Ride sharing links - This is from entry number 9 (link is to Mark Perry, not Huffpo so clicking is merited).
. . . where Dean Baker writes, Will Uber go under?"
More after the break.
No. Well, not right away. Pretty much all companies today will have gone under, been consumed by other companies, or will have become mere shells of their former glory within the next 50 years.
Comparing Fortune 500 firms 1955 - 2015
Back to Dean Wormer, er, Baker, sorry! "While this is a dramatic story that made headlines across the country, a less covered story could have far more impact on Uber’s future. This is the story of Uber’s departure from Austin, Texas.
Uber, along with Lyft, stopped operating in Austin in early May after the city’s voters endorsed a requirement that drivers for these services had to be fingerprinted and undergo background checks. The companies complained that the requirement placed an onerous burden on them and instead said that they would just stop operating in the city."
This will only hurt the people of Austin economically, but it does offer local politicians a huge amount of graft, and corruption in the form of taxi company donations to reelection campaigns. See, this is about the politician featherbedding, not protecting the citizens of Austin. Uber/Lyft, and others already have strong protections against crimes, like fraud, and other personal crimes by drivers, or passengers due to the fact that the Uber app connects the driver, by identity to the rider, by identity. This means that while nothing can stop opportunistic personal crime from happening, the police will nearly immediately know who perpetrated the crime. This is a strong deterrent to crime. With cab companies, this is not the case, since unless the cabbie reports the pickup, there is only a tenuous connection between the driver, and passenger.
The next paragraph by Mr. Baker is so ridiculous as to be incomprehensible:
"This raises the issue of whether Uber will really be able to monopolize the taxi industry, or at least capture a very large share. The experience in Austin indicates that it may be very difficult to maintain a monopoly or near monopoly in the taxi industry. What Uber seems to be counting on is a mix of regulatory uncertainty and political power to give it an advantage over competitors. (It hired on David Plouffe, President Obama’s top political strategist, as an adviser.)
The belief that Uber will be able to obtain a near monopoly explains it $66 billion market capitalization. Such a price would not make sense for even a very large actor in the traditional taxi industry."
Monopolize the taxi industry? This simply proves Mr. Baker is an economic fop, who does not understand what a monopoly is, how they are created, why they are created, or what is going on in the "taxi" industry. While monopolies can be naturally occurring, this happens rarely, and only when the resulting monopolist provides spectacular customer service, spectacular pricing, and spectacular products, and/or services. If you disagree, the comments are below, please provide a list of your top ten monopoly industries, and then explain your disagreement, remember, naturally monopolies.
The other way monopolies are formed, and the most common, is through government mandate. These occasionally are actually monopolies like Pre 1984 AT&T, or frequently local cable companies. More commonly today, they are oligopolies, which are like monopolies but with a small number of "monopolists," er, oligopolists. You know, like the Austin taxi cartel, which is nothing more than a government mandated monopoly/oligopoly.
Why would government limit competition in taxis and not grocery stores, or in moving companies, but not donut shops? Because these tiny industries realized they had few barriers to entry, low entry costs, and competition would be fierce. So, they approached the state noting that they needed regulation "to protect the consumer" putatively from themselves, or nefarious rogues who would rape, and pillage the consumers. But really just to limit competition, so the taxi companies could exist with higher fares, and limited number to taxis on the roads. All of this in exchange for a bit of money funneled to the politicians campaigns, or perhaps hiring of a politician's children, wife, uncle, or other relative.
But Baker doesn't realize that the current Austin taxi situation is what he projects onto Uber, a monopoly, er, actually oligopoly.
Uber is not a monopolist, Uber is the axe which is chopping down the oligopoly. And doing so with lower fares, better service, more speed, and incredibly high customer satisfaction, everything the taxis don't do.
