This article was published by The McAlvany Intelligence Advisor on Monday, June 29, 2015:
Although the definition of “neo-Luddism” is a “movement of passive resistance to the … frightening technologies of the computer age,” in Paris the resistance is hardly passive. Last week taxi-drivers shut down entrances to and exits from the Charles De Gaulle International Airport, attacked cars driven by Uber drivers (including their passengers), overturned some of them, and set tires on fire. All this to express their frustration over how Uber is slowly, inexorably, putting them out of business. Since they were on strike, even when customers wanted a ride, the cartel members turned them down. After all, they were on strike! (Shown above are passengers toting their own luggage away from De Gaulle airport.)
As the head of taxi company G7 said on French television, “We are truly sorry to have to hold clients and drivers hostage. We’re not doing this lightly.” Or without thinking, either. Imagine going on strike against their own customers.
The thugs representing the some 55,000 taxi cabs in France forcibly removed passengers from Uber drivers’ vehicles and beat them – one so badly that when he posted a selfie on Facebook showing his swollen face and black eye, it went viral. Other taxi drivers posed as Uber drivers and took their unsuspecting passengers to deserted locations and assaulted them.
Some of them attacked the Uber vehicle transporting Kurt Cobain’s widow, Courtney Love, who had to be rescued by motorcyclists. She tweeted:
They’ve ambushed our car and are holding our driver hostage. They’re beating the cars with metal bats. This is France? I’m safer in Baghdad….
Paid some guys on motorcycles to sneak us out, got chased by a mob of taxi drivers who threw rocks, passed two police [who] did nothing.
This is how the anti-capitalist mentality in France plays out when confronted with new technology that threatens their existence: shut it down, destroy it, eliminate it. In the case of Uber drivers, that means passing laws and seizing their cars. On Friday, June 26, France’s Minister of the Interior Bernard Cazeneuve told Paris announced: “I have given instructions, considering the grave problems with public order and the development of this illegal activity [of Uber’s] to the police … in Paris to ban Uber activities.”
When the new law was passed prohibiting Uber drivers from activating their smartphones and accepting requests for rides, Uber went to court. The court gave them a brief reprieve and Uber drivers continued to decimate France’s Big Taxi. Those drivers now carry 400,000 fares, every month!
This has caused taxi drivers to see their revenues cut by between 30 and 40 percent just over the last couple of years. It has also greatly reduced demand for the licenses that the cartel uses to limit competition, licenses that cost upwards of $270,000.
In an irony no doubt lost on the thugs attacking Uber drivers, Uber got its start in Paris in 2008. Company founder Travis Kalanick was attending a web conference in Paris and couldn’t get a cab. So, in 2009 he and Garrett Camp started Uber, launching it in San Francisco in 2010. Investors saw the potential and the company now has a street value in the billions.
Uber is now available in 58 countries and 300 cities worldwide, and is expected to generate revenues of – get ready – $10 billion this year. It’s a runaway success driven by consumers who see a better way to get from Point A to Point B: cheaper, faster, safer, and friendlier. Within 15 seconds of requesting a lift, an Uber driver will bounce back to the consumer who can track the Uber vehicle on his smartphone. The consumer knows in advance who the driver is, what his driving record is and what other passengers think of his service. All financial transactions happen offline, with the passenger’s credit card not being charged until he is happily and safely deposited at his location.
While the confrontation between France’s Big Taxi and Uber drivers in and around Charles De Gaulle airport last week is still to play out, Uber’s impact is being felt in other big cities like New York and Boston. Each of them has their own cartel, protected with “medallions” that drivers must purchase in order to join. In November 2013, NYC medallions were going for more than $1 million. Today? $800,000 and falling.
Same in Boston. The ticket to ride there was about $700,000 for a similar medallion a year or so ago. Now, they’re going for $500,000, and, if observers are to be believed, will be even lower in the near future, thanks to Uber.
The Uber impact – called “Ubering” – is also impacting the primary financial services company that buys, sells, and trades in these medallions: the Medallion Financial Corporation (Nasdaq: TAXI). Its stock hit a peak eighteen months ago and now trades off by more than a third.
As economist Mark Perry, an observer of Schumpeterian creation and destruction for years, noted:
In the battle between the new, innovated economic entrepreneurs like Uber and the traditional business like Big Taxi, I predict that innovation will be victorious. When it comes to the “power of the people” versus the “power of the regulators”, I’ll put my money on the power of consumers to empower the new entrepreneurs and overcome the regulatory [and thuggish] roadblocks….
The sharing economy is the biggest story in a generation, and the regulators won’t be able to stop it. Consumers have already gotten a taste of the significant benefits of the sharing economy and they won’t go back to “business as usual.”