Why People Use Flywheel & Taxicabs Instead of Ubers or Lyfts

Customer response to the Flywheel taxicab app have been overwhelmingly positive. The number of people using the app grew 6X over the last year despite limited funds for advertising.

This fact has been ignored by all forms of media so I thought I'd write about it myself.

I've gotten most of my information from talking with over a hundred of my taxi and Flywheel customers. The following ideas and comments come from these ad hoc interviews.

A major reason why Flywheel is becoming more popular ...

How to Improve Service? Centralized Dispatch?

Before entering this debate, I think it would be helpful to imagine an ideal business model. And, this model should be looked at strictly from the standpoint of picking up cab customers in the most efficient way possible. It should have:

1. One dispatching system. As to whether this would be one big company like Pre-K Yellow Cab or a centralized dispatch is not important. What's essential is that all the taxis in the city would be connected to it.
     A. You ask why? Primarily because it would minimize the major curse of all radio/computer dispatch players - the NO-GO. No mas customers calling 7 cab companies simultaneously.
     B. No mas 4 taxis showing up for an order while passing 3 potential calls en route.
     C. This would work for the customers as well because they wouldn't be calling for, say, a distant Yellow when there was a Luxor a block away.

2. I think the system should be computerized with a modern app like Cabulous and the cabs should all be GPS enabled.
     A. I have a vision of a computer or a dispatcher automatically assigning each order to the nearest taxi. No muss mo fuss.

3. All drivers should have to pick up whatever order they are assigned unless they have very, very good reasons.
     A. I'm not interested in the employee vs Independent Contractor debate here. This is an "Ideal" system.
     B. The drivers, for instance, could agree to pick up all dispatched orders as part of their contracts. As to whether or not this would play with the EDD is something I can't answer.
     C. In any case, certain orders would not be picked up (for one reason or another) unless such a rule was in place.

Of course the system would be overwhelmed from time to time like during conventions or rush hour Friday nights but, on the whole, I think it would give the City very good coverage with the number of taxis we have now. It might also allow a cab to do things like piggy-back pick-ups when it's the only taxi in an area like the deep Sunset. And, customers could be given a more accurate estimation of how long it would take for them to get a cab; thus easing their anxiety, hostility and their desperate desire to ride in expensive limos.

Coming Soon - Reality.

Yellow Needs More Cabs? For Whom?

There are several questions and interesting aspects about Yellow Cab manager Jim Gillespie's claim to the MTA Board that Yellow needs 139 more taxis in order to service all the radio calls that the company gets.

1. Why 139? Why not 140 or 135? Must be scientific, huh? Let's do the math:

• Gillespie says that Yellow failed to pick up 280,000 or 25% of its radio calls during the last 6 months.
• 280,000 / 139 = 2,014 radio calls that Gillespie expects each new taxi to pick up in 6 months
• 2,014 / 182.5 days = 11 radio calls per cab picked up per day.
• /2 shift a day = 5.5 radio calls per day per driver.

Sounds a bit lame, doesn't it? But, maybe Yellow doesn't expect much from new drivers. Let's look at the veterans for comparison:

• If 280,000 = 25% then 840,000 (280,000*3) calls must have been picked up during the last 6 months by Yellow's 500 cabs.
• 840,000 / 500 = 1,680 radio calls picked up per driver for 6 months.
• 1,680 / 182.5 = 9.2 radio calls taken per cab per day.
• /2 = 4.6 radio calls per driver per day.

Hmmm. Seems like the vets are even lamer. Let's do a little more math. What if each vet picked up 5.5 radio calls per day?

• 5.5*2 = 11*182.5 = 2,007.5 picked up calls per cab for 6 months * 500 = 1,003,770 radio calls picked up.
• If 280,000 = 25% then Yellow handles 1,120,000 (280,000*4) radio calls per 6 months.
• 1,003,770 / 1,120,000 = the percentage of calls that would be picked up by Yellow drivers if the vets were as good as Gillespie expects the rookies to be = 89.6% of the calls picked up.

 What if the vets worked just a little harder and picked up 6 rides per shift per day?

