Bacon's Rebellion

Democracy Thrives in Sunlight

Smooth Ride Ahead for Uber, Lyft

—

by

James A. Bacon
in ,

Is that a smile I see under that Lyft mustache?
Is that a smile I see under that Lyft mustache?

It looks like Uber and Lyft will be a permanent part of the Virginia transportation landscape. Legislation essentially legalizing the two ride-for-hire companies has passed both houses of the General Assembly, and Governor Terry McAuliffe has indicated his willingness to sign the bill.

The legislation proposes entirely reasonable regulations that will allow the transportation-network companies (TNCs) to preserve their business models intact, while providing basic protections for riders. Companies must ensure that all drivers are at least 21 years old and properly licensed, and have been screened for criminal backgrounds and sex offenses. Drivers convicted of driving under the influence or other moving violations would be disqualified. Additionally, drivers are required to maintain an $1 million in liability insurance.

Far from putting a damper on the emerging industry, the regulations could legitimize Uber and Lyft in the minds of consumers. At the same time, the new rules are not so onerous that they would discourage competitors from entering the market. This is a victory for everyone.

“The legislation … provides the perfect balance of public safety measures while fostering innovation,” said Del. Tim Hugo, R-Centreville, a co-patron. “Improving transportation for Virginians takes more than just building infrastructure; it requires us to embrace new technology to better meet citizens’ transportation needs.”

Hugo has it exactly right.

There is more to Uber’s technology than apps that connect riders with drivers. Those apps can, and have been, readily replicated. The real secret sauce is Uber’s proprietary algorithms that tell the company how many cars to have on the road at a given point of time and where they should be positioned.

The next step. It is in society’s best interest for these ride-for-hire apps and algorithms to migrate to lower price-points. The end goal is for Uber, Lyft or other companies inspired by them to provide rides in vans or buses for just a couple of dollars. That will put them in competition with municipal bus companies, which carry a lot more political clout than the taxicab industry. That will be the true test.

— JAB

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35 responses to “Smooth Ride Ahead for Uber, Lyft”

  1. larryg Avatar
    larryg

    But here is the CORRECT Headline:

    Uber and Lfyt – FALL to Regulation and FAIL to “disrupt” !

    so at the end of the day – what are Uber and Lfyt doing – different from other regulated taxi services – that existing regulated taxi services could not also do – and are?

    I’m speaking of the Smartphone Dispatch capability – not unique to Uber and Lyft and actually used by other taxi services.

    The regulation requires Uber an Lfyt to have DMV decals on their vehicles and it also requires background checks as well as commercial liability insurance.

    so.. once again – the free market that is often spoken of and advocated here – has sucumbed to the boot of government…

    right?

    oh – and the Smartphone app is going to do much, much more. It’s going to become a parkin genie (as you have written). It’s going to become a “slug” thing and it’s going to revolutionize van and transit services.. when uber and lyft and others start running van and bus services..

    but… regulated… by the govt… not free market.

    1. James A. Bacon Avatar
      James A. Bacon

      Larry, as usual, you are critiquing straw men of your imagination. I have always maintained that it is legitimate for government to enact regulations to protect the public health and safety. That doesn’t mean I agree that all such regulations are justified — some go too far — but I have no problem with the principle of government regulation for that purpose.

      1. larryg Avatar
        larryg

        re: ” The First to Join the Luddite Parade”

        excerpts:

        ” Upstart transportation companies Uber and Lyft, which link drivers and passengers by means of a smart phone, have run into resistance from taxicab companies and municipal regulators around the country. But Virginia is the first state to crack down on the two companies, contends Ken Cuccinelli, former attorney general, in a Sunday op-ed in the Richmond Times-Dispatch. That fact should give pause, he suggests, to anyone who fantasizes about Virginia staying in the vanguard of technological progress.”

        ” Cuccinelli writes. “Virginia holds the dubious distinction of being the first entire state to join the Luddite parade.”

        “The two companies assert that they are operating legally and have refused to shut down their Virginia operations.

        Anyone who wonders why Virginia has tumbled from a No. 1 rating in CNBC’s Best State to do Business rankings to No. 8 need look no further for an example why. ”

        “The state code literally discriminates against for-profit enterprises. ….the taxicab lobby, the limousine lobby and other transportation providers who feel threatened by the superior technology of the Silicon Valley upstarts.”

        “If Virginians want to be able to use Uber or Lyft to get a ride within 10 minutes instead of calling a taxi and hoping one arrives in an hour, then we need a government that doesn’t put the taxi owners in charge of regulating Uber.

        Governments need to rethink their regulatory models, Cuccinelli writes.”

        This is my favorite:

        “Otherwise the rest of us aren’t just going to be denied more convenient and cost-effective transportation, we will be denied an infinite number of other goods and services in the future as well, because other companies that would make our lives better for less money will never come into being.”

        On this point, Cuccinelli is absolutely right.

        Virginia missed a once-a-generation opportunity then [on bank regulation]
        . Let’s not miss the next one.”

        I rest my case!

