back to article Uber isn't limited by the taxi market: It's limited by the Electronic Thumb market

We've had a look before at that valuation of Uber at $40k bar** and mulled over whether it makes any sense or not. And there's a little snippet of news out that shows that there might be more substance to it than most of us tend to think there is. It could, of course it could, still be just an absurdly over-hyped product of …

  1. bazza Silver badge

    Economy

    "But economics is not a zero sum game, the economy is not limited as to size in any fixed sense."

    If we're talking fundamentals, the size of the world economy is the difference between all the stuff we've ever mined, harvested or extracted and all the stuff we've thrown away, burnt, lost, worn out, rusted, blown up or eaten. Even a good old fashioned honest hard day's work requires a food input (though some of us, me included, have a few of those stored up around our waistlines).

    Everything else such as money (and printing more or less of it), growth, profit and loss are simply humanity's way of divvying that up among ourselves.

    And forget environmentalism. Unnecessary consumption/disposal/wastage is simply a good way of making us all poorer. The trouble being that that is apparent only in macro economics. It's not something that many people think about when they're chucking something out.

    So you're nearly right. The economy is limited by the resources available to us on this planet. One day, no matter how careful we are here with our resources on earth, we'll have to go off and mine some asteroids, etc.

    1. Ossi

      Re: Economy

      "So you're nearly right. The economy is limited by the resources available to us on this planet. One day, no matter how careful we are here with our resources on earth, we'll have to go off and mine some asteroids, etc."

      Not quite. The "size" of the economy (and Worstall, probably for didactic reasons, plays fast and loose with the term 'wealth' in this article) is its output, i.e. the value of goods and services produced in a year. This is found simply by multiplying the number of people by how much each person produces (and this, remember, is largely services these days). Thus, the limiting factors are the number of people, and how much value each person produces (known as productivity). Productivity has been increasing for at least 200 years. You don't need more resources to increase productivity necessarily - you need cleverer ways of doing things. We've been finding those for 200 years, and Uber's a clear example of this. Indeed, getting more out of less is the very definition of productivity.

      Those resources you're worried about are not leaving the planet. They're still here. We're using up the energy, sure, but we already have replacements for that.

      Take a look at the second graph on this page (http://wilcoxen.maxwell.insightworks.com/pages/804.html) which shows energy intensity (i.e. the amount of energy used per unit of GDP) in good 'ol gaz-guzzling 'merica as an example of how more output can be got from fewer resources.

      That's not to say there won't eventually be a limit - there might be - but I confidently predict the limit will be our ingenuity, not natural resources. Or, to put it another way, the limiting resource will be humans.

      This is not an anti-green message, just the way things are. There are other perfectly good arguments for looking after our planet and avoiding waste.

      1. bazza Silver badge

        Re: Economy

        @Ossi,

        "This is found simply by multiplying the number of people by how much each person produces..."

        What each person "produces" is the difference between what they add and how much of that which is thrown away never to be used again. If they're digging stuff up out of the ground or growing it, they're maybe a net producer. I say maybe; you can't eat gold or diamonds, they're just pretty.

        Everyone else is a net consumer. For example, the car factory worker consumes iron ore, oil, copper, crops, etc. in order to make a car. The manufacturer's accountant measures how "productive" the worker has been, but then again he's not counting what happens after the car leaves the factory gates. When that car is disposed of that worker's productivity doesn't (from a civilisational point of view) count for anything.

        "Those resources you're worried about are not leaving the planet. They're still here. We're using up the energy, sure, but we already have replacements for that."

        They're not leaving the planet but the laws of entropy mean that there has to be an energy input to get them back into a usable condition.

        Energy is everything. We are using up the energy, but we merely have ideas as to how to replace the supply. We haven't actually built the 10s of thousands of nuclear reactors or developed the fusion reactors that are actually needed to allow the world economy to survive as is (never mind grow) when the last drop of oil is used up.

        1. Tim Worstal

          Re: Economy

          "What each person "produces" is the difference between what they add and how much of that which is thrown away never to be used again."

          No, really, it isn't. At least not in the manner that an economist talks about value. Value is simply whatever subjective value a consumer puts on something. And so production is the production of that value.

