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What we talk about when we talk about Uber and Lyft

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(AP Photo/Richard Vogel, File)
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http://sfexaminer.com/category/the-city/sf-news-columns/i-drive-sf/

It’s 2:35 a.m. and I’m looking for a cabstand showing signs of life now that everyone’s in motion, either trying to go home or get to an after-hours joint.

In front of 1015 Folsom, a large crowd is milling about in the street among several dozen unmarked sedans blocking the flow of traffic while a few taxis wait patiently outside the club.

As I slow down to suss out the situation, a young guy approaches my window. He wants to know the fare to Berkeley.

“Around $35-$40,” I tell him. “Plus the bridge toll.”

“But Lyft is only $20.” He holds up his phone as proof.

“Then take Lyft,” I say.

I start to roll up my window but he has another question.

“Why are cabs so expensive?” he asks. “Don’t you guys want to be competitive with Uber and Lyft?”

“The City determines taxi rates,” I tell him. “I don’t have any control over them. Neither does my cab company.”

“Really?” he asks, genuinely surprised.

“You think we just charge more because we’re bad at business?”

He’s about to respond when another guy approaches my cab and asks if I’ll take him to the Richmond District for $10.

“You gotta be kidding me?” I laugh. “Sorry, that’s a $20 ride.”

“But an UberPool is only $7.”

“Then take Uber!” I say abruptly.

“I would,” the guy tells me. “But my phone’s dead.”

“You know what, then,” I say with a smirk. “The fare’s now $30. My cab just went into surge pricing.”

The guy scoffs while the first one laughs.

“Come on,” Mr. Richmond pleads. “None of these taxis are going anywhere anytime soon.”

“That may be true, but I still have my dignity. Why don’t you ask another cab driver?”

“I asked them all. You’re the last in line.”

“Then the price to the Richmond is now $40. My surge multiplier just went up!”

“Come on!”

“Tell me something,” I address the two of them. “Do you guys really think it’s acceptable for these companies to charge half the price of a taxi and justify it by calling it a disruptive business model? You know that’s bullshit, right? That’s not disruption. It’s predatory pricing, plain and simple. And who pays for all these cheap rides? Not you. Not Uber. Not Lyft. It’s their drivers who get screwed so you guys can get a good deal.”

“Nobody is forced to do anything,” Mr. Berkeley points out.

“Because jobs grow on job trees?” I ask. “I think most people who decide to use their own cars as taxicabs are doing so out of desperation.”

“Everyone has options,” adds Mr. Richmond.

I decide to change my approach. “Tell me, do you guys support Bernie Sanders?”

“Of course!” Mr. Berkeley declares. “Love him!”

“Bernie’s my man!” says Mr. Richmond.

“Then why are you participating in the exploitation of workers? Isn’t that something Bernie is fighting against?”

They both shrug, not seeing the connection.

“The people who drive for Uber and Lyft don’t make shit and assume all the risk involved with driving a car on the congested streets of San Francisco just to make four or five bucks off a $7 ride. You think that’s cool?”

“I’ve never heard a driver complain.”

“You hold a rating over their heads,” I say. “They’re afraid of losing their jobs.”

“But …”

“Well …”

“Look, you guys are obviously confused about what being progressive means. This new gig economy is regressive. It pushes the most vulnerable members of our society into wage slavery, where they’re paid for piecework rather than given an opportunity to secure a stable income. And what’s worse, instead of seeing their profits increase by working more, due to the constant Uber-Lyft price wars, they actually make less in the process. How can you support a system like that?”

“But if people stopped using these services,” says Mr. Berkeley, “it’ll hurt the drivers more because they won’t have a job left.”

“Yeah, less of something is better than nothing!” Mr. Richmond pipes in.

I’m about to launch into another tirade when I notice the time. It’s 3:15. I’ve already wasted over half an hour arguing with these guys. I might as well be making some money along the way.

“Guess what? My cab just turned into a TaxiPool. I’ll do $10 to the Richmond and $25 to Berkeley. But, goddamn it, you better give me decent tips. Get in and let’s go.”

I don’t even bother hitting the meter as I speed away.

Kelly Dessaint is a San Francisco taxi driver. Write to him at piltdownlad@gmail.com or visit his blog at www.idrivesf.com.

Click here or scroll down to comment

  • Kevin M

    How does the price of a medallion factor in? Uber/Lyft drivers don’t have to price that $250,000 into the cost of a ride, right?