        Uber and Lfyt – ARE regulated and on govt terms not theirs.

        and yes – the regulation of Uber and Lyft – WILL – deny SOME benefits of a disruptive free market… very true.

        so .. it appears we’ve gone from an argument that subjecting uber and lyft to conventional govt regulation – harms the free market and harms the benefits it would deliver to customers..

        so I ask – what exactly did survive from Uber and Lyft and not succumb to conventional regulation?

        serious question. what rollbacks to regulation have occurred in order to accommodate uber and lyft?

        It appears to me – and I’ll be the first to claim ignorance – that Uber and Lyft pretty much got regulated.. and in a way that does not give them really serious advantages over existing regulated taxi services – who are also free to adopt the same smartphone dispatch capability.

        I’ll concede at least one area – surge pricing… which .. I presume will also be made available to conventional taxi services also…

        so .. is that all? do we basically agree to allow any taxi service to now use surge pricing? If true – I’d concede it’s a major change… and perhaps regulation was pushed back a bit.

      2. larryg Avatar
        larryg

        going back to previous posts in BR – I got the impression that you felt that regulation in general is unwarranted and specifically in the case of uber/lyft but NOW you seem to be APPLAUDING the imposition of regulation!

        so I AM confused!

        in earlier posts – you did seem to argue that govt should not require the drivers to have background checks, the cars insured with commercial liability, and recently – you seem to have advocated that bonds and torts replace regulation. So I WAS surprised to see you SUPPORT regulation!

        For me, the regulation was the desired outcome – what I thought should have happened from the get go.

        And For you? the same?

        it’s not so much that I’m tipping at strawmen as much as – perhaps I really don’t understand your position on regulation and this is an example

        Virginia did do something smart in my view and that was to specifically update regulations to INCLUDE their Uber/Lyft business models, rather than have them continue to say their business models were unique and should be exempt from regulation. A fait accompli that I thought you opposed from the get go.

        So , NOW – we BOTH agree on the regulation that was put on Uber and Lyft?

        you apparently NOW do believe that the level of regulation is warranted?

        so what has survived to remain unregulated for Uber and Lyft that you felt should not be regulated?

  2. virginiagal2 Avatar
    virginiagal2

    Jim, I don’t think either Uber or Lyft have “proprietary algorithms that tell the company how many cars to have on the road at a given point of time and where they should be positioned.” I don’t think that’s the way the software is structured (please correct me if you find information otherwise.)

    As I understand it, drivers for Uber and Lyft are independent contractors who basically sign in, GPS notes where they are and the app sends it back to the company, and they are added to the list of available drivers. The potential passenger chooses which driver, based on proximity, and based on reviews.

    It’s more like being an Amazon seller than anything special either Uber or Lyft do. I don’t think they they are using complex operations research algorithms to determine best path and I don’t think they are setting staffing levels or location – that’s what surge pricing is supposed to do, provide a market mechanism to get drivers to go where they are needed when they are needed.

    My expectation is that both Uber and Lyft are going to see growth capped below expectations when self driving cars become available – because that will make it pretty simple for people to set up their own co-ops of car sharing, similar to CSAs with farms. I think a CSA model is likely to be pretty popular, possibly replacing a primary car, possibly replacing the need for a second car.

    Self driving cars will also make it far simpler for a family to get by with fewer cars, since you can send the car where it’s needed. Effects on miles driven are likely to be mixed – if it starts in, say Midlothian, drives one spouse to Short Pump, then the other to downtown, then drives to Midlothian to take the kids to soccer practice, then back to Short Pump, downtown, and return to Midlothian to pick up the kids – may be a savings in mileage, may not.

    Even if you don’t coop, you are likely to need fewer cars since it doesn’t have to sit in one place waiting for you. It can go do other things and come back to pick you up.

    One other thought – once it’s done those things, it needs to determine where the car should wait when not used – that last could really help parking issues, including safety-related reluctance to use parking garages.

    It’s fairly complex to run the math on all of these, and whether it’s fewer miles or more, and what’s the most efficient route – the math on routing gets pretty complex pretty fast, especially when you try to determine aggregate effects.

    Self driving cards have lots of implications on number of parking spaces needed, road patterns, road capacity, city design.

    1. James A. Bacon Avatar
      James A. Bacon

      Virginiagal, I base my statement upon a February 2012 interview with Uber CEO Travis Kalanick, in which I wrote:

      The smartphone application is the least of it. The company created a brain trust comprising a nuclear physicist, a computational neurosurgeon and a machine-learning expert to predict the demand for drivers, match the supply with the demand, and then position the cars where the demand will be. “The whole point of the math department is to minimize pickup times and maximize utilization.”

      That’s a tricky balance. You can put 1,000 cars on the road and you’ll have very short pickup times – and you’ll go bankrupt. But if there’s a demand for 100 cars and you have only 99, you’ll have long delays and unhappy customers. Getting the right balance under continually changing conditions is an incredible mathematical challenge. The company has developed systems to incorporate feedback from thousands of interactions – people downloading their Uber apps, opening their apps, calling cars – in order to refine their systems.