          " If they're digging stuff up out of the ground or growing it, they're maybe a net producer. I say maybe; you can't eat gold or diamonds, they're just pretty."

          People value just pretty. Thus producing just pretty creates value.

          The same is true of anything else that people value. Produce value and you're, umm, producing value.

          1. Neil Barnes Silver badge

            Re: Economy

            But we've already established in previous discussion here that economics is not yet, and may never be, a science. Economists talk about wealth depending how it advances their arguments...

            One might make the point, for example, that 'wealth' in the end comes down to how many megajoules one is able to command: everything you spend your wealth on is eventually the use of energy. Whether that is the energy required to drive the private jet and built the jet and pay the pilots and the guys who built the plane and to refine the alloys and dig the ore and transport it... or it's the energy required to plough the ground and plant the seeds and harvest the food and process it and get it to market... Everything comes down to energy.

            Money is just an agreement; a number that I will do this amount of work for that amount of money; that I will receive this amount of goods for that amount of money.

            Maybe we should be paid in megajoules instead of pounds?

            1. Ossi

              Re: Economy

              "But we've already established in previous discussion here that economics is not yet, and may never be, a science. Economists talk about wealth depending how it advances their arguments..."

              They've got a single and very clear definition of wealth, and it's pretty much the same as everybody else's: the total value of a person's net assets.

              "One might make the point, for example, that 'wealth' in the end comes down to how many megajoules one is able to command"

              There were economies before there were megajoules. And if you think that's pedantic, consider this: Da Vinci might use the same amount of 'energy' producing a painting as Rolf Harris, but Da Vinci will produce a lot more value.

              So let's talk about value. Everything an economy produces is ultimately satisfying human beings in some respect: someone (or some organisation) somewhere will only pay for something if they want or need it - money is a proxy for the amount of "satisfying" something does: you would be willing to pay more for something you really enjoy than something you rather enjoy. Thus, the value of something ultimately is related to how much "satisfaction" it creates. That's why Mr Da Vinci's work creates more value than Mr Harris's.

          2. Lysenko

            Re: Economy

            "No, really, it isn't. At least not in the manner that an economist talks about value. Value is simply whatever subjective value a consumer puts on something. And so production is the production of that value"

            In other words an Economist's "value" is a psychological artifice that may or may not have any material or energetic reality.

            That makes Uber twice as valuable as global cancer research and FacePalm ten times as valuable. Investment in cancer research is therefore obvious economic madness!!

            1. phil dude
              Boffin

              Re: Economy

              The statement that "economics is not a science" is probably true, but not helpful.

              The statement that "the scientific method can help with economics" is probably true, and helpful.

              Value, or perceived value is a quantity based on expectation of expense over desire. There is also a "how long to gratification" factor.

              Uber raises perceived value go up due to convenience, and gratification is instant.

              If you make each variable (e.g. not just cost, but reliability?vacuousness? clear this has an effect on perceived value) part of a distribution, then modelling would be a bit easier...

              And not wanting to be picky but the set of people who can take a taxi ride is great than those with cancer.

              Possibly your statement "Investment in cancer research is therefore obvious economic madness!!", might be an indication that things are not what they appear....

              P.

              1. Yet Another Anonymous coward Silver badge

                Re: Economy

                Uber creates value if there are people who want to pay for a ride but can't find a cab and with Uber they can and do. In the same way that deregulating telecoms allowed people who wanted to pay for a phone to do so without waiting 3months for the GPO.

                If all it does is create an arbitrage market for 100s of resellers undercutting each other to offer a specific ride then it might be good for some users but it's not clear how much value that creates in the economy.

                1. Ossi

                  Re: Economy

                  @ Yet Another etc. If a trade takes place, then value has been created. A seller will sell only at or above the cost of inputs. A buyer will only buy at or below the value she places on a good or service. Both buyer and seller benefit from a trade otherwise, in free market, they will decide not to carry out the trade. Common sense really, but I think you appreciated that in your post.

