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No, a New Uber-Like App for Yellow Taxis Won't Save This Dying Industry.

Arro was designed to solve the problems of taxi drivers, not customers.

Here's a red flag that the developers of the smarpthone app Arro aren't destined to become the great saviors of the beleaguered yellow taxi industry: Mike Epley, the company's director of product managmeent, claims that not utlizing surge pricing is a competitive advantage that his company has over Uber.

The New York City-based Arro, which was profiled in Crain's New York Business on Thursday, is currently beta testing an Uber-like app for ordering a traditional yellow cab with a smartphone. Passengers will pay roughly the same regulated, metered fares that taxis always charge, but they'll be able to order them with their phones rather than sticking their hands in the air. (The Crain's article didn't mention if there will be an additional surcharge, or how Arro will make money, and the company didn't respond to my request for an interview.)

Surge pricing isn't designed for drivers to make occassional windfall profits; it's a mechanism for enticing them to head towards areas with cab shortages. Uber drivers see a map on their phones showing neighborhoods where fares have spiked because of supply shortages, and they gravitate towards them to make more money. Once the shortage is alleviated, the price goes back down. Without this function, Arro simply won't be able to deliver the quick service Uber customers rely on. So why would anyone use it?

From Nick Bilton's Twitter FeedFrom Nick Bilton's Twitter FeedAnd what happens if a yellow cab driver en route to picking up an Arro customer sees a hand waving in the air? Will he cancel the booking for the promise of a quick cash ride?

Sure, it might be cheaper to use Arro than Uber on New Years' Eve, or other high-demand holidays when surge pricing is the norm, but what are the chances of getting a quick cab pick up with Arro in Midtown Manhattan after the ball drops?

Arro's problem is that it was designed to solve the problems of taxi drivers, not taxi customers.

In New York City, where Arro will launch first, the ability to take street hails is still a advantage for the taxi industry over Uber in some situations because sticking your hand up on 42nd Street will still get you on your way faster than any other method. The problem the industry is facing is that there are too many yellow taxis to serve this limited purpose—and they each have a revenue-sucking license attached to them called a medallion.

For more on how Uber destroyed the value of New York City taxi medallions, and all the collateral damage, watch my recent Reason TV story, "Uber and the Great Taxicab Collapse:"

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  • prolefeed||

    Fist?

  • Fist of Etiquette||

    Best first comment ever.

  • prolefeed||

    And what happens if a yellow cab driver en route to picking up an Arro customer sees a hand waving in the air? Will he cancel the booking for the promise of a quick cash ride?

    Depends on the enforcement mechanisms for cancelling a booking. But, if Arro's business model is to charge taxi drivers a fee for each customer, say a buck a ride, then your choice as a cab driver in the above situation is:

    1) Get an immediate full price fare.

    2) Keep driving, wasting gas and time, to pick up a discounted fare.

    Guess how that incentive might play out?

  • Rhywun||

    There's no way to tell because the driver has no idea how far the person with their hand in the air is traveling.

    Me, I think this app stinks. If I'm stumbling drunk out of a bar at 4AM I don't want to have to fumble for a phone to get a cab - I just want to hold my hand up. If this app succeeds it was basically make owning a smartphone a requirement in order to get a cab, and that's not right.

  • *GILMORE*||

    "There's no way to tell because the driver has no idea how far the person with their hand in the air is traveling"

    Speaking of which... in the last year or so, have you had drivers pull up and ask you where you were going before letting you in?

  • Rhywun||

    I haven't taken a yellow cab in years, mostly because I don't "go out" in the city much any more. But back in the day, yes, they would do this all the time. Or more accurately, I would get in the car, tell them I'm going to Queens, and they're like "No."

  • Rhywun||

    Anecdotally - I recall from living in SF years ago that it was impossible to hail a cab because every car you saw was on its way to a phone call. This was long before "apps" so I'm not sure what the incentives were - only that I fucking hated it.

  • bassjoe||

    Really? My impression is that whenever I call a cab in SF, the driver picks up a hailer rather than me...

  • Harold Falcon||

    Fuck you, socialist.

  • __Warren__||

    We need to build walls (or moats) around all the sidewalks in NYC to keep out illegal rideigrents. On properly vetted cabizens will be allowed through the barrier to pick up fares.

  • Akira||

    You forgot to mention how many billion dollars you will need to study this idea!

  • __Warren__||

    Seven. I need seven billion dollars.

  • John Titor||

    You're still not thinking creatively enough Warren. What you guys really need to do is dig America out of the ground, encase it in a massive bubble, and suspend it in orbit above the planet. Only then will you be safe. Until the moonmen start takin' all your jerbs.

  • __Warren__||

    GODDAMN MOONMEN!

  • Another David||

    "Without this [surge pricing], Arro simply won't be able to deliver the quick service Uber customers rely on. So why would anyone use it?"