      1. virginiagal2 Avatar
        virginiagal2

        My understanding is that the drivers are independent contractors that work on commission, so I don’t see how it would cause Uber to go bankrupt if they had too many drivers. The drivers, maybe, but AFAIK it’s not going to affect Uber’s bottom line if it has 1000 drivers and only needs 100.

        As I understood it, the systems are not to tell the drivers where they are supposed to go, but rather to tell the drivers where demand is, and assign the closest driver(s). The complex math, at least as I understand it, is directed towards the surge pricing and determining hotspots.

        If you wanted to do proximity quick and dirty, the formula for determining distance using GPS points isn’t that complex. GPS functionality is built in to smartphones. The calculation isn’t that hard, and there are publicly available software libraries for pretty complex map functions (Google has one, I think there’s a licensing fee for commercial use) and you can use those libraries to do it quick and very accurate.

        I don’t particularly see how a nuclear physicist or a neurosurgeon would help Uber with this, other than marketing as a coolness factor. Experts in machine learning, definitely.

        Again, this is based on my understanding that Uber drivers decide when and where to check in, rather than being assigned. I did go to their website and it does appear to indicate this is correct, and I found an article from someone who drove for Uber that appears to confirm this – but I’ve never driven for Uber.

      2. larryg Avatar
        larryg

        the thing is – that any company, including existing taxi companies can use technology like Uber and Lyft are using – and – now they are going to be free to use surge pricing also – which I support – like I do for tolls .. electricity pricing and airlines.

        but I’d ask – in whose interest is it to try to supply more cars and drivers when a limited supply brings more profit?

        I’d predict it won’t be long – if it has not happened already that services like Kayak and Trivago will pop up for taxi’s which will also assign ratings to the various services so I expect conventional tax companies to get into the same game and now that everyone is regulated the same – to give uber and lyft a run for their money.

        Many taxi drivers are also independent contractors.. and one of the key issues is who determines the price especially when “surging” and will there be one uniform – locality wide price – set by the company or set by the individual contractors?

        this is one of the key issues the IRS uses to determine if someone is an employee or an independent contractor.

        i.e – can a company tell an independent contractor what the prices are for what are essentially privately operated businesses?

        if there is a local tax – who collects it and gives it to the state – Uber/Lyft or each driver.

        Fed Ex was operating this way a few years back but the IRS was warning them that the definition of an employee means the employer is dictating the work – day to day, minute to minute instead of a contract between them and the independent contractor where it is written in the contract the duties of the contractor.

        Why is this important?

        well.. for all sorts of reasons to include who collects FICA taxes and what other things like pensions and health care are usually NOT provided by the company but by the contractor for themselves.

        Virginiagal2 – would I be too nosy to ask if you are working as an independent contractor or an employee?

        finally – I’m not convinced of self-driving cars nor GPS-based gas taxes!

        some day – yes.. the tort potential of self-driving cars boggles the mind a hell of a lot more than even Uber/Lyft. Keep in mind Uber/Lyft themselves are going to have to also get liability insurance – and almost surely will be named in lawsuits and have to defend I just cannot imagine how a fatal crash with a self-driving car works it’s way through the court system and I strongly suspect that before that happens – they too will come under the control of regulations.

        technological disruption – pushes the envelope on laws and regulation but it does not proceed outside of regulation – at least no for long – even though govt seldom does a wonderful job of writing the regs – for sure early on – check out how the govt is dealing with drones…

        and I’d almost see personal people-carrying drones before self-driving cars!

        1. virginiagal2 Avatar
          virginiagal2

          I agree that this functionality is not just limited to Lyft and Uber – one reason I’m a skeptic about them as companies.

          The disruption to me is not just the technology, since that can be used by current companies and other new entrants – the key disruption is the change to laws that removes supply limitations. Once that’s occurred, though, it applies to anyone who meets the regs.

  3. virginiagal2 Avatar
    virginiagal2

    Hi Larry –

    I am an employee in my day job. I’m also one of the owner/managers of an LLC. ( I’m kind of a workaholic.)

    From recent news, self driving cars are now legal, at least for testing purposes, in four states. Currently, they can’t handle many routine problems (bad weather, police signalling traffic directions, potholes, and the most appropriate ways to avoid road debris – such as, it’s okay to drive over a beer can) but Google has publicly stated they expect these issues to be resolved by 2020.

    1. larryg Avatar
      larryg

      thanks Virginiagal.. you were sounding like someone familiar with independent contracting!

      I’m still a skeptic on Google self-driving cars and I’ll tell you why. It’s people.

      these days I’m dodging people coming across the solid line who are playing with their cell phones. It’s become rampant. I’ll pass folks on the right – they are in the left lane going slower than the posted speed and when I look over they are screwing with their cell phone.

      It reminds me of the days when the conventional wisdom was that people who drank and drive – had “accidents” that were unfortunate and largely unavoidable. Until gradually there was an uprising from people whose family members had been killed by drunk drivers and the news that some drunk drivers had actually killed more than one person in separate accidents.

