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If Ridesharing Is Banned, What About Ride-Trading? 353 353

Bennett Haselton writes "The city of Seattle just imposed new limits on commercial app-based ride-sharing companies like Uber and Lyft, effectively protecting taxi companies from low-cost competition in the form of smartphone apps. If other cities follow suit, could a company help ridesharers circumvent the restrictions by creating a ride-trading app, allowing drivers to earn 'miles' by driving passengers, and redeem those miles later to get rides for themselves?" Continue reading below to see what Bennett has to say.

The cab companies got Seattle to crack down on ridesharing companies by arguing that by letting drivers charge money for rides, they were essentially operating illegal unlicensed taxi services. So it's not hard to imagine other cities taking similar action on the same ambiguous legal grounds, as Los Angeles did in sending cease-and-desist notices to Uber, Lyft and Sidecar, ordering them to stop operating entirely.

I tried some of these services and actually never saw what the big deal was. Much of the time, they were almost as expensive as taxis, much too pricey to use on a regular basis, and I would never use them unless my own poor planning left me somewhere without my own car and desperate somewhere faster than public transit could take me. Perhaps cab companies were afraid of where the services were eventually headed -- especially towards a model where drivers could set their own prices. As far as I know, currently all ridesharing services set a minimum price per mile and don't let drivers set their rate any lower. But many drivers would probably be willing to drive at a price lower than what the app allows, and a set-your-own-price model probably really would put the cab companies out of business.

Perhaps some cities will take a more benign view of ridesharing in the long run, but as long as money is changing hands, (1) the city will certainly view it as within their rights to regulate the ridesharing industry, and (2) taxi companies will be able to argue, not unreasonably, that the companies are effectively running unlicensed taxi services. Of course the real solution would be for cities to stop limiting the supply of taxi medallions and artificially enriching cab companies at everyone else's expense (if the city's concern is with rider "safety", they could increase the number of taxi medallions while still requiring all drivers to take safety training). But that doesn't seem likely to happen any time soon. So instead, what if a company created an app that attempted to circumvent the legal restrictions, by allowing users to trade rides -- not for cash, but for returning the favor?

Here's how it could work: When you sign up as a new user, you have a "miles" balance of zero. (The very first users of the system would have to start out with a nonzero balance, so that there are some units in the system to trade, but everyone who joins after that starts at zero.) You have to earn miles by giving someone else a ride before you can redeem your miles by getting a ride yourself. So you log in as a driver, and some other user "hails" you through their smartphone app, much as riders hail drivers through Uber or Lyft. You pick up a passenger and give them a ride to their destination, and at the end of the journey, they transfer a number of "miles" to you indicating how far you drove them. You now have a positive miles balance, and you can "spend" it by hailing a ride yourself later on. Drivers and riders could leave ratings for each other just as they do on Uber and Lyft. What Couchsurfing is to Airbnb, this service would be to Uber.

Since no money is changing hands, the arrangements would presumably not be covered by existing taxi statutes. You could even make an argument that a city couldn't pass a law regulating these ride-trades even if they wanted to, because as voluntary arrangements between consenting parties, they're protected under our First Amendment right of freedom of association! Of course, libertarians believe all commercial transactions between consenting parties ought to be exempt from regulation as well, but most state and local governments take a dim view of that premise. However, take money out of the equation, and you're on much stronger ground that your ride-trading arrangements aren't covered by existing laws.

(It is of course silly and inconsistent that the law often forbids selling something for money, but allows trading it for something of "value", or permits it if the nature of the trade is not made explicitly clear. If a girl sleeps with you and you occasionally "lend" her money, she's a high-maintenance girlfriend, but if she ever does you the courtesy of spelling out the arrangement explicitly, she's a prostitute and can go to jail. But as long as the government makes those silly and arbitrary distinctions, we might as well use them when they count in our favor.)

Would ride-trading with strangers be safe? Well, when a rider pages a driver, the system could tell the rider the license plate of the car associated with that driver's profile, so unless the driver was in a stolen car, the system would always have a record of the license plate (and, hence, the owner) of any car that picked up a passenger. More generally, if I were a user in a system like this and someone told me it sounded unsafe, I would just say the same thing I always say about Couchsurfing (where I've hosted over 50 people with no bad experiences). Namely: "Look, have you or any of your friends ever gone home with someone you met at a bar? And that's fine, I'm not judging you, I'm just saying that was a hell of a lot more risky than meeting up with someone in a system where you can read other people's references." Besides, in many cities there's already thriving subculture of slugging -- picking up total strangers so you can use the carpool lane and they get a free ride.

