For San Francisco Cab Drivers, Once-Treasured Medallions Now a Burden

This is an especially poignant story, and it&#x27;s hard to not feel bad for this driver.<p>On the other hand, people face investment risk all the time, i.e. when franchising a restaurant. When Chipotle or whoever comes in and devours the fast food market, I wonder if the local struggling burger franchisee asks the city for help?<p>I can&#x27;t speak on behalf of other cities, but anyone who has lived in SF pre-Uber has no shortage of nightmare stories from taking cabs. For people who had to wait years and pay enormous costs for their medallions, many taxi drivers acted smug, entitled, rude, and sometimes even downright shady. I know you can&#x27;t say this about _every_ taxi driver, but there&#x27;s no doubt that the current ecosystem treats the consumer many orders of magnitude better.

This isn&#x27;t unique to San Francisco, the entire industry is in a free fall nationwide... It is incredible to watch the effects of a little innovation and (effectively) deregulation.<p>Chicaco: &quot;Once a sure bet, taxi medallions becoming unsellable&quot; <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=9564478" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=9564478</a> <a href="http:&#x2F;&#x2F;www.usatoday.com&#x2F;story&#x2F;news&#x2F;2015&#x2F;05&#x2F;17&#x2F;taxi-medallion-values-decline-uber-rideshare&#x2F;27314735&#x2F;" rel="nofollow">http:&#x2F;&#x2F;www.usatoday.com&#x2F;story&#x2F;news&#x2F;2015&#x2F;05&#x2F;17&#x2F;taxi-medallion...</a><p>New York: &quot;New York City Taxi Medallion Prices Keep Falling&quot; <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=8856231" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=8856231</a> <a href="http:&#x2F;&#x2F;www.nytimes.com&#x2F;2015&#x2F;01&#x2F;08&#x2F;upshot&#x2F;new-york-city-taxi-medallion-prices-keep-falling-now-down-about-25-percent.html" rel="nofollow">http:&#x2F;&#x2F;www.nytimes.com&#x2F;2015&#x2F;01&#x2F;08&#x2F;upshot&#x2F;new-york-city-taxi-...</a><p>Philadelphia: &quot;Philly medallions fetch less than 17% of asking price&quot; <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=9528301" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=9528301</a> <a href="http:&#x2F;&#x2F;observer.com&#x2F;2015&#x2F;05&#x2F;the-taxi-industry-is-in-total-collapse&#x2F;" rel="nofollow">http:&#x2F;&#x2F;observer.com&#x2F;2015&#x2F;05&#x2F;the-taxi-industry-is-in-total-co...</a>

I had a great professor who specialized in (Economics of) Public Utilities who made a very important distinction about types of regulation; of which, he said there are essentially two: economic and &quot;safety and soundness.&quot; He said, about them, economic regulation is strictly* bad. Safety and soundness, is always* good. Make sure you know which type a regulation is, e.g. Many financial regulations are for safety and soundness of &quot;the markets&quot;; not economic.<p>In this case, I think it&#x27;s key point out, the pain felt is due to economic regulation. Which was&#x2F;is putting up barriers for entering and exiting the market. The government removed competition, it raised prices, and was generally bad (I.e. State santioned monoplies). When innovation, and change, eventually moved around those economic barriers it was bad for those protected by &#x27;em.<p>I hope going forward any regulations are strictly safety and soundness related with taxi service. It&#x27;ll save a lot of pain on all sides.<p>* If you&#x27;ve taken enough Econ, you&#x27;ll know strictly and always are going &quot;depend on ...&quot;

Cab driver &#x2F;= medallion owner.<p>For every poor hardworking cab driver who has taken a mortgage out to buy a medallion, there are a dozen sleazy operators who own piles of them, do not drive, and have leased them out to cabbies at horrific rates.

&quot;So many people wanted one that they were hard to get. Drivers used to sit on a waiting list for more than 10 years. When their names finally came up, the city charged them $250,000 to buy one.&quot;<p>This is the source of the problem.