"While Uber’s political connections probably protect it from any anti-trust actions coming out of the Obama administration, Austin’s experience suggests a very simple way to rein in the company. Other cities could impose the same reasonable requirement as Austin; they could require that Uber and other taxi companies do background checks and fingerprint their drivers. If Uber follows the Austin precedent, then it may have to shut down in many other cities in the not too distant future. This would open up these markets to new competition, just as was the case in Austin."
Apparently the way to "open up these markets to new competition is to impose new anticompetitive regulations. Welcome to 1984, enjoy yourself, no words mean what you think they mean. What makes this so nonsensical, is that the taxi system strictly limits competition, Uber, et. al. blew these limitations apart, and by reconnecting some of the restrictions, a much more limited number of services now compete with taxis. This is not increasing competition. This is nonsense regulation in the attempt to kill creative destruction, and the improvement of an industry. Baker never lets us in on the reasons why we would want to limit competition, mostly because from a consumer position there are none, but from the taxi cartel, politician, bureaucrat position there are lots (mostly dollars).
This is the progressive way, this is the Blue model, this is the religiofication of the corporate over the individual, and in the end, this ends in autocratic socialism, er, hell. All will be prohibited, except that which is mandated. This will be called free choice.
"This will likely be a very good economic development strategy for cities that go this route. Uber has been willing to lower fares to drive out competition, even if this has meant losing money. However the end goal has been to secure a monopoly or near monopoly in the market, which clearly is the basis of its enormous market value. No one pays a huge price for stock in a company that they expect to keep losing money."
Development strategy for whom? Only the taxi companies, the bureaucrats, and the politicians. Apparently, low fares are bad, like low gas prices, low food prices, low housing prices, who is this idiot? With Uber, there is no need for a taxi commission, or other bureaucratic apparatus. The direct drive rating system ensures only the better drivers will find customers, and that problems are resolved quickly, instead of taking years as they do in the current taxi cartel system. This terrifies pols, and bureaucrats because they see how this could spread to other regulated industries. They see how the Internet could disrupt all regulated industries, eliminating the need for 19th century bureaucracy, resulting in the elimination of government jobs, and entire bureaucracies. These people do not want this, they want the opposite, more government, more bureaucracy, and more need for political oversight, for it is here that power, graft, and corruption intersect, and they all can become wealthy, and powerful.
Uber does not need a monopoly to be profitable, and only slack jawed knobs like Baker would think they do, this is because his model is the progressive government imposed monopoly model, which, unsurprisingly requires monopoly. Uber will do fine in a competitive environment, and if it does not, the replacement company will have done things better, faster, cheaper, and with better customer service for the consumer, and might be a local company, or not.
Baker wants to maintain, and strengthen a system which does these elemental things more poorly, why?
Baker's penultimate, and ultimate graphs are economic flapdoodle of the highest order.
"By driving Uber out of the market, cities can help to keep their taxi industry competitive. They are also likely to be opening up opportunities for locally based taxi services. This will mean that instead of sending profits out to the billionaires of Silicon Valley, they are more likely to be generating income for local entrepreneurs. And, they are more likely to have taxi companies that will seek to work with regulators rather than fighting and/or ignoring them.
Who knows, if this trend catches on it may deflate Uber’s market cap, helping to rebuild the middle class in the Bay area. And if a deflated Uber brings the stock price of some other high-flying tech companies down to earth, it could even help the cause of affordable housing in San Francisco. This is clearly a win-win all around."
Driving out competition will increase competition. Again, welcome to 1984. This is utter, no make that udder, nonsense. What a flapdoodle. The way to open up local taxi competition is to eliminate the nonsensical, but politically desirable graft, and corruption driven regulations. Baker has no idea how corporations work, or who owns them if he thinks the money goes to Silicone Valley. The great goal here should not be to "work with regulators, " but to eliminate regulators, who provide no useful service to customers, but who do drain the public treasury, and impose costs on consumers.
While every word in the ultimate graph appears to be english, they are arranged nonsensically. Blah, blah, blah deflate Uber's market cap blah, blah, blah affordable housing in San Francisco blah, blah, blah.
Where does Huffpo find these naifs?