                  What, I hear you say, about all those taxi drivers losing out? Yes, they'll lose, but the gain to consumers will be greater. It's difficult to explain why without drawing graphs, but consider the ad absurdum situation of regulations saying that there can only be 10 taxis in a city. It might be easier then to imagine how the profits of the few are easily outweighed by the lost benefit of the many. The same argument holds with larger but restricted numbers of taxis. The maximum value is not realised until the total number of taxis is such that the very cheapest taxi meets the very meanest consumer, so to speak. All value has then been rung out of the system.

                  That's not to say that regulation is a bad thing or Uber is a good thing, just that the economics are on Uber's side. There are other extremely good reasons for regulating taxis.

                2. strum

                  Re: Economy

                  > deregulating telecoms allowed people who wanted to pay for a phone to do so without waiting 3months for the GPO.

                  Bollocks. Digital exchanges allowed BT to speed up installation. Deregulation had sod all to do with it (remember, BT retained the installation monopoly, long after privatisation).

              2. Lysenko

                Re: Economy

                "Value, or perceived value is a quantity based on expectation of expense over desire. There is also a "how long to gratification" factor"

                In that case, what is the value of the five card poker hand I'm holding?

                There is the objective value, which is a function of the stakes in the game and the statistical probability that it is the strongest hand. There is also (by the definitions given previously) an "Economist Value" which is a function of how skilled I am at psychological trickery, neuro-linguistic programming and subliminal hypnosis vs. how resistant the other players are to this. Stock markets are the same. There is objective value (earnings per share) and casino value (whatever you can con the rubes into believing, for the moment).

                Applying scientific method, Investment in cancer research is "economic madness" not because it is a mad thing to do but because (NULL + VALUE) IS NULL = TRUE. "Economics" IS NULL (unknown and presently incalculable*) therefore the result of any expression involving it is logically also unknown.

                However, the objective value of cancer research is calculable in terms of person years of life saved over time. Cancer research therefore exists, despite it being "economic madness" cf. investing in FacePalm shares, because it is financed to a large extent by non-profit organisations interested in objective rather than economic value definitions.

                *Maybe, someday, if we ever develop a complete reductionist analysis of every human neural net in the system.

                1. Ossi

                  Re: Economy

                  @Lysenko

                  Let's talk common sense. Nothing has a value unless someone wants or needs it. This is not an idea unique to economics. What other determinant of value could you possibly have?

                  Economists don't attempt to magic up a value for something - they wait until there's a trade. The person buying then reveals, by how much they're willing to spend, how much they want or need something. Money is proxy measure for this - you'll pay more for things you want more. The value is determined by how much somebody wants or needs something - their 'psychology', if you want to use those terms. The value is measurable in the price.

                  If no one wanted or needed cancer research then its value would be zero. It turns out, as you've pointed out, that we do want and need it. Economists don't decide what the value of things are - people do.

                  1. Lysenko

                    Re: Economy

                    "Let's talk common sense. Nothing has a value unless someone wants or needs it. This is not an idea unique to economics. What other determinant of value could you possibly have?"

                    Mathematics? (2 + 2 = <some value>). It doesn't matter what I want or need (2 + 2) to evaluate to, it IS "4" whether I like it or not (and trust me, I have frequently wished I could bend arithmetic to be what I want it to be).

                    I agree, Economists don't attempt to magic up a value for something out of nothing, what they attempt to do is estimate herd perception, prejudice, greed, gullibility, desire, faith and a host of other unquantifiable subjective considerations. That isn't science, it is mentalism and like all good mentalists, the best practitioners can be very convincing.

                    Additionally, Economists don't just observe markets, they make public predictions and therefore move the market creating a self fulfilling prophecy. It is going on at this very moment in relation to Greece and the Euro. How much of the currency market movement is a product of independent want/need and how much is herd instinct based on Economist's predictions?

                    Even Economists recognise this. They talk about currencies and commodities etc. being under or over valued. Since the current value is whatever the market says it is it would be impossible to have an "under valued" commodity unless there were some other definition of value to compare it to. Therefore if Economists say Gold is over valued (for example) they are deciding what the value of Gold should be in defiance of what the people in the market currently believe (or else the Gold price would already have moved).

                    1. Ossi

                      Re: Economy

                      @Lysenko

                      "Mathematics? (2 + 2 = <some value>). It doesn't matter what I want or need (2 + 2) to evaluate to, it IS "4" whether I like it or not (and trust me, I have frequently wished I could bend arithmetic to be what I want it to be)."

