, then like any other robust monopoly, it will be able to make big profits by raising prices — especially surge prices — and ultimately charging customers more than they were paying before Uber came along.

It is true that Uber really has figured out ways to make the for-hire transportation market more efficient, but that is not the point. You have to look at the bigger picture. In economics jargon, there is something known as a network effect. It’s the reason that eBay has a stranglehold over the collectibles market and Craigslist dominates online classified ads. Sellers list their goods on these markets because they have the most buyers; buyers go to them because they offer the largest selection. Once a dominant company is established in a two-sided market like this, it’s hard for anyone else to create a viable competitor. This is why Uber is offering lavish subsidies to both drivers and passengers to try to become the dominant operator in as many markets as possible.

Competition has almost always driven p[rices down. Competition is healthy and good for the consumer. But an Uber-dominated market will prevent a competitive market, leaving much room and the amity to raise for fares, further decrease competition and create massive profits for Uber shareholders.

As a consumer, you should consider these things because it is you...the consumer...that is the one who will be crying when Uber is the only game in town and they jack prices up so high that you are once again, forced to take the subway.....and the driver, it is you what is making Uber a monopoly. They can't exist right now without you. But you can exist without them. You can go back to the traditional car service, livery base or black car company you came from and help prevent Uber dominance. By continuing to driver for Uber, all Uber drivers are creating their own demise. Once the self-driving vehicle comes out, you will all be unemployed. All of your traditional companies (taxis and car services alike) will be gone and you will have to find a new profession. You will be kicked to the curb in a few years. Why do you think Uber is investing so heavily in the self-driving vehicle market. Because they are planning on replacing you. Don't let them do this. Get out now.

So here it is in a nutshell.......

1. Consumers- stop using Uber because your continued use will lead to an Uber monopoly which will surely driver prices up sky high, which you will ultimately pay and be unhappy about it

2. Drivers- stop driving for Uber as you are allowing Uber to render you useless to them. There will be no Uber drivers in a few years because they will not need you anymore. Your old car service affiliations will be done because you enabled Uber to get rid of the competition

3. For-Hire Vehicle Industry Stakeholders- get involved, call your politicians, call your trade organizations, take a stand, yell out loud, help others get involved, do whatever you can to stay alive and fight the good fight. To do anything less will surely lead to your demise.

Uber and the Demise of the Taxi industry and the Dawn of the Tyranny

New York state took over a small credit union in September of this year because of the “unsafe and unsound conditions” at the institution. The real reason for this is Uber. One third of Montauk Credit Union’s portfolio of $170 million in outstanding loans were to taxicab operators, all of which have been struggling to pay their loans to their lenders.

Since the dawn of the Hass Act, a taxi medallion was likely the best investment in the world. Enter Uber and the technological revolution they brought to the for-hire vehicle industry in New York City. Taxicab operators typically take out loans for medallions, the city-issued licenses that they need to operate. Yellow taxi medallions were always a hot commodity in New York City because the city always severely limited how many licenses it issues, thus driving up the demand for them and their value. Just two years ago or so, a single license could sell for as much as $1.3 million.

When Uber entered the marketplace, they exploited loopholes in the system by skirting existing rules and regulations or by simply ignoring them. By the time the TLC got around to bringing them under their regulatory umbrella, Uber was already entrenched in the market. The loopholes exploited by Uber let the company’s fleet of drivers grow over the past five years to about 60,000 drivers in New York City. Keep in mind that there are only 13,237 licensed yellow cabs in the city. 

As Uber’s estimated value has skyrocketed to an estimated $65 billion in the past few years, the value of the city's taxi medallions has shrunk from $1.3 million to less than $700,000. The plummeting value of taxi medallions doesn't just hurt taxi owners. Much like how the housing bust in 2008 shook the home loan industry, banks across the country that specialize in medallion loans are now taking a massive hit. With the crash in prices, many loans are now underwater, many borrowers are in default and lenders are reluctant to continue to refinance as the borrowers struggle to make payments.

A group of Credit Unions have sued New York City and the Taxi and Limousine Commission for allowing Uber to operate, saying the company is destroying their businesses and threatening their livelihoods. The situation will get worse before it gets better for taxi owners and their lenders. Financial institutions with large exposures to the taxi medallion industry have had to take appropriate steps to measure and mitigate this increasing credit risk. As Uber and the other so called “ride-sharing companies” have overtaken the on demand transportation market in New York City, medallion prices will to continue to decline. The end result is still unknown. No one, except a few people, would have predicted the housing market crash in 2008 and look what long term ripple effects that caused. While the Taxi industry is not quite as large as the housing industry, the fact remains that the “Uber effect” has not only decimated the taxi industry in New York City, but is harming, and sometimes destroying, the credit unions that loaned taxi owners money to purchase the medallions in the first place.

