The rise of Uber to an over $40 billion valuation may seem absurd to most, but Uber is revolutionizing the way people travel within a city. Taxi drivers may scream and moan as much as they want, but Uber is here to stay. The taxi service business has been abysmal at best for years and needed an upgrade. As Brad Stone mentions in his article Invasion of the Taxi Snatchers: Uber Leads an Industry’s Disruption:
“San Francisco, like other urban centers, has long capped the number of taxi medallions, even as the population increased by 300,000 in the last 10 years. Dispatchers at the major cab companies didn’t seem to care about prompt customer service since they make money primarily by leasing their cars to drivers.”
This has caused companies that loan money to taxi drivers to buy a Medallion, such as Medallion Financial Corporation, to be losing share price drastically. As James Sterngold describes this in his WSJ article Uber’s Rise Has Taxi Lender Talking New Route, “But amid a taxi-business showdown that can look more like corporate mud wrestling than textbook market competition, Uber describes its service as a market disrupter and says the recent slide in medallion prices is just the beginning.” Investors in Medallion Financial beware, but this revolution is good for the overall consumer because it means that the supply of taxi like cars will more correctly meet the demand.
No longer will the Average Joe have to stand out on the street curb trying to hail down a taxi for half an hour in the pouring rain. No longer will Jane be late for her meeting because she couldn’t catch a taxi in time. With Uber’s revolutionary concept of its Surge pricing policies to encourage more drivers during high demand times. While these can run to 3x as expensive as a normal taxi trip, it is much more enjoyable than waiting an hour outside of Wrigley Field trying to find an open taxi after a Cubs win as this blogger has done! As Sterngold later mentions, “The taxi industry, including Medallion, and government rule makers “have propped up an artificial market for ages” by constructing “a castle of regulations,” says Corey Owens, head of global public policy at the San Francisco-based company. The result, he says, is that medallions have grown too expensive, making it tough for drivers to earn a living and stifling innovation.”’
This has to change, and Uber has its foot in the door trying to disrupt the ride sharing space, but it’s not going to be easy. As James Sterngold quotes Mr. Murstein, the president of Medallion Financial, “Owning a NYC. taxi medallion is like owning a piece of NYC.,” Mr. Murstein says. “I would never bet against them.” Well Mr. Murstein, it looks like NYC is about to change, for the better I might add!