                      You're obviously confused by words having more than one meaning:

                      Value (noun)

                      (1) Relative worth, merit or importance

                      (2) Magnitude; quantity; number represented by a figure, symbol, or the like

                  2. Tom 13

                    Re: Let's talk common sense.

                    Not gonna happen.

                    You can tell that from the language in his first post. Whether it's because he natively lacks it or is just here to be argumentative may be in question, but that's rather a moot point.

        2. Lysenko

          Re: Economy

          "Energy is everything. We are using up the energy, but we merely have ideas as to how to replace the supply"

          Since we're talking fundamentals, we aren't "using up" energy in a meaningful sense since the planetary mantle absorbs more of the stuff than it radiates. Eventually the core will freeze and the sun will run out of hydrogen, but aside from that energy is not a constraint in principle (fossil fuels being nothing more than historical solar energy).

          We don't need to create more energy (which is good, since we can't: conservation of energy etc.), all we need to do is improve the efficiency of capture, storage and conversion. That is applied science, not entirely new theoretical physics (like FTL etc) or dismal pseudo-science (like Economics). The constraints are neither material nor energetic - they are political.

    2. Doctor Syntax Silver badge

      Re: Economy

      "It's not something that many people think about when they're chucking something out."

      This observation isn't necessarily true in Yorkshire. And maybe not in Scotland but we Tykes tend to look on Scots as amateurs.

    3. DaveDaveDave

      Re: Economy

      "If we're talking fundamentals, the size of the world economy is the difference between all the stuff we've ever mined, harvested or extracted and all the stuff we've thrown away, burnt, lost, worn out, rusted, blown up or eaten."

      No, it simply isn't. So that's your entire argument out the window, then. You've entirely omitted the value added by human endeavour. Very obviously, for example, the value of a smartphone is more than that of the sand and sand-like ores used to make it.

  2. Bruce Hoult

    Not really, and for two reasons

    The first is that the only resource from the Earth we're actually using up is energy. And the actual atoms still exists even after we've thrown things away.

    Eventually, our garbage dumps will become the highest concentration sources of iron, copper etc and we'll start mining them.

    The other reason in that the multiplier between physical resources used and economic value can be as close to infinite as you can imagine.

    Suppose a comedian stands up on a stage for an hour, and then sells the recording to 100 million people as an internet download for $10 each. That's a billion dollars of value created from the expenditure of how many resources? A Big Mac, pretty much.

  3. Elmer Phud

    Bar? humbug

    'Bar' is a well established specific weight for measuring amounts/ and sale of illicit (in this manor) smokable substances - not defined being peculiar to solid or vegetative vareties.

    Apparently

  4. Dave Bell

    Uber limits

    I don't know what the systems are in the USA, but in the UK we've had "private hire"—minicabs—for a long time, and the Uber service looks a lot like them. That affects the boost to the economy from Uber. We also have, in at least some place, smartphone Taxi-summoning systems, a bit like Uber but for the licensed taxis.

    I suspect that some of the Uber-hype comes from the USA, and is based in an ignorance of the rest of the world.

    Anyway, the electronic thumb model can make traditional taxis more efficient, and is doing. If you have the number, you've been able to summon a minicab since the first mobile phones. What's new about Uber? It's maybe a little bit easier the finding the phone number in a strange place, but how much of the wealth generated is innovation and how much is from dodging regulation?

    Uber apparently doesn't like its drivers to tell insurance companies what they're using their cars for. That's not good.

    1. Grikath

      Re: Uber limits

      "Uber apparently doesn't like its drivers to tell insurance companies what they're using their cars for. That's not good."

      Well no, then again, the absolutely last thing you want to do is bring professional extortionists into a business model. More so for state-sanctioned extortionists.

      1. Doctor Syntax Silver badge

        Re: Uber limits

        "Well no, then again, the absolutely last thing you want to do is bring professional extortionists into a business model."

        Let's examine that a little.

        Maybe you haven't had the experience I've had of being in a taxi that's crashed*. If you had & had been injured then you'd need some compensation for loss of earnings or any out-of-pocket costs arising from that. As the taxi driver himself might not be able to afford this you'd rely on the driver's insurance.