Let me guess. For every person in this situation, there were probably ten in his situation a few years back. I suspect if you were to ask him or folks in a situation similar to him before he got his medallion, they would have complained about <i>overregulation</i> from the city and definitely wouldn&#x27;t have called for more. Perspective.

I feel bad for the guy, but no way I would have made that purchase in 2012.<p>A basic SWOT analysis would have made me hightail out out of the taxi business instead of taking on debt to spend $250k committing myself to it.<p>If he gets his $250k back less the processing fee that feels like justice to me. He shouldn&#x27;t have to wait for a buyer to come up though - it should just automatically be an option now that not regulating Uber seems to have become policy.

I see a lot of comments suggesting that medallion owners should be compensated. But the government is not morally obligated to compensate people whose investments lose money due to changes in regulation. And it would be prohibitively expensive to do so, because it is a one-sided affair. No one who made money investing in medallions when they went up in price was arguing &quot;when we bought medallions, we thought that the number of available medallions would increase with demand, resulting in a stable price. Instead, prices shot up, so we feel we should pay back the government some money because their unexpected policy change benefitted us&quot;.<p>The government might <i>sometimes</i> compensate people, but that would depend on many factors such as 1) To what extent the person was unable to avoid the risk, and to what extent they willingly bet on the price of the medallion, and 2) Whether the government did all in its power to keep policies predictable, given the unpredictable nature of technological change.

It&#x27;s hard to feel bad for people who chose to invest in rigged markets. Their frustration should remain squarly with local representation. Show me the public vote that decided to implement medallions. It&#x27;s like voting to regulate the number of restaurants in a given city and leaving half that market to mcdonalds. (For safety of course) People would laugh at not leaving that up to supply and demand. The only reason it worked with cabs is because nobody used to care how it worked keeping it open to political grease balling. Suddenly people care and now everybody is scrambling trying to explain their positions on it. And make no doubt about it... Every representative from when it was implemented to today is responsible for allowing it to continue under their watch. Once they know you all are going to hold our representitives personally responsible it will go back to supply and demand faster than anybody can thrown money at it.

I don&#x27;t know what to say. These people made a bet that the future would look like the past. They were wrong, and it&#x27;s costing them significantly.<p>Yet... what are we supposed to do about it?

There are 1800 medallions for all of SF ( <a href="https:&#x2F;&#x2F;www.sfmta.com&#x2F;services&#x2F;taxi-industry&#x2F;medallions&#x2F;medallion-holders" rel="nofollow">https:&#x2F;&#x2F;www.sfmta.com&#x2F;services&#x2F;taxi-industry&#x2F;medallions&#x2F;meda...</a> )<p>At 250k, buying them back would cost $450 million.<p>The city could tax the new cabbies on a percentage of each fare, while buying back medallions over the next few years.

Here&#x27;s the thing I don&#x27;t understand -- if the main attraction (from a customer point of view) is the app (with everything that comes with it), why haven&#x27;t the cab companies got in on the same game? Either put out their own app to hail rides (and maybe give their cabs a more luxury look to them), or sign up as Uber&#x2F;Lyft drivers themselves? Or is there something I&#x27;m missing?

Sad story but every economic change for the better creates winners and losers. You can&#x27;t regulate away loss without regulating away improvement.<p>He is better off forgetting the medallion and finding work somewhere else to repay the loan. He should be able to make a few dollars renting the medallion in the meantime.<p>As for the government stepping in - live by the fake government market, die by the fake government market. I have no sympathy for people who build businesses behind government firewalls or with government subsidies, and suffer when those rules change. Because plenty of legitimate businesses have engine to the wall when the government arbitrarily creates regulations where previously there were none.<p>I just don&#x27;t understand why this guy doesn&#x27;t start getting uber pickups - if that is the problem, just join them.

you know what&#x27;d be a good PR move? Uber helping private cab drivers such as those in the stories out by buying out the medallions and letting them drive under Uber. Win win.