Pumping the Brakes of a Collapsing Taxi Industry

Valued at an estimated $60 billion, Uber is here to stay. The San Francisco based ride-sharing company has completely changed the way people are meeting their transportation needs, especially in big cities. Consumers are happy because they can schedule rides more cheaply and conveniently. Uber is happy because in just seven years they took an industry by storm and reaped the rewards. However, not everyone is as ecstatic with the success of this start-up. The taxi industry has suffered immensely, and without organizational innovations they could soon become a relic of the past.

While the taxi industry may have lost a significant portion of their client base to Uber, I believe that a focus on deregulation, as opposed to what they are currently attempting, could be the answer. Taxis are required by law to charge pre-approved prices. Uber strategically avoided this by claiming they are a rideshare service, not a taxi service. From the taxi industry perspective, most of calls to action focus on adding regulations to companies like Uber to level the playing field. Instead, I think they should stop pushing for regulation and take their own industry in the other direction. An unregulated taxi service could adopt Uber’s pricing model of charging a premium during times of high demand and slashing prices during off-peak times. Taxi’s still have a monopoly on curb-side pickups, and more flexible, competitive pricing could bring in higher profits.

I would be interested in bringing the social entrepreneur Fabio Rosa onto my team for this project. Although his efforts to bring electricity to remote areas of Brazil may not have much in common with taxis, Rosa’s work ethic and history of innovation could prove to be invaluable. Rosa worked relentlessly to achieve his goal, and I don’t think there will be a dramatic resurgence of the taxi industry without that kind of effort. I would also be curious to see the perspective of Milton Friedman on this proposed change. I believe that it goes in accordance with his shareholder value theory, as it would maximize profits for companies in the taxi industry. This plan is not focused on the social responsibility of the taxi industry to the public or the environment, it is meant to recapture lost market-share.

Empirical evidence tells me that I fall into a small minority of people that have never used Uber. If I were in need a ride, however, I would not hesitate to use the service. Currently, it is the cheaper, more convenient solution most of the time. A deregulated taxi industry could compete with Uber, and potentially help consumers by lowering prices while helping themselves by lowering costs.


2 thoughts on “Pumping the Brakes of a Collapsing Taxi Industry

  1. Uber has been a prime example of basic economics. Supply and demand are at work here as their lower prices have clearly worked for them with the massive demand for quick and easy transport. It’s a a free market economy and if you can win with lower prices, the competition will need to make changes. Deregulation could be the answer for taxis.


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