        The driver's insurance costs will in turn be based on certain assumptions. If the driver is assumed to be involved in the sort of mileage and passenger carrying levels of a private motorist then the insurance company will be rating the risk as much less than that to which they were really carrying**. And in that case they may refuse to pay and you'd be seriously out of pocket. That may be a risk you wish to take but most taxi passengers probably won't agree with you.

        *No injuries to me or the other passengers. I'm not sure about the car he T-boned; it was amazing how quickly another taxi arrived to remove all possible witnesses.

        **The alternative, of course, is that the insurance companies spread the taxi drivers' risks across all motorists so that the many of us who aren't taxi drivers subsidise those who are.

    2. Anonymous Coward
      Anonymous Coward

      Re: Uber limits

      Uber apparently doesn't like its drivers to tell insurance companies what they're using their cars for. That's not good.

      Well if you look at their website for the UK, drivers explicitly have to have hire & reward insurance, and a Private Hire Licence too, for that matter. There's a lot of mixing up of the Uber X amateur "lift-sharing" set-up that attempts to dodge taxi/mini-cab regulations and provokes understandable fury, and the entirely legitimate fully licensed/insured private hire model they're using in the UK that just annoys hackney cab operators. And that's no bad thing, IMO.

  5. Peter Johnston 1

    Wasn't it Robert Maxwell who said there is no such thing as money? His view was it was only a promise on a piece of paper. Uber seems to have bought into the theory.

    Apple raises an interesting question. Is the Smartphone market actually larger than the mobile phone market would have been? Hasn't it cannibalised the music player market, the camera market, the filofax market, even the taxi market (as people communicate online rather than going to see eachother)?

    But the biggest question is over the 1%. I'm reminded of the old story of the guy driving past an American and a Brit in a Rolls Royce.

    The American says "I'm going to try hard and one day I'll have a car like that".

    The Brit says "How dare he have a car like that - I'm going to scratch it."

    Perhaps Oxfam should employ more Americans. Then we can all have our 7 billionth of something worth having a share of.

    1. Doctor Syntax Silver badge

      "Wasn't it Robert Maxwell who said there is no such thing as money?"

      I think his actual view was that there was no such thing as other people's money.

  6. Zog_but_not_the_first

    "Wasn't it Robert Maxwell who said there is no such thing as money? His view was it was only a promise on a piece of paper."

    He was quite right of course. It didn't stop him stealing a great deal of other peoples "promises" though.

    1. bazza Silver badge

      A lot of the world economic problems are because too many people and countries have made promises they can't keep... The economic downturn is just a complicated monetary way for one bunch of guys to tell another bunch of guys, "I don't believe you anymore". Quantative Easing, aka printing money, is just a way of conning the few remaining believers but that's not going to work forever. It all gets counted up eventually, and for a lot of places the number starts of with a minus sign.

      As for Uber? Well, they're quite good at creaming off the top whilst encouraging it's drivers to play fast and loose with local licensing laws, insurance, etc and not reminding it's users why cab licensing was brought in in the first place.

  7. Zog_but_not_the_first
    Devil

    Regulation

    "As for Uber? Well, they're quite good at creaming off the top whilst encouraging it's drivers to play fast and loose with local licensing laws, insurance, etc and not reminding it's users why cab licensing was brought in in the first place."

    This reminds me of a conversation with someone who worked for the Health & Safety Executive. She said that when people complain about excessive regulation, "nanny state" etc., they forget (or never knew) that behind most safety regulation lies a death or serious injury.

    1. Paul Crawford Silver badge

      Re: Regulation

      I was going to make exactly the same point, regulation exists to prevent costs as well - crime, accidents, injury etc.

      The goal of regulation should be to balance folk getting on with doing things, against folk getting on an ripping others off or exposing them to excess/unknown risks.

    2. WOOOOO

      Re: Regulation

      Whilst i would always take an insured taxi and in uber's case agree the risk of a traffic accident warrants the regulation, isn't the "nanny state" point that HSE gets to involved because the too many people are brain washed into a blame culture? So those of us who see free choice as a human right are somewhat restricted. E.g. the cheese rollers of the world.