I don’t blame Uber for this. I blame the City of New York. The allowed Uber to operate outside of the law, allowed them to proliferate over time and caused the value of the hottest commodity in town (the taxi medallion) to plummet…and that decline will only continue and the ripple effects will be harmful not to just the taxi owners and their lenders, but to the public. If things continue as they are, there will likely come a time when Uber is the only game in town….and when they are, they will do as all monopolies do, they will exert their power and influence in a manner that is detrimental to the interest of the riding public. The only difference between Uber and Standard Oil is that once the medallion industry is decimated and the car services are no longer in business, there is no going back to the “old days”. A theoretical break up of Uber, if it were to become an illegal monopoly, would not make the price of the yellow medallions rise, will not prompt people to go out and purchase medallion and will not prompt lender to loan money to those who may seek to purchase a medallion. Hence, any theoretical break of the Uber Monopoly that is set to occur in the future will not increase competition because there will be no competition.

And remember, Uber is not the Salvation Army. They are not here to save the world. They are here to gather your information and data for their own purposes. Uber is not just a ride sharing company. Look further into the future, remember George Orwell’s 1984 and consider what happens when an almighty entity controls all the data on the comings and goings of the citizens of New York City. The consolidation of power has been a danger since the dawn of time. Our country was founded upon the principle that the consolidation of power is bad and leads to tyranny. Where do you believe Uber is headed? Think about It and Draw your own conclusions. 

Independent Contractor Model Is Under Siege and Must Be Defended

Independent contractor misclassification lawsuits have surged against companies of all sizes and industries. The laws governing whether a worker should be classified as an employee or independent contractor are riddled with grey areas, potentially exposing employers to costly litigation, including multiple and punitive damages.

With the IRS, DOL, NLRB and state governments continuing to closely scrutinize the independent contractor model, individual, collective and class action worker misclassification lawsuits will only continue to climb.

In light of the growing litigation in this area, companies must develop effective strategies to not defend against these lawsuits, but to prevent them as best as possible. My firm has been successful in crafting effective settlement strategies to minimize the time and expense of litigation. Further and most importantly, we have been able to guide employers in modifying business operations and establishing valid independent contractor models that will assist them in withstanding heightened scrutiny and minimize the likelihood of litigation.

Our firm provides guidance to employment counsel and to management directly for not only risk management purposes, but also in defending litigation matters and negotiating settlements of litigation alleging employer misclassification of independent contractors. The latest trends in individual, collective and class action worker misclassification lawsuits have changed over the years and the scrutiny being placed on small and large companies is more stringent than ever. We counsel our clients on creating and maintaining the best practices for independent contractor models that will help employers minimize or withstand litigation.

The key issues every employer must consider is:

• What are the bases for the recent wave of independent contractor individual, collective and class action misclassification lawsuits—and what defenses are available to employers?

• What litigation and settlement strategies have proven effective for counsel defending worker misclassification lawsuits?

• How can employers establish, defend and maintain independent contractor models amid the increased government and worker scrutiny in this area?

We are happy to meet with your organization to answer your questions about these important issues directly.

Automakers vs. Uber- Now That’s One Hell Of A Fight I Would Love To See

Car makers are rushing to invest in mobility services to capture the massive revenue from selling both vehicles and creating their own on-demand service in order to carve out a stake in the industry now dominated by Uber.

For one, Tesla seems to see the potential earnings as they think ride-sharing/hailing is the future of mass-market mobility. General Motors has made one of the biggest bet, investing $500 million in Lyft in January. GM's upcoming electric Chevrolet Bolt was designed expressly with car sharing in mind. Tesla lacks the deep pockets of GM all while the so called "ride-share service" companies like Uber and Lyft burn billions of dollars in price wars to secure regional dominance (or as I call it, "monopoly power" to dominate eventually the industry and raise prices to massive levels).

Tesla recently announced that all of its vehicles going forward will (eventually) have full self-driving capabilities. But buried in fine print of is website is a warning to customers who may be seeing dollar signs in Tesla’s new driverless upgrades (which won’t be activated for a few years). “Please note also that using a self-driving Tesla for car sharing and ride hailing for friends and family is fine, but doing so for revenue purposes will only be permissible on the Tesla Network, details of which will be released next year” This means that you will be able to use a Tesla, but not on the Uber network. Too bad for Uber, but I refuse to shed a tear for them. But back to the Tesla’s Network. So now Tesla is going one step further by combining the vehicle and the app network. Very interesting. Many are getting in on the action and rightly so. It’s a great industry that combines technology and transportation in a way never imagined a decade ago.

Seven years ago, just before Uber opened its business, the company was valued at exactly zero dollars. Today, it is worth around $68 billion. But it is not inconceivable that Uber, as mighty as it currently appears, could one-day return to its modest origins, worth nothing.  Some believe that the day when driverless cars become commonplace in America is largely a game of close your eyes and throw a dart at the board. I believe it will happen in two years or so while others suggest closer to 5 years. Given how many companies are working on this technology, and how quickly they are overcoming once seemingly immovable obstacles from safety concerns to legislation, the timetable is only shrinking. In some countries, these vehicles are already here. In Singapore a company called NuTonomy launched a fleet of self-driving taxis.

