Drinking the Poison

DRINKING the POISON

I grew up in a small city in Western Pennsylvania that was, at the time, a thriving center of coal mining and steel manufacturing.  By the early 1980’s, low cost foreign steel producers had kicked the chair out from under the area’s economy.  I recall a great deal of acrimony and bitterness as battles raged between owners and union employees and as politicians tried in vain to put their thumbs in the dike. 

There was one crucial participant in the problem that was rarely acknowledged:   the customer.  That may sound like academic pabulum, but the fact is that the buyers are the only ones who have the power of choice.  The only action that could have saved domestic steel production was being chosen by steel customers.

Despite the obstacles of foreign government subsidies, lower labor and environmental costs, domestic producers could have sought ways to streamline production, supply and distribution channels; create incentives for labor productivity; pioneered and adopted new, efficient technologies.  Labor unions could have worked with manufacturers to meet the competitive challenges and come away with a stronger, more productive, more profitable domestic steel industry.  They did not and they went dinosaur.  By putting all the blame for their problems on outside forces and nefarious “others”; by turning to politicians to use force against those “others”, the steel industry drank the poison and surrendered its power to change its own future.

 

 

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Fast-forward to a very different time, place and situation.  A different industry is facing a similar existential threat.  Traditional taxi service market share is dropping like a mudslide in the face of competition from Transportation Network Providers or TNPs.  I drive for Uber, the oldest and most successful of the new services--“oldest” meaning just over five years in business.  “Successful” meaning operations in 60 cities worldwide and 2014 revenues projected to top one billion dollars.  Uber is relatively new here in Phoenix, having entered the market last October.  Being new, it is common for riders to express how much they love Uber and/or how much they hate taxis.  Riders complain that taxis are expensive, unreliable and passengers never know what and who will show up at their doors, if they show up at all.  They tell tales of unscrupulous drivers taking round about routes, texting while driving, behaving rudely and pulling tricks like pretending their onboard credit card readers don’t work in order to pocket cash.

Using Uber, the entire process is done through the smart phone app.  Riders create an account using a credit card, so there is no cash and no tipping involved.  They can see a picture of their driver, photos of the driver’s vehicle and how previous passengers have rated their performance.  They can track the progress of the driver as he approaches for a pickup.  They can direct him or her to their destination or the driver will use GPS if riders prefer. 

 

In my experience, the most critical advantage that rideshare programs offer is the rider’s ability to rate the driver and the company’s ability to get rid of any driver who does not please the customer.  The fact that the business model includes incentives for performance is what gives Uber and other rideshare services their biggest competitive advantage of taxi services.  In the taxi world, there are no incentives to produce anything other than money.  Therefore, cabbies often do whatever they feel is necessary to maximize their fares. 

 

 

Like the steel industry of decades ago, the taxi industry seems determined to place the blame for their decline on outside forces rather than examine their own programs and look for ways to improve and be competitive again.  Also like the steel industry, they turn to politicians who have long regulated and protected them use the power of government force to crush innovation and maintain the status quo—dingy though it may be.  Again, rather than turn a competitive threat into an opportunity to improve, they drank the poison instead.

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 Related Links:

If the idea that the domestic steel industry could have risen above the challenge of foreign imports seems to be delusional optimism, please direct your attention to an American steel producer that has grown to be the nation’s largest, most successful steel producer—NUCOR  http://www.nucor.com/

Here is a link from the poison drinking file.  To emphasize the fact that the taxi industry has no intention of being introspective or improving itself, they have hired a DC lobbying/PR firm to create a website warning the public of the dangers of using rideshare. 

http://www.whosdrivingyou.org/

Although their names appear nowhere on the site, the WHOIS data indicates the site’s proprietor is a partner in the firm.  Their own website indicates they do a great deal of work for political candidates and organizations.  I’ll leave it to you to guess whether they are on the right or the left. 

And finally, to put an even finer point on taxi company bullying, there is this from Chicagoland:  threats to out gay city aldermen if they do not ban ridesharing.:

http://chicago.cbslocal.com/2014/03/11/taxi-publication-threatens-to-expose-secretly-gay-aldermen-if-city-doesnt-ban-ride-sharing/