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August 17, 2016


Miguel Madeira

For decades that there are taxi coops (usually to have a common phone service), and I think that today many have apps.

Perhaps the big difference has to do with the business model of Uber - selling taxi services who, according to the law, are not taxi services (meaning that it was exempted from many regulations); these model, almost by definition, can't be replied by "official" taxi services.


This has been very well covered by Tom Slee in "What's yours is Mine"

see https://www.theguardian.com/books/2016/apr/02/whats-yours-is-mine-against-the-sharing-economy-tom-slee-review for a review


Companies such as Uber are primarily regulation companies, not technology companies; they spend millions lobbying to persuade governments to allow them to remove regulations and create an environment where they can extract all the profits to low-tax countries and pass all the risk on to the drivers.


$200,000 is a lot for a cabby to raise?


Luis Enrique

it may be that being Deliveroo worker is really worse than working doing deliveries for a local independent takeaway, but the articles I have read decrying Deliveroo and late stage capitalism / the gig economy is, haven't shown that

Luis Enrique

also N investors can back N Uber-a-likes, one or two of which will succeeded. Harder for London cabbies to back N horses.

Jonathan Monroe

Hailo isn't quite a co-op, but half the founders were licensed black cab drivers and part of the businss model was always treating the drivers as the key stakeholders rather than hired help. They have pulled out of the US because they can't compete with Uber. Data on how they are doing in London isn't publicly available.

One issue that the Uber boosters point out is that the global reach of Uber is a source of competitive advantage - how true this is depends on what fraction of cab business comes from people travelling in a city they rarely visit. A driver co-op is necessarily local.


What poor people need for more success is ... more jobs, and more job offers. Uber, Lyft, LiftAndGo, and other unregulated taxi services offer more people more opportunities.

That's good for poor folk. The Uber gig business model also offers a lower cost taxi service to customers, so poor & rich customers both benefit.

Why not before? Your #1 was *ding*ding*ding* most correct: " lack of entrepreneurship". The first business has to be a full market trial proof of concept.

Now it can be copied. Why are (were) so many gas stations built right across the street from a gas station? Because the first one established that it was a good location, but most folks look for convenience AND price -- so the second one could be successful at the same or just a bit lower price.

Bot-driver taxis are coming, but before that there might still be the taxi-bus: multiple point A pick ups not far from each other going to multiple point B destinations, for even less than current low Uber prices; maybe as low as most busses.

(First time here)

Jose Luis Campanello

Hi, i live in Buenos Aires and we have here the same Uber/Taxi problems.
For one side, i have to say that, to me, Uber does not seem to compete with the regular taxi that you hail on the street, but with call-for-a-taxi services (immediate vs wait).
In that sense, here we have (for over a decade) many of those companies and i think none of those is a coop. These companies charge drivers for brokerage services with customers (i think this is the same model as Uber). Not sure if it is a monthly fixed value or a per-ride value.
Also, many taxi drivers actually rent the car, paying up to 70% of daily revenue for rent (plus fuel expenses).
Not a nice picture.
The Union seemed to take the "no insecure rides and no servant work", but nothing to say about the 70% rent and the existing companies with a similar model.
For Uber, i can say that is handy to have an app on the phone and to have a reputation system. Companies here are just starting to have any of that and did no innovation for a long time.
I think what you describe here is due to:
1) DRIVERS: lack of entrepreneurship (and the other reasons)
2) INCUMBENTS: like the status quo and lobby for it
3) UNIONS: do not actually represent workers (this happens all over the board with most public interest institutions these days).
A perfect storm it seems


"Thirdly, there are credit constraints. Uber began with $200,000 of seed funding. That’s a lot for a team of cabbies to raise."

To do that you have to change the roles of banks in the economy. See, Minsky's work on What Banks Should Do (this have been developed further by MMT):


We need to regulate banks on the asset side by setting strict criteria and any loans made taht go outside that criteria are unenforceable (of course non-banks can lend whatever they like.) But any lending businesses that doesn't want to take the oath, then has to fully fund their lending on a maturity matched basis Zopa style. *No* deposit insurance, *no* access to the Bank of England, and losses *absorbed by those doing the lending*. This then becomes the fate of the shadow banking system - the building societies and money funds.

About the only reason we should pay bankers to do anything is if they can demonstrate the skill of underwriting capital projects against a prospective income stream.

