I stood in the doorway of the Ebenezer Coffee House watching a mid-summer thunderstorm dump water on Washington, D.C. Although Union Station, and the taxi cab I needed, was little over a block away, getting there in the downpour would result in my getting soaked. With appointments still to keep that was not an attractive option.
Fortunately, I had downloaded an app on my smart phone that allowed me to summon an Uber car. Uber is one of the new ride-sharing companies that have revolutionized the transportation industry using the latest technology.
With the touch of a finger the app assigned a car to pick me up. A photo of the driver appeared on my screen along with her name, a description of the car she was driving and an estimate of time, in this case less than five minutes, before the car would arrive. I was able to watch the car’s progress on a map as it neared my location. Not only did the Uber car pull up right in front of my door, but I didn’t even need to have cash on me to pay for the ride since I had previously established an account.
In addition to the creative use of technology and ease of use, I found other interesting aspects to Uber. The woman who gave me a ride that day was a single mother in her late 20’s. She has two small children and driving for Uber allows her to get her children off to school in the morning, work the hours they were gone and then be free to pick them up again in the afternoon. Weekends when her children are visiting their father, she earns extra money driving again for Uber.
As with any major advancement in a business model ride sharing companies such as Uber and Lyft have arrived in a blaze of controversy. Public transportation, especially the taxi cab business, is highly regulated. They also tend to be controlled by influential interests who jealously and zealously guard their turf.
The problem for the taxi companies is that they are moribund, having evolved little since switching from horse drawn carriages to motor cars. Getting a cab still usually involves standing on a street corner waving your arms, or placing a telephone call and enduring a long wait. Neither exactly suits a highly technology-driven society that demands instant gratification from nearly every service imaginable.
Essentially taxi cab companies are rotary telephones operating in a smart phone world. While some have evolved web sites and downloadable apps, few can approach the sophistication level of Uber and Lyft. Technology aside, traditional cab companies operate on a centralized business model, while the new companies harness individual entrepreneurs. People always work harder for themselves than they do for someone else giving the ride sharing drivers extra incentive.
The advent of this new model of public transportation has also caught regulatory agencies off guard. Ride sharing companies don’t fit into any existing regulatory category. This has created problems in that regulators first instinct is to say "no," you can’t run your business that way. But Uber and Lyft have persisted often to the point of defying cease and desist orders.
But the ride sharing companies have forced government regulators to find ways to accommodate them. The danger though is that over-zealous bureaucrats pile excessive regulations on the companies. Regulators like to regulate, and with the taxi cab companies pressuring them to reign in the new kids on the block, the danger exists that government does what it usually does and over-regulate the new industry.
While regulators have a legitimate responsibility to ensure public safety they must carefully consider the impact of any new regulation. Certainly cars must be inspected and insured, but regulators cannot institute rules simply aimed at making the ride sharing companies less competitive. If they do the legislature will have to step in.
In the meantime, competition is good. Uber and Lyft offer customers a convenient new option. And, perhaps the taxi cab companies will respond by coming up with an even better idea. The free enterprise system is operating as it should, rewarding those who innovate and pressuring those who don’t to do better. In the end, we the consumer are the winners.
(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is [email protected].)
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