The London Taxi War

Apparently the London taxi war continues to heat up, with London's mayor apparently siding with the traditional black cabs against Uber and minicabs.  I hope Uber can stay legal long enough for me to visit later this year.  I have really come to appreciate Uber's service when I travel.

The taxi war in London hit me in an odd way the other day.   I was trying to pick out a hotel in London that would not require me to mortgage the house to afford, and was reading reviews on TripAdvisor.   Sprinkled in 4 and 5 star (circle?) reviews on Tripadvisor for hotels that have very good reputations were a bunch of one star reviews.  Many of these said roughly the same thing -- that this was a terrible hotel because a minicab picked them up, or they saw minicabs there, or the hotel called a minicab for someone (minicab meaning "uber" apparently).

Given the passion in the traveling public for Uber, and the fact that it is hard to accidentally get an Uber to pick you up, my hypothesis is that traditional black cab drivers are going into the hotel review sites and giving one star ratings to ones that use (or who have customers who use) Uber.  This seems like a pretty typical labor-dispute-style tactic, but maybe I am missing something?


  1. kidmugsy:

    I think you are missing what a London mini-cab is.

  2. Tanuki Man:

    I second kidmugsy's comment.

  3. CY_Yankee:

    Last week my exhaust started getting loud when I drove a few hours to spend a couple days in a B&B on Cape Cod. I never occurred to me that I should rate the accommodations lower because of something that has nothing whatever to do with them. If I read a review and it was something that stupid, I would just ignore it. At some point, you look for the merit in the complaint, and if there is none to be found, then presume the person who posted the comment is at fault.

  4. SimonF:

    Bit off topic but once you know when you are in London let me know as I'd like to repay you for the entertainment and education, especially on climate change, in time honoured fashion by buying you (and you family) a few drinks. I don't live in London but I spend a couple of days a week there and will fit them round your itinerary.

    And if you have any links to your military the Victory Services Club near Marble Arch does a very good reciprocal deal.

  5. Matthew Slyfield:

    Typical of governments, that official UK government link has a rather thread bare and not very helpful explanation.

    This is better:

  6. Douglas2:

    Since the invention of the proto-Uber "mincab" in 1961 the difference between a London Taxi and a minicab has been that only a taxi could be hailed on the street, legally the minicab must be arranged in advance. In 1961 that was done using the technology of the telephone, in 2015 that is done in Uber's case by using a smartphone app. Transport for London, the governmental agency that governs both taxis and "minicabs" has said that Uber drivers generally are conforming to all of the legal requirements for operating minicabs. One of the requirements is that the cost of the fare must be agreed in advance, and that a minicab cannot charge based upon an installed fare meter. TfL has ruled that the Uber app on the Uber customer's phone, although it computes the charge based partly upon time and distance, is not an installed fare meter.
    I've used minicabs extensively long before Uber, and the only substantive difference I've seen from the traditional minicab model is that the variable pricing means you can always get an Uber minicab in a reasonable amount of time.

  7. scottrobinson:

    Just got back from London. Not a typical American urban topography. Uber drivers are at a disadvantage because they don't know the vagaries of London traffic. You can spend a lot of time (and metered money sitting in slow moving traffic especially in the center of the city). As you learn the Underground, travel becomes a lot faster and cheaper.

  8. sch:

    I spent 3-4 days in London in 2012 and not being highly time dependent, found the underground could easily get me into walking
    distance of any attraction I wanted to go to. Not only that it was extremely interesting just to walk about. Walks of several miles
    were not a problem. We were there in May, when the chestnuts were in full bloom, an amazing sight. The Oyster card was easy
    to load and use. We did not use the buses, which had a more complicated routing system, but if you delve into them they literally go
    everywhere. On walkabout you never saw less than two bright red doubledecker buses on the street. One of us downloaded a map of London onto his ipad and could tell us immediately where we were and what was nearby.

  9. Mercury:

    I'm all for consenting adults agreeing on a price to exchange goods/services between themselves unfettered by government but I suspect that the Uber business model is built on 1. information asymmetry 2. more efficient distribution 3. regulation skirting - probably in that order.

    The app and related technology is obviously an advantage over the existing taxi dispatch & street hailing model much of the time (the tech also increases capacity utilization of all cars on the road) and the regulation skirting part is about surmounting an artificial but not entirely un-beneficial barrier to entry. Most importantly though, I doubt most Uber drivers have any clue what their actual, all-in cost per mile is to run their cars as cabs. They're screwing themselves basically and that's the main source of the value-add to the customer and Uber as a business. Enjoy it while it lasts.

  10. Geoff:

    Would be great to meet up with you too - perhaps you could have an open house session in a pub for a couple of hours? :-)

  11. Douglas2:

    Except in London's case, for (3) the regulation skirting happened well over 50 years ago with minicab companies finding the "loophole" that allowed them to get away with operating, and since then a big body of law and administration has evolved as various scares over vehicle safety, drivers attacking passengers, inadequate insurance, etc have sprung up. You don't become an Uber driver in London without conforming to all those laws - the placards must be displayed, and the enforcement is active. And as to (1) I wonder how many would go through the trouble of getting themselves and their vehicle certified without having run the numbers.