In simple terms this means somebody going into a bank with a proposal that requires a certain amount of money. The bank staff considers whether the prospective income stream proposed to repay that money is adequate to repay the loan and pay the wages and costs of the bank.

Note that there is no asset collateral involved in this process.

The lending banks we need are the ones that can lend development capital effectively and stick to doing just that. If we are to have private lending banks, then they need to be able to make a decent profit doing development capital lending.

The way to narrow banks is to offer them an incentive - an unlimited cost free overdraft at the Bank of England. 0% funding costs. In return they must drop all the side businesses and just do capital development lending on an uncollateralised basis - probably in the form of simple overdrafts. In other words they become an agency businesses delivering state money to those that require it.

This underwriting process is of *great benefit* to all of us as it helps to ensure that we all have jobs and output. And that is why the state stands behind the banking business - helping to make sure that the cost of lending is low - in the hope of promoting that process.

The other reason is shown in this post. Banking helps prevent the concentration of equity in society. If I want to start a business and the bank won't lend, then I have to find a rich person and sell them most of my business to get the money necessary to get it going. That turns me from an entrepreneur with ownership into an unpaid lackey dancing to the tune of the Vulture Capitalist class. As Felix Dennis puts it in How To Make Money:

"All Faustian pacts in the raising of start-up capital should be avoided ... No founder of a business who surrenders control in exchange for capital is ever likely to retrieve control of their business. Their financial destiny is in the hands of others and the entrepreneur has lost their way on the narrow road."

The amount of state money injected is limited by demand - as determined by a highly distributed set of underwriters locally on the ground varying interest rates to suit local conditions and their own profitability vs the competition from fully match funded lenders.

That is a flexible system that can respond rapidly to changes in circumstances and is infinitely superior to a cabal of the elite "economists" like Wren Lewis sat in luxurious surroundings in London trying to work out how much the economy requires by applying the Wisdom of Solomon that they don't really have.

Furthermore the payments sytem has to be nationalised. The transaction system is clearly being used as a hostage by the banks to get whatever they want out of the government and the central bank. Do as we say or we shoot the transaction system!

Transactions must operate on the balance sheet of the central bank, not the individual banks. So you would have a Transaction Department at the Bank of England (alongside the Issue and Banking Departments) and current and savings account ultimately represent liabilities on that balance sheet.

The functional aspects are less important - existing bank accounts could be held in trust by the current banks, run as separate subsidiaries companies and a myriad of different other options. But the key point is that the operational entity is acting as agent and the legal ownership and responsibility is always at the central bank. That makes anything recorded in the transaction system exactly the same as holding cash. You have a receipt for liabilities at the central bank.

However that makes the individual banks short of deposits and balancing liabilites. The replacement on the individual bank's balance sheets is of course an overdraft from the central bank - as i mentioned earlier on lending. Existing banks would then have to get the match funding to free themselves from the central bank lending restrictions, conform to requirements or just enter run-off.

The transaction system is like the road or rail infrastructure and is a common good required by all. Inevitably the state will have to fund its existence - because there is no money in running it. I see the state providing a 'white box' system that anybody authorised can put a marketing veneer on. Done correctly it would mean that you can literally operate your bank accounts through any of the competing front ends. Account numbers would stay the same whoever you are notionally with.

Shadow banks would just have an account on the transaction system like everybody else and would lend by advance - paying money from their account into somebody else's. Overdrafts would be authorised by the underwriters for state funds. All that does is lower the limit at which transactions are refused to somewhere below zero. You could have a combined savings/transaction account by allowing the customer to increase the limit at which transactions are refused above zero.

This design maintains the mutual elements of the UK banking system - our common cash machine system and payments infrastructure as well as the 'free banking' transaction system, it frees the lenders from a crippling cost obligation and it ensures that everybody can rely on 'cash in the bank' being there - regardless of the turmoil in the lending institutions.

The one casualty is interest on deposits. To have interest on deposits in a private system there has to be income from somewhere else to pay that interest. Therefore in this system it becomes a line item of government spending - likely via interest bearing accounts for individuals at National Savings. Paying interest on deposits in this way is then really just the same as paying coupons on Gilts. Gilts, of course, would cease to be issued under any rational government.


Common sense says that people with more skin in the game should own the company, because they have the sharpest incentives to make it work. As Oliver Hart put it, "a party with an important investment or important human capital should have ownership rights."

