Why traditional livery services should love Uberx

Today I spent a full day driving for Uberx. Longer than I had intended. I am now up to a grand total of 21 paying fares. Of the folks who chatted about Uberx - they all loved it. The reason was primarily the broken dispatch model of the traditional services. I'll have more on this in another post but in short, traditional livery is OK dispatching out from concentrations of customers such as suburban metro stations, downtown core areas and large events. It is terrible at getting the ride to the rider's home. Again and again, the story was the same - riders have to call well in advance and the rider has no certainty the driver will show up. Added to traditional livery's comparative disadvantage is the very positive experience with Uberx drivers compared to traditional taxi drivers. They folks I talked to have no reason not to use Uberx in terms of quality or cost of services. This is also fodder for another post.

So why should traditional livery not try to regulate Uberx out of existence?

Uberx is not the enemy.

The privately owned automobile (POV) is the enemy of livery.

Uberx is part of the solution to eliminating POVs from the major metropolitan areas.

The reason is simple. The high entry costs (medallion fees) and fixed costs (commercial insurance) of a traditional taxicab means it has to be in service almost 100% of the time in order to provide a decent living to its driver(s). Because of this traditional livery will never be able to surge to meet peak demand. There will always be periods when people must wait too long for a taxi or not get one at all. More importantly, many people do not consider livery because of service problems and poor experiences.  Since ride demand is starved by the available pool of traditional rides, it does not grow and flourish. Enter Uberx with its very low entry cost and its pool of part time drivers. While it is admittedly competing with traditional livery, Uberx is also expanding the demand pool by allowing people to easily hire a ride rather than have one sit idle on the street or in a garage 95% of the time.

One of my rides today was taking a young person from her home in the suburbs to her job in the suburbs. This person is a routine Uberx customer. Before Uberx, she probably would have had a car.

Cars are capital assets that mostly sit idle. It is the American way.

Uber has a compelling fix for the dispatch problem. This was an evolutionary advance that will, one way or another, eventually be embraced by the livery industry. The Uberx model (admittedly pioneered by others) is revolutionary. It has the potential to fundamentally change the relationship between the automobile and the urban core. This is one case in which human capital can productively replace idle automotive capacity clogging our inner cities. Consider the impact of removing 100,000 of the cars parked in downtown DC every day. I will, in the next post.