      Good way to stimulate the ecomony with HSE directives over any slightest fear of accidents!

      1. Throatwobbler Mangrove

        Re: Regulation

        But it's a load of bollocks. The organisation that publishes the most "health and safety myths" press releases each year is...the HSE.

        It's nonsense that cheese rollers are restricted. Jump off cliffs, ride mountain bikes down steep hills, run through moors at night - it's all out there for you to do.

        1. John 62

          Re: Regulation

          Exactly, it's fear of liability in case of an accident that prevents things, not the HSE. Police prevent cheese rollers from rolling cheese because they fear being held liable for any injuries incurred.

  8. Mage Silver badge
    Mushroom

    Apple, arguably, invented the smartphone

    What???

    Sorry, no, not even close. Unless you mean commodity HW, a touch gui based on low resolution and port of OSX in a rather plain box, with actually LESS applications and features coupled with poorer performance than previous smart phones counts as inventing the Smart phone.

    They were successful for one main reason. Consumer Data plans. Previously really smart phones mostly business use because of horrendous data costs. Yes, the GUI was simpler (which actually was largely bought in). But others (not Nokia) did have low resolution touch GUIs already, though not as slick.

    1. Tim Worstal

      In my defence

      "arguably"

      1. Zog_but_not_the_first

        Re: In my defence

        Invented? Nah! Popularised? Certainly.

      2. dogged

        Re: In my defence

        > "arguably"

        In the same way that the earth is arguably flat?

        1. Anonymous Coward
          Anonymous Coward

          Re: In my defence

          > "arguably"

          In the same way that anyone who bakes invents a cake?

      3. Mage Silver badge

        Re: In my defence

        I forgive you this time.

  9. Anonymous Coward
    Anonymous Coward

    Still don't believe the Uber valuation

    I still don't see how, for all its convenience, Uber is going to treble the amount of their hard-earned money that the inhabitants of San Francisco choose to spend on riding about in other peoples' cars. I can only assume that the idea is that if it's cheap and convenient enough then people will give up their own cars and rely on Uber instead, but I don't think that's realistic. Fortunately it won't be my money that Uber's investors lose if/when this turns out to be just a slightly more convenient boring taxi operator..

    1. Yet Another Anonymous coward Silver badge

      Re: Still don't believe the Uber valuation

      And when Google's driverless cars work then you click on the Uber app and a car will turn up, you will pay the same as now but Uber doesn't have to give any to the driver.

      Google are a big investor in Uber, Google didn't get to be that rich by being completely stupid.

      1. Anonymous Coward
        Anonymous Coward

        Uber is easy to replicate

        Write an app, offer a bigger share of the revenue to the drivers (or wait for Uber to inevitably start screwing over their drivers with various bad policies or taking a bigger cut) and take a share of their market. Or operate somewhere they currently don't, or somewhere they got kicked out of for thinking they're above local laws.

        This is not like building a competing search engine, where you need specialized algorithms, huge server farms, and have advertisers uninterested in bothering with you until you reach critical mass so you better have money to operate and grow for a few years with little or no revenue. It isn't even like building a competing Android phone, where you need to have supplier relationships with dozens of suppliers to get all the parts you need, engineers to do at least basic physical design, a contract manufacturer to make it, programmers to at least paste your logo onto Android, etc.

        If the market is anywhere near big enough to justify Uber being worth $40B, there will be a flood of entrants. They don't need to take on the world, I might start one in my town, you start one in yours, and we all provide the thousand cuts that bleed Uber's market valuation down to commodity levels.

        One may argue that Uber has some network effects due to its size, but as competing services come, someone will write a meta app that checks all the services available where you are and lets you choose between the cheapest price or quickest arrival. Even the tiniest service can compete once that's in place, and Uber can do nothing to fight it.

  10. Jason Hindle

    Uber's success in its own market is understandable

    Its success elsewhere is not guaranteed. In the UK, Uber is pretty well regulated. In other markets (India? Australia?), I'm not so sure. We've already had an article, on El Reg, about Uber trying to avoid Australian regulators. Many UK cities now have their own electronic thumb, with apps like

    Kabx*.