• 6*2 = 12 pickups per cab per day*182.5 days = 2,190 pickups for 6 months*500 taxis = 1,095,000 pickups.
• 1,095,000 / 1,120,000 = 97.8% of the calls picked up.

Well, it looks like we've found a solution to Yellow Cab's problem - train or whip the slackers.

In short, this is the only time that I can recall a company using the incompetence of its personnel as a reason to expand its business.

In short, the only science involved in Gillespie's speech was the science of bs.

2. Yellow Cab will not guarantee that all, or any, of the new drivers will take radio calls.

Perhaps you, gentle and misinformed reader, imagine that Yellow has a dispatching system that will use GPS to automatically assign the closest of those 139 cabs to one of those 280,000 radio calls?

Alas - that's not the case. Yellow's computer will inform their closest empty cab that there is a nearby radio call but whether or not the driver will accept the order is anybody's guess. He or she can take it or leave it. This also assumes that the closest driver actually has his computer on, which is problematical.

What's going on here?

3. Yellow Cab (along with all other San Francisco taxi companies) is in the leasing business, not the taxi business.

• They make their money from leasing taxis to drivers, not from the actual fares.
• The drivers pay the companies first and then make their money from picking people up.
• As long as a cab company can fill it's shifts with lease drivers, it doesn't matter how much actual business the company does.
• Mild recessions (with declining demand for taxis) are usually good for cab companies because desperate, unemployed people will take bad shifts. A little money is better for them than nothing.
• Yellow Cab, for instance, wasn't hiring in 2008 and 2009 because all their shifts were filled. 

4. Yellow Cab (along with all other San Francisco taxi companies) will never tell a driver to take a radio call. Why?

• Cab drivers in San Francisco are Independent Contractors, not employees.
• What these drivers are is independent of are all laws that protect employees.
• Cab companies do not have to pay unemployment taxes, social security taxes or (for Long Term Lease drivers) Worker's Compensation, etc on Independent Contractors.
• Telling a driver to take a radio call would make said driver an employee. 
• Telling a driver to take a radio call would mean that Yellow Cab would have to pay the taxes etc listed above.

5.  Yellow Cab (along with most other San Francisco taxi companies) is more and more operating its medallions under long term lease arrangements.

• The medallions are leased by the month and the taxi companies have no control over who drives the cab.
• Hundreds of experienced drivers have lost their shifts due to this trend.
• They have been replaced by new drivers who aren't trained (for Yellow to train them would make these drivers employees).
• Most of these Long Term Lease drivers hang out at the airport or head downtown.
• These new drivers are much less likely to take radio calls than the people they replace.

And, those are the real reasons why people in the Bayview, the Sunset, the Richmond and Noe Valley, not to mention the attractive blond at Greenwich and Scott, aren't getting taxis as quickly or as often as they should.

As long as the current taxi system remains in effect, 139 more Yellow Cabs will do little or nothing to improve San Francisco's radio business. 

Gillespie was quoted in the Examiner as saying, "If we had more taxis and they were more spread out, people could get their cabs quicker and more people would call ..."

If the cabs were "more spread out" ... but they won't be any more spread out than the current cabs are. Under the current system there is no leadership or direction, there is no one to tell the taxi drivers where to spread. The new taxis, like the currents ones, will gravitate to areas where the service is already good like SFO and Union Square but service to the outlying areas would not be improved one whit.

If Yellow Cab (along with the other companies) ran their businesses in a more rational manner, if the companies were more interested in serving the public than in avoiding various forms of taxation, the taxicabs we already have on the street would more than adequately handle the radio calls.


The only people who would really benefit from those 139 more medallions would be the owners of Yellow Cab along with the new medallion holders.

The Independent Contract - In Sum

Over the last 30 years, the law has pretty much caught up with the Independent Contract. A series of court cases have given drivers Workers Compensation and, maybe, Unemployment. It's no longer legal for companies to demand insurance deposits from their drivers.