  • rickbynight

    Ultimately, the way I view the future involves decoupling this stuff from private enterprises. Society should, via a heavily progressive income tax, create minimum baselines for every American, including a basic income, universal healthcare, universal education, etc.

  • Rich Brunelle

    There is nothing fair about Uber’s disruption of the Taxi services. Were the law to be upheld what has happened is illegal. Our children and their children will suffer the loss of jobs that were capable of supporting a family. What we leave future generations is bs Uber jobs.

  • Don Anderson

    Both the price of medallions, and the price of the taxi ride, are set by the MTA. Besides labor, the cost of giving any cab ride, whether with Uber/Lyft or with a licensed taxi, is primarily the maintenance and depreciation of the vehicle.

    Most cabdrivers in SF don’t own or need medallions; and medallions used to be given out free based on seniority, until the MTA decided to start gouging cabdrivers.

  • Kevin M

    What do you mean that most cabdrivers don’t need medallions? Don’t they need them to operate legally?

    I understand that prices of both are set; my point is that uber/lyft aren’t subject to these costs, but the author tries to make the point that TNCs are setting prices artificially low. I disagree — TNC prices reflect labor (albeit a low-paying non-employee labor rate) plus depreciation, but without a huge fee tacked on. Plus, it’s depreciation of your primary vehicle, not a cab. If you run a home business, you don’t have to pay rent on an office…

    What’s the point of medallion fees? To regulate how many cabs are out there? I think uber/lyft should pay drivers more and guarantee safer drivers, but there’s got to be a middle ground between the status quo and uber/lyft today. It’s not predatory pricing; it’s an exposure of the hugely distorted and artificial cab market and the market failure that happens as a result.

  • Kevin M

    What do you mean that most cabdrivers don’t need medallions? Don’t they need them to operate legally?

    I understand that prices of both are set; my point is that uber/lyft aren’t subject to these costs, but the author tries to make the point that TNCs are setting prices artificially low. I disagree — TNC prices reflect labor (albeit a low-paying non-employee labor rate) plus depreciation, but without a huge fee tacked on. Plus, it’s depreciation of your primary vehicle, not a cab. If you run a home business, you don’t have to pay rent on an office…

    What’s the point of medallion fees? To regulate how many cabs are out there? I think uber/lyft should pay drivers more and guarantee safer drivers, but there’s got to be a middle ground between the status quo and uber/lyft today. It’s not predatory pricing; it’s an exposure of the hugely distorted and artificial cab market and the market failure that happens as a result.

  • Kevin M

    What do you mean that most cabdrivers don’t need medallions? Don’t they need them to operate legally?

    I understand that prices of both are set; my point is that uber/lyft aren’t subject to these costs, but the author tries to make the point that TNCs are setting prices artificially low. I disagree — TNC prices reflect labor (albeit a low-paying non-employee labor rate) plus depreciation, but without a huge fee tacked on. Plus, it’s depreciation of your primary vehicle, not a cab. If you run a home business, you don’t have to pay rent on an office…

    What’s the point of medallion fees? To regulate how many cabs are out there? I think uber/lyft should pay drivers more and guarantee safer drivers, but there’s got to be a middle ground between the status quo and uber/lyft today. It’s not predatory pricing; it’s an exposure of the hugely distorted and artificial cab market and the market failure that happens as a result.

  • Kevin M

    What do you mean that most cabdrivers don’t need medallions? Don’t they need them to operate legally?

    I understand that prices of both are set; my point is that uber/lyft aren’t subject to these costs, but the author tries to make the point that TNCs are setting prices artificially low. I disagree — TNC prices reflect labor (albeit a low-paying non-employee labor rate) plus depreciation, but without a huge fee tacked on. Plus, it’s depreciation of your primary vehicle, not a cab. If you run a home business, you don’t have to pay rent on an office…

    What’s the point of medallion fees? To regulate how many cabs are out there? I think uber/lyft should pay drivers more and guarantee safer drivers, but there’s got to be a middle ground between the status quo and uber/lyft today. It’s not predatory pricing; it’s an exposure of the hugely distorted and artificial cab market and the market failure that happens as a result.

  • Kevin M

    What do you mean that most cabdrivers don’t need medallions? Don’t they need them to operate legally?

