Why We Need The Taxi Industry And Uber Clones

Thursday, February 19, 2015 0 No tags Permalink 0

Uber tends to be one of those companies that draws a strong response from people. They either love the democratization of the transportation industry or they see an evil technology upending the general way things are done. People publicly voice their anger over protectionist and anti-competitive measures taken by the traditional cab industry to stall Uber’s growth, or people complain about the evil of surge pricing and lack of screening of drivers.

Like most things in life- the answer is somewhere in between. Yes- the transportation industry NEEDED to be disrupted, especially in SF where Uber originated and it used be to a running joke about how it was impossible to catch a cab anywhere. However, Uber’s global domination and emergence as a potential monopolist is absolutely scary, especially considering its “evil” streak.

We need the taxi industry and we need more Uber clones. While Uber’s business has extremely low barriers to entry, scaling an on demand marketplace to reach liquidity between supply and demand is one of the hardest things for a business to accomplish. Not only do their need to be drivers on the road in every single operable city, but there need to be an equal or similar volume of riders requesting service at the same time. This is where rivals like Sidecar have not been able to beat Uber- one or two times a rider checks Sidecar and there are no drivers, they stop checking the app fairly quickly.

There could easily be a number of good competitors, however. The service Uber is providing is “multi-honing,” (yes business school people walk with me here) meaning consumers don’t have to stick with one absolutely option. They can use Uber, Lyft and any number of other services without harmful consequences for not picking one. Sure, in the long run, there might be incentives for sticking with one over the other, but when you’re stuck in the rain outside trying to get home, you probably don’t care.

On the driver’s side of the market, Uber’s power is downright scary. Their marketing message is both brilliant and manipulative. “Come drive for Uber,” they told taxi cab drivers a few years ago. Then they undermined their own customers’ businesses by introducing UberX. Why not? It was good business. Drivers who make money on the side now who are not professionals enjoy the flexibility of the job. However, they shouldn’t be shocked when Uber releases self driving cars and cuts humans out of the process completely.

Yes dear friends, this is the story of potentially a monopoly gone rogue. Can you imagine what life would be like if Uber had complete pricing power? Surge pricing…all. the. time.

So we need taxis. They fulfill a critical function in many cities (especially NYC) and have established great standards to protect consumers that companies like Uber might consider emulating. We also need Google to come out with a competing service, and any number of other clones.

So next time you see protesting taxi drivers and roll your eyes at their antediluvian ways or profess your love for Uber…consider that coexistence is the better outcome for consumers.

Photo Credit: waldopepper via Compfight cc

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