Minneapolis: Embrace 21st Century Transportation Options

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Minneapolis is almost one step closer to joining the 21st century. After months of dragging its feet, it should opt to do the inevitable: allow Lyft drivers to pick-up people within its borders. Well, the City is in the progress of making that happen.

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It was 2004. I remember looking in awe at the price tag of college textbooks: $100 for an introductory of macroeconomics textbook? I begrudgingly bought the book – a used copy no less – from the college bookstore and proceeded to use it (maybe) a dozen times throughout the semester. At the semester’s end, I brought it to book buy-backs only to find they’d upgraded to a new edition and weren’t buying back copies.

Shit. I remember feeling cheated. Like, the system was rigged.

Upon the recommendation of a friend (thanks Adam!), I decided to check out Amazon.com. I listed the book and sold it for like $75. I didn’t make money on the deal, but it was better than the alternative. Eventually I started selling my old textbooks.  When that wasn’t enough, my friend and I noticed the college bookstore would discard literally hundreds of “outdated” textbooks each month on a table with a sign that read, “free books.”

We’d grab our backpacks and laundry baskets, fill them up and list everything on Amazon. The college provided free packing materials at the time, so our cost was virtually nothing. I made around $3,500 the first semester and a couple thousand the following semester before the University started donating to Books for Africa.

To this day, I still sell books on Amazon. While my margins aren’t as big as they once were, I still capture value from something that I would never have prior to Amazon. The downside to all of this is that me – and countless hundreds of thousands like me – are putting stores out of business.

Technology disrupted the traditional marketplace. Cities can regulate against change, but here’s the catch: they can’t be ignored for long.

Lyft. Uber. Sidecar. Airbnb. These are technological disruptions to the status quo that cities are struggling to handle. While other reasons are often cited, this delay often comes down to money, and who gets it. For example; car services; while cities don’t balance a budget on taxi cab fees or taxes, the revenue they generate is not insignificant. When it comes to App-based ride-sharing services, cities like Minneapolis (or Seattle and even Paris) get little in the way of revenue.

Getting started in the taxi business can be expensive. In Seattle, getting started will cost you at least $50,000 for a license. In New York City, a “medallion” can run upwards of $1 million. The cost in Minneapolis is more sane, but the number of taxi licenses are limited. At best,  it’s protectionism by keeping the old guard propped up under the disguise of safety  At worst, it creates scarcity and a monopoly develops. [Note: If anyone in the process is getting pinched, it’s likely taxi drivers who are subject to regulations and an out-dated “medallion” system. They aren’t paid well, need to jump through all sorts of loops, have a dangerous job and little job security].

I can’t remember the last time I was happy about taking a taxi. If your cab shows up, the experience usually goes like this: it shows up late, the backseat is messy, the ride costs too much, the driver won’t take a credit card and insists his machine is broken and doesn’t have proper change.

I’ve used Lyft a handful of times, and it is, hands down, a superior service. It’s more reliable, more affordable and more comfortable. Unless given no other alternatives, I will likely never take a taxi again.

In many regards, Lyft is doing what Amazon did in the mid 2000s: it creates harm to the establishment for the benefit of the masses. Taxi cab drivers will need to either adapt or risk having to find a new job. The upside is that a lot of people like me can make $200 on a Friday shuttling people around. The downside is that people with full-time jobs in that industry are without one. It’s benefit to the many with little regard for the few.

These new services aren’t going to solve our transportation woes, but they are another tool in the toolkit. If a weekly Lyft ride helps just ten people ditch their own car, then I say it’s probably worth it.

Airbnb is in the same. While I haven’t had many negative experiences staying in hotels, they get expensive after a few days. If you need a place for 4 or 5 days, hotel price tag can add up. I was in Louisville last October, stayed in a loft with a few others for an extended weekend and my bill was a $110. That’s not bad. It was as nice as a Holiday Inn, but $250 cheaper.