      Next – check out the interstates where people get in the left lane and sit there until people starting moving up on the right and cutting back in front of them.

      how would a driverless car deal with these kinds of situations?

      inevitably – there will be accidents – and the drunk drivers and scofflaws will blame the self-driving cars – and the folks who operate them will be sued and have to mount expensive defenses to ward off the ambulance chasers.

      I have zero doubt that a self-driving car can be designed to operate with OTHER self-driving cars but I have serious doubts that we can create self-driving cars to operate on the same roads as people….

      someone has to program the self-driving cars and I wonder – for instance, what you would program if the self-driving car was behind a slow-driving human in the left lane… what behavior would the programmer assign to the self-driving car for that scenario? fall back and go to the right lane with cars coming up behind you?

      my suspect is that self-driving cars will be programmed to yield to aggressive drivers .. to get out of the way – and go sit in the right-most lane…

      but at this point, I’m not sure I’ve even seen any dialogue about what the behavior of self-driving cars should be – on roads with humans.. going 80mph…

      Google will “fix” this in six years? When pigs fly! You’d be better off developing a people-carrying drone!

    2. virginiagal2 Avatar
      virginiagal2

      I know a little about how independent contractors work – one of my siblings primarily works as one. That said, I’m not an expert on the rules of contracting, and I don’t play one on TV.

      It seems like the algorithms for self-driving cars are basically weighted towards minimizing risk, so I’d guess right hand lane, pass only if clear, avoid erratic drivers, stay within the speed limit. That last could be challenging on 95 in rush hour.

      There have already been a couple of accidents with them – one was rear-ended, another when the car was in manual mode. From public comments, it seems they’re very aware of this.

  4. larryg Avatar
    larryg

    I have a couple of more predictions.

    First – the scofflaw crowd will quickly determine the standard behavior of self driving cars – and then consider them to be clones – all with the same lower-level “intelligence” than can be subverted with the right kind of opportunist maneuvers.

    then, for every behavior that disrupts or slows down traffic – even if it is justified when dealing with aggressive drivers – will be the subject of massive complaints which will encourage legislators to pass laws that force self-driving cars to NOT block traffic – even if it is aggressive driving traffic!

    in other words – the clone like attributes of self-driving cars will make them – as a whole class of vehicles – targets of restrictive legislation – that will end up making them no better options than taking transit or Uber… or whatever.

    Third – they’ll ALSO have cameras and license-plate readers onboard that will “report” the scofflaw behaviors as encountered – a GOOD THING and perhaps the way that self-driving cars will be able to travel with humans and scofflaws.. just report them..!!!

    Instead of one or two pesky troopers sitting in the medians – there will be a phalanx of self-driving vehicles – each one “monitoring” scofflaws so maybe I’m wrong and they will not only come online quickly but they will revolutionize the way we deal with scofflaws.

    They’ll have a bright future for transporting packages – also!

    1. virginiagal2 Avatar
      virginiagal2

      Agreed – I was thinking that cameras and readers were a possibility too. Would be interesting to see if this results in laws allowing tint or curtains in self-driving cars, to restore some privacy to the occupants.

      Also agree re transport – maybe not for home or office delivery – it can’t currently put it on the porch or get a signature – but it could take it from the port to a railhead, railhead to a warehouse, and from the warehouse to a store.

  5. DonR Avatar
    DonR

    You have to think economically rather than technically here. Uber has costs of doing business. If Uber had too many drivers relative to demand then the drivers would get too few rides and would quit driving under Uber contract. At that point Uber would go bankrupt. So, it’s clearly in Uber’s interest to match supply of drivers to demand for rides. It’s how they keep the suppliers (i.e. drivers) happy. I don’t know how (or if) they are doing that but they clearly have an incentive to keep the drivers making adequate money.

    The other economic consideration is along the lines of efficiency. My understanding was that Uber initially appealed to limo drivers who spent a large part of each say sitting around waiting for their scheduled rides to happen. Being available “on demand” let the drivers stay busier. However, within limits, it did not generate any increase in aggregate demand for rides. Instead, it “took share” from incumbent providers (i.e. taxi companies). In its own little way Uber helped accelerate the income and wealth gaps by increasing supply in a market with stable demand. This will eventually reduce prices. Now comes the tough question – what is the elasticity of demand for “on demand” transportation? My guess is relatively inelastic. Decreasing the price will not create sufficient increased demand to hold either total or marginal revenue steady. In other words, it will put some operators out of business.

    At this point conservatives will no doubt shout “Ah Ha! Schumpeter’s theories of creative destruction tell us that this kind of economic churn is good for an economy.”. Up to a point I’d agree. However, Schumpeter more or less assumed that the demand for labor would rise as the economy reorganized around more efficient uses of capital (in this case, higher utilization of limos). However, there is no law of biology, technology or economics which holds that the economic gains from increased efficiency through technology will be evenly distributed among the population. Or that increases in capital efficiency will always result in higher aggregate demand for labor. Historically, technological advances have created more opportunities for labor than those advances have eliminated. But there is no reason to believe this will continue indefinitely. I wonder if we have already crossed the line where increasing efficiency generated by technological advancement has already started to erode the need for human labor in the aggregate, at least in the United States.

