The medallion system pretends to regulate the taxi industry, but in actuality it’s a scheme that allowed people to buy into a monopoly. This unusual arrangement has insulated the taxi industry from normal market forces at the expense of pretty much everyone living in or traveling to New York.
Riding in a New York taxi is unpleasant and expensive, but since it was a monopoly it had no incentive to do better and there were never any real consequences for failing to provide decent service – even as it became increasingly aggressive in soliciting outrageous tips and jamming advertising down its customers throats.
But it’s not a monopoly anymore and that’s a good thing for New York. I won’t shed a tear for the taxi industry.
Totally agree with you wrt to the taxi industry, but it's the individual stories that are heartbreaking :(
"While the auction has drawn attention to the precipitous fall of the once-mighty taxi industry, it does not reflect the hardship — and heartbreak — of individual owners like Mr. Isac. It is their stories that often get lost in the larger debate over new technology and commutes, and tell of the human cost of the city’s rapidly evolving transportation landscape."
Agreed. In Turkey, taxi medallions are part of a terrible system. They are extremely expensive in big cities. In many cases, Taxi drivers do not own them. Different drivers work in two or three shifts and pays a predetermined amount to medallion owner (a hefty sum). Sometimes medallions are rented by a third party and he manages the taxi drivers and pays to the top dude.
Government does not allow Uber like systems. Also Taxis are very expensive especially in smaller cities. And no, many does not behave nicely. They are also reckless in traffic.
So we stuck to this monopoly and nobody questions. Why is driving a Taxi a profession in this age of technology? Anybody with decent driving skills can do this yet Taxi drivers are the first to prevent any competition. This pattern is quite noticeable in many other areas of industry. They make restrictions and regulations with good intentions, later it turns to a monster.
To be fair, the reason the medallion system exists in New York is because road space in Manhattan is limited, and the taxis cause a disproportionate amount of traffic. Traffic conditions have gotten notably worse post-rideshare, although there are a bunch of confounding factors as well that could also explain that.
I feel very badly for the people in the article who lost their life savings on a failed investment.
I also feel very badly for people who went broke on Beanie Babies and tulip bulbs, for almost precisely the same reasons.
Edit: I'm serious. Medallion prices peaked in 2014, well after the start of Uber and Lyft's explosion onto the spotlight. It seems like a bad idea for someone in 2006 to have invested a life's fortune in an arbitrarily limited commodity, but fiscal insanity to do the same in 2014. Those things were only ever valuable because the government issued so few of them, not because of inherent worth. When the demand for them fell below even their meager supply, they became (relatively) worthless - as predictable.
I wish the people in the article had sold their medallions to corporations in 2014 when they were still worth a mint. Failing to do so was a tragic miscalculation.
I think this comment is bringing it to the point. Investment wise it was a bad idea to begin with, and when competitors start to hit and easily conquer the same market, then of course it becomes really stupid to invest in that market.
In that regard my pity is also limited. Yes I feel their pain with them. But we also have a responsibility to investigate before making such a huge bet. And sadly if you discuss with people who lost their life savings like that, many actually think they are not responsible BECAUSE they didn't think about. The "logic" being, if you don't think about it, you can't be responsible for the result.
> I feel very badly for the people in the article who lost their life savings on a failed investment.
San Diego did a good thing with this. They bought back the medallion at some price relative to what was paid minus some amount for time owned, interest, etc. Then when they redistributed those bought back medallions, they slightly increased the medallion count.
That sequence stopped a lot of the problems. Anybody who got caught out by medallions collapsing could just get out. Anybody who bought in at this point knew what they were getting into.
> I wish the people in the article had sold their medallions to corporations in 2014 when they were still worth a mint. Failing to do so was a tragic miscalculation.
Some of the people mentioned in the articles were running corporations. They wouldn't by 2+ medallions for themselves.
Good riddance. I was in New York recently, and hailed a taxi for the ride to EWR instead of Uber/Lyft because my phone's battery was flat. The same ride that cost me <$50 on the way in on Uber was over $100 the way back, including effectively mandatory 20% tip -- and this was the lowest of the "suggested" options of 20%, 25% or 30%! And yellow cabs are a lot less comfortable as well, you're separated from the driver by a Plexiglass cage with a TV screen bolted on, attempting to blare ads into your face.
I sympathize with cabbies who spent a lot of money on buying a medallion of their own in the early 2000s and drove their own cab. I have less sympathy for the guy who invested $2.6 million in 2013.
