Saturday, March 14, 2015

Gone the way of the cabosaur

Gregory Ferenstein says that taxicabs can't compete with ride sharing companies like Uber, Lyft and Sidecar;
In San Francisco alone, Uber reportedly earns more than three times the entire taxi market ($500 million vs. $140 million). Today, Uber's main competitor, Lyft, announced that it has raised a whopping $500 million, at a $2.5 billion valuation.
Anyway you slice it, investors think that ride-sharing is going to be worth many times more than the entire cab industry. More importantly, new research from Uber's data science team reveals why taxis may never be able to compete with their Silicon Valley rivals.
Which includes the flexibility that the ride-sharers offer their driver-partners;
In San Francisco, one study found that just 16 percent of taxis arrived in less than 10 minutes after being called, while 90 percent of ride-sharing cars did. (To be sure, the taxi industry is suffering huge losses in San Francisco.) This is a structural problem with taxis. Unions purposefully limit the numbers of cars on the road to keep drivers' wages artificially inflated.

Cab drivers often wait years for a medallion. They also have to pass a number of time-intensive exams. Given all the upfront costs, it's harder to ask someone to be a cab driver. Uber drivers, on the other hand, can be certified in a fraction of the time, and work only a few hours a day. And no experience is required to learn insider tricks that might result in higher pay.
And Uber drivers can earn more as part-timers than full time taxi-cabbies. Former Obama CEA head Alan Krueger explains;
Uber has grown at an exponential rate over the last few years, and drivers who partner with Uber appear to be attracted to the platform in large part because of the flexibility it offers, the level of compensation, and the fact that earnings per hour do not vary much with hours worked, which facilitates part time and variable hours. Uber's driver-partners are more similar in terms of their age and education to the general workforce than to taxi drivers and chuffeurs. Uber may serve as a bridge for many seeking other employment opportunities, and it may attract well-qualified individuals because, with Uber's star rating system, driver-partners' reputations are explicitly shared with potential customers.
Therein, a lesson for politicians who are supporting the cabosaurs.

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