I feel like I would be happy to have this ride-trading service available if I ever wanted a quick ride across town and didn't have my car. The only "cost" to me would be the cost of giving someone an equal-length ride at some other point in time when I wasn't in a hurry. (Or even giving someone a lift to a place that I was already going.) It's an efficient transaction because it lets me spend miles when my time is valuable, and then rack up the miles later on when I have some time to kill that's not as valuable. You can realize even more efficiencies by letting people pay "premium rates" for periods when demand is high (Friday and Saturday nights) or supply is low (early mornings when people need rides to the airport), so that the balance of miles that you pay for a ride may be greater than the actual number of miles traveled.

On the other hand, there's an inefficiency in that the system cannot serve the needs of people who want a ride, but whose time is too valuable to spend it driving in order to "earn" the miles to redeem for the ride. This is a limitation in any system that bans money as a means of trade and only lets you trade a service for a repayment-in-kind of the same service.

To environmentalists who would object that this promotes greater car usage: First of all, it might result in more impromptu car pooling over routes that were being inadequately served by buses, in which case the passengers were going to have to take cars anyway, so they might as well be piled into fewer of them. But in any case, I would actually take the bus more if a service like this existed. I live in Bellevue, about a 20-minute bus ride outside of Seattle, and I'd gladly take the bus in to Seattle if I was going to a specific destination close to the bus line, and knew I was coming right back afterwards. The problem is that once I'm in Seattle, if I want to get to some other arbitrary destination in Seattle, taking public transit is slow and annoying (and, you may have heard, often involves some waiting around in the rain). I drive my car in to Seattle not because I want to drive to the city, but in order to have a car while I'm there. If I could summon a ride in under two minutes to take me anywhere else in the city (with the only price being to return the favor to someone else later), I wouldn't need my car and could take the bus downtown.

So, even assuming a service like this would be useful, why would a company create it? We know how Airbnb and Uber make money, by skimming a cut off of each transaction. But how would a company make money just by connecting riders and drivers for complimentary rides through a free app? Well, Couchsurfing connects users for free stays in each other's houses, and they got venture capitalists to invest $22 million. The thinking seems to be that if even a free a service has enough users, it must be worth something.

The major obstacle to deploying the system, is that the system would require a critical mass of users in any given city, before it could become effective. If there aren't enough drivers active in the city, then hailing a ride would take so long that after factoring in the delay, you might as well have taken the bus. You'd need enough drivers active to be reasonably sure that in any given neighborhood, you can catch a ride quickly -- and for the drivers have to be out in force, they have to know that there's a critical mass of riders who are ready to offer some miles in their balance for rides. Services that require a critical mass of users in order to be successful, are notoriously hard to get off the ground. If the project had the feeling of a social movement behind it -- in the spirit of resource sharing, as well as environmental friendliness insofar as people like me would be more likely to start using the bus -- perhaps the founders could sign up a base of users over time, prior to actually launching the service. And then once the number of enrolled users was large enough, could launch the live service with a critical mass of users already in place. (Of course, if they tried that out here, this being Seattle, most of those enrolled users who said they would show up, would probably flake out.)

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If Ridesharing Is Banned, What About Ride-Trading?

Comments Filter:
  • It Won't Work (Score:4, Insightful)

    by Talderas (1212466) on Monday March 31, 2014 @11:44AM (#46621867)

    It won't work because it will be, successfully, argued that you're getting paid in miles rather than cash.

  • Free market (Score:3, Insightful)

    by DaMattster (977781) on Monday March 31, 2014 @11:45AM (#46621877)
    So much for free market economics and competition. I hate it when government goes to lengths like these as competition is good all around.
  • Re:Free market (Score:5, Insightful)

    by CanHasDIY (1672858) on Monday March 31, 2014 @11:55AM (#46621985) Homepage Journal

    So much for free market economics and competition.


    I've always believed the black market to be the only true "free" market, anyway.

    Criminalizing booze and drugs never slowed down usage, all it did was eliminate the need to follow regulation, and kept/keeps the government from getting a cut of the action.

  • by Anonymous Coward on Monday March 31, 2014 @11:55AM (#46621999)

    and why should I value what he has to say?
    (Yes, I know he pays /. to post his stuff)

  • Re:Free market (Score:5, Insightful)

    by hawguy (1600213) on Monday March 31, 2014 @11:59AM (#46622033)

    So much for free market economics and competition. I hate it when government goes to lengths like these as competition is good all around.

    As long as the new services operate under the same constraints as taxi companies, I see no reason why they should't be allowed to operate since, as you say, that's a free market at work. But they shouldn't get to skip over all of the costs of business that taxi companies absorb -- things like driver background checks, driver training (in some cities), insurance requirements, car maintenance requirements, etc.