The fares between EWR and NYC are insane because New York State and New Jersey don't have reciprocal taxi licenses. That $100 covered the "lost" fare back to NYC as well as the fare to EWR. If you take a taxi from EWR to NYC you'll also pay effectively a return fare since the taxi can't (in theory) pick up a legal return fare.
Most metro-area car services are cross-licensed in both states (so an NYC black car service can pick up in NJ and vice versa).
> including effectively mandatory 20% tip -- and this was the lowest of the "suggested" options of 20%, 25% or 30%
I moved to NYC just before you could pay by card in the cab. At the time, my friends told me to give $1 if the ride was less than $10, and $2 if it was less then $20 and so on. Most of the time, I think I effectively tipped between 10% and 20%. I kept with that habit after they introduced card payement with these insane suggested tips. How is it now? are you really expected to tip that much?
> Sohan Gill once saw his medallion as such a good investment — ”better than a house”
If something looks like it's an impossibly good investment, it may actually be.
It's a shame that US city governments let this happen by retaining the medallion monopoly system. If cities let the taxi supply adjust to demand, a taxi license would have been worth the same as any other business license.
Even if cities decided that it is in their best interest to limit the number of taxi drivers, there is no good reason why the license should be transferable property that can be bought, sold and rented.
If a taxi driver quits, the city, and not the previous driver should choose who is the best candidate to replace them.
Trouble is if you don't regulate taxi numbers under the old system you end up with 30 taxis hanging out in the same prime location fighting over customers and causing congestion. Hailing apps solve that problem.
I can't feel too sympathetic for the owners--they've been riding high on the back of their drivers for years. The drivers, who in fact are their employees, get no benefits of any kind due to a legal fiction that classifies them as independent contractors. If the drivers--who are actually operating the taxis--want to take calls from the street, from dispatch, from Uber, from Lyft, it should be up to them. After all, if a driver wants to simply park his leased taxi and not drive, he's free to do so--he's an independent contractor. The medallion owners got themselves into this mess by becoming vehicle lessors, not taxi operators. Once upon a time driving a cab was a good job with good benefits. Now it's not a job at all, which is why immigrants rush to drive.
> due to a legal fiction that classifies them as independent contractors.
The taxi industry pioneered the independent contractor model. They provide the car, I lease it and do whatever I want with it for the duration of my lease. The company has very little control over what their drivers do - they would offer bonuses on certain fares to try to get drivers to go get their contracted fares in outlying areas...
Renting a car is much cheaper than leasing a taxi, so the only reasonable use for my leased taxi was to try to make some money with it.
I met a few other taxi drivers who thought that ppl like me, who drove for the biggest taxi company in Phoenix, were getting screwed by Big Taxi. One of these drivers was a solo owner-operator. He did everything himself: regulatory compliance (meter certification and whatever else the department of weights and measures cares about), advertising, etc. The other guys drove for smaller companies because they didn't like Big Taxi's corporate culture. I thought the arrangement with Big Taxi was acceptable.
The series of events which forced my retirement from taxi driving were about 2 years ago, and I haven't kept up with the industry news... One of the guys I used to drive with gave it up when the owner-operator he leased from three in the towel. He did two or three trips for 'duper, rapidly realized that was a waste of his friend's new Prius, and got a 7-day-a-week job at a golf course. Another guy just went back to taxi driving after a year and a half "working his ass off" for a funeral home that didn't actually appreciate his efforts. This one said the call volume is significantly down, but call quality is way up. He recently got to take a fellow from Phoenix to Tucson - the guy had to be in federal court by 9am... It was a good fare.
In Guatemala, ex-taxi drivers tell me the daily spend on the car went to 1/3rd the amount when they bought a car versus renting a taxi. So they were paying 3x as much per day, and in a few years would have nothing to show for it. So even with Uber's 25% cut and lower prices, they say they're doing way better.
In the US, I'm not sure you can compare a medallion costing nearly a million dollars with a car loan for a few dozen thousand. The medallions can swing in price (as we see), a car probably will follow a well-known decrease.
Unless companies like Uber and Lyft can continue to raise billions of VC money almost forever, they eventually have to turn themselves into a medallion system eventually.
This or, expect drivers to get paid way below minimum wage to sustain their current pricing model. Which won't happen.
So medallions are here to stay. Uber and Lyft never had a revenue model apart from subsidize-until-competition-dies. The best case scenario is Uber will be the new medallion system, the worst case will be older system will be back.
The transportation and logistics industry is one of the worst industry to be in. Its a capital intensive market with very low profit margins. Minus VC money Uber and Lyft won't go too far.