The tax implication: the City of Louisville gets nothing. If I stayed at the Holiday Inn, they’d be getting a lot more (hospitality taxes are usually high – upwards of 13 percent). Louisville got nothing, but a person willing share a spacious loft gets $660 for an extended weekend. That helps cover the mortgage, homeowner association fees, etc. There’s some benefit there, but from the prescriptive of local government, it’s very indirect.

Here is the technological disruption that is occurring: direct vs. indirect economic benefit.

Every book I’ve sold on Amazon is a book that would otherwise have been sold elsewhere. Instead of someone buying it at a bricks-and-mortar establishment that provides jobs and pays taxes, they’ve chosen to save a little and put $10 in my pocket. It’s a system that has drastically effected a small number of people, but marginally benefited a great number of people.

The response isn’t to ignore, but to embrace. Update the city code, and in the meantime,  also make sure taxi drivers aren’t being pinched in the process. Make Lyft, Uber and Sidecar viable, but also make it easy to be a traditional taxi cab driver. If this happens, there is a space in the marketplace for everyone.

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15 Responses to Minneapolis: Embrace 21st Century Transportation Options

  1. Evan Roberts
    Evan March 6, 2014 at 8:00 pm #

    Lots to complain about with Minneapolis taxis, such as their prices still being regulated, but their numbers are no longer capped.

    http://www.startribune.com/local/minneapolis/150704145.html

    • Matt Steele March 6, 2014 at 11:27 pm #

      Given that the numbers are no longer capped, does taxi regulation include a price floor? Otherwise prices should drop.

      • Nathaniel M Hood
        Nathaniel March 7, 2014 at 9:51 am #

        Cabs have set rates and they can’t legally discriminate against location (which is somewhat costly if it includes dropping off someone in Lakeville).

    • Nathaniel M Hood
      Nathaniel March 7, 2014 at 9:48 am #

      I heard that. I haven’t found their services to be any better after the license cap was lifted. I think it was just an industry that got lazy and put customer service to the wayside.

  2. Spencer March 7, 2014 at 8:34 am #

    “The tax implication: the City of Louisville gets nothing. If I stayed at the Holiday Inn, they’d be getting a lot more (hospitality taxes are usually high – upwards of 13 percent). Louisville got nothing, but a person willing share a spacious loft gets $660 for an extended weekend. That helps cover the mortgage, homeowner association fees, etc. There’s some benefit there, but from the prescriptive of local government, it’s very indirect”

    Mortgage, HOA dues, AND (importantly) property taxes! And the effects don’t stop with that transaction. What does the Airbnb guest do with the money they saved on lodging? Probably spend more thant they would otherwise on local food, entertainment, and shopping. Maybe they wouldn’t have made the trip at all if their only loding option was an expensive hotel stay. What does the homeowner do with their extra income? Probably spend more money in the local economy, perhaps make some improvements to their home (adding to the tax base). Maybe it just means they can continue to afford paying their mortgage and taxes.

    Indirect benefits perhaps, but not unsubstantial. Giving people more choices in how to spend and make money is a good thing.

  3. Nathaniel M Hood
    Nathaniel March 7, 2014 at 10:34 am #

    Spencer – You’re right. There are benefits and I totally agree with your analysis. My only thought is that cities view that benefit as very indirect as far as their coffers are concerned. So, since it’s indirect and harder to track, they aren’t as welcoming.

  4. Peter Schilling March 7, 2014 at 11:34 am #

    There are a number of problems with this article, especially the author’s baffling suggestion that what benefits a large number of people needs be embraced, to heck with the moral ramifications. First, it’s convenient that Nathaniel’s opening analogy is a contrast between purchasing and reselling textbooks and selling them on Amazon–this is an easy target, because we all feel cheated from our college days buying books and then selling them back for next to nothing (or not at all.) Amazon is a much more pervasive threat though, –the indie bookstores, including some mom and pop college bookstores (they do exist) are facing the worst of Amazon’s marketing schemes.