When these self-driving cars do become the gold standard and the rule rather than the exception, a new form of transportation in America will take place on a proportion no one could ever imagine. When that happens, society as a whole is also going to change First, very few people will actually own a car. Rather, most people will likely subscribe to them, or rent their usage, in the same way that we currently rent music or movies, which we enjoy in our living rooms but technically live in a far-off digital cloud. We will use apps or services that connect us with these cars, not too dissimilar from the way Uber works today. When this happens, however, our fundamental notion of vehicles—those things with a steering wheel and five seats—will change drastically. Cars will become experiences. Most importantly, Uber drivers WILL be out of business because Uber will no longer need drivers. This is why I keep saying to Uber drivers that they must wake up as they are creating their own demise and leading themselves down the ranks of the unemployed.

There are other benefits to no longer having to own a car. Parking, and all the headaches that come with trying to find a spot, or getting a ticket for not feeding the meter, will all vanish. Driveways in homes could become larger gardens. Speeding tickets and D.U.I.s could be eradicated. But if you think about it, Uber isn’t actually connecting passengers to cars. Instead, it is really connecting passengers to drivers. When those drivers are replaced by computers, Uber is a less important, and less valuable, middle man. The opportunity is open to a lot of other companies who are trying to not be erased by the approaching reality of autonomous vehicles. Everyone knows what happened to Polaroid when they failed to look ahead and keep up with technological changes.

This game change is emblematic of a far greater pattern spreading through virtually every industry. In the past, car manufactures competed with car manufactures. Now, in the same way that The New York Times competes with Instagram and Facebook for your time, car manufactures are contending with a slew of different kinds of companies from different industries. Uber is eager to hold on to its position and is currently working on a technology that augments vehicles, and is testing its own fleet of self-driving vehicles. Meanwhile, its competitors in this new, amorphous space include other start-up ventures; existing car manufactures (Ford, Tesla, BMW, Mercedes, among dozens of others); tech companies (Apple and Google); and several universities around the world. There is a vision of the world where every car company and every tech company has a version of Uber for driverless vehicles.

Driverless cars will change cities around America. It is going to be similar to 1999 when there was one Napster, and then a few years later there were 50 competitors. Uber is quite vulnerable because if Google doesn't beat them to the punch, they could be eradicated by Ford or Apple or one of those small start-ups no one has ever heard of.

If the car companies all create cars that can drive by themselves, what role does Uber or Lyft play in that transaction? They could continue to offer to connect cars to passengers, but in doing so, they will likely want a cut of the revenues that the carmaker gets from each transaction. It is unlikely that Google or Apple want to give Uber 20 percent of their profits. Neither would Elon Musk at Tesla, nor Mercedes or any other company for that matter. They will all simply want to offer their own app with their own proprietary service or subscription.

There are plenty of pros and cons that will come with the driverless-car age. Currently, over one million people die per year in motor vehicle accidents. Driverless-car may make auto related deaths an anomaly. Going to the DMV would be a thing of the past. Pollution would drop dramatically. Most of all, think of all that wasted time with your hands spent on the wheel.

Then there are the inevitable negatives. Hackers will surely try to gain access to cars and steer vehicles off roads, or worse, into other people. Privacy standards could be eroded even further in a society where corporations can track your habits through your smartphone clicks, but will now also have more detailed information about where you go. And maybe more frightening, an extraordinary number of jobs will be lost to these autonomous vehicles. Then there are the ancillary trades that support all of the people who earn a living by driving, including gas-station attendants, meter maids, Drivers’-Ed teachers, valets, highway patrol, delivery drivers, and—yes—people who earn a living driving for Uber. Anyone who drives a vehicle for a living will see their jobs disappear.

Uber already has an incredibly valuable advantage over Ford or Tesla because of its treasure trove of data, but, who knows how long that will last. It seems that Uber is surely to face the classic dilemma that stifles all big businesses as technology starts to attack them from the future: they must change in a way that eats away their core business, or someone else will. There are some businesses that can adapt quickly enough to the changes, and survive, and others that can’t. When Steve Jobs from Apple released the iPhone in 2007 he was fully aware that it would kill the iPod, which was a core part of Apple’s revenue. In doing so, he was able to thrust Apple forward to become the most valued company in the world. But then there are those that were not able to adapt, like Polaroid. While the camera-maker was once valued at billions of dollars, and fully aware that its business was about to be decimated by digital cameras, executives simply couldn’t adapt. That is the key in my mind ladies and gentlemen. Businesses in decline now or who are worried about the future must think outside the box and most of all figure out a way to overcome and adapt.  

Uber Drivers- Get Ready to Be Unemployed

Uber is preparing to dump its drivers as the self-driving vehicle is not so far away. A few years ago, when I told people that self-driving cars was the new technology, the wave of the future and likely the next biggest thing since the advent of the internet, I was looked at like I had 4 heads. Now, Telsa, who is at the forefront of developing the self-driving vehicle, has announced that all Tesla cars being produced now have full self-driving hardware

Self-driving vehicles will play a crucial role in not only improving transportation safety, but in revolutionizing how people seek and utilize transportation. Full autonomy will enable a Tesla to be substantially safer than a human driver, lower the financial cost of transportation for those who own a car and provide low-cost on-demand mobility for those who do not.