I'm reminded of the 2005' Man Push Cart movie about a Pakistani immigrant that sells coffee from a rented push cart in New York. His only dream is to save enough to buy his own cart one day.
This only happened because Uber broke the law, actually undermined the rule of law and they got away with it. Think of what would happen if every corporation could pick at will which legislation they ignore.
Think about this, a business is disrupted to the point where they can't make any money at all. Yet, no customer is hurt in the process. In fact the customer is happier because now at least, he has a choice. I would break a monopolist law for that.
And since people get a better service out of that, on average (yes, I know everyone can bring up a terrifying anecdote), it looks like we're better off making a few changes. You seem to paint it black & white, but really if some laws are still being broken, they can be enforced. Or changed. Or reconsidered from the beginning for the new situation.
The change proved that medallions were either a bad idea, or a badly managed idea. Some change would occur anyway.
It only worked for Uber because they provided a valuable service that consumers loved and because the law was corrupt in the first place.
I do not care that rich people who spent millions on a medallion, only to rent it out to actual workers, are losing money.
The self made man taxi driver, is a rare exception, not the rule. The people who own these medallions are rich taxi companies, that then force workers to pay them rent. Good riddance.
[+] [-] bww|8 years ago|reply
Riding in a New York taxi is unpleasant and expensive, but since it was a monopoly it had no incentive to do better and there were never any real consequences for failing to provide decent service – even as it became increasingly aggressive in soliciting outrageous tips and jamming advertising down its customers throats.
But it’s not a monopoly anymore and that’s a good thing for New York. I won’t shed a tear for the taxi industry.
[+] [-] djchung23|8 years ago|reply
"While the auction has drawn attention to the precipitous fall of the once-mighty taxi industry, it does not reflect the hardship — and heartbreak — of individual owners like Mr. Isac. It is their stories that often get lost in the larger debate over new technology and commutes, and tell of the human cost of the city’s rapidly evolving transportation landscape."
[+] [-] afsina|8 years ago|reply
Government does not allow Uber like systems. Also Taxis are very expensive especially in smaller cities. And no, many does not behave nicely. They are also reckless in traffic.
So we stuck to this monopoly and nobody questions. Why is driving a Taxi a profession in this age of technology? Anybody with decent driving skills can do this yet Taxi drivers are the first to prevent any competition. This pattern is quite noticeable in many other areas of industry. They make restrictions and regulations with good intentions, later it turns to a monster.
[+] [-] bobthepanda|8 years ago|reply
[+] [-] BurningFrog|8 years ago|reply
It is a rather ingenious "free market monopoly hybrid" that I can't think of existing in other fields.
[+] [-] kstrauser|8 years ago|reply
I also feel very badly for people who went broke on Beanie Babies and tulip bulbs, for almost precisely the same reasons.
Edit: I'm serious. Medallion prices peaked in 2014, well after the start of Uber and Lyft's explosion onto the spotlight. It seems like a bad idea for someone in 2006 to have invested a life's fortune in an arbitrarily limited commodity, but fiscal insanity to do the same in 2014. Those things were only ever valuable because the government issued so few of them, not because of inherent worth. When the demand for them fell below even their meager supply, they became (relatively) worthless - as predictable.
I wish the people in the article had sold their medallions to corporations in 2014 when they were still worth a mint. Failing to do so was a tragic miscalculation.
[+] [-] erikb|8 years ago|reply
In that regard my pity is also limited. Yes I feel their pain with them. But we also have a responsibility to investigate before making such a huge bet. And sadly if you discuss with people who lost their life savings like that, many actually think they are not responsible BECAUSE they didn't think about. The "logic" being, if you don't think about it, you can't be responsible for the result.
[+] [-] bsder|8 years ago|reply
San Diego did a good thing with this. They bought back the medallion at some price relative to what was paid minus some amount for time owned, interest, etc. Then when they redistributed those bought back medallions, they slightly increased the medallion count.
That sequence stopped a lot of the problems. Anybody who got caught out by medallions collapsing could just get out. Anybody who bought in at this point knew what they were getting into.
[+] [-] totalZero|8 years ago|reply
Peaks always look like peaks in hindsight, but there are plenty of rallies that keep on rallying, too.
Would it have been nice to sell a medallion on the 2014 highs? Sure.
Is it insanity to have bought one there? No.
It was simply an investment in rights to a regulated business, which has faced headwinds from unregulated competition since that time.
And please keep in mind that a million dollars in NYC isn't the same as a million dollars in Iowa.