Actually, that's the opposite of what Hart was saying. In his papers, for example, he discusses an example of a catered ship that's for rent, showing that the cook, not the captain, should own the ship. (Given the inputs chosen.) The one that should own the company is the one that has the most important uncontractable investment, which is often effort, not physical capital. Physical capital investments are fairly contractable. Trying hard, not so much.

An Alien Visitor

In the past Serfdom survived by the power of the Knights lance pointed at the Serf.

We should ask who, if anybody, is holding the lance now?

I am reminded of a scene in Once Upon a Time in the West where the rail baron says to Henry Fonda, you can never be a businessman because you will never understand that the only weapon that can stop that (the gun) is this (a fistful of cash)!


this is good on how Uber got going in London

" It was already served by a formidable private transport market, with one of the world’s most recognisable taxi fleets – the black cabs – and a fragmented scene of some 3,000 licensed “private hire” operators. Just one of these, Addison Lee, had 4,500 cars and revenues of £90m a year. London even had ride-hailing apps, led by Hailo, which had already signed up 9,000 black cab drivers. Kalanick has described London as the “Champions League of transportation” and said that Uber spent two years plotting its approach to the city.

Howard rented a one-room office on the King’s Cross Road, next door to an Ethiopian church. Two launchers, from Seattle and Amsterdam, arrived. He put a sign on the wall that said “#Hailno” and tried not to think too much about the competition. “We were worried,” he told me. “We were worried that Addison Lee would get smart, spend £1m – which isn’t a lot of money for them – and make a really nice, seamless app that copied Uber’s. But they never did"


Hart's IC theory states that the party which needs more incentives should get have ownership. However it also says that the investment cannot be verified. In the case of Uber/Car shares, driver's investment (more miles) can be easily verified and observed. Uber's investment in a faster app, attracting more clients (with ads and discounts), expanding services cannot be observed and verified. Thus, it should be Uber that owns the Uber, not the taxis. I know this is a simplification too, but I think we need to be careful when mapping theory to real world applications.


"Common sense says that people with more skin in the game should own the company, because they have the sharpest incentives to make it work."

And Uber have more skin in the game than any one taxi driver. THAT'S the point.

The software that allows Uber to co-ordinate drivers with passengers cost literally millions of pounds to develop. Bespoke software development is expensive (which suits me fine, since that's what I do for a living). The server infrastructure required to support that software is also an ongoing cost of thousands of pounds a month.

It's true that the marginal cost of an individual taxi journey to Uber is minimal, but to get to that state of affairs relied on huge initial investment plus massive economies of scale.

An individual taxi driver simply could not afford to build anything remotely resembling Uber. And without Uber, those drivers make less money (as evidenced by their voluntary choice to sign up with Uber).

Anyway, explain to me why it's any of your business how taxi drivers find customers, or whom (and how much) they pay others for assisting in that process?


Catch me if you can: http://www.bloomberg.com/news/features/2016-08-18/uber-s-first-self-driving-fleet-arrives-in-pittsburgh-this-month-is06r7on - that is your Uber moat. In any case, Uber is hardly a taxi company: https://medium.com/@alexdanco/were-shifting-from-driver-culture-to-car-culture-should-that-change-the-way-we-think-about-uber-5e571247da53


In Seattle, Lyft is a good competitor for Uber. Based on what the drivers have said, they all use both, but Uber is much less driver friendly. One driver, with an MBA, noted that it was impossible to tell what percentage one would get from Uber, while Lyft had a straight forward schedule. At least one article I have read points out that Lyft rides are usually longer and more profitable than Uber rides.

The taxi industry had a serious problem in that they were selling shifts to drivers, while Uber and Lyft sell rides to passengers. Taxis were originally about selling rides, but medallion scarcity and closed access to corporate radio dispatch changed that.


It's the universalness of Uber that sells. It's only one app to remember.

But coops could do that, too.

What is needed is a coop of cab companies, a coop admitting global membership, where the coop creates a single app for all members to use. All members then become owners of the app and users of it.

Bye bye Uber, then.

Phil Beesley

Uber's original business model was as a broker for chauffeurs of limos and luxury saloons. It sort of worked but the niche was too small. Uber reinvented itself as the company we see today.

Like many tech companies, Uber didn't get things right first time. Would a co-op or company based on a different financial model survive the initial mis-step?

Laurie Macfarlane

Great blog. I wrote something on building platform cooperativism on a large scale through reimagining collective bargaining for the technological age:


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