Tesla’s already doing its own early testing which shows vehicles with fully autonomous capabilities navigating city and freeway streets with apparent ease. Tesla has been criticized for rolling out autonomous features before the technology is fully proven, but then again, when was the last time a disruptor to any industry was not criticized. Just like Uber, Tesla learns a great deal of information from its computers and full fleet of vehicles. Every Telsa car, even those in customers’ hands, collects data and sends it back to the company’s headquarters, where engineers analyze and refine the system. The same applies for Uber and the millions of people that use its app.

The CEO of Uber says self-driving cars won’t replace human drivers in the near term. This is surely a bluff to keep Uber drivers from leaving its flock before the next big shift in transportation takes place. We all know that the next big shift is the self-driving vehicle. Once this is fully tested, accepted and approved, Uber will kick its drivers to the curb and by then. Of course, Kalanick, the CEO of Uber, has been less vocal about how Uber’s self-driving ambitions will affect its fleet of urban drivers. Of course Uber has been less than vocal. Do you tell your staff of workers that they are about to be fired and replaced with robots before the robots actually arrive? Never. You wait till the robots arrive and then you fire everyone. Whether Uber makes deals in the future with automakers, rents self-driving vehicles or creates some other new business model in the transportation industry, the fact remains that Uber’s drivers do not have long term security with Uber.

So the question remains…why don’t Uber drivers open their eyes and realize their days are numbered. Why stay with a company that is planning, in the short term, to replace you? Why stay with a company that treat you like a commodity, rather than a person who provides a valuable service? Uber helped decimate much of the for-hire vehicle industry in New York City and the Uber drivers that stay with Uber are only furthering the demise of long-standing car service and dispatch companies. Many may say, well those long standing companies should have invested in technology like Uber and should have catered more to the needs and desires of their customers and should not complain now. Be that as it may, the reality is that once the self-driving vehicle arrives, Uber drivers will be knocked off in drives and will be seeking affiliations once again with their old dispatch bases.

Many of the smaller dispatch bases in the outer boroughs of NYC are already being decimated or are closing down. The bigger ones are holding their own, but why would a Uber driver who, eventually, is going to go back to affiliate with once of their old dispatch bases help to contribute to their downfall. Why not leave Uber now and go to a dispatch base that values your service as a provider of transportation. Yes, Uber is a means for drivers to make extra money and to have an alternative to the way business has been done in the for-hire vehicle industry in NYC for the past 30 years. But, take a look down the road, read the news and open your eyes. Uber is not the salvation army and is not going to keep one driver for one second longer than they have to. Uber drivers should not just think about today, but think about the future of transportation in NYC and their own future with a company that is actively plotting to get rid of you.

Deregulation off the FHV Industry in NYC?????

It has now come to pass that one company is capable of dominating a whole industry. You know the name of the company. But let u go back to the Haas Act of 1937 which instituted the “medallion system” to regulate the number of taxi operators. The yellow taxi system became a government backed monopoly that for decades reaped millions and millions of dollars upon the City of New York and the medallion holders in general. The Taxi industry successfully lobbied to limit the number of medallions for their own benefit.  The taxi companies used their influence to sway politicians in favor of their monopoly. For so many years, an investment in the medallion was a better investment that almost anything in the world.  Ironically, this monopoly left the taxi companies with no incentive to innovate or improve their services, rendering them vulnerable to something they never saw coming……..market forces.  Coddled by this lack of competition, taxi operators have made insufficient effort to be more responsive to customers, who were often frustrated by the difficulty of getting a taxicab, among other issues. So while the taxi medallion owners counted their money and laughed at those on the outside who could not get in, the City of New York became complicit in the demise of the industry. They did nothing to innovate either. No incentive to innovate or think outside the box. This caused an effect that no one could imagine.  A monopoly is essentially concentrated economic power in the hands of a few. Any concentrated power in the hands of a few is antithetical to a free market and democratic society.

The community based car services were born out of the rule mandating that the radios be taken out of the taxis and the general rule that taxis are prohibited from accepting pre-arranged transportation. So for decades, the taxis accepted street hails and the car services (and black car radio groups) provided transportation by pre arrangement. The lines were very clear and all had prospered. Then came the insurgents (the “disruptors”). All of a sudden, the lines between street hail and pre-arrangement became blurred. The Mayor of New York City is quite tech savvy and he was all in favor of the disruptors and their new “toy”. Allowing them to operate outside of the law was a governmental abuse of power and abdication of its responsibility to its citizens. All of a sudden, the disruptors were allowed to accept street hails and prearrangement, which took a significant chunk of business away from both the taxis and the car services. While the taxis and car services played by the rules and were smacked by the regulators when they violated the rules, the disruptors were permitted to operate unlawfully and with impunity.