[+] [-] skookumchuck|8 years ago|reply
[+] [-] user5994461|8 years ago|reply
Some of the people mentioned in the articles were running corporations. They wouldn't by 2+ medallions for themselves.
[+] [-] jpatokal|8 years ago|reply
I sympathize with cabbies who spent a lot of money on buying a medallion of their own in the early 2000s and drove their own cab. I have less sympathy for the guy who invested $2.6 million in 2013.
[+] [-] epc|8 years ago|reply
Most metro-area car services are cross-licensed in both states (so an NYC black car service can pick up in NJ and vice versa).
[+] [-] yodsanklai|8 years ago|reply
I moved to NYC just before you could pay by card in the cab. At the time, my friends told me to give $1 if the ride was less than $10, and $2 if it was less then $20 and so on. Most of the time, I think I effectively tipped between 10% and 20%. I kept with that habit after they introduced card payement with these insane suggested tips. How is it now? are you really expected to tip that much?
[+] [-] troydavis|8 years ago|reply
If something looks like it's an impossibly good investment, it may actually be.
It's a shame that US city governments let this happen by retaining the medallion monopoly system. If cities let the taxi supply adjust to demand, a taxi license would have been worth the same as any other business license.
[+] [-] ProblemFactory|8 years ago|reply
If a taxi driver quits, the city, and not the previous driver should choose who is the best candidate to replace them.
[+] [-] delazeur|8 years ago|reply
Probably not a fair criticism of the investor in this case. 20 years ago, it would have been a totally accurate assessment.
[+] [-] tim333|8 years ago|reply
[+] [-] api|8 years ago|reply
[+] [-] pseingatl|8 years ago|reply
[+] [-] taxicabjesus|8 years ago|reply
The taxi industry pioneered the independent contractor model. They provide the car, I lease it and do whatever I want with it for the duration of my lease. The company has very little control over what their drivers do - they would offer bonuses on certain fares to try to get drivers to go get their contracted fares in outlying areas...
Renting a car is much cheaper than leasing a taxi, so the only reasonable use for my leased taxi was to try to make some money with it.
I met a few other taxi drivers who thought that ppl like me, who drove for the biggest taxi company in Phoenix, were getting screwed by Big Taxi. One of these drivers was a solo owner-operator. He did everything himself: regulatory compliance (meter certification and whatever else the department of weights and measures cares about), advertising, etc. The other guys drove for smaller companies because they didn't like Big Taxi's corporate culture. I thought the arrangement with Big Taxi was acceptable.
The series of events which forced my retirement from taxi driving were about 2 years ago, and I haven't kept up with the industry news... One of the guys I used to drive with gave it up when the owner-operator he leased from three in the towel. He did two or three trips for 'duper, rapidly realized that was a waste of his friend's new Prius, and got a 7-day-a-week job at a golf course. Another guy just went back to taxi driving after a year and a half "working his ass off" for a funeral home that didn't actually appreciate his efforts. This one said the call volume is significantly down, but call quality is way up. He recently got to take a fellow from Phoenix to Tucson - the guy had to be in federal court by 9am... It was a good fare.
[+] [-] sschueller|8 years ago|reply
[+] [-] toomuchtodo|8 years ago|reply
[+] [-] MichaelGG|8 years ago|reply
In the US, I'm not sure you can compare a medallion costing nearly a million dollars with a car loan for a few dozen thousand. The medallions can swing in price (as we see), a car probably will follow a well-known decrease.
[+] [-] kamaal|8 years ago|reply
Unless companies like Uber and Lyft can continue to raise billions of VC money almost forever, they eventually have to turn themselves into a medallion system eventually.
This or, expect drivers to get paid way below minimum wage to sustain their current pricing model. Which won't happen.
So medallions are here to stay. Uber and Lyft never had a revenue model apart from subsidize-until-competition-dies. The best case scenario is Uber will be the new medallion system, the worst case will be older system will be back.
The transportation and logistics industry is one of the worst industry to be in. Its a capital intensive market with very low profit margins. Minus VC money Uber and Lyft won't go too far.
[+] [-] molteanu|8 years ago|reply
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] chx|8 years ago|reply
[+] [-] firefoxd|8 years ago|reply
[+] [-] viraptor|8 years ago|reply
The change proved that medallions were either a bad idea, or a badly managed idea. Some change would occur anyway.
[+] [-] stale2002|8 years ago|reply
I do not care that rich people who spent millions on a medallion, only to rent it out to actual workers, are losing money.
The self made man taxi driver, is a rare exception, not the rule. The people who own these medallions are rich taxi companies, that then force workers to pay them rent. Good riddance.