It's also true that I have probably romanced the virtues of being an employee. It's doubtful that, under the political climate of the last three decades, we would have been able to form a union even if we been given employee rights. Unions have hardly proven themselves to be bastions of morality either. A friend of mine, in a Longshoreman's Local, had to tip union agents to get shifts. And, the foundations of building have been poured on many an ex-Teamster.

The level of corruption seems to be about the same. On the other hand, union workers are usually much better paid.

But there are advantages to driving a cab as an Independent Contractor. It's a cash business and nobody tells you what to do. You can take radio calls or not, work the airport or not, use any system you can think of to make money and take breaks (or not) any time or any place you like. Furthermore, an economic recession is unlikely to cost you your job. All that happens is that you make less money. In fact, people laid off from other industries invariably swarm taxi companies looking for work during recessions. Most of them make less money driving cab than they had been making before but at least they make something.

Comparing lease drivers to workers in 19th Century sweat shops is also way off the mark. You can do what you want when you drive a cab and, benefits aside, taxi driving pays better than most clerical or retail jobs. The combination of the freedom and cash is what got me into the business - and what keeps me there.

However, the biggest advantage of the Independent Contract clearly goes to the companies. The ability to fire people (excuse me "cancel their leases") without cause has given cab companies way too much power and led to abuses that I've written about earlier (see Alleged Tipping and the series on the Independent Contract). Beyond that it has saved the companies huge amounts of money that they have not had to pay in the way of taxes and benefits.

The gates and gas system has also made the taxi industry recession proof. Although the taxi business is currently down (by most accounts) 30% to 50%, the companies are flourishing. Former stock brokers, computer geeks, money managers and (god knows) maybe lawyers are lining up to drive cabs. But they can't even get an application. The companies are backlogged with drivers. They aren't hiring.

I guess the question is whether or not this is a good thing. As a medallion holder, I appear to be benefitting from this system. But I wonder? Is is right for companies to be flourishing when the amount of actual business they do is in decline? Is it right for them to be protected from the laws of the marketplace?

Most the plans for "reforming" Proposition K, for instance, call for putting more taxis on the street. The people who drew up these plans act as if the current recession didn't exist. As such, these plans as disconnected from the economic realities of our time. Would this be happening if the companies were actually in the cab business instead of the leasing business?

Is the public truly being served by this system? The major complaint about the taxi service in San Francisco is that it's hard to get a taxi in the outlying neighborhoods. But a company cannot tell an Independent Contractor what to do. That would make the driver an employee. Therefore, the companies cannot assign a driver to a call or tell him or her to work a specific area or neighborhood. Because the drivers themselves are on a gate system, they cannot afford to stay in neighborhoods with little business and naturally head back toward the busy areas as fast as they can.

Because the City has not allowed companies to raise gates thus shrinking their income and to avoid legal problems arising from the current system, taxi companies are more and more going to long term leases. They give up their day to day control but they don't have to sweat the details either.

This is a big problem for dispatchers by the way. The days of FIVE in and FIVE out are becoming a thing of the past. They're lucky if the long term lease drivers toss 'em TWO a couple of times a month ... and that's how it should be.

However, it's difficult to see how the long term leases serve the public. Most of the drivers appear to work the airport and the companies have no control over them whatsoever. It's hard to envision these guys spending a lot of time in the Sunset taking radio calls.

I'm tempted to say that I think the system is broken and needs a drastic reform. In fact, in an earlier version, I did. But that's a drastic exaggeration. I got carried away by my own rhetoric.

On the other hand, the public isn't being served as well as it should be, the drivers are treated unfairly and the companies themselves might do better under a different set up.

The gate and gas system may be outdated. As it is the only way the drivers can make more money is by raising the fares and the only way the companies can make more money is by raising the gates. The fares are already among the highest in the country and it's hard to see how raising them now would do anything other than lose business. The gates are already too high for the amount of business we have.

There has to be a better way. All we need is a Solomon to figure it out.

Players & Plans: The UTW & The Asian Law Caucus

Before examining this proposal, I should admit that there are two reasons why I can't pretend to be objective:

1. Money for the plan would come out of my pocket. It would treat other medallion holders and myself as if we owned companies instead of just medallions and tax us as much as $10,000 per year.

