If you’ve been following the “Taxi App Wars” in the media, you’ll have heard of companies like Uber, Sidecar and Lyft. A lot of hoopla has been made about this fracas, from people who want to see these new services shut down to those who want to see them dismantle the current system of taxis and limos in most cities. Both sides make a lot of arguments against the other, and most of these are red herrings. For example, it is not about monopolies and taxi lobbyists on one hand, and it isn’t about the so-called safety of drivers that don’t have taxi licenses on the other.
The real issue comes down to why the taxi/limo/livery system started and persists through 120 years of history, through multiple phases of deregulation followed rapidly by re-regulation in many cities. Check 1979-1983 Seattle for one example.
Bottom line is this: Grandma needs a ride home from the supermarket on a random-access basis (not just the bus) for a price she can afford.
This one goal of keeping random access ground transit affordable – that cities all over the world come to again and again through history – perturbs the entire “free market” structure that so many pundits around this story suggest: just let supply and prices float and everything will be fine. Not so. Been done. Doesn’t work. Many reasons. Becomes a mess fast.
Regulating prices is not a great way to do things, but in most cities, the number of wealthy people that can bid up the price of a ride exceeds supply, even when supply is liberal. Grandma gets left at the curb. This leads organically to the introduction of price-regulated meters. Once you have meters, you have people tampering with meters. And that leads to the department of weights and measures having to spot-check and certify meters…same as they do the scale at the meat department at the grocery store.
(By the way, who thinks metering rides with iPhones is a good idea? Terrible. Who but a 1-percenter is comfortable hopping in a car, not knowing what the ride will cost, and then relying on a driver’s iPhone to tell him accurately where you are and how much to charge? How long would it take some of our hacker friends to game that? And I don’t know about you, but my iPhone puts me in the middle of the Pacific frequently when I’m standing in San Francisco’s financial district’s tall buildings…do we really want to trust a smartphone GPS with the distance measure used to calculate the cost of the ride?)
Right now we have an unsustainable situation: a group of drivers who are obliged to charge what the meter in their car says, and now a group of drivers who can charge whatever they like (or rather, whatever these services choose to charge without regard to city fare regulations). This cannot stand. Two obvious paths to balancing this equation: 1) eliminate the meter in the taxis and let them charge whatever they want; 2) put validated city meters into Uber/Sidecar/Lyft/etc. Presumably nobody wants to see 2, and with 1, we are back to grandma getting left at the curb. (We’ve done this test…drivers who can get floating bids on a smartphone quickly wait for the higher bids and leave the meter-price rides to someone else…which means nobody. )
Flywheel (full disclosure…I’m a founder and investor) took a long look at this and found a better solution. Because Flywheel provides a cloud-based dispatch system as well as providing a unit in the car and an app for the passenger, it can tell when drivers are turning down “shorts”…what I’m calling the “grandma fare” here. We found a way to essentially turn the practice of picking up grandma reliably and consistently into “table-stakes” for high-bid dynamic priced fares. If a driver wants that airport ride, or the bid-up offer from a high-roller out at club in the Mission on a Friday night in the rain, he better be responding to all his dispatch fares, and not ditching people on the way to pick them up.
I believe this approach, invented by Flywheel at great cost and by listening intently to passengers, drivers, dispatchers, fleet owners, regulators and others since 2008 when the company began as a student innovation project, is the long-run solution to the deep issues that cause so much historic dissatisfaction in city ground transit. It took us three years of really understanding the nuances of city ground transit to figure this out. And once implemented, I believe it will mean more money for drivers, and a reliable ride for everyone from the busy lawyer to grandma.
The CEO of Uber likes to say that he “breaks things to fix them.” Break it to fix it has been tried with taxis a dozen times since the early 1900′s. I’m an innovator and have broken many things to fix them over 25 years in business. But the biggest thing I learned while breaking things is that it is usually a good idea to understand what you are trying to change before you either cause a mess or simply repeat history.
Are the Ubers of the world innovating? Maybe.
But maybe they’re simply destined to be the Napster of transit: the companies we thank for shaking things up, and which are then shaken out.
Take a look at Flywheel. In the long run, I think it is the better approach. I’m biased, of course.