Travis Kalanick’s dream of an Uber on every street corner has a dim future

By Steven Hill , written on August 6, 2015

From The Travis Shrugged Desk

Uber and Big Taxi are at loggerheads, with battle lines drawn and the public and politicians taking sides.

Recently New York City Mayor Bill DeBlasio found himself in the crossfire, when he dared suggest that Uber and ridesharing are contributing to traffic congestion. Even the presidential candidates have been weighing in on Uber.

Yet the likelihood is that over time taxis and ridesharing are going to merge until they are virtually the same. Already taxi companies are incorporating their own apps into their service. The history of commercial passenger transport gives us a clue as to how this is likely to play out. It reveals that Uber CEO Travis Kalanick’s dream of an Uber on every street corner has a dim future.

It is important to view our streets as a public utility, as much as our electricity and sewage systems. The subways, buses, personal autos, taxis and now on-demand ridesharing vehicles together form a transportation system for moving people and goods from place to place. Stepping back for a second, can we think about what kind of transportation system makes sense, and what would be in the public interest?

We can learn some valuable lessons from the past. The commercial transport of passengers goes back centuries. Horse-drawn coaches-for-hire first appeared on the streets of Paris and London in the early 17th century. These independent operators were unregulated and freewheeling, and proliferation and chaos soon ensued. King Charles I of England finally ordered in 1635 that all the vehicles on the city’s streets had to be licensed by the state “to restrain the multitude and promiscuous use of coaches.”

Centuries later in the United States, the Great Depression threw millions out of work, some of whom owned a car. Suddenly the number of cars-for-hire exploded, clogging the streets. Uninsured drivers regularly got into accidents that injured passengers, and unsavory drivers engaged in criminal activities. It was difficult for the injured or aggrieved to receive justice or compensation.

This vexing situation struck New York City particularly hard. Baruch College professor Edward Rogoff has written of an oversupply of taxis in the Big Apple, starting as early as the 1920s. By 1931, there were 21,000 New York City taxis, a 40 percent increase in only eight years. The New York Times blamed Midtown congestion on taxi oversupply, opining “The industry cries aloud for regulation.”

In 1933, a U.S. Department of Transportation official wrote—sounding presciently familiar to today’s ridesharing situation in cities like New York and San Francisco —that “the excess supply of taxis led to fare wars, extortion, and a lack of insurance and financial responsibility among operators and drivers. Public officials and the press in cities across the country cried out for public control over the taxi industry.”

The policy response was that most major cities instituted regulations over licenses, fares, insurance and other parts of the rapidly evolving taxi service. Crucially, they also imposed limits on the number of taxis permitted within a city. Indeed, this is where today’s much-reviled medallion system came from. 

Constricting the taxi supply prevented the flooding of the market with too many operators, and in that era was recognized as a legitimate way to keep the public thoroughfare from becoming too clogged. It also was seen as a viable way to ensure that drivers were able to earn a decent and consistent income. The huge numbers of cars and competition had shrunk profit margins to the point where drivers were working long 16-hour days yet were barely squeezing out a living. 

Over time, this approach also gave municipalities the ability to impose additional consumer and safety protections on the taxi industry, like background checks and insurance requirements. Despite the protestations of many Uber enthusiasts and free marketeers, this history shows that many of these regulations were enacted for good reasons.

Certainly careful study should be conducted to figure out the causes of traffic congestion in New York City, San Francisco and elsewhere, and how much ride-sharing contributes to it. But looking at the history, often what has driven regulatory interventions is the proliferation and resulting chaos of having too many vehicles on the road. With ridesharing’s popularity, it’s not hard to imagine how this still relatively new service could result in city after city returning to the “good ol’ days” of too many drivers, not enough safety, and inadequate consumer protection.

London often is plagued by rogue, unlicensed cabs, and it has been reported that 11 women a month are attacked in them, with unlicensed drivers responsible for a shocking 80 percent of all stranger rapes. While Uber drivers are monitored by an app, passenger ratings, and have had background checks, the company also has had a number of passenger complaints about its drivers (as have taxis). Uber’s background checks are widely viewed as inadequate, including by leading law enforcement officials.

Medallions and other regulations capping the number of vehicles are often derided as Big Taxi protectionism. And certainly there is a degree of truth to that. But limiting the number of liveries on the public roads fulfills other important policy goals, such as cutting down on traffic congestion, air pollution and carbon emissions, as well as safety. Uber’s CEO Travis Kalanick has stated repeatedly that his business plan involves flooding the streets with as many cars as he can, so that passenger waits are as short as possible. Certainly it’s a nice convenience to be able to hail a car whenever you need one.

But there are competing public goals. How happy will customers be if they can hail a ride right away, but then are stuck in traffic for 30 minutes longer because the streets are jam-packed with congestion? Anyone who has visited Shanghai or Beijing, and witnessed the clogged traffic and toxic smog that prevents you from seeing buildings a block away, knows that there can be too much of a good thing.

In many ways, this discussion is another version of the age-old argument about the public commons vs. individual freedom. The history of livery services shows that it is important to regard our streets as a public utility, with the subways, buses, taxis and now ridesharing vehicles together comprising a transportation system that the public depends on.

Unquestionably there is room for ridesharing in that big picture. The Uber technology shows real promise. Finland has launched an Uber-like app for public transportation which, instead of dispatching individual cars, pools riders on a public mini-bus, with each customized route being calculated in real-time.

Particularly in dense urban spaces, the different components of the transportation system must coordinate. A balance of “competing conveniences” has to be weighed, with the public good – not Uber’s market share or IPO -- kept at the forefront of these discussions. The history of livery shows that cities can’t allow ever-greater numbers of barely regulated quasi-taxis without having it backfire at some point.

Interestingly, policy makers actually could use the Uber technology to address this. Since it is now technically possible to track livery vehicles, any city could decide how many cars of whatever type it can accommodate within its downtown core and neighborhoods. When it reaches that limit, no more of that type of vehicle would be allowed unless it paid a higher congestion fee. An algorithmic limit on the number of drivers during congestion times could be a win-win approach to solving this problem.

But this would be easier to do if Uber and other ridesharing companies were more cooperative and willing to share their data, so that its drivers can be tracked. When are these companies going to make themselves part of the solution, instead of always being the subject of the latest controversial headline?

In short, the Uber technology could be used to get rid of the unpopular medallion system, and replace it with a technology-driven 21st century solution for urban transportation that balances the needs of customers, the public and the different commercial sectors and stakeholders. That’s the way to the future.

Steven Hill is a Senior Fellow at the New America Foundation and the author of the forthcoming Raw Deal: How the "Uber Economy" and Runaway Capitalism Are Screwing American Workers