The City of New York used the taxi monopoly for its own benefit for decades and now has essentially abandoned the transitional for hire vehicle industry. When the “disruptors” came to town, some were not daunted and did not see the need to innovate. Also, they did not see nor could they comprehend that an evil empire had come to town. This was a huge mistake. The black car industry enabled the disruptors and the TLC allowed them to operate outside of the law for so long that by the time everyone woke up, it was too late.

We are now at the point where most in the for hire vehicle industry have begun to lose faith that anyone or anything can help them. By its very nature, monopolies tend to arrest progress. In the beginning, when the taxis reigned supreme, the City of New York standardized the prices and the products, but in the process, in order to retain that standard, the City arrested efficiency and progress…and that itself stagnated the industry and prevented it from growing and innovating.

Very often, a business grows in efficiency as it grows from a small business to a large business; but there is a unit of greatest efficiency in every business that may be too large to be efficient. The profits of a monopoly are not due in the main to efficiency, but are due to the control of the market. The ratio of profit ordinarily is in direct relation to the ratio of control. Where a company has a high degree of control, the profits are great; where they had a small degree of control, the profits are small.

When is the City of New York going to learn the fact that the effect of a monopoly is the arresting of progress and the arresting of advance in industry. It should have learned this with the taxi industry, but now it is doing the same thing with the “disruptors”. The City of New York is perpetuating another monopoly. The City and its regulatory regime is on the wrong path right now and unless they change course, a great for hire transportation infrastructure for the future is unattainable.

A practice is unreasonable if it tends to destroy competition. And we know now what the main practices are which have been pursued by the “disruptors” to secure the monopoly-control of our industry. They are cut-throat competition, espionage, doing business as fake independents, the making of exclusive contracts, as well as many other methods and practices of unfair trade which have been pursued not for the purpose of conducting a business in competition with others, but for the purpose of killing competitors. Again, we have found grave defects in our regulatory machinery.

Personally, I would like to restore competition and do away with the conditions that make for monopoly. But the regulators of the City’s taxi and limousine industry are blinded. The “disruptors” have a lack of respect not only for the law, our City and our institutions, but also our citizens themselves. And yet, with this great demand for on demand transportation staring us in the face, we need to be calling upon everyone we can to do everything we can to bring the “disruptors” back to a respect for law and to convince the regulators to deregulate the industry. This is to prevent another monopoly and for the benefit of all. We are seeing that if we follow the current path, a few rich and powerful people can defy the law; that their power is so great that there will be private monopoly and we cannot prevent it; and that, therefore, if such is the case, we must content ourselves with seeking to mitigate the evil. Respect for the law must be supreme, but the great question involves question more fundamental. For generations immigrants came to this City seeking and obtaining the job of a taxi driver. This used to act as a gateway to the American Dream and the ownership of a medallion was the gateway to riches. Now, it’s the gateway to hell and destruction.

If this opportunity is no longer available and this is no longer the land of opportunity, then what does America stands for. Our whole regulatory system of the industry is for naught. What does democracy involve? Not merely political and religious liberty, but industrial liberty also. Is not business today one of the greatest part of life? What America needs is not the combination of power in the hands of a few, but to keep open the path of opportunity to enable the industry to do for themselves. The current regulatory regime is not merely a capitalistic control of the industry. It is the worst form of capitalistic control. It is absentee capitalistic control. The responsibility and sensibility of regulation is lacking. If there had been responsibility of regulation in the industry, then we would all not be witnessing destruction of the minority based community car services in all 5 boroughs of NYC. 

Uber- the User of the Human Race

When I said a few years ago (3 to be more exact) that there would be something in the near future called the driverless vehicle, people looked at me as if I was crazy. I then reminded them of a time in history, not too long ago, when there was no cable TV and the thought of paying to watch TV was laughable. Also, there was a time when the idea of a cordless telephone, much less a pocket sized computer, would have seemed like a crazy idea. But any fan of technology will always remember Moore's Law. Gordon Moore was a founder of Intel Corp and he extrapolated that the computing would dramatically increase in power, and decrease in relative cost, at an exponential pace. Moore’s observation transformed computing from a rare and expensive venture into a pervasive and affordable necessity. All of the modern computing technology we know and enjoy sprang from the foundation laid by Moore’s Law. From the Internet itself, to social media and modern data analytics, all these innovations stem directly from Moore and his findings. So with technology moving and improving at an exponential pace every other year, why would it be so far fetched to have a driverless car. Now, we all know it is not so far fetched.

Also, when Uber came around and blindsided everyone, many sat around thinking that Uber had a great idea and would be a great addition to our transportation needs. I told people "you don't get it". Uber is not just out to conquer the for-hire transportation market. They are out to revolutionize the world. Now keep in mind that I did not say they are going to revolutionize the world in a good way. Their innovation is amazing. But you have to look long term, just as Uber is and has been doing since day #1.

First and foremost is that Uber drivers, all of which thought Uber was a great way to make extra money or a great alternative to providing traditional taxi or car and limousine service. They all flocked to Uber and some still do. Unfortunately, they only look at what is in front of them. New articles are slowly popping up when an Uber driver aptly explains that they now understand that Uber is literally using its drivers....and I don't mean using as a means to make money. I mean using as a placeholder until the new technology comes out (self-driving vehicles) which will ultimately displace all the Uber driver who thought they found gold in Uber....Yes, it was gold, but fools gold.