  • Re:It Won't Work (Score:4, Insightful)

    by Lumpy (12016) on Monday March 31, 2014 @12:08PM (#46622181) Homepage

    It's only illegal because of the legitimized extortion racket that most cities have in place.

  • Not playing nice. (Score:4, Insightful)

    by duke_cheetah2003 (862933) on Monday March 31, 2014 @12:09PM (#46622185) Homepage

    Sounds like, after doing a quick 15 minutes of research that Uber, Lyft and their kin don't really care to play by the established regulations for for-hire drivers.

    Looks like these new kids on the block are being rebuffed trying to bully their way past regulations that're established to keep the for-hire drivers gainfully employed and playing fairly.

    Also seems to be a huge money grab by Corporate outside of these cities, charging drivers rather steep 'dispatch fees.' Read between the lines folks, this is not an innocent 'innovative' tech company trying to fix something that's broken. Smells more like swooping down on an establishment that's individualized to each city and nationalize it.

    No sympathy here. Play by the established rules and regulations or GTFO, ok?

  • by businessnerd (1009815) on Monday March 31, 2014 @12:15PM (#46622253)
    Can we stop referring to these companies as "Ride Sharing" apps? It's just a way to make it sound like they are not car for hire services, but they really are. And I'm not complaining about the services themselves. I use Uber constantly. I love it. But I am under no illusion that UberX drivers "just happen to be going my way." They picked me up because they want my cash. And that is the real problem with the author's idea. The drivers don't want to barter. They don't need credit for future rides. This is their profession. Most of the drivers I have spoken to drive at least part time, if not full time. Last ride I got, I asked the guy when he usually called it quits for the day (it was the end of a long workday for me). His response: "I'll be driving all night. This is all I do." Does this sound like "ride sharing" to you? Regular taxis should have every right to be worried, though. And price is the least of it. I use a lot of taxis and Ubers, so I feel I can make a fair comparison. In general, Ubers are friendlier. Their cars are cleaner. And the biggest reason I use Uber, is because of the ease of payment. I travel for work, so I put everything on my corporate credit card, including taxis (Using cash means I 1) need to be carrying it, 2) I need to carefully track receipts and 3) I don't get the money back for another few weeks). With Uber, I just step out of the car, and my card is immediately charged and I receive and e-mail with the receipt. With regular taxis, he tells me how much, I say I want to pay with a credit card. At this point, I get one of two responses. If I am lucky, he says, "No problem" and takes my card. More often then not I get "can you pay cash instead?" or "the machine's down, cash please". I then insist on credit, at which point the machine magically works again. (No joke, last week a guy gave me the "machine's down" line and then after I suggest he do a carbon copy, he whips out his iPhone with a Square reader attached!). Ok, back to the machine. If the machine is the kind in the back seat, process is fairly smooth, but does take a little time. Or it's the old school one in the front that takes a little more time to process the payment and print out the receipts. I get that taxi drivers get less money and it takes longer to get paid (so I usually tip more), but it's a huge hassle, and creates a shitty experience when I have to argue with every taxi driver. Uber's experience is far superior. And there is no reason that taxis couldn't adopt the same payment system.
  • Re:Free market (Score:5, Insightful)

    by geekoid (135745) <dadinportland@ y a h o o.com> on Monday March 31, 2014 @12:15PM (#46622259) Homepage Journal

    There is a reason taxi's are regulates heavily. The industry was rife with abuse. Random charging, taking long way around, dropping people off in the wrong place, extortion, and people had no avenue of recourse.

    That is why there is regulation around taxi companies.
    And taxi companies feel, rightful IMHO, that the regulation should apply to anyone ding the same job.

  • Because their is a min. bar of safety expectation from consumers.
    I suppose you don't think there should be health inspections at restaurants since they aren't required in personal homes?

  • Re:It Won't Work (Score:5, Insightful)

    by SuperTechnoNerd (964528) on Monday March 31, 2014 @12:27PM (#46622437)
    I ran a computer consulting company for years. I used to sell 5 - 10 new custom built computers a month. Now it seems the small device market (phones and tablets) have destroyed that. Perhaps I can get the government to make phones and tablets illegal, so I can go back to building computers and making profit...
  • by BitZtream (692029) on Monday March 31, 2014 @12:52PM (#46622701)

    I'm probably willing to pay more than he is, so whats the charge for front page placement on slashdot?

    I'm sorry if I'm being ignorant, but is there a price sheet online that I'm just not aware of, or do I have to call in or something to get it?

Computer Science is the only discipline in which we view adding a new wing to a building as being maintenance -- Jim Horning