    On a separate topic, Larry’s arguments on regulation miss the point. Virginiagal is quite correct is writing that the technology to perform electronic dispatch via smartphones using GPS is fairly straight forward. It is indeed. So, why didn’t any of the thousands of taxi companies across the US start doing this? I’d suggest that the issuance of a restricted supply of medallions (below the natural level of demand) worked to keep supply low and prices high. This was a direct result of crony capitalism perpetrated via regulation. Uber added to the supply without going through the restricted medallion process and broke the crony capitalist via regulation structure. Yes, they ultimately submitted to safety regulation. However, as far as I know, they have not submitted to minimized supply through restricted medallion issuance. That was a huge victory of the free market over regulated crony capitalism.

    1. larryg Avatar
      larryg

      re: why don’t taxi’s do the smartphone thing?

      they do.. I’ve provided links to them before..

      re: uber/lyft – existing demand – elasticity – et al

      the question is – is there a market BEYOND what taxi’s are already providing services to that uber/lfyt will exploit or are Uber/Lyft going to cannibalize some of the existing market and if so – how?

      Will you be able to get a Uber/Lyft “cab” cheaper than a regular cab – anytime?

      I think not. I think they will skim the cream on the cheap trips but then rip you a new one during “surge” times.

      if this is the case – has Uber/Lyft provided “value” or have they just changed the way the market works?

      let me give an example with airlines and tolls.

      can you see where I am going?

      with airlines -you can – if you know what to do and are willing to make some serious compromises – get a cheap seat. However, at other times – when you don’t have that flexibility – you will pay out the wazoo – for the same exact seat. In fact, on any given flight – there can be a fairly wide disparity between what people paid -…

      same thing with dynamic tolls. sometimes they will be cheap and at other times -when you REALLY do need to get somewhere on a time-sensitive basis -you’re going to pay out the wazoo.

      so Don likes Uber/Lyft but not dynamic tolls?

      I would assert that Uber/Lfyt are the taxi version of dynamic tolls…!!!

      and – I DO support them – but in the same way that I support airlines – dynamic pricing – but not at the expense of safety … we can’t have airline versions of dollar buses and vans and we SHOULDN’T have them for buses, vans or taxi’s either.

    2. virginiagal2 Avatar
      virginiagal2

      “Historically, technological advances have created more opportunities for labor than those advances have eliminated. But there is no reason to believe this will continue indefinitely. I wonder if we have already crossed the line where increasing efficiency generated by technological advancement has already started to erode the need for human labor in the aggregate, at least in the United States.”

      I have wondered the same thing. If that’s the case, then decreasing populations in advanced countries may not be the problem some fear.

      1. larryg Avatar
        larryg

        re: the price of labor.

        yes. labor is clearly a supply/demand item that is affected by technology.

        ask the folks whose jobs are now being done by machines..

        the question is – are new jobs available in building the machines?

        and the answer is – sure -if you have a stepped-up education…

        this is what is behind the POTUS call for “free” Community College.

        your Dad’s high school education these days is worth warm spit and the new “high school education” is at least 12+2 with the ‘2’ being an associate degree and/or certificate in a field that required specialized labor.

        this is why the rural areas are dying and the people in them – out of luck – if they can’t go to an urban area (or from home) with a stepped-up – “competitive” education.

        you can’t make a living running a cash register or serving lattes.. or pumping gas or a thousand other things that no longer provide an adequate income to pay for your shelter and food.

        the very best thing Virginia could do for it’s citizens – is to provide them with access to a 2yr supplemental education and access to primary care.

        anything else is just fooling ourselves.

    3. James A. Bacon Avatar
      James A. Bacon

      “Now comes the tough question – what is the elasticity of demand for “on demand” transportation?”

      A most interesting question. Based on anecdotal personal observation, I would say that the entry of Uber into the Richmond marketplace has increased the demand for on-demand transportation. I have friends who summon Uber with some frequency, particularly during the evening when they’ve been drinking. They never used to call the taxicab. They’d usually resort to designated drivers. Uber’s responsiveness and convenience changed the market.

      1. larryg Avatar
        larryg

        “on-demand” does come at a cost – though. I totally support it but
        the average person is going to have sticker shock like they do with dynamic tolls and I wonder if we are going to hear cries of “rip off” ..

        so is Uber ‘lyft the transportation equivalent of payday loans?

  6. James A. Bacon Avatar
    James A. Bacon

    A dramatic surge in technology-driven productivity could in theory reduce the demand for labor and increase joblessness. But that’s not what appears to be happening to the U.S. economy at the moment. To quote a 2014 Wall Street Journal piece, “Productivity Growth Has Taken a Dive.” The problem with the economy is a sharp decline in the rate of new business formation. Recent articles have emphasized that U.S. business start-ups have fallen to European levels — or even lower. More businesses are dying each year than are being created.

    That’s a problem we need to worry about a lot more than productivity killing off jobs.

    1. larryg Avatar
      larryg

      you can form new businesses unless there is demand for products/services.

      to put it another way – you can’t produce products and services for which there is no demand for.. well you can.. but you’ll either go broke or drive some other business competing for the same demand – broke.

      what creates increased demand?