Little by little, Uber drivers are realizing that by working with Uber, they are continuing to contribute to their own demise. They all should either start looking for another profession or go back to the car services and taxi companies they were affiliated with before Uber hit the market. It is not too late to go back and prevent Uber from destroying the world as we know it. Uber is an evil empire and is not out to dave the world, but is out to dominate the world in so many ways. Combine the inventions of the vehicle (internal combustion engine and assembly line) with computers and the light bulb and you won't even come close to the revolution that Uber is trying to create.

The problem is not so much that Uber is the evil empire, unlike Thomas Edison, who was truly a benevolent inventor, but that I do not believe the world is prepared to deal with all the changes to life as we know it, the global economy and human interactions. These are just a few things. But don't take my word for it.....Do you own research and think about it for just little bit and you may see that Uber is much more than it appears and all of what is seen is not good......so if what you see is not so good then what will happen next.

Remember, there are a number of extremely smart people who have investment mule-millions and billions of dollars into a company that has yet to turn a profit. Is it because all these people are dumb? Is the valuation of over $60,000,000,000,00 unrealistic? The people behind Uber, who have invested mega amount of money, all know something that we don't. They all know that Uber may very well be the next Apple, the most valuable company in the world. Steve Jobs was an innovator with no comparison and Apple did wonders to change the world...but Uber is a different story. Again, think about it, do you own research and come to your own conclusions.

Now that we are at the end of my ramblings, back to my main point. Uber drivers should leave Uber and stop contributing to their own demise.

Permissionless Innovation in the FHV Industry in NYC

While Uber may have come up with a fantastic app, their business model of dispatch (i.e. closest car) is hardly novel. Their superior technology allowed them to hit the industry hard when its back was turned. The problem is that the main players in the industry are now, after having been hit hard, looking for solutions in the traditional mode. The problem is that we are well past the traditional means of solving issues in the industry.

The days of having the leaders of the industry sit down and work things out are over. If Uber showed us anything it surely was that new updated ways of thinking are necessary in this day in age and at this stage of the game.

Immediate, massive Uber adoption allowed them to flout the laws/regulations all while gaining PR at an unprecedented pace….and remember….all PR is good PR. .” In a short period of time, enough people started using the regulation-flouting service which made it both impractical and politically unpopular to crack down upon. Ask NYC Mayor Deblasio who he supported when he was the Public Advocate. When it came time to stand up to Uber, our Mayor backed off.

When confronted with legal obstacles, such as tickets for operating illegally at Newark Airport, Uber utilized its massive checkbook to circumvent any problems by paying the fines incurred by its drivers and fighting their court cases. In the meantime, the company lobbies politicians, and of course, their massive pockets go a long way to obtaining time with leading politicians who are all tool happy to take their money to help in their re-election campaign……and in the meantime, most of the public are oblivious as to what Uber is doing….doing to its drivers, doing to the industry, doing to their own safety….but in the end, then win over unwitting consumer. In every instance thus far the NYC Taxi and Limousine Commission relented and brought Uber’s practices within the four corners of the law.

In nearly every city it’s entered, Uber’s strategy has succeeded with far-reaching consequences. By muscling into urban center after urban center, Uber hasn’t just changed how people work and get around. It’s transformed what it means to be a consumer..

Uber’s strategy is called “permissionless innovation”. It is the idea that we should make just about everything legal and let the individualized choices of consumers dictate the shape of society…..and when people get hurt, lawyers, laws and lawsuits can try to retroactively sort things out. I believe that experimentation and innovation with new technologies should generally be encouraged, but not without any limitation. Before Uber came along, the for-hire vehicle industry in NYC was vibrant. Yes, the yellow taxis needed to become more responsive to the needs of consumers and the car services needed a bit of a kick in the butt to get them to innovate a bit, but at least they played by the rules. Unless a compelling case can be made that a new invention will not bring serious harm to society, innovation should not be allowed to continue unabated and just wait to address the problems when they occur at a later point in time.

Generally, permissionless innovation means a start-up is allowed to break the law so they can give consumers what they want. Regulation sure shackles entrepreneurialism, but regulation is mostly in place for a reason. It is the job of the government to look after the health, safety and welfare of its citizens…and hopefully to regulate in a fair manner. It is not laws that corrupt people, such as politicians. It is money that corrupts people. Money corrupts politicians, eventually corrupts the process and in the end causes more harm than good.

What is Uber today if not the biggest lawbreaker in the world. Uber’s lawbreaking is unprecedented in the transportation industry. Uber’s open defiance of municipal law sets it apart from others Permissionless innovation is just another way of saying “it’s easier to ask forgiveness than permission”…and for every rule that Uber breaks, the NYC TLC seems all too happy to forgive Uber. Permissionless innovation suggests that the correct order for dramatic technological changes should be first harm, then fix. Perhaps the resolution is to totally deregulate and let the consumer make their choice.

