Enjoyed reading a comprehensive working paper from the Harvard Business School on the upsides, downsides, and potential downsides of two-sided markets (aka platforms); implications and challenges for the legal system with respect to regulating these new types of services. The paper suggests ending “protectionist” regulation and discusses negative externalities (many of which have initial evidence but require further study), asymmetry in information (as compared to incumbent services), cognitive biases such as racial profiling based on profile picture, not being incentivized to provide “universal service”. The paper provides a nice overview of both driver and consumer perspectives, concerns, and challenges.
New software platforms use modern information technology, including full-featured web sites and mobile apps, to allow service providers and consumers to transact with relative ease and increased trust. These platforms provide notable benefits including reducing transaction costs, improving allocation of resources, and information and pricing efficiencies. Yet they also raise questions of regulation, including how regulation should adapt to new services and capabilities, and how to correct market failures that may arise. We explore these challenges and suggest an updated regulatory framework that is sufficiently flexible to allow software platforms to operate and deliver their benefits, while ensuring that service providers, users and third parties are adequately protected from harms that may arise.
It appears that the potential and role of government in regulating these services is to provide sustainability of these services (whether through private or public, one or many players); this means long-term and consistent reliability and wide-spread and fair access. The role of government is to look beyond the capitalistic systems upon which corporations operate and look beyond the short-sighted-ness of individual citizens, as a way to protect it’s people.
Regulation can usefully set minimum standards to protect consumers who fail to recognize potential problems and to protect against problems prior consumers could not notice… Many long standing transportation requirements address aspects of safety that customers would struggle to access even after a ride–for example, requiring vehicle inspection with heightened frequency or rigor.
What is role of statistics and control theory in these questions of providing assurances to the consumer?
Susan Crawford (Professor of Law) promotes improving taxis in urban areas, as a way to provide reliable and cost-effective mobility to people in general. Uber aims also to provide reliability, but the definitions are fundamentally different.
This following trends makes sense, given the incentives (and purpose) of corporations to produce profit:
Uber drivers have a tough time making a living; they’re responsible for their own cars, fuel, benefits, maintenance, tolls, and certain insurance as well as the kickback to Uber that takes a substantial slice out of every fare they pick up. They may or may not know where they’re going, and they may or may not be driving cars that are safe. Uber consistently squeezes its drivers as tightly as it possibly can; new drivers are paying an even higher cut to Uber than the first generation did.
These trends will be particularly true for the lower-income drivers, who rely on driving as their primary income.
It would be interesting and insightful to do a historical analysis on the AT&T monopoly in telecommunications and draw parallels to this pending monopoly in transportation networks.
So even when private companies provide basic transport and communications services — in America, that’s often how we do it — they do this subject to extensive public obligations. That’s where the whole idea of “common carriage” came from — transport and communications networks operated by private companies that provided a high level of uniform service at uniform rates under uniform promises of safety and reliability.
I’m not sure that taxis are the answer, however, though the model of Mobility-on-Demand (MoD) systems is extremely compelling in urban areas, not necessarily operated by a single player (or even a single private player). As some commenters point out, taxi drivers also face many of the same issues as Uber drivers. Taxis are an old and slow-moving system, not very suitable to “compete” in today’s fast-paced world. Governments and public agencies must be willing to experiment, break their own rules, and move fast, if they wish to protect its people.
One last curiosity: bus drivers in some American cities are paid well and have nice benefits. They welcome riders with a smile and some centralized system optimizes their shifts so they have variety in their weekly routes. Perhaps there is something to be learned from public transit systems when considering MoD systems.
A very nice response by Tim O’Reilly addresses many additional problems and differences between taxi and Uber, most notably access to a private vehicle. (Taxis are rented; Uber drivers are required to have their own vehicle.) He lays out several actionable items for the government:
1. Removing outdated taxi regulations that make it difficult for taxis to compete with Uber and Lyft, even given comparable technology. For one example, consider Washington D.C., served by taxis with geographic restrictions. A taxi driver can pick up a passenger in Montgomery MD and bring her into DC, but must then drive back to Maryland to pick up another passenger, since he is prohibited from picking up in the city. A driver from Virginia can only pick up Virginia-bound passengers at Washington National Airport. And so on.
2. Working closely with Uber and Lyft to understand how well the city is being served. There is some evidence that Uber and Lyft are improving availability in previously under-served neighborhoods. Cities should be working to build on and verify these studies.
3. Understanding whether the reputation systems (and other self-regulatory regimes) of Uber and Lyft are producing results at least as good as the older regulatory regimes under which taxis operate. The passenger experience suggests that they are doing considerably better than the older regulatory regimes, but cities should actively be pursuing data to confirm or disprove this anecdotal evidence, and introducing regulation only when systematic problems have been uncovered.
4. Working with Uber and Lyft to understand the tradeoffs between lower fares for passengers and driver income. There is a risk that in pursuit of low prices for consumers, these companies could end up exploiting workers. Government does have a role in making sure that companies produce great experiences not just for their customers but also for the workers delivering their services. But guess what: government has abdicated that responsibility in low wage industries like retail and fast food, where workers are paid so little that they must supplement their wages with public assistance. (Recent estimates put the taxpayer subsidy to these industries at $153 billion/year.) I’d much rather see government focus on areas like this where there is a clear and present problem rather than in new industries like on-demand transportation where the market has not yet settled on the right balance between value to customers and value to workers. The fact that Uber and Lyft are competing so hard to attract drivers suggests to me that the market still has a lot to say about that balance.