    2. larryg Avatar
      larryg

      the key phrase is “aggregate demand”

      if aggregate demand remains static then any new business formation is basically
      cannibalizing the existing aggregate demand.

      the issue is – to have NEW business formation that is feeding off of increased aggregate demand – and not cannibalizing the existing pie.

      and you get that from increased productivity – which we are, without question, experiencing – but the gains from increased productivity are not going to workers but instead to investors – which can be seen with the stock market.

      but increased holdings for investors does not increase aggregate demand. Basically investors are using the gains to increase their own wealth.

      I’m not advocating wealth re-distribution here as a solution but I am saying to recognize the facts and the facts are that we ARE getting increased productivity , and it’s not getting reflected in paychecks of workers – but instead is showing up in investors portfolios.

      clearly – it was not workers salaries that went into changes that increased productivity – no question that it came from investors.

      but it’s also true -that we will continue to have a stagnant economy as long as increased productivity results in static wages and lost jobs.

      All I’m saying here is that we do need to be brutally honest about the facts – before we ever get to the point of advocating changes.

      we need to recognize the current facts.

    3. DonR Avatar
      DonR

      I am not sure you can view the question in the aggregate. I lead software design teams. I am very confident that the new technology advances will keep me and my folks busy. We’ll keep getting richer. The question is whether the productivity advances we are pioneering will ever trickle down as opportunities for people without decades of experience in technology or engineering degrees. I have my doubts.

      I fly out of LaGuardia Airport from time to time. Recently there have been a number of restaurants which have converted to automated order establishments. Instead of ordering from a person there is a tablet in front of every seat. There is also a credit card swiper. Patrons use the tablet to order their drink and meal. They then swipe their credit card. Pretty quickly a runner (or bar back) brings out the drink and then the food. A relatively large and busy operation can be serviced by two people running food and drinks. I’d guess the prior approach required five or six people. This new efficiency doesn’t cause people to eat more food it just reduces the labor required to serve that food.

      Here is the latest BLS report on labor productivity (3rd quarter 2014). Some interesting quotes:

      ” … output increased 4.9 percent and hours worked increased
      2.5 percent.”

      “Unit labor costs in the nonfarm business sector fell 1.0 percent in the third
      quarter of 2014, as a 1.3 percent increase in hourly compensation was smaller
      than the 2.3 percent gain in productivity.”

      http://www.bls.gov/news.release/prod2.nr0.htm

      Yes, it’s just one quarter but it highlights the realities of a “jobless expansion”.

      Meanwhile, US population growth was .71% in 2013. While that is slow by historical standards it still represents a need for more jobs in the future.

      1. larryg Avatar
        larryg

        productivity can be measured in different ways.

        you can have 4 people become as productive as 5.

        then you fire 1 of them… because the 4 can deliver the productivity
        needed to satisfy the demand with no increase in wages.

        so the owner has saved 1/5 of his production costs and can pocket the
        savings.

  7. larryg Avatar
    larryg

    oops -you CAN’T .. CREATE more demand… which is what new businesses formation is looking for…

  8. LifeOnTheFallLine Avatar
    LifeOnTheFallLine

    This article by Jon Liss at the Nation sums up my feelings of Uber pretty well.

    http://www.thenation.com/article/196233/uber-and-taxi-industrys-last-stand

    “Uber has no requirement to serve the public. Indeed, there is a strong race, class and age bias as to who can utilize the service. You have to own a smartphone, which has an average cost of more than $500. Uber requires customers to pay with a credit card, cutting off those with no or poor credit. Until recently, the company had no wheelchair-accessible vehicles in Virginia, and continues to lack adequate services for the disabled in many places.”

    “Uber’s ‘surge’ pricing, in which rates jump based on the relative scarcity of drivers, makes this unaffordable to many in times of high demand, including emergencies like Hurricane Sandy. An attempt to mirror the actual ‘market value’ of a ride at any given time, surge pricing does not serve the vehicleless public that is dependent on rides as part of daily survival. Drivers already rig the system by turning off their app and then jumping back when the price has risen. This is decidedly not operating like a public utility.”

    “By creating part-time jobs that are the equivalent of Walmart greeters on wheels, the company can keep wages low (benefits, of course, are out of the question). It’s little wonder why Uber fights regulations that would require it to insure its drivers’ vehicles, conduct background checks, pay fees or limit its workforce: without restraints on the number of passenger-serving cars, and with a very low barrier of entry to the profession, the number of drivers will continue to grow until the market hits a point of saturation, sending costs plummeting in the process. Because Uber has few operating expenses to speak of—the investment is all made up front in developing the app, after which maintenance is minimal—the company enjoys a substantial profit no matter how many drivers flood the market.”

    The old system wasn’t perfect, but what Uber brings to the table isn’t going to be better.

    Personally, I don’t understand how you get upset at people disrupting a city hall meeting, but are fine with a company that operates illegally until it spends enough money to convince interested parties to tilt the rules in its favor, but that’s just me.

