Change Management (Uber and Taxis)

(Photo: Bobby Doherty/New York Magazine)

Until very recently, if you wanted a taxi, there was one way to get it: Go outside and stick your hand in the air. The business of the yellow cab had—from a passenger standpoint, at least—changed markedly little since 1937, when the medallion system came into use. Since then, the city has required that cabs have permits bolted to their sheet metal, and the majority of those medallions are in the hands of big taxi fleets. The business is so tightly regulated that these companies can seem state-owned, except for the fact that they make a lot of money. (One of the great art collections of the mid-20th century was assembled by taxi magnate Robert Scull.) The city has added a few medallions over the years, but not many; their essentially fixed quantity has driven prices past $1 million apiece, making their owners disinclined to risk. The fleets’ only significant change to the business model has been to shift their drivers from staff to hired-gun status, thus eliminating their benefits, some of which were later regained through unionization. A generation ago, drivers drove eight-hour shifts and earned passable middle-class wages. Today, after driving 12 hours and paying for gas and the odd parking ticket, a full-time fleet driver earns a bare-bones income—on the order of $35,000 per year. Neither passenger nor driver nor cabbie nor fleet owner fundamentally altered the exchange: Raise arm, pull over, drive to destination, exchange cash.

Well, as they teach in business school: If a system has chugged along, making money without challenge for decades, change will be dramatic when it does come. So it has gone with the taxicab business. The smartphone, paired with onboard electronics, opened a back route into this formerly closed world, and the yellow taxi suddenly finds itself among many other cars of unfamiliar colors.

Over the past two and half years, New Yorkers have seen the arrival of Uber, the San Francisco start-up that allows you to hail a black car, and certain yellow cabs, from your cell phone. Its junior arm, UberX, lets drivers use their own vehicles, and its passengers pay reduced rates. Lower rates, in fact, than yellow-cab riders: Uber has just dropped its X pricing by 20 percent to undercut the standard taxi rate. Only when its derided “surge pricing” comes into effect does the figuring get muddled. (But maybe not much: What are your odds of a street hail when it’s pouring?) Unsurprisingly, quite a few medallion owners have been howling about what they call unsustainable price-cutting. What they have to say about Uber’s stunts, like July ice-cream giveaways and on-demand kitten delivery, is almost certainly unprintable.

Uber, last Friday, was joined by Lyft, a competing service that had been trying to duck New York’s Taxi & Limousine Commission regulations. Lyft has positioned itself as a more extreme UberX, letting any automobile owner who can clear a background check become a driver, picking up jobs at will. In San Francisco, driver and passenger fist-bump at the moment of pickup, a gesture intended to promote a cheery familiarity. Lyft cars are also distinguished by giant furry pink mustaches bungee-clipped to their radiator grilles. (In New York, this West Coast whimsy will likely be scaled back to a dashboard item because of concerns about grime, and also because it looks so very stupid.) A restraining order from the attorney general abruptly halted Lyft’s New York launch earlier this summer, and the company has since agreed to require drivers to have T&LC licenses, though it’s looking for a workaround that preserves its “friends driving friends” worldview. A number of other apps, like Whisk and Hailo and Gett are also carving out niches for themselves.

In the Uber-and-Lyft paradigm, the driver takes a larger cut of the car’s income than he or she would get from a yellow-cab garage, because nobody is making horrific payments on a medallion. Uber claims that the median gross income of drivers who work more than 40 hours a week is, incredibly, a bit over $90,000. The customer experience has been reimagined to be more like a livery company’s. The cars are plusher than cabs. They are unpartitioned. The Uber app displays your driver’s first name while you wait, and users seem to report more Hi, Jim! How’s traffic today? conversations than they ever had in cabs. (This may also be owed to a higher percentage of native English speakers behind the wheel. The Uber driver pool is noticeably stocked with “Who’s Who in the Cast” faces, people who might otherwise be baristas or bartenders. More women, too.) The Lyft fist bump is silly, but it does convey that this is not a relic of the old New York—where, if your cabbie greeted you with a fist, it wasn’t to say hi.

As the tech companies have been plotting this soft coup, the city has—after an extended, contentious back-and-forth with the old-line taxicab owners—introduced a second fleet of cabs, painted a precise custom shade of lemon-lime green. They’re allowed to pick up passengers anywhere outside central Manhattan, and drop them off anywhere. (Their drivers reportedly hate going downtown, because that commits them to a long drive back into their zone without a fare.) Both yellow and green cabs are all geolocatable, owing to the onboard Taxi Technology System; every fare can be paid with a remarkably un-prone-to-breakdown credit-card system. Even the backseat TVs feel like an innovation, if an irritating one. We are also, perhaps, about to see the citywide introduction of a purpose-built cab, the Nissan NV200, a.k.a. the “Taxi of Tomorrow,” though it’s been fought by both the fleet owners (who want more vehicle options) and advocates for the disabled (who were dismayed that it wasn’t wheelchair accessible).