    * Not as slick as Uber, but does the same thing. My experience has of Kabx has been positive.

  11. Mark 85

    Is it generating wealth or transfering it?

    If one uses Uber, then the money spent on owning a car, driving it, parking it, etc, is transferred to the Uber driver. So this appears to be transferring it from the auto industry, parking industry, etc. to Uber. Or did I miss something?

  12. thames

    What About Unlicenced Taxis?

    Something that seems to have been skipped over in the discussion is unlicensed black market cabs. These are cabs which don't have a license to operate, but operate anyway illegally, often manned by people who are in the country illegally, paying no taxes, etc. In some cities, they are a very significant part of the market. There were very large numbers of these in San Francisco before Uber came along. Some people claimed they outnumbered the licensed cabs there.

    There are also taxis which may be licensed to operate in one city, but not in an adjoining one, or who are only licensed for certain routes (e.g. to and from an airport). These drivers would often bend the rules to pick up or drop off fares they weren't licensed to handle.

    What Uber might be doing is not enlarging the market. What they may be doing is tapping into an existing black market. The advantages that something like Uber offers to the existing underground cab operators is that since Uber operates openly, it can advertise and operate a dispatching service. In other words, it's acting like a "firewall" which attempts to put the public face of the cab service outside the reach of the legal authorities in each city. The individual drivers are more difficult to track down, and they were already taking a risk of being caught and fined anyway.

    Because of this, I would be very wary of projecting San Francisco's taxi industry across the taxi industry globally. If they had an existing large black market, that is "surfacing" under Uber's brand then there may be not much more in the way of taxi services being consumed now than there were before. It's just something that wasn't being measured very well previously, or was being measured in other categories (e.g. as airport limousine services when in fact the ride didn't go to or from the airport).

    As for whether Uber is doing anything better than previous operators, they may (I'm not judging this) offer better dispatching, location, and payment options than the existing system. If so, then they are increasing "wealth". What you may be seeing in San Francisco (and some other cities) though is largely just their "skimming" of existing black market revenues.

  13. Anonymous Coward
    Anonymous Coward

    To Hell With Uber

    I want to know how much wealth creation is going to occur when virtual porn is created for Microsoft's HoloLens! [And how the Microsoft Tax is going to be applied would be nice as well.]

  14. J.G.Harston Silver badge

    Taxi regulation is there to protect the customer, not to limit the market. Unfortunately, UK taxi licensing legislation allows a licensing authority to have a numbers limit, so capping the number of market operators. When I was a taxi licenser every time limits came up I voted against it, but the votes went for the cap. The regulators aren't (shouldn't be) in the business of guaranteeing taxi drivers a job, they are there to protect the travelling public. If the market can only bear 1000 drivers and there's 2000 drives, well, then, 1000 of them will go bust and (should) realise they're in the wrong job and move into something else.

    Uber is just the latest method of hiring, all the way from waving in the street, to sending your servant, to using the telephone, to using email, to using a website, to using SMS. Uber is just another taxi control office.

    1. LucreLout

      If the market can only bear 1000 drivers and there's 2000 drives, well, then, 1000 of them will go bust and (should) realise they're in the wrong job and move into something else.

      I upvoted you because I agree with most of what you say, especially for whom the regulation exists to protect. To expand your point above though...

      Surely the 1000 you get left with are the 1000 that are least able to do something else, or who are willing to work the most hours to generate that income? The most tired and least able doesn't sound like a good mix for any regulated industry.

    2. strum

      >The regulators aren't (shouldn't be) in the business of guaranteeing taxi drivers a job, they are there to protect the travelling public

      One argument for caps is that it isn't necessarily a good thing to have too much competition, which might encourage drivers to cut corners (literally or figuratively) to gain advantage.

    3. Tom 13

      @ J.G.Harston

      If this were true

      Taxi regulation is there to protect the customer, not to limit the market.

      this wouldn't happen

      every time limits came up ... the votes went for the cap. (despite your honorable service).

      I don't think Uber is just the latest method of hiring. I think it is truly expanding the market, mostly through casual drivers, not professional ones. Hence the huge disparity in numbers. A professional driver might not be able to cover expenses at $20 for a 20 mile drive. For the casual driver, it offsets his gas money so it's worth it.