    1. virginiagal2 Avatar
      virginiagal2

      I agree and disagree – I was strongly opposed to Uber and Lyft breaking the law and operating illegally. At the time, I was told it could take years to rewrite the regs – obviously it didn’t.

      That said, I don’t think it’s Uber or Lyft’s job to be a public utility. The public advantage they have provided is, they have opened the door to competition – competition from small companies, local companies, mom and pops, maybe even companies that want to do mass transit like Jim wants. Heck, Jim could start his own dispatch on demand transit company if he wanted to.

      If competition is allowed to work, you are very likely to have different price points with different amenities. High end might be Uber and Lyft – low end might be “Jane Doe’s Discount Drive”.

      If surge pricing kicks in, and Uber charges a lot, who’s to say Jane Doe won’t fill the niche?

      Price gouging works when you have limited supply and high demand. Sometimes the limited supply is real, sometimes it’s artificial, such as taxi regs. The new regs have removed much of the supply limits, so prices have the potential to become more responsive.

      1. larryg Avatar
        larryg

        I like Virginiagal2’s argument.. it’s cogent and reasonable in my view.

        I’m sure all of us have had things break – plumbing, cars, furnaces… etc and
        the dance that follows in trying to find a reputable, trustworthy company that at the same time – won’t rip you off.

        I once had a contractor tell me he could, of the the 3 – fast, cheap, and good – only do two of them and it was my choice!

        I just think Uber and Lfyt’s fundamental business model is seriously flawed and ask would you choose a plumber or furnace repair based on the same situation?

        You might choose a landscaping company like that – but would you put your kid in a private car with someone who is doing that in his spare time for extra money or even full time – but they are using their own personal car to do it? Would you check to see if his tires are bald or if the back seat is clean or the driver not smelly or alcohol on breath?

        With a branded Taxi – you have a number to call and you also have local and state regulators – and that entire enterprise is on the line if you and others start making those kinds of complaints?

        Young millennials may not care as much… but then they’re pretty tolerant of a lot of things that older folks are less so.

        I’m just a skeptic ..

        McDonalds – has franchise stores – yes – run by independent entrepreneurs but their franchise standards are so draconian and strict – that it’s virtually impossible to tell the difference between a company store and a franchise store.

        When Uber and Lyft get to that level of “branding” – I’ll become less of a skeptic.

  9. larryg Avatar
    larryg

    re: ” The end goal is for Uber, Lyft or other companies inspired by them to provide rides in vans or buses for just a couple of dollars.”

    I think there is some pretty fuzzy thinking going on here and here’s why.

    If you are a transit rider – how do you decide which bus to take in terms of pickup and destination?

    you look at the two stops – does the bus pick up there at what time and what time does it get to your destination? Say you have a job at that location and need to get there every day at 8am. So you look up the schedules and figure out where the bus stop is that you need to be at – and what time. Is that the core service that Uber/Lyft vans will be offering? Every day at a certain time an Uber Van will pick you up and get you to your destination at the same time every day?

    I don’t think this is what Uber/Lyft are really about. What they’re really selling is “left over” service.. much like someone signing up for last minute cheap seats on an airline because they do not need to be at a certain place at a certain time… they are flexible.

    so what happens with a Uber/Lyft Van that is picking up multiple riders ? How would they guarantee you to be at a desired destination at a drop-dead time?

    do you know – when you call for Uber/Lfyt – when they are going to get to your destination – whether it will go directly there or you will being dropped in the order of sign-ups or the closest point or what?? and will that schedule be the same every day or will it vary every day?

    How many people are going to get on a Van – not knowing when it will get to their destination – which will be dependent on who else gets on that van and what their desired destination is?

    So I do not think people who want constancy in the stops and consistency in schedule are going to find the Ad Hoc world of Uber/Lyft – appealing nor desirable for things like getting to work or other fixed appointments like doctors, etc.

    I think Uber/Lyft are flying by the seat of the pants – without a real clear idea of the importance of time destinations.

    It’s one thing to get a drunk home at 2am… or there abouts.. but it’s a totally different game to get someone to their at the same time every work day.

    1. James A. Bacon Avatar
      James A. Bacon

      First of all, I don’t know if Uber or Lyft have any interest in getting into the van/jitney business. It would represent a considerable departure from their current business model. But the tools that they have created can certainly migrate to vans/jitneys.

      Second, by your logic, if passengers absolutely, positively require vehicles traveling according to regular schedules how did jitney services get off the ground in Nairobi and other developing countries?

      That plane can’t fly, says Larry G — it’s wings don’t bend like a bird’s! It’s impossible!!

      1. larryg Avatar
        larryg

        re: ” Second, by your logic, if passengers absolutely, positively require vehicles traveling according to regular schedules how did jitney services get off the ground in Nairobi and other developing countries?”

        umm.. how about because they are 3rd world countries with 3rd world standards for mobility and commerce?

        some folks keep confusing the “free market” with 3rd world and mistakening believe that 3rd world “free-market” is a step up!

        I would strongly suspect that most jitney service is not about getting to an appointment on time nor is it for very far – a few blocks.. not Tysons to Dulles.. etc.

