Uber new world

The taxi industry in NSW is an old school rent-seeking cartel in action.

What should be an untaxed form of public transport is in fact an expensive service stuck in the 20th century. This is because vested interests have the ear and pockets of state politicians who have enacted many laws and rules to protect the cartel from competition. To wit, there is a controlled number of cabs on the road and their ‘plates’ have high asset value. Users pay government-mandated exorbitant fees, most of which go to the government as a form ‘user-pays’ tax, the cab plate owners, and the taxi payment system owners, with a pittance left over for the drivers.

Enter Uber and a host of other apps. These are using the availability of the internet, mobile phones and back-end services to disintermediate the taxi cartel.

Today Uber offered me a ‘low cost’ option which uses private drivers and cars at about half the cost of taxis. I expect the ‘taxi council’ (really!) to attempt to use their influence to make such a service illegal, probably on the basis of public safety or some-such. In fact they will pull out all stops because Uber’s low cost service effectively makes taxis obsolete.

Any cartel or monopoly relies on two things:

1.Information asymmetry – in the case of taxis in the old days the users had no idea where taxis were at any time. Drivers couldn’t easily connect with users. Taxis had to be colourfully labelled. There was no technology available to cut out the middlemen; this has changed.

2.Control of government – excessive profits are partially reinvested into the political process to maintain a control over any threats that arise, or to increase profits by enacting further customer-gouging rules.

Haven’t mobile phones and the internet changed things? Every single product and service industry in this world has, is or will go through total restructure.

I don’t expect our politicians to properly understand this and they will continually attempt to stand in the way of change despite all the evidence that this is a waste of time.

But looking forward a few decades, when it’s all done and dusted, the Ubers of this world are simply trying to establish themselves as the next cartel members. The basic idea is to replace a bunch of middlemen with one middleman (themselves) or One Big Arsehole in the Middle, as James Clark described them.

And since these new middlemen will be global we can expect their power, greed and arrogance to be substantially greater than today’s mob.Today’s disintermediating heroes will, in our lifetime, be the most hated ‘big brothers’.

This is human nature and we have no way of stopping it.