  15. Anonymous Coward
    Anonymous Coward

    Uber - not just taxis

    Uber satisfies a demand, some of that is just displacement, replacing bus/bike/car with a taxi doesn't really create new value however if it increases the overall number of journeys then those are increased economic value.

    I can use Uber to hail a car to take me from A to B, I could also use Uber to request that someone brings me another 4 pack from the offy now (the online supermarket won't deliver till later).

    It would save me from having to walk to the shop which I wouldn't do (nearest shop is 6 miles), I'm not allowed to drive as I have consumed my current beer stash so Uber would have created new economic activity that wouldn't have been there before.

    The fact that I could get an Uber driver to bring me any good I desired and could pay for on demand (subject to a willing driver and the space in the vehicle) also means that a whole host of goods not normally available without difficulty could be presented to the market.

    As has been pointed out, regulation is supposed to be there for the protection of the public but sometimes that regulation, in the eyes of consumer/supplier, is misplaced and this can have a chilling effect on that market.

    Uber might offer a convenient way around some of these 'intrusive' regulations allowing this economic activity to take place and so increasing GDP. (hookers and blow now being added into the existing GDP calculation)

    Obviously people operating outside the 'regulated environment' are subject to sanctions from the authorities and this will be reflected in the risk premia applied to the price charged for the service provided.

  16. Zog The Undeniable

    Tragedy of the commons

    Of course, any massive expansion in Uber cars at the expense of public transport will cause more congestion on the roads - a shared public resource - and then none of Uber's services, or those of the black cabs, will work well. So there's another limit to the size of the market, unless we want to build twelve-lane expressways through London. And that investment in the public resource is a lot more expensive (leaving aside its unacceptability to residents) than paying a little extra to get in a car instead of on a bus because you feel richer.

    You already see this in city centres where deregulated bus services have resulted in a logjam of half-empty buses in different colours, trying to compete for the same lucrative routes. Obviously you can't get a bus at all on the less lucrative routes any more because even the councils have given up subsidising them. Mind you, you can't get a black cab to take you sarf of the river after chucking-out time, either.

    1. LucreLout

      Re: Tragedy of the commons

      massive expansion in Uber cars at the expense of public transport will cause more congestion on the roads

      Yes, and no. It's estimate that at rush hour 1/3rd of traffic is looking for a place to park. If Uber expands only at the expense of public transport then yes congestion must increase, though since much of that is an artificial construct to disincentivise car use in favour of public transport, it is readily manageable. It is more likely that Uber will also grow at the expense of private car ownership - especailly inner cities such as London.

      1. Anonymous Coward
        Anonymous Coward

        Re: Tragedy of the commons

        OT but can I point out

        Successful Commons

        http://www.onthecommons.org/magazine/elinor-ostroms-8-principles-managing-commmons

    2. jonathanb Silver badge

      Re: Tragedy of the commons

      In London, Über are just another minicab operator. There are loads of them around. Addison Lee is the biggest, they are cheaper than Über, and they also have a mobile app to book their cars.

  17. JimmyPage Silver badge
    Boffin

    Pot noodle ...

    in Ben Eltons "Gasping" (which I saw with Hugh Laurie and Bernard Hill :) ) there's a piece of dialogue where the Ad agency boss (Hill) explains to the misbred young executive (Laurie) the concept of a Pot Noodle in marketing ...

    "When it was first released, the market share of other snacks did not decrease .... the Pot Noodle made money where there was none before."

    It may or may not be true, but it does stray into the Apple/Smartphone question upthread.

    So what other products have been "pot noodles" ?

  18. Anonymous Coward
    Anonymous Coward

    Cortana, Get me a cab...

    Uber hope to become the Google of Taxis, I want to be the Google of pizzas, that's the reason for the potential added value.

  19. Anonymous Coward
    Anonymous Coward

    Cortana speaks Mandarin

    so perhaps Baidu of pizzas as well. (wow, what speculative wealth !)

    1. Anonymous Coward
      Anonymous Coward

      Re: Cortana speaks Mandarin

      I also want to be the payment processor.

      One Ring and all that.

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