Yes, I think of Uber as a private sector solution to the public sector problem of concentrated benefits and dispersed costs. These public choice factors gave rise to and made difficult to eliminate the taxi medallion cartels through political processes (electing political leaders to change the regulations). Uber solved that problem by introducing a service that looked just enough different from a taxi service to provide a plausible justification for saying that the taxi regulations should not apply to them.

Megan McArdle wrote a column about new “Uber for X” ventures [http://www.bloombergview.com/articles/2016-03-29/even-uber-can-t-live-up-to-the-expectations-it-set]. When one chooses X thinking that Uber is about technology, those ventures don’t seem to be working out. The right X’s are, as Arnold says, areas where regulation has created rents.

Just stop and think (after some research or reading) what has been inserted into the courses of individual human relationships since my birth in 1924.

The underlying relationship is between the driver and the rider. The Uber system provides the facility for establishing the relationship (a service to both parties), in a format satisfactory to each.

In Taxi service, Administrators (usually politically directed) determine the relationships of one the parties (drivers & owners) with any other parties. That is intrusive intermediation, a major stagnating force exercised by an entity NOT a party to the relationship. The same can be applied to bakeries, bars, hair-braiding, amusement venues, clubs, restaurants AND elementary & secondary school facilities.

Consider how much politically determined required intermediation there is in daily life, and you won’t wonder at its effects in the economy.

I’ve been to UMich (well, the law school). My impression is that Ann Arbor is a fairly typical low-density medium-sized midwest college town where 99% of work commuting (i.e. by government employees) is done via personally owned vehicles and there are plenty of parking structures, lots, and spaces. The major airport is far away, and people mostly rent cars or take shuttles, not taxis. Public transit is there, but pales in comparison to automobile utilization. From what I observed, taxi service is mostly something young people use on weekend evenings to get to and from the bars.

This is like a perfect storm for enforcement against Uber. (1) Lefter than average bureaucrats, (2) That barely use local taxi services and so have little personal stake in the matter, (3) Taxi operators that absolutely depend on peak demand times to make their money for the week, and (4) Peak times being a perfect opportunity for some part-time, cash-strapped college student to use his free time and otherwise idle vehicle and pick up some extra bucks over the weekend if he’s not going out that night, because his opportunity cost is so low.

That’s a life-or-death kind of fight for a taxi-cab company. Indeed, I suspect that part of what happened is that at least some of the marginally-competitive traditional licensed operators simply went out of business as a result of the disruption.

It is interesting that this disruption, the public outcry, and the costs and delays in prosecution, was sufficient to encourage Ann Arbor to drop the whole effort. But I think that wouldn’t be enough in the big cities without the additional contributing factor of unmotivated prosecutors with personal interests that would be adversely affected by a successful trial outcome.

First, people who say “Uber’s not about software” are failing to grok the nature of the distributed information transmission ecosystem. Uber is mostly about distributed high function personal computers customers carry on their persons. That is, smartphones. And literal network effects, as in wireless networks that offer blanket coverage to the relevent markets. The actual software isn’t THAT hard. The wirelessly geographically distributed telematic infrastructure is hard. Now that’s here, lots of interesting things will easily be built on top of it.

Second, a pretty clear side-story to PSST can be summed up as “people are not all the same”. Truth be known most any taxi driver and most any taxi operator doesn’t have the first clue about how software, smartphones, startup-funding, or any market other than the one they live in, works. At all. Hence they can no more conceive a step past Uber than I can conceive some radical new surgical instrument.

Third, if I were in charge of a huge investment pool tasked with competing with amazon, I wouldn’t buy walmart or target, I’d buy UPS or Fedex. Order on-line and pick up will-call is ONLY useful for “pick it up in 60 minutes before the same-day-delivery truck can possibly get here.” Amazon is about lower-total-hassle – time, leaving home/work environment, reliability, timeliness, etc.. And again, the software isn’t *that* hard (though issues of scale matter) – amazon is a logistics company, not a software company per say. (AWS – and Azure and rackspace etc. – are all mostly about scale and logistics, not radical new software.)

Disclosure – I was/am a software person, so what I think of as “not THAT hard” might seem utterly impossible to others. Just like most surgery seems impossible to me but is clearly “routinely done” to surgeons…

I believe it’s just too big a change to the corporate DNA of the taxi industry. They have reached a local maximum doing things they way they do, and such a change would be massive for them.

I suspect they’ll do it in the long run, but they are behind the curve. Moreover, anyone using the Taxi App (TM) is going to insist on competitive rates with Uber, which will be much lower than the rents taxi drivers are used to receiving.

A new entrant will need to make a really big improvement before they can really penetrate. Once it happens, though, it will tend to snowball, and happen in a hurry.