2. The UTW went to Supervisor Chris Daly's back door before the people in the taxi industry even got a chance to look for more reasonable and creative solutions to the benefits problem at Town Hall Meetings.

The UTW and the Asian Law Caucus (ALC) mainly want:

1. Health insurance for the drivers.
2. Retirement for the drivers.
3. Enforcement of laws against illegal limousines.

Well and good. I agree. In fact we medallion holders are already paying $1.5 million (or 5% of our incomes) to (among other things) help fight bandit limos - who also steal rides from us.

The ALC does make several statements that I can agree with:

• Non medallion drivers, many of whom are immigrants, are low paid, forced to sign "independent contracts" which deny them the right to unionize and are exploited in numerous ways.
• These exploited drivers must wait for as long as 15 or 20 years in order to own a medallion.
• Once a driver owns a medallion his or her life is changed dramatically by an income that effectively doubles.
• In addition to whatever they make driving their cabs, medallion holders earn around $2,000 per month by leasing their taxis out when they themselves are not working.
• "The dream of holding a medallion inspires many taxi drivers to stay in the industry and maintain good driving records."

Well and good. It's all true. The disagreement starts with the UTW's financing plan. They want to charge medallion holders an additional fee of from 20% (ALC) to 50% (Supervisor Chiu). This is a tax rate many times higher than any company or corporation pays for employee benefits.

The reasoning to justify such outrageous fees - if reasoning is the word - starts with the above mentioned facts and then goes bonkers. George Orwell probably would have called the UTW's arguments double-think - in his kinder moments. Many of their other rationalizations are just plain false.

• The $2,000 that these poor, exploited drivers stayed in the industry for up to 20 years to earn is magically transformed into "unearned income" by the UTW. Apparently all those years of toil and strife should gain drivers nothing but a chance to pay the bills for people who haven't yet paid their dues. It's OK for those abused immigrants to dream but not too much.

The ALC also likes to load it's arguments. The word "immigrant" mysteriously disappears whenever medallion holders or fees are mentioned although a substantial number of the holders who would pay these fees are indeed immigrants.

• The $2,000 is treated as a huge pile of money by the ALC that claims that imposing extortive fees "will encourage medallion holders to actually drive their vehicles ..." This is a variation on a bogus factoid constantly yammered by Rua Graffis of the UTW who once claimed that medallion holders stayed home "eating pizzas" instead of driving.

This is nonsense! Where do these people think we're living - San Francisco Del Mar, Mexico? Studio apartments here rent for $1,500 a month. Even if there wasn't a driving requirment, we'd need to work. But there is a requirement. If medallion holders don't work, they lose their medallions. Personally, I work about 50 weeks a year just to tread water.

• The purest piece of double-think, however, is the idea that the plan will give medallion holders an "incentive to retire." This in turn supposedly would result in an "exit" strategy that is lacking now.

Think and think about this. The medallions holders would pay 20% to 50% of their incomes to finance not only retirement plans but other benefits for thousands of people. Any such plan would pay them back cents on the dollar. Maybe I just have a strange sense of humor but wouldn't we be better off putting that $4,000 to $10,000 into our own plans? As for the "exit strategy" - another joke. Under the UTW's plan, holders would be able to save little if anything and would cling to their jobs even more desperately than they do now.

As a former insurance underwriter, I think the main flaw of this and other proposals like it is that it distributes the cost among too few people. Usually the rate of insurance is spread among tens of thousands or hundreds of thousands of people. This was the case back in the day when the Teamster's union provided benefits for San Francisco's cab drivers.

But, the ALC and the UTW want to stick less than 1,500 people with the bill. This means that San Francisco's medallion holders would be charged a rate five or ten times higher than any other group pays to provide similar benefits. As such, the fees would be punitive and oppressive.

However, one aspect of this proposal is true. It would speed up the waiting list. Few drivers, immigrant or otherwise, would be willing to spend 15 years being abused by the companies only to be exploited in turn by the UTW, the Asian Law Caucus and the City of San Francisco.