    I understand that prices of both are set; my point is that uber/lyft aren’t subject to these costs, but the author tries to make the point that TNCs are setting prices artificially low. I disagree — TNC prices reflect labor (albeit a low-paying non-employee labor rate) plus depreciation, but without a huge fee tacked on. Plus, it’s depreciation of your primary vehicle, not a cab. If you run a home business, you don’t have to pay rent on an office…

    What’s the point of medallion fees? To regulate how many cabs are out there? I think uber/lyft should pay drivers more and guarantee safer drivers, but there’s got to be a middle ground between the status quo and uber/lyft today. It’s not predatory pricing; it’s an exposure of the hugely distorted and artificial cab market and the market failure that happens as a result.

  • Don Anderson

    You only need a medallion to own a cab, not to drive one. There are about 3 or 4 drivers for every medallion in the city. And the “value” of the medallion, completely arbitrary as you say, still has nothing to do with the price of a cab ride, and counts for at most a very small proportion of the price of operation.

    Of course Uber and Lyft are predatory pricing: neither business is making money while they live off investors’ money. There is a constant turnover of drivers as new drivers discover that they are not making a living wage. The current pricing of both Uber and Lyft is not sustainable, and is meant to drive competitors out of business (or in Lyft’s case, to hang on until Uber is forced to raise prices back to something reasonable).

  • Kevin M

    OK, yes, I’m aware that medallions are rented along with the cab by multiple drivers per day. I think it requires quite a bit of chutzpah to say that the price of the medallion is not related to the price of a ride. Drivers have to pay how much to rent the medallion each shift? And you think SFMTA/taxi commission is not aware of the cost, and does not figure it into the calculation of the regulated fare at all? C’mon.

    Sure, TNCs are probably burning through investor cash, but I think they’re in it for the profit, too. Surge pricing would indicate that they care about the bottom line at least a little. I’d like to see the stats about driver turnover compared to muni drivers or cab drivers; I make it a point to ask drivers about their experience, on the rare occasion I use a TNC, and the results do not reflect the blanket statement you made.

    I’m aware of the protests and the litigation, and I want to make it clear that I do not fully approve of the current TNC system. I simply think this article plays up the emotional/political side too much while ignoring basic math/economics. The real argument should be more deregulation of taxis and additional regulation of TNCs, not a user boycott of either one.

  • Don Anderson

    I’m just responding to a common misconception about the effect of taxi medallions on pricing. I think I’ve already made it clear that the effect is minor and does not “explain” the difference between Uber/Lyft and taxi fares. That has much more to do with the distortion of the market by predatory pricing and a reckless burning-through of driver supply. In the news, just this week, you can read about uber borrowing $6 billion in junk bonds to stay afloat, and about leaked documents showing Uber drivers making minimum wage or less. This isn’t a sustainable situation.

  • Kevin M

    Ha, you haven’t made anything clear – you’ve just stated your narrative. Your argument that a medallion “has nothing to do with the price of a cab ride, and counts for at most a very small proportion of the price of operation” seems to contradict itself, so I’m confused.

    I really don’t know the operating budget of a cab driver, which is why I asked the question in the first place. I appreciate your responses, but they haven’t been very helpful. What’s the annual depreciation of a cab vs. annual rent on a medallion? I would guess they’re actually pretty close.

    Regardless, I don’t think TNCs are sustainable, either. Uber is borrowing because other TNCs in China are actually undercutting them severely, which would be ironic given your accusation. But yes, the litigation will either lead to real compensation for employee drivers or will continue to fuel turnover until TNCs can get their automated vehicles on the street.

  • Don Anderson

    Look, the price is set by the city, not by the cab companies. And until a few years ago, medallions in SF were neither bought nor sold. Only after the MTA realized they could use medallions to squeeze cash out of the taxi industry did their price get set at $250k or whatever it is now. This happened in 2012, but taxi fares in SF have remained unchanged since 2011. See the disconnect?

    Unlike Uber, which can change its pricing at a whim, those drivers who choose to buy medallions after this change do not get to charge higher fares to recoup this investment–they have to charge the same amount as every other driver.

  • ua2

    Great write up. I used Uber Black a few times back in 2012 in DC when I had some credits but soured on it. I’ll support cabs.

  • Jason Salonga

    Actually yes TNCs are setting prices artificially low, to attract more riders who don’t know better, and then jack up fares anytime to entice more drivers with surge pricing incentives. It’s not rocket science. The author is correct, while you on one hand just repeated the Uber/Lyft talking points. Your view is shared by many who bought and drank the Uber/Lyft koolaid they started peddling a few years back. Twist it any way you want, it’s predatory pricing, period.