Uber pitted regulators in NYC between the existing regulatory system and the desire of thousands of consumers to utilize a new service. Some permissionless innovation proponents equate consumer choice with democracy. Every purchase of the services of a Uber driver is akin to a vote for a product, it service and its business model. Yet, what is good for consumers is not always good for the public on the whole. Tensions between workers’ interests and consumers’ interests often collide. Even more than that, workers and consumers enjoy fundamentally different levels of power under capitalism. Most workers cannot choose between competing employers the way a shopper chooses which TV to buy. Millions of workers cannot even find employment. Uber claims to be a creator of jobs, but its recent entry to the creation of the driverless vehicle proves that Uber is not looking to create jobs, but is looking to use drivers to roll out their product to the consumer and when the driverless vehicle comes into being, to drop those drivers like a bad habit.

Uber benefits from and exacerbates the precarious situation between worker and consumer by drawing many of its drivers from the ranks of the unemployed and/or underemployed— and then completing the circle of death by classifying them as independent contractors. But misclassifying its drivers as independent contractors is not what sets Uber apart from the others. What’s different is Uber’s unconcealed contempt for the rules set out by citizens’ elected representatives. Therein lies the danger. You don’t have to regard monopolistic taxi laws as democracy incarnate to recognize the threat Uber poses to basic norms of popular governance.

Permissionless innovation has produced a world where a paying customer justifies any and all business practices, where certain laws— like the minimum wage and overtime pay — is entirely warranted if the market deems them unnecessary. But citizens are not synonymous with consumers. Consumers act according to different imperatives, and in ways that often undermine the rights of workers. And if you confer on them supreme power — sidestepping the ballot box and other forms of democratic control — you create a reactionary new order.

Personally, I am OK with deregulation of the FHV industry and letting he market decide for itself what it wants, but then don’t come crying to me when someone gets hurt or a workers is paid less than the minimum wage…..or for that matter don’t go running to your local politician for help because they usually do more harm than good. Finally, don’t go running to the courts when you feel you have been wronged. In the civil justice system, justice is like beauty, as it is often in the eye of the beholder.

I am all for getting rid of the regulators and letting the FHV industry fight it out amongst themselves. Let the strong survive or let the meek inherit the earth. Regulators serve only one purpose and that is to create more regulations. This does not help the situation, especially in NYC. We don’t need more regulations. We need the ability to compete on the merits without politicians and regulators telling us what to do. The NYC TLC has shown its contempt for competition on the merits. If they had any respect for the rule of law, Uber would have had its license pulled years ago.

In the end, the consumer wants Uber…of simply Uber-like service. So then let the public have what it wants, but there will be consequences and I believe the politicians and regulators in NYC, a liberal state, will simply not allow this to happen. Politics in NYC has largely been corrupt since the beginning of time. Uber has adeptly taken advantage of the loopholes in the law and the regulators have turned a blind eye.

So where does that leave us after my long rant…….Fair competition is the key to a healthy market. The regulators and politicians either cannot allow it or will not help maintain it……since all else has failed thus far, why not let the market be deregulated for a period, let consumers choose and suffer whatever consequences may come their way from their choice of providers/suppliers…… and let innovation reign supreme…..but in the meantime, get the regulators off our backs or at least put on a show and act like they are truly seeking to maintain a fair and open marketplace. Until, we put the brakes on all of this, the consequences of the Uber disruption will be felt for generations to come. If it is good, then our children and our grandchildren will benefit. If it is bad, then we have ourselves to blame for not taking a minute to put the brakes on innovation and growth of the for FHV transportation marketplace. The stakes are very high for all involved, but for the moment very few people are looking at the big picture. Ask yourself the hard questions, look at each point of view, consider what is best not just for yourself, but for society in general…and then you may begin to wonder, is permissionless innovation a good thing that should continue unabated…or should we take a minute to stop and consider the long term ramifications. 

Uber the Monopolist- What Happens When Uber is the Only Game in Town?

Nearly everyone who uses Uber is impressed by this transportation service. In many cases it makes transportation within urban and suburban areas less pricey. Due to the supply of "Uber Drivers", the service is also much more convenient to obtain on demand transportation than it was in the pre-Uber-era dominated by government-regulated taxicabs. Uber may be a boon to consumers (for the moment) and to the drivers (until the self-driving vehicle displaces all the drivers). But there is a much bigger problem that I do not believe the public sees or even fully understands.

Uber is the prime example of creative destruction. In the case of on demand transportation, destroying not only an older, established way of serving consumers but, more importantly of destroying the government-granted monopoly of the taxi medallion. The taxi industry sat on its fat ass for so long that it had zero incentive to innovate. They relied 100% on what they believe to be a government backed privilege that would never be destroyed....that is until the government didn’t really back it anymore because something better came along. While this is very short sighted on the part of the government that sells these medallions, the fact remains that the government let it happen. Worse of all, the NYC Taxi and Limousine Commission continues to let it happen by allowing Uber to operate outside the law.