    But let’s look at Lyft. I am not entirely certain of Lyft’s liability insurance, and neither is anyone else–they have thus far not shared that info (according to the latest Strib piece, http://www.startribune.com/local/minneapolis/247374901.html). I’m sorry Nathaniel has had bad experiences in cabs–actually, I have never had a bad experience in a cab, but as a writer I wouldn’t use my own experience to assume everyone is in the same boat, as he does here (then again, this piece comes from a perspective that since it happened to me, the experience must be universal.) I’m glad that he’s dropped in a quick note to show that he’s aware that the often Hispanic and Somali immigrants who drive cabs are being taken advantage of… yet doesn’t bother to show us how Lyft might affect them, doesn’t speak to one of them, nothing. “Taxi cab drivers will need to either adapt or risk having to find a new job. The upside is that a lot of people like me can make $200 on a Friday shuttling people around. The downside is that people with full-time jobs in that industry are without one. It’s benefit to the many with little regard for the few.”

    Great observation, but Nathaniel’s nonchalance about it is striking to me. Considering this piece applauds both Amazon and Lyft, he’s clearly fine with that balance-an attitude, sadly, that also makes us as a society say that it’s fine for us to have cheap iPhones from underpaid foreign workers (a much smaller number than those who benefit from cheap mobile devices, no?) “Update the city code, and in the meantime, also make sure taxi drivers aren’t being pinched in the process.” Like the worst TED talks, this is just an idea–any clue as to how to make this work? Not really.

    Unlike Lyft cars, who of course will have strict background checks and make sure their drivers don’t go anywhere dangerous (we could get into some class and racial implications here, too, but… nevermind), are not going to need as much costly insurance, etc. Lyft makes certain that the drivers have good records. Is Lyft going to make certain that the cars are inspected? That all the safety belts work, that the car won’t die out in the middle of nowhere, etc? Honestly, this “the customer is being served!” argument is what drives Amazon to hope to destroy small bookstores, is what Whole Foods uses when they happily hope co-ops go away, is honestly what people used to use to wish that unions fail–after all those are a “few” interfering with the “whole” being able to get their products cheaper, right?

    Nathaniel includes a link to a disclaimer on a device that shows us that finding a taxi on said device is no guarantee of a taxi, thus proving their limitations. Lyft hasn’t been around long enough for us to know if its quality and response times are anything like a taxi. Nathaniel’s had some great experiences, so Lyft is great. Why is it that these companies, who have compete with the rest of the world, exempt from taxes, inspections, etc? Why can’t Airbnb have the city inspect, pay hospitality tax? Why can’t Lyft be subject to the same rules and regulations as taxis? Why can’t Amazon be taxed like the brick and mortar stores.

    “Every book I’ve sold on Amazon is a book that would otherwise have been sold elsewhere. Instead of someone buying it at a bricks-and-mortar establishment that provides jobs and pays taxes, they’ve chosen to save a little and put $10 in my pocket. It’s a system that has drastically effected a small number of people, but marginally benefited a great number of people.”

    If Nathaniel thinks that the shuttering of brick and mortar stores that employ people and pays taxes has “drastically effected a small number of people” then, with all due respect, his head is in the sand. This does not effect a small number of people drastically, it effects all of us, with widening implications that will be dramatic in short order.

    I hope MN Streets turns to a cabbie or cab company for some kind of rebuttal.

    • Adam Miller
      Adam March 7, 2014 at 12:03 pm #

      Moral ramifications? There are no moral issues here. It’s not virtuous to “protect” jobs with higher prices and worse service.

      Cabbie and cab companies are going to be hurt by competition. That’s what competition does. The reason we nonetheless favor competition (indeed, there’s a whole body of law on it), is that nonetheless consumers benefit.

  5. Nathaniel M Hood
    Nathaniel M Hood March 7, 2014 at 12:26 pm #

    Peter – I think you’re reading into this piece a little too much. I recommend taking a deep breathe and relaxing.

    Lyft, Uber, etc. are nice, convenience services, but you’re giving them too much credit. They are tools in a toolkit. If I had to make a bet, I’d venture to say they won’t replace full taxi services. Hopefully they’ll get cabs thinking about how they can improve service.