    Oh, gee, I don't know, maybe they could use literally any other method to make the drivers do their jobs? "Turn a customer away and you're fucking fired" seems to work pretty well in most industries.

  • Brochettaward||

    Ok, fire me. I'll go drive for Uber where I can make my own choices about where I pick people up. And, oh yea, Uber doesn't require an investment in a medallion or getting indebted to someone who bought the medallion for me.

    Taxis have no incentive to really care about meeting customer demand, which is what you seem to miss. The rates are the same in the high traffic area versus the low. The dynamic incentive system that encourages drivers to meet demand in real time doesn't exist.

  • In League with the Dark Ones||

    What happens when there are more customers than employees?

    That's the whole point of surge pricing — to encourage moving drivers from areas with fewer customers to areas with more customers.

  • Muzzled Woodchipper||

    And it works. Just last night, while driving for Uber, even after having said to myself that the ride I dropped off at nearly 2a would be my last of the night, when I saw that the surge in the area was at 2.6x, I amended my plans and kept on driving.

  • Fist of Etiquette||

    Arro's problem is that it was designed to solve the problems of taxi drivers, not taxi customers.

    Customers? Who cares what they want?

  • reviled preference||

    In San Francisco, Flywheel does the same thing for the local cab drivers. (As it happens, it's about the third time in a few years someone tried to build this app for them, but the first time the drivers adopted enough to be useful).

    They don't exactly have surge pricing, but they have an unadvertised option that does something similar. If the app shows that a wait for a cab is too long for your tastes, you have the option to provide a "guaranteed tip" on top of your fare to see if it will improve you wait. The tip (last I looked) can be up to 200%, or 3x. This effectively lets the passenger, rather than Uber's centralized system, determine the surge.

    In my opinion, it's actually quite clever, and to me a system like this alleviates many concerns I have about Uber's centralized and opaque control of pricing (see http://www.interfluidity.com/v2/5822.html for a more eloquent explanation.)

  • Brochettaward||

    Foolishly clicked on your link. Short version - fuck off, slaver. Some of the gems I saw in the first few paragraphs:

    None of this is to say that rent controls are good or bad, or that non-price barriers to construction are good or bad. These are complex questions involving competing values textured by local circumstance. They deserve bespoke analysis, not pat dogma imposed by distant central planners economics professors.

    Economists who argue against rent control are not akin to central planners imposing their will. Only a moron would even suggest that removing barriers to the private property owners to set prices as they see fit is the same as central planning.

    There also are no 'competing values' on these issues. There's people who want to tell other people what to do with their property.

    Our main concern should be to ensure investors do not win that bet. In particular, public policy should focus on encouraging “multihoming”, where drivers advertise availability over several competing platforms (Uber, Lyft, Sidecar, etc.) simultaneously.

    If surge pricing is bad and pisses off consumers, or even a percentage of them - Lyft won't go anywhere. You don't actually seem to know how a market works. Uber is not setting prices for the market, but for its own drivers and services. It's competition can, should, and does undercut those prices.

    Or municipalities might offer such applications to the public directly.

    Yea, that will work, buddy.

  • *GILMORE*||

    People like to cover up their ideological distaste for free markets with a buch of Scientistic hogwash where they pretend that there's a "spectrum of alternatives" ...when really what they're saying is, "There's tons of types of regulation we can impose that don't *sound like* price-controls, but accomplish the same thing!"

  • Sevo||

    "None of this is to say that rent controls are good or bad, or that non-price barriers to construction are good or bad. These are complex questions involving competing values textured by local circumstance"

    Rent control has made sure the only cheap rental units in SF are the ones occupied by people who have been there for half their lives.
    Show me a 'local circumstance' where 'complex questions' has done otherwise.

  • Sevo||

    Aimed at the slaver, not B or G...

  • __Warren__||

    I wonder if Mike Epley is the BigMike that would shit up every Uber thread last year. Not likely I know, but goddamn it would fit.

  • *GILMORE*||

    2013-2014 really was the year that progressives went Ubertarded.

    The Pando-obsession with them is like GamerGate-level-stupid

  • Rhywun||

    Uber is the new WalMart.

  • commodious spittoon||

    Without this function, Arro simply won't be able to deliver the quick service Uber customers rely on. So why would anyone use it?

    Probably for roughly the same reasons some people "buy American." How Arro plans to make a sustainable business catering to a handful of idiots is anyone's guess.

  • Francisco d'Anconia||

  • commodious spittoon||

    lol @ "Dwarf Fortress remake."

  • Francisco d'Anconia||

    The New York City-based Arro, which was profiled in Crain's New York Business on Thursday, is currently beta testing an Uber-like app for ordering a traditional yellow cab with a smartphone.

    Wait, you mean it took a free market competitor to get a government enforced monopoly to innovate?

    I'm shocked!

    Who knows, the next step they take might be to push back against the regulation and unions and actually start serving their customer's desires.

    THE HORROR!