Uber is a true monopolist partially because its success involves destroying the medallion and the independent car service companies that have traditionally served the markets. Entry restrictions and other government-granted privileges that use to protect traditional taxicab owners from competition is now long gone. While Uber likely could have passed any restrictions to entry, had it chosen to do it the proper way, the problem is that they chose to do so in an improper and underhanded fashion. The key here is not that they entered in a destructive manner, but that they did so in an illegal and unfair manner. A technology company my ass. They are partially technology and partially transportation. But the fact of the matter remains that they entered the market and the government regulators took so long to get on the ball that by the time they did, it was too late. When the regulators finally woke up, Uber was already here to stay. So the government could only say to them "fine...you can stay so long as you submit to our regulations". By then, it didn’t matter, Uber was already a powerhouse. So much for the government protecting the small businesses that have served as the backbone of our neighborhoods for decades. Most of all, so much for the government requiring businesses to follow the rule of law. Uber broke the law (and continues to do so) and is either granted absolution by the NYC Taxi and Limousine Commission or they simply continue without any repercussions.

A monopoly in an of itself is not wrong or illegal. But an entity that becomes a monopoly by engaging in illegal anti-competitive behavior is an illegal monopoly. Using new technology to destroy a long-entrenched monopoly is not itself a lamentable, monopolizing development. Using aggressive tactics to obtain drivers and customers is also not improper. The ultimate problem is that for Uber to succeed, it must destroy all the competition. Uber can’t leverage anything if it’s just one of several competing ride-sharing apps. That’s why the company must behave so aggressively. Again, aggressive tactics are fine, but the law specifically prohibits certain exclusionary or predatory conduct because it is anti-competitive. Such anti-competitive conduct comes in many forms. Exclusionary conduct has been defined as conduct, other than competition on the merits or restraints reasonably necessary to maintain competition on the merits

Uber's actions and conduct is not just aggressive, but it is clearly exclusionary and predatory. Pick your poison.....Uber has engaged in Predatory Pricing, Predatory Bidding, Predatory Affiliation, violated the Federal Trade Commission Act (FTC Act) (15 USC 45) that prohibits ‘‘unfair or deceptive acts or practices in or affecting commerce".....and most of all, we all know that Uber has intentionally engaged in Misclassification of Drivers for the Purpose of Gaining an Unfair Advantage.

Of course any company worth the weight of its corporate charter wants as large a market share as it can possibly achieve and will act aggressively in pursuit of that as-large-as-possible market share. That’s what competition is supposed to incite companies to do. Competition is good. Competition is healthy for the market and for the consumer. Competition, in the case of Uber, has required the traditional taxis and car services to find new ways to gain customers and to WOW them with their customer service. This was a well needed kick in the ass. BUT...the main point is that the law does not protect competitors, but seeks to protect competition itself.  Competition on some basis other than the merits or any conduct by an entity that secures market share by means other than the competitive merits of a specific service is anticompetitive and illegal. this is the essence of Uber.....illegal anticompetitive conduct.

The purpose of antitrust laws is to protect free enterprise and consumers. What if there were only one grocery store in your community? What if you could buy a phone from only one retailer? What if only one dealer in your area sold cars?  Without competition, the grocer may have no incentive to lower prices. The phone shop may have no reason to offer a range of choices. The car dealer may have no motivation to keep its showroom open at convenient hours or offer competitive financing. Competition in America is about price, selection, and service. It benefits consumers by keeping prices low and the quality and choice of goods and services high. Competition also encourages businesses to offer new and better products. Competition makes our economy work. Antitrust laws often have to be used by competitors in order to ensure that our markets are open and free. The law seeks to promote free and open competition and encourages challenges to anticompetitive business practices to make sure that consumers have access to quality goods and services at competitive prices, and that businesses can compete on the merits of their work.

The word “antitrust” dates from the late 1800s, when powerful companies dominated industries, working together as “trusts” to stifle competition. Thus, laws aimed at protecting competition have long been labeled “antitrust.” Fast forward to the 21st century: you hear “antitrust” in news stories about competitors merging or companies conspiring to reduce competition. Antitrust laws often have to be used by competitors and consumers to challenge business practices that could hurt consumers by resulting in higher prices, lower quality, or fewer goods or services.

While the government and its regulatory agencies are supposed to monitor business practices and challenge them when appropriate, the reality is that our government has done nothing to stop Uber and our elected officials are not going to take any corrective action. Thus, we need the industry to “think outside the box”. How ironic is it that one of the most successful monopoly-destroyers of recent years — Uber — is quickly becoming a monopoly itself.

The average consumer may not know it now, but when Uber is the only game in town, what will stop Uber from raising its prices beyond the norm and essentially raping the average consumer with its "surge pricing". The answer is NOTHING. When the competition is gone, Uber will be able to do whatever it wants. Some will say that no one will use the service if it gets too expensive. Remember that Uber changed the rules of the game. People now not only want, but they expect on demand transportation..... and Uber has shown that the consumer is willing to pay for it. When Uber is the only game in town, because they have gone unchecked for so many years, who will stop them then. The time to act is now. Contact me to discuss this matter further.