    As Adam mentioned above, there is no issue of morality. And, even if there was one, I’d venture to say it would be on the other side. Requiring people to pay more money for an inferior service? And for what? To protect a group that’s been effective at lobbying.

    I include personal experiences in my writing because it helps tell a story. It’s aantidotal. Yes. But, if we had to take a vote, I think you’d find yourself in a small minority who haven’t had a negative taxi cab experience. That, or you are being dishonest.

    I recommend the City of Minneapolis embrace these services. Reasonable regulations are totally fine. But, they need to start working towards a creative solution that isn’t the status quo.

    • Bill Lindeke
      Bill Lindeke March 7, 2014 at 1:28 pm #

      I think by morality, Peter is talking about the race and class ramifications of urban policy. There’s always an issue of morality… Who is this policy affecting (note: affect not effect)? Does this policy exacerbate or mollify racial and class inequities? Does this policy bring us closer to the society we want?

      We have to ask these questions. You can’t pretend that race doesn’t play a major role in the perception of taxis, where they go and do not go, and who is able / open to using different kinds of systems. If we have a taxi service run for and by people of color that goes to poor parts of town, and a smartphone service run for and by (mostly) white people that sticks to nicer neighborhoods, is it a good policy? (It would be like a car service equivalent of the skyway system… ostensibly “neutral” but racist in practice.) OTOH, if services like this lower the cost of car sharing especially for those least able to afford it, then it might be great.

      Not saying I have answers, just that these are questions we should raise. It’s disingenuous and irresponsible not to.

      • Adam Miller
        Adam March 7, 2014 at 2:28 pm #

        I applaud your good intentions, but I just don’t see how those issues are particularly in play here if the question is whether to allow services like these. That is, I don’t think it is morally superior to continue to protect the taxi industry from competition because, for example, taxi drivers are more likely to be people of color. Among other things, doing so involves making assumptions about those people’s ability to do other things (e.g., drive for one of the new services, among many other things) that are probably not well founded.

        Where I do see moral issues at play, which you and Peter both highlighted, is how the new industries may need to be regulated.

  6. Nathaniel M Hood
    Nathaniel March 7, 2014 at 1:39 pm #

    I think a good policy for the City of Minneapolis to implement is that these services can be operate in within city limits legally if they agree to open up the entire city; e.g.: not exclude particular neighborhoods.

    • Bill Lindeke
      Bill Lindeke March 7, 2014 at 2:39 pm #

      My point is that even if a law applies equally to everyone, it might in practice be aimed at certain groups. The classic example is the law that prohibits everyone, both rich and poor people, from sleeping under bridges. That applies to wealthy folks, too, so it’s obviously not discrimination, right?

      How have other cities made sure that these kinds of services are equitable in practice? Nate’s idea here is a good start.

  7. stewart resmer March 8, 2014 at 11:22 am #

    California to Lyft, Uber, Sidecar, Wingz: Get your act together – Tech Chronicles

    California regulators warned four app-based ride companies on Thursday that they haven’t provided some information required to receive state operating permits. The companies in turn said they are working to comply. The move came a day after several San Francisco supervisors blasted the regulators for not cracking down more on the transportation networking companies, or TNCs.

    In letters to Lyft, Uber, Sidecar and Wingz (formerly Tickengo), the state Public Utilities Commission said they had lagged in providing required information and warned that this was their second deficiency notice. “Please note you will have 60 days from the date of this letter (March 6, 2014) to complete the deficiencies or the application will be denied,” the letter said.

  8. MplsJaromir March 11, 2014 at 8:57 am #

    Seems to me Lyft will be a great boon to men who are either clueless or of questionable character.

    http://valleywag.gawker.com/when-your-smartphone-chauffeur-becomes-a-stalker-801080008

    If one thinks that the taxi cab regulations are too onerous, then one should lobby to fix those. Embracing techno-libertarian “disruptive” apps like Lyft and Airbnb are really about skirting the law. If one had to pay taxes and follow regulations, Lyft would probably not be very appealing.

    Silicon Valley people are embarrassing.

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