Innovation Uber Alles

The Washington taxicab — threatened species, or oppressive agent of the status quo?

Personal-driver enterprise can revolutionize transportation services

by James A. Bacon

On Dec. 15, San Francisco startup Uber brought its “personal driver” service to Washington. The selling proposition: Any time you want a car ride, just pull out your smartphone and tap the Uber app, and a luxury car will respond within minutes. You can even watch your phone map as the car gets closer. The service isn’t for everyone. At almost twice the cost of a taxicab ride, Uber serves a rarefied market. But tips are included, the ride is luxurious, the convenience is unbeatable and there are no cash transactions.

The service was an instant hit, easily beating Uber’s ridership and revenue forecasts. Within three weeks, District taxicab drivers began beefing about losing business, and D.C. Taxicab Commission Chairman Ron M. Linton accused the company of operating illegally. “We plan to take steps against them,” he said during a public hearing.

Rachel Holt, Uber’s Washington general manager, insists that the company is operating within the law. There’s a big difference between Uber ride and a taxicab, she says. Taxi cabs take street hails. Uber doesn’t. It’s that simple. She is confident the company can survive any legal challenge.

We’ll see. Never underestimate the ability of a powerful vested interest such as the taxicab industry to wield the coercive power of government to block unwelcome competition. Taxis, whose business model has hardly changed since the invention of the taxi meter in the 1940s, have a lot to worry about. A taxicab company’s technology and business model compare to Uber’s like a Model T does to a Chevy Volt.

“There’s a lot of stuff that goes on behind the scenes to make the magic happen,” says Travis Kalanick, the 35-year-old, venture-funded entrepreneur who co-founded the company in 2009 in San Francisco. 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.

“It’s happening all the time, real time,” says Ms. Holt. “There’s literally information coming in every second of the day. We’re using that information to make better, smarter decisions.”

While Uber is content for now to dominate the high-end transportation service in six U.S. cities as well as Paris, France, there is nothing to stop it – or new entrants in the marketplace – from migrating the same data-driven, iterative-learning processes to a price point where it competes directly with taxicabs. Someday, startup companies even could be using Uber-like techniques to pack vans and jitneys full of riders. That should be beneficial to everyone except the vested interests who operate taxicabs, bus lines and other government-sheltered artifacts organized around the state-of-the-art transportation technology of a half-century ago.

Thanks to innovators such as Uber and Zipcar, which allows subscribers to rent conveniently located cars by the hour, it may be possible one day for millions of Americans to achieve the “green” dream of a car-free lifestyle. With the driverless cars said to be on the commercial horizon, there’s no telling what dynamic business models might emerge over the next 10 to 20 years.

By embracing radical new approaches, Americans can reignite the market for shared ridership vehicles. We can redesign our communities with fewer parking spaces and less asphalt, making them more compact and pedestrian-friendly. Over the long term, we can drive down the number of vehicle-miles driven, reduce traffic congestion and cut automobile emissions such as hydrocarbons and carbon dioxide.

We can achieve all those worthy goals without social engineering, subsidizing money-losing transit monopolies or forcing Americans into lifestyle choices they would not willingly make if left to their own devices. What an urban transportation system for the 21st century does require is more economic freedom and less government intervention. The D.C. Taxicab Commission needs to back off, and taxicab and limousine services need to learn how to compete by innovating, not by shutting down the competition.

This op-ed was published originally by the Washington Times.

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8 responses to “Innovation Uber Alles”

  1. DJRippert Avatar


    DC’s Taxicab Commission is far from backing off. In fact, they are on the verge of enacting a medallion law which would make things much worse.

    One would think that DC could take a look at New York City’s medallion fiasco.

    As far as I can see, the medallions in NYC don’t benefit the people of New York City nearly as much as those who will trade in any asset.

    I have used Uber and Zip Cars. They are both great services.

  2. DJRippert Avatar

    From the Henrico County website:

    ” Taxi Driver Public Necessity Permit
    This permit must be obtained if the taxi driver is also an owner/operator. If the taxi driver is an employee, his/her employer must obtain this permit. To obtain this permit, your vehicle must pass an inspection by the Permits Officer. Please call the Permits Officer at (804) 501-4825 to set an appointment for this inspection and bring your completed application and fee with you. Applicants must file two permits – one to operate a taxi and a Certificate of Need. The fees for these applications are $20 and $15. Both applications can be picked up at the Public Safety Building in the County Government complex at 7721 East Parham Road. After an investigation, the Chief of Police issues the permit.”.

    Jim … why does Henrico County require a Certificate of Need for a taxi permit?

    Does Henrico County require a Certificate of Need for restaurants? Lobbyists? Bloggers?

    I can understand why Henrico might want to inspect taxis for safety and cleanliness. But a certificate of need?

    I thought you guys in Henrico were free market types.

  3. I have no idea why Henrico County requires a Certificate of Need. Sounds totally bogus to me. As for the “free market,” that’s usually for the other guy.

  4. You’d think this would be on the radar screens of the GA in Richmond, eh?

    and while they are at it..get rid of it for health care also.

  5. If taxis cost half as much and are losing business, you think there might be a reason?

    I once told a cab driver to stop and let me out. His driving scared me to death.

    And was p.o.d that I refused to pay him.

    And we didn’t even get out of the airport.

  6. smartphone apps are going to revolutionize on-call transit service …that “creative destruction” the capitalists love to wax eloquently about.

    but the problem is that Taxi’s in many areas have essentially a monopoly on their business and I’m not sure why they ever had it to start with… but now it’s a big problem that needs to be fixed.

    I would point out that you really don’t want ANYONE providing a tax service though. You need to have some kind of standards and regulations…yeah some of that nasty fascist govt regulation that squashes property rights… but I don’t want an ax murderer operating the cab I’m in and I don’t want him/her to have no driver’s license because they are a habitual offender either.

    cell phone apps have the potential to make jitney service a viable reality…

    1. DJRippert Avatar

      LarryG comes tantalizingly close to “getting it” in this comment. But then he falls off the apple cart with …

      ” …yeah some of that nasty fascist govt regulation that squashes property rights… “.

      Taxis should be regulated. When hailed from the street it is impossible for the buyer to know what the cabbie will charge. Therefore, established fees provide a reasonable balance between free enterprise and consumer protection. Public safety concerns reasonably require that cabs be inspected for safety – just like personal automobiles – and cabbies be vetted as generally law abiding citizens.

      None of which has anything to do with New York’s absurd medallion system, DC’s anti-Uber threats or Henrico’s Certificates of Need.

      You see, Larryg – our political elite are corrupt. In New York the medallions go for $700,000 while the cabbies work 12 hour days in an effort to make minimum wage (after costs). The winners of New York City’s taxi regulations are the medallion owners and those who trade medallions on Wall Street.

      And that’s in New York City – one of the liberal elite’s favorite places.

      Conservatives oppose EXCESS regulation, not regulation. The moneyed classes who pull the puppet strings on our political elite use the excessive regulation to line their own pockets.

  7. I’m having a hard time identifying the IDENTITY of the political constituency that supports a medallion system and a de-facto monopoly but it’s very real.

    One of the major ills of our time – the ability to be mobile – to get from point A to point B at the time you need to do it is on the precipice of a potential revolution.

    I’m talking about more than Cabs. I’m talking about modern-day equivalent of Jitneys and flexible dyanmic routing transit driven by a region-wide dispatch data server that communicates with vehicles and people via smart phones.

    here we have an institution that is holding on to the past while technology is rendering it’s purpose less and less relevant in a modern world and yet it stands as a massive obstacle to change and who is it that is defending it?

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