  • Almanian - Trump's Woodchipper||

    they take might be to push back against the regulation and unions and actually start serving their customer's desires.

    haaaaaaahahahaha...hahaha.... hahaha.... HAAAAAAAHAHAHAHAHAHAHAHAHAHAHAHAHA!

  • ||

    Such behavior is not very Presidential.

    Yeeaaaaahh !

  • __Warren__||

    So I'm thinking about letting my orphans age out and instead of replacing them by the usual means replacing them with highly-trained African pouched rats.

    The rats cost more to train but they eat a lot less and take up far less room in addition to not needing any clothes and of course they don't get any dangerous ideas.

    Any critiques of this idea?

  • Francisco d'Anconia||

    Why in God's name do you feed and clothe your orphans?

  • __Warren__||

    It's gruel and burlap! I find that somewhat nourished and warm orphans are more productive. You might have a different experience.

  • Herpes Trismegistus||

    Render the grousers down to soap, and grind everything else into feed for the rest of the little shits.

    It's like I'm the only one who read the fucking manual: "Orphans and You: Why No One Gives Two Shits About THEM and How That Benefits YOU" (with a delightful forward by Mother Teresa).

  • __Warren__||

    That book is like 600 pages long, no one reads that much.

  • F. Carlos the Jackal, Jr.||

    with a delightful forward by Mother Teresa

    How dare you besmirch the name of a modern day saint!

  • __Warren__||

    GRAND SLAM! WAY TO GO PENNSYLVANIA!

  • Acosmist||

    Quakers baseball? What on earth is this about?

  • Francisco d'Anconia||

    Is the series on?

  • __Warren__||

    Yup. USA 10 JPN 9

  • Francisco d'Anconia||

    How stoked is a kid who hits a slam in the series? THAT'S FUCKING AWESOME!

  • __Warren__||

    Tied up now.

  • __Warren__||

    13-10 JPN

    Tied for most runs in a LLWS final.

  • __Warren__||

    13-11 now. But JPN is up to bat...

  • __Warren__||

    JPN failed to score. USA up now.

  • __Warren__||

    Still 13-11

  • __Warren__||

    JPN fails again! Two great plays by the USA kids kept them from plating anyone.

  • __Warren__||

    USA didn't score. Top of the 6th with JPN due to breakout another big inning.

  • __Warren__||

    Team USA has fallen apart, it's now 18-11 after numerous errors by the USA kids.

  • __Warren__||

    Japan wins.

  • *GILMORE*||

    "PATHETIC. This would never happen with me in charge. I love the Japanese. Great workers. They should stick to karate and sushi or we should bomb them again. #MAKEAMERICAGREAT"

  • Francisco d'Anconia||

    Shit.

  • Rhywun||

    Children's baseball is only watchable when there's beer and cursing.

  • __Warren__||

    Oh, they're totally shitfaced.

  • Ted S.||

    The children?

  • __Warren__||

    Yeah, Al Swearengen IV is the head umpire today. He insisted.

  • Jerry on the sea||

  • __Warren__||

    She really knows how to grip a shaft.

  • TransportThoughts||

    good article, but you are missing a big element.

    Arro will work best during periods of high taxi usage, or in areas that are underserved. Cabs will flock to the areas where demand is high but supply is limited.

  • *GILMORE*||

    Why would it do any of that better than Uber?

  • commodious spittoon||

    Because a command economy always allocates resources to their most productive uses, especially when no incentives are involved.

  • *GILMORE*||

    ah. of course. I'd forgotten my Progonomics 101

  • *GILMORE*||

    OT = has anyone else had experience with Comcast/Xfinity throttling their bandwidth?

  • __Warren__||

    Apparently on 6m of Uganda's 35m people have banking services and so mobile banking (M-pesa like) is going to happen via their central bank. So it'll be screwed up but that's not the interesting part.

    A bank functionary was interviewed and stated that in rural areas people keep money under their mattresses or in pots.

    So my advice to rural Ugandans is: If some blonde jerk-off wearing a green suit and waving a sword around shows up, kill him immediately.

  • commodious spittoon||

    Fucking asshole not only busting up all the pottery but stealing all the monies too.

    But he does keep the grass short, so there's that.

  • John Titor||

    +1 HYAH

  • nyctuber||

    If it's a 'dying industry' it's because Uber is being allowed to blatantly break the law. They do e-hails without paying a cent for a Medallion. It stands to 'reason that 'reason.com' has been paid off by Uber.

  • Illocust||

    Make it a little more obvious that you have never been to this site before why don't you. We are libertarians. We don't support crony capitalist Medallions.

  • bassjoe||

    I've had an app that does this for, like, ever. It's called a phone. Using it, however, doesn't at all guarantee a taxi will show up.

  • taximeters-n-toplights||

    Wow nice content. I really like your blog. Please keep up the good work. To learn more about how to fight back against Uber Pond Scum check out http://www.taximeters-n-toplights.com

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