Uber won. I’m not breaking any news. We all know Uber won a long time ago. I finally traveled for work the last few weeks, a first since the 2020 Covid lockdown, so I had the opportunity to check out how the taxi/ride-sharing industry is doing. It was nice to be out and about.
Let me be clear that this is not a stock recommendation. I haven’t looked at the stock in years. I remember it used to burn a lot of money. Maybe they turned things around? I don’t follow the company so I don’t know. This post is about Uber, the ride service, not the stock. (Update: Okay, I quickly checked the stock and it’s not going well.)
Q1 2022 hedge fund letters, conferences and more
I checked Uber, Lyft, and the regular local cab service. Maybe the local cabs had the opportunity to patch things up over the last couple years. Like picking up the low hanging fruit such as better service, easier payment service, a driver rating system, technology adoption among other things. Basically taking on Uber but with a local flare. In my head I framed it as the big outside chain vs the local established family restaurant. I even downloaded the local cab app.
Verdict: Uber crushed it. It’s in a different league. The regular local cab drivers were nice and got me to my destination. But that’s the minimum right? Their car was ok. More used and messy than new and clean. Fine for my standards but I can see another person not being satisfied with the “hygiene” standards. I know Uber has higher standards when it comes to that stuff. And when it came down to paying with a credit card, oh boy, do we go back to the stone age. First the driver was reluctant, then he had to set up his machine, then he had no paper, then it wouldn’t print my receipt…on and on. Out of my pity and desire to help, I almost told him that there’s an app for that stuff. You would think that after the Uber disruption and the pandemic that drivers would have figured out the credit card thing. Who carries cash?
As for the local taxi app, it wasn’t functional. It just wasn’t working. It was broken. I couldn’t get a cab and their GPS map thing wasn’t working. The whole thing was bad. It looked like a school project put together at the last minute. There’s no point in addressing the design. Because the app wasn’t working, I ended up calling 3 different local companies. The first one didn’t pick up. The second one went to voicemail. The 3rd one had the wrong phone number listed!? Archaic. I think they are just trying to lose or they completely gave up. It almost looks like these professional sports teams that are tanking on purpose with the hope of drafting that number 1 pick but in this case in the hope of a government bail out?
This is a broad generalization, but local taxi companies in cities operate as a cartel. You have 2-3 companies dominating the city. Business was good so there’s no need to up their game. None of them invested in technology. If it ain’t broke, don’t fix it. But the taxi industry is broken.
The taxi industry was ripe for disruption. Innovation is what happened. You have an old stodgy industry anchored in their comfortable ways of doing things. Uber saw an amazing opportunity to bring innovation to this antiquated industry. The threat to the old school taxi industry: A phone app. Uber has a great app. The service is great. We rate the driver, they rate the riders.
I remember when Uber started disrupting the local taxi game. There was a lot of resistance from the cab drivers. They paid good money for their “medallion” (license to drive a taxi). They basically bought a job, a way to make a living. The medallion could be sold at retirement with the expectation that it would be worth more. But in life nothing is a sure thing. That system was disrupted by a superior outsider with deep pockets that didn’t pay good money for a medallion.
My take: Reimburse the medallion and call it game over. Trying to save an outdated business model that refuses to adapt simple technological improvements is a fool’s errand.
I’m amazed at the strength of the local taxi lobby. They have the support of many politicians. I don’t get it. It’s not like giving rides is a strategic industry of importance. At its core the business is somebody giving a ride to somebody.
Uber is not perfect. The issues are well documented. Here are some of the drawbacks:
Surge pricing: Your fare is impacted by dynamic pricing. The fare is constantly bouncing around driven by supply and demand. I have seen rates go from ~$15 to $75 to $130 then drop back down in 10 minutes. It’s annoying but I get it. Higher prices help encourage more drivers to go online and accept trips, which bring down prices. If prices are too low, there are no drivers. But as a consumer, we like flat/fixed fees. It’s easier to budget and provides certainty. On that point, I give local taxis the advantage.
Lack of presence in rural/regional areas: Uber was built for the metropolitan areas.
Restricted areas drop-off/pick-up: Because of by-laws, let’s say you were going to airport, Uber can only bring you to designated area instead of your carrier
Gig economy: There’s this whole debate over gig workers. There are good and bad points. I talked to two drivers with over 5,000 trips and they basically said they “game” the system. They don’t follow Uber driver’s recommandations. They said that Uber’s recommandations probably work well in a major metropolitan but not for a regional city. They developed their own way of making it work. The hustle economy is not for everyone.
As for Lyft, Uber’s main direct competitor, I kept comparing the fares between Uber and Lyft. They were more or less the same. The app is fine. But I didn’t end up getting a Lyft (I did maybe 3 years ago) So on that topic I don’t have much to add.
We should embrace innovation. That’s how we progress. That’s how society gets better. End the pain. Pull the plug. Stop protecting the unprotected. Reimburse the medallion and call it game over.