As Crain’s noted last week, Medallion Financial, the only publicly traded taxi business with a large number of medallions, has seen its stock slide by a third in the past year. And no wonder: People have wanted better ways to hail a cab for a long time, certainly since GPS came along. (Food for thought: If one of the fleet owners—or the city itself—had created its own app, might it have pulled in the funding that Uber has?) The taxi interests contributed more than a quarter-million dollars to Bill de Blasio’s mayoral campaign, looking for pull. As public advocate, he’d come out against the Taxi of Tomorrow plan. Yet for all their contributions, the fleets got—well, less than they expected. Lyft has been approved, the Taxi of Tomorrow seems likely to arrive (in some form), and more green cabs are coming. There’s even talk of legitimizing more of the dollar vans that ferry outer-borough residents to and from subway termini. The monopoly has been broken.

So far, Uber appears to be pinching traditional car services—Carmel, Dial 7, and the like—hardest. (They have apps, too, but Uber’s is the one you’ve heard of.) The big question is about the prices for medallions, because so much of the yellow-cab business depends on their future value. Solo operators, who own 42 percent of the medallions, may be the most vulnerable. The fleets are big businesses, many of which bought their medallions decades ago for peanuts. They’ll be okay. But consider a guy in Elmhurst who is leveraged out the window to pay for his medallion, and leases his car at night to other drivers just to cover the payments. Eventually, it will be his kid’s tuition, his Florida condo, his IRA—unless he’s underwater, with a medallion that cost him $700,000 but is worth much less.

And it’s hard to see how those prices won’t slip. Medallions, after all, are part of a top-down system formed to fight the abuses and dangers of the old crooked New York: rattletrap cars, overclocked meters, bribed inspectors. Its heavy regulation in turn empowered the taxi lobby and (somewhat) the drivers union. That system may be a pain to deal with, but in its defense, it provided predictability and security. The loosey-goosey libertarian alternative, conceived in the clean Northern California air, calls upon the market to provide checks and balances. A poorly served passenger can, instead of turning to a city agency for recourse, switch allegiances or sue. When a smartphone-hailed car cruises up your Brooklyn block, it brings with it a little of Rand Paul’s America, fronted with a pink mustache.

Taxi Talk

(Photo: Courtesy of the drivers)

Junior Uber SUV Age: 36 Experience: 5 months Previous job: New-media CEO Income: $370 per day “Riders want to talk on a higher intellectual level. I read the papers, follow the stocks. I also offer free Wi-Fi and Netflix on the TV screens. All these other drivers were asking me, ‘How do you get such high ratings?’ So now I’m co-hosting weekly Uber seminars.”

Arkadiy Livery Age: 58 Experience: 16 years Previous job: Air-conditioner cleaner Income: $100 per day “Black-car businesses have built their reputations over many years and have a solid customer base. People can feel more comfortable in a car service they can use consistently that’s familiar. Uber hasn’t built that kind of reputation with their customers yet.”

Jawaid Yellow cab Age: 45 Experience: 23 years Previous job: Baker Income: $120 per day “I won’t participate in those apps like Uber and Hailo. I like focusing on the road. Too many electronics in the cab leads to accidents.”

Seth Yellow cab Age: 54 Experience: 30 years Previous job: English teacher Income: $100–$150 per day “When I started driving, I couldn’t control the doors, which would have come in handy back in the ’80s. But now the cabs have those TVs. When a tourist turns up the TV, I turn up my jazz radio, out of spite.”

Pedro Lyft Age: 50 Experience: Two weeks (in New Jersey) Previous job: NYPD officer Income: $82 per day “I work part-time as an accountant. When Lyft launches I’m going to do it on off-hours. I interviewed at their office, and they observed how I engaged with other people. Can you put on a smile and laugh? Then I fixed my third brake light, and my pink mustache came in the mail.”

Women!

With Uber’s job openings and fewer late shifts, a male-dominated industry is suddenly a little less so.

(Photo: Bobby Doherty/New York Magazine)

1. Sugey “Raquel” Ramos Age: 38 Experience: One year with Uber. Income: $1,200 per week. “People are shocked that I’m a girl and I know my way around, but they love that I drive a nice car—I’m the only Uber driver in the city with a Land Rover. I pick up a lot of schoolkids on the Upper East Side and the Upper West Side; their parents trust them to ride with me by themselves.”

(Photo: Bobby Doherty/New York Magazine)

2. Jyoti Lama Age: 27 Experience: Three months. Income: $375 per week. “There’s a safety net with Uber. You can track the last person in the car if, God forbid, something were to happen. The yellow-cab partition isn’t enough to make the driver feel safe—it just makes the driver feel squished.”

(Photo: Bobby Doherty/New York Magazine)

3. Phulbas Arjune Age: 55 Experience: Five months. Income: $1,500 per week. “In 2008, I lost my job as an office manager. It was difficult for me to get a job making the same kind of money, especially as a woman of a certain age. Finally, I tried driving a yellow cab for a few months, which was so hard, and that’s when I heard about Uber. My stress level has totally changed. I don’t have to wake up at four in the morning to get the car and then wait because there’s no one on the street until 7 a.m. My passengers get out and say, ‘Can I hug you?’ ”

(Photo: Bobby Doherty/New York Magazine)

4. Shelly Martin Age: 42 Experience: Two years. “I call myself ‘the Harlem Bombshell.’ I’m an aspiring actress, so it’s important to have work that allows me to go on auditions. I need 25 to 40 trips a day to make my earnings goal—I’ve got to pay for head shots.”