5. Improving crime reporting so that there is a consistent basis for evaluating the relative safety of taxicabs versus Uber and Lyft. While there are many anecdotal accounts of bad Uber experiences, there are also anecdotal experiences of bad taxi experiences, but crime statistics are not reported in a way that allows cities to understand if new safeguards are needed.
Guanxi in Asia, which is the idea that everything is relationships, is quite something. Our tours for the day were made possible by the following relation: my friend’s father’s elementary school friend and his wife. One of our visits from Day 6 was made possible by the relation: my father’s brother’s wife’s college classmate.
We visited Colibri, an automation machinery design company and a small quantity high precision machine shop, and Great Wall, a consumer electronics assembly company. Great Wall was our only company visit conducted primarily in Chinese. It seems like a bunch of the places we have seen are fairly empty because of a combination of a bad economy (needing to pay more for operators) and because of the seasonal migration home for many plant workers. It would be cool to see some of these places again at their full capacity. As we saw it this time around, there was plenty of space to operate and move around, but we’ve been told that the plant floor can also be a sea of people during the peak season.
Also, en route to Colibri, as we exited the subway station, we were greated by a long line of illegal motocycle taxis. The transportation / taxi situation is really interesting in Shenzhen; it was the greatest “culture shock” I felt during our short stay in China. It’s a huge mess of taxi meters that don’t mean anything, drivers colluding, black taxis, illegal motorcycle taxis, and official taxis with unethical practices.
Later that day, we were tipped off that the taxi ride back to the hotel should not cost more than a few tens of RMB, but we had happily paid 110RMB in the morning for the same distance, so Nancy and I resolved to fix this on the way back. We started our price at 40RMB, but were unsuccessful with the first taxi driver, and the price was bumped up to 80RMB almost immediately. The driver wasn’t willing to drive us for 80RMB, so we decided to move on, but by that point, there were about 6 other drivers hovering around us, taunting either us or the first driver — I couldn’t really tell. Probably nothing bad would have happened, but it was 6 of them and only 4 of us, so I felt some chills, stood up straight, and walked calmly out of the ring of drivers. Feeling uncomfortable, we proceeded to walk down the line of cabs and resolved to take the first cab that would drive us for 80RMB. Immediately, one of the drivers from the ring ran up to us and agreed to drive us for that rate, so we patted ourselves on the back, and headed over… but realized he was not an official taxi driver, so we started our task over. The taxi drivers seemed to be colluding! There was this ~100RMB barrier for foreigners that the taxi drivers seemed extremely opposed to breaking. I believe we ended up paying a driver 90RMB to take us home and away from all that mess.
Our lunch was at a traditional Canton place with managers from both plants (+ friends), where there was basically a miniature market indoors with living sea creatures, tubs of vegetables, and counters stretching down a long corridor full of plates of potential dishes and you walk down ordering what you want. And then the sea creatures are slaughtered and the dishes are cooked, fresh. Our dinner, by contrast, was on our own, so being the college students that we are, we wandered into a giant supermarket and bought random pastries and things. We were later berated by real people for not eating a real meal.
We spent our evening at Chaihuo (柴火创客空间), the Shenzhen makerspace (our first makerspace visit in Asia!), where they had a show-and-tell organized, and they even advertised our attendance [src]. The space is very neat; it is divided in half, one part for working, the other for chilling and eating — ingenious. Their space is also super clean and organized, something I would not in a million years have expected. Attendance was in the 20s, and people talked about Seeed Studio, an upcoming Makerfaire in Shenzhen, a robot kit project, programmer board design, light sensors, etc. We talked about our projects and fielded questions about MITERS and MIT. Josh and Julian presented in English, and then Nancy and I presented in Chinese. Nancy was extremely well received, which was really nice to see. I mostly talked about my computer vision projects (Everything in the Kitchen Sink, Kinect Symphony Conductor, Maslab). Afterwards, we broke off into free form talking, and I was pleasantly surprised to see interest in my work. I feel like I don’t have a great sense of the place that software holds and its role in China. I know the strength of China in manufacturing, hardware, and electronics, so at first glance, software seems to be something on the backburner, something to get around to, something not quite valued. I very much hope to learn more about role of computer science in China. Anyway, I enjoyed our short time at Chaihuo very much.
I think at this point in the trip, I also started feeling super self-conscious about how Asian I looked — or rather, how Asian I don’t look. Multiple people were surprised that I spoke Chinese… and I’m in freaking Asia! Some combination of my height, my pale skin, my brightly colored clothing (why is everyone wearing dark clothing here?), my accent and lack of Chinese vocabulary, and my mannerisms probably gives it away, but I wish I knew the key factors that gave it away. I later felt redeemed (basically as soon as we left Shenzhen) because people started being surprised that I was from America. 🙂