        I would posit that most folks in the US that want to use a vehicle for hire – have a desired time at destination – requirement.

        If you’re drunk and want to get home or you are shopping somewhere and want lunch nearby – not so much an issue. but trying to get to work everyday at the same time – is that a legitimate business model for Uber?

        I don’t see them as a core service but rather more an opportunistic “skimmer”.

        When you can get on your smartphone and get a money-back guarantee that you’ll arrive at your destination by a certain time – Uber will have made serious competitive inroads in the for-hire transport world.

        Until then – ascribing that capability to them in advance is risky business.

        I think the folks who said Uber would “break” the current regulation regime were wrong and I think the folks that think Uber – as currently operating is going to replace transit or van shuttle – are also wrong.

        First world economies run on schedules not 3rd world jitneys

  10. Cville Resident Avatar
    Cville Resident

    I think LifeontheFallLine nails it.

    The folks I know who use Uber view it almost as a ‘status service.” Mr. Bacon is right…people drunk at bars do call Uber when they didn’t call a cab….but I think if you did a deep dive into the demos, they would be upper-middle and upper class folks. Calling a cab doesn’t have social cachet. Uber does…at least with its current “hipness” and pricing.

    I’ve used Uber once, just to see what it was all about. No complaints, but I definitely felt like it was more about “status” than transportation.

    I don’t think you’ll ever see it replace buses/mass transit/and “cabs.” Some taxi folks will go out of business (those that primarily rely on airports is my guess). But the taxis that serve those too poor to own a vehicle will not feel a bit of business drop-off from these services.

    I’d also point out that masstrans is its own social ecosystem for users. If you ride the bus for a week in any American city, you’ll quickly figure out that people have a lot of friends/social connections associated with their fellow bus riders. It’s a unique ecosystem that a good anthropologist/sociologist could write a book about….

    1. larryg Avatar
      larryg

      I’m willing to admit that Uber and Lyfts full story has yet to be told – and that current perceptions and impressions may not be what ends up evolving.

      A lot has to do with the folks who run the company – in terms of what their vision is and steps they’d take to make it a more powerful competitor.

      For instance, I joked about guaranteed money-back service. Well. that
      might well be a way to prove to the skeptics that they are for real and someone wanting to get to an important meeting or airport departure – give them a shot.

      If they set up an “express” service that guarantees to get you to work on time – again – this goes to the founders ideas about what kind of business they want to operate – and for every Apple or Instagram – there are Blockbusters and Kodaks…

      so the question is – are Uber/Lyft – payday loan type operations or are they Yellow Cab and Greyhound on steroids?

      I’m in the skeptic camp right now – primarily because they thought they were going to be able to operate outside of regulation (and so did their supporters) and the reality is – they’re already now regulated – and more regulation is coming if they develop a reputation for abusing customers or operating in questionable ways.

      that’s why I asked Jim – what part of their business escaped regulation…

      and the only thing I can see is -surge pricing… as an alternative to not being to get a cab at all at certain times – a kind of dynamic pricing – which I really do support… give people that choice. No one is guaranteed a ride any time they want for cheap. Ask the airlines or the HOT lane folks.

      which people at the airports and other places, call “pirate taxis”.

      again – it boils down to where the company wants to go but if they are run by a bunch of scofflaw types – they are toast.. in the longer run – a blip in the rear view mirror of history…

  11. larryg Avatar
    larryg

    I do note the involvement of GOOGLE and ongoing news that seems to imply that GOOGLE and UBER may be parting ways and pursuing their own visions.

    Uber says that they always thought that self-driving cars were the end game.

    Don’t ask me why – but I trust GOOGLE to do smart-phone dispatched self-driving cars before I trust Uber/Lyft.

    can’t really explain why – perhaps it’s a bias ..

    but .. I also wonder what happened to ZipCar and variants ….. that in the end – found themselves attracting those who had “issues”… with getting drivers licenses, insurance, an credit.

    I will also admit – the more this evolves -the more it makes conventional transit look anachronistic in modern society.

    I help out with a food pantry in a rural area – and the truth is – that virtually everyone – has a car or others can get a ride with someone who has a car.

    Transit is a joke in that it comes about 3 or 4 times a day and does not return for hours.. so if you are hoping to use transit to get to town and return – it’s going to take the whole dang day to do it. It’s easier to get your own car or hitch a ride!

    but I can also say without any trepidation at all – that no one I know uses Uber nor finds it particularly useful nor cheap.

    I’m still a skeptic on self-driving cars.. I think the problem is other drivers that will rain death and destruction down on self-driving cars… they’re going to become like mechanic deer wandering in front of the driving ignorati and self-driving cars are going to end up festooned with cameras and license plate readers to help capture the offending miscreants…and get them into the hands of the authorities.

    In fact, I see the earliest adopters of self-driving cars to be the police who will send them forth to mingle in traffic and photo-capture all the idiots who drive like they should have their licenses suspended … and will – with the advent of self-driving cars – the greatest thing since sliced-price for the oppressed traveling public!

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