  • Jason Salonga

    The price of a medallion has got nothing to do with the price of a cab ride and vice versa.
    The city sets the meter rates, medallion owners and part time drivers have to abide by it.
    Another ‘myth’: Taxi companies get percentage of each ride just like Uber/Lyft.
    Nope, wrong. Taxi companies are in the business of renting cars to drivers, that’s it.
    After drivers pay the gate(rent) and fuel cost and taxes, the earnings for the rest of the shift is his/hers. For cab drivers it’s simple math, really.
    Taxi companies shoulder the maintenance expenses, insurance and other liabilities for each vehicle.

  • Jason Salonga

    “The real argument should be more deregulation of taxis and additional regulation of TNCs, not a user boycott of either one.”
    No, that’s another misdirection tactic by TNCs. Deregulating taxis and other legit transportation will never happen nor it should. Regulations are put in place for all the right reasons.
    Look, there’s enough passengers in SF for all drivers to make a living out of legally. Legitimate taxis, limos and shuttles compete with each other with no issue at all. The problem is oversaturation of uncapped and uncontrolled number of TNC vehicles. It’s difficult when city streets are flooded with TNC cars, half of them roaming around empty waiting for orders, causing daily congestion and traffic slowing everyone down. More TNC drivers means less money for other TNC drivers, they are simply cannibalizing each other down. Regulating TNC numbers should help. Unfortunately Uber/Lyft would never even try to agree to a middle ground with regulators, and why would they? Their business model is purely based on throwing as many cars as possible on city streets while they get 25% cut of each fare.
    The author summed it up nicely- the so-called young progressives/ liberals have developed a blind side when it comes to Uber/Lyft.
    Frankly, the only ones ignoring basic math/economics are TNC drivers.

  • Kevin M

    I get that medallion prices and fares are set. I think it’s foolish to think that they could possibly be set independently or arbitrarily, with no consideration of the relationship between them. It’s incredibly simple math to understand that the price/rent of the medallion factors into the profit of a driver, as you described in your comment.

    Maybe I need to put it another way. If the medallion was set at $10,000,000, would taxis continue operating? No, of course not. None of them could possibly recoup the cost of the medallion unless the fares were raised. So clearly there is a relationship. Similarly, if the medallions were eliminated, the fares could be set lower with no adverse effect on driver take-home. I UNDERSTAND that it’s a regulatory body that sets the fares. I am desperately trying to say that I think the folks on that panel take medallion prices into account when doing so.

  • Kevin M

    So TNCs are able to restrict supply anytime they want to, thereby creating artificial demand and surge pricing, but at the same time, TNC drivers are cannibalizing themselves by all jumping into the fleet, over-saturating the market. Doesn’t it seem like it has to be one or the other?

    There would be enough passengers in your scenario because SF only issues so many medallions. The cab companies fight every year to restrict the number of medallions out on the street, and for good economic reason. But that’s certainly not best for the consumer.

    Yes, I have to take a devil’s advocate side in these comments just to ask questions, apparently. I started out quite against TNCs, but after learning more about what a racket the taxi ownership has going on, I’m not so heavily on that side, either. It seems both cab & TNC drivers are caught in the middle with problems stemming from ownership. And I’d simply like a more honest discussion about each side instead of thinking TNCs are the ultimate solution or cabs are perfect with no changes needed.

  • Mickey

    Wow the arguments in this comment section are insightful, emotional, and informative. You never see that on a news website. I need to come here more often. I’m going to throw something out here about the cab vs u-lyft debate. I hate uber drivers. I love the convenience of the app based rides, and I need to test flywheel, but I really dislike the uber drivers. Why? They solely live on their GPS based directions. I can tell a cab driver “I’m going to X place at Y and Z streets” and before I’m seatbelted we’re rolling. Do that with an uber driver and you spend 5 minutes of conversation before he types into the GPS. U-drivers have to have an actual address to type in or they don’t know where to go. Twice now I’ve had U-drivers trying to make a left hand turn onto Geary at stop sign at 7pm. OMG I could walk to my destination faster. I still use uber when I want it’s 12 mid night and I don’t want to try to hail a cab, but if I’m planning a ride I prefer to call a cab (Veteran’s) and pay extra or maybe less if it’s “surge time” just for the lower frustration factor.

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