All Commentary
Thursday, October 22, 2015

The Battle for New York

Freedom is winning

I’m sitting in the car with my Uber driver and he points to some construction on the road. We are driving through the clogged streets of downtown Manhattan.

“See that construction? It’s been that way for 10 years,” he notes, pointing to a big mess of blockages and torn up asphalt that is causing traffic to crawl. “Every day, 100 guys show up, drinking coffee, talking on their phones, having fun, and two guys, two Mexicans, are working on something. But nothing ever changes. The construction is never finished. It’s a mafia, I tell you.”

His English was broken, but he continued on to explain to me how the New York taxi monopoly works. It’s a scam, just like the road-work scam. Politicians get paid by private industry and, in exchange, they pass laws that benefit them. They stop competition. They stop progress. They stop the future.

Then he pointed to the cameras on the streets that take pictures of cars going over the speed limit or turning left on a yellow light. He explained that New York City is not navigable without breaking the law. This gives the city endless excuses to pillage drivers to pay for things like that other construction boondoggle that’s been going on for 10 years.

“It’s all about the money. Take from some, give to others. Rob us and give to them. That’s all government does in this city. It’s all a scam.”

The Not-So-Quiet Revolution

Well, you know, it’s hard to disagree with that. But in the midst of it all, there is a beautiful revolution taking place, and transportation is battle zone — the most obvious sign of the breakdown of the old order and the beginning of a new one.

Passengers all over the city are fed up with the Yellow Cab taxi monopoly — the city’s most conspicuous symbol of insider corruption. People are pulling out their cell phones and summoning Uber and Lyft drivers — and neither company can keep up with the demand. The first time I’ve had issues with a driver not showing up was this trip. The demand is too intense and the call signals are coming in every few minutes for every one of them.

Also roaming the streets looking for passengers are drivers from another outmoded form of taxi: the Black Car. These were once reserved for the well-to-do. You made a reservation in advance, mostly on the phone — that is, via a telephone call — and they came to you, at a high price.

Now these cars are driving around the city without passengers, since, as it turns out, the rich are using Uber instead. So they pull up to stranded people and offer their services — charging even less than Uber.

The Yellow Cabs are suffering too, with drivers quitting by the day, leaving medallion holders in the lurch. Many of these holders owe huge debts because they bought million-dollar medallions on leverage. Now they are under water, same as many homes in 2008. How long before we see them abandoned on the side of the road?

It’s a spectacular thing to see and experience. It is coming about by two factors: technology and consumer demand. Mobile applications are allowing consumers and producers to trade directly. And these consumers are expressing their wishes for better services at lower prices.

Just two weeks ago, I was in Uber’s headquarters, touring the space and seeing what the programmers and managers have to do to keep this company’s explosive growth on track without going off the rails. Now I found myself in Manhattan, the most important and fastest changing landscape for on-the-group upheaval. If market forces can bust up this monopoly, it can do anything.

Two Vocabulary Words

There are two vocabulary words to understand in order to see the underlying dynamic: disintermediation and equipotency.

Disintermediation means to find a way around the administrative agencies that block consumers and producers from making their own deals. If a trade is intermediated, it means that producers must be permissioned into the system, and the consumers must approach the providers only through official channels. To disintermediate is to discover a technology that allows people to make deals directly. Mobile applications are powered by this peer-to-peer technology.

Disintermediation is clarifying. It reveals a truth we had not seen previously. It leads to better service and lower prices because it unleashes market competition where it had previously been suppressed by regulation and imposition. No one using ride sharing services would deny learning that transportation can be convenient, affordable, humane, and wonderful. Who knew?

Equipotency means that the power to be a producer or consumer is widely dispersed, not invested in a centralized and monopolized system. Anyone who meets the terms of use for Uber or Lyft can drive. Once you are enabled, you make your own schedule. You can choose whom to pick up and whom to forgo, depending on reputation. Anyone, even those who are driving Yellow Cabs, can join. And these same people can be consumers as well.

Put them together and you have a system of service provision that eschews monopoly in favor of market forces. It allows people to trade value for value, and be creative about doing it. The resulting dynamic is so powerful that it can melt away even the most ancient and entrenched systems of command and control.

It’s exciting and thrilling to see this dynamic working itself out in real time, right on the streets on the world’s most exciting city. It’s about the gradual triumph of human agency over every attempt to control and direct it. As the cars buzz here and there, and the data from the mobile apps do an invisible dance all over the city, you get a sense of what it looks like when freedom finally makes a break for itself.

And it’s not only about transportation. It’s happening in every area of life: accommodations, food, services, goods, employment, and elsewhere. New York City is changing — not thanks to any political movement but due to revolutionary technological and entrepreneurial shifts.

In 10 more years, the crew of layabouts might still be repairing that road, but the rest of the world will have moved on.