  12. MNHawk:

    You lost me at the "but."

    God I hate frauds that pollute review sites, as well as sites like this, just because they can't man up and make an honest case for or against Uber.

  13. Mercury:

    Uh, that is an honest case and what does being “for” Uber mean exactly? There are three, major interested parties in the Uber business model: the owners, the drivers and the customers. It’s certainly possible that this business is not an unequivocal win-win-win for all three.

  14. Mercury:

    I'm sure each city is a different situation and it sounds like in London it might be that harder for Uber drivers to actually turn a profit which supports my main (#1) point.

  15. morgan.c.frank:


    you are missing a big part of the issue.

    taxis have a 4th party who is deeply invested in the process: the government.

    like uber, a cab company must buy and run and insure a car etc. but they ALSO have to buy a mediallion. those can be seriously expensive, many, many times the price of the car. that is a big source of cash.

    they also need commercial plates and, in many places, drivers need a cdl. those are additional costs.

    the idea that lower prices for uber must mean divers, owners, or customers must be losing out is not so.

    dis intermediating huge costs from the state monopoly system likely accounts for most of it.

    being "for" uber is being for innovation, better service at lower prices, free markets, and competition.

    being against it is being for government granted monopoly, guild systems, unresponsive service businesses, and low quality overpriced service as a result of the lack of competition.


    this, in my experience, is not the case:

    "I doubt most Uber drivers have any clue what their actual, all-in cost per mile is to run their cars as cabs."

    i ask lots of uber drivers about how the business runs and how they like it. many are former cab drivers. uber driver retention is higher than cab company retention.

    many of the drivers have struck me with how well they do understand their model. i've even met some that just view it as a "free car" where they do just enough to cover the lease and insurance, maybe 1 day a week and then get to use the car.

    they are not "screwing themselves". uber drivers are making more than cab drivers.

  16. morgan.c.frank:

    think about it this way. you buy a $500k medallion (common in big cities and far more in some).

    you finance it at 6%. that's $30k a year JUST IN INTEREST. that's $2500 a month. that is 8-10 X what it costs to lease many cars.

    if you're looking for the place that the expense comes out of the system allowing bigger profits for both drivers and uber while offering lower prices to customers, that's it.

    you also get greater efficiency and grow the ride market by making pickup faster and more efficient and cutting down on deadhead trips (long empty rides).

    between the 2 factors, all 3 stakeholders you identified are all better off.

  17. TimB:

    Most London hotels suck. Good luck.

    By the way, be thankful for the plethora of good quality hotels that line our freeways here in the U.S.

  18. Mercury:

    The more the local government is "invested in the process" the worse that is for Uber because the government generally will not give up their vig that easily even if it looks that way now. Most government at this point exists simply to generate red tape, and perpetuate itself. They may be a bit slow off the mark but in the longer term they will not smile on or shrug their shoulders at gee-whiz, red tape cutting innovation and technology.

    I'm sure Uber drivers who are/were also cabbies and other professional drivers have a pretty good grip on their all-in cost per mile but I stand by my original, general assertion in this regard nonetheless.

  19. marque2:

    "i ask lots of uber drivers about how the business runs and how they like it. many are former cab drivers. uber driver retention is higher than cab company retention."
    Is really not a good rebuttal to - many drivers don't know their actual cost per mile. In fact it isn't one. Most people don't have an notion at all about the cost to operate their vehicle. Many can't think conceptually more than, it is just the cost of gas.
    I am not an anti Uber person, but I have to say Mercury has a point there. It would be interesting to see some research.

  20. morgan.c.frank:


    actually, yes, it is. i have asked them that exact question and been really surprised by how on top of it they were. i've been fascinated by the uber model for years and use it a lot, so i have had dozens of these conversations.

    sure, not all of them are up on it, but then, neither are all cabbies.

    what i can tell you is this: the average uber driver is miles ahead of the average taxi driver in terms of sophistication about their business.

    further, what's to rebut? mercury is making a completely unfounded assertion.

    what is that based on? a hunch? he has not even provided anecdotal evidence, just made a blanket claim without any support.

    an awful lot of taxi drivers have moved to uber, but the reverse is not so. if they were getting screwed, they would see it eventually.


    why is cost per mile relevant? most i have spoken to think more in terms of "cost per week" or "profit per hour/week".

    they are mostly not worried about maintenance because they are leasing their cars and have a warantee.

    so they care about gas, insurance, lease payments, and the time value.

    it's actually a very simple equation.

    your outlays are highly predictable. you just need to figure out what the revenue is.

    this is not nearly so complex as you guys are making out.

  21. morgan.c.frank:

    "I'm sure Uber drivers who are/were also cabbies and other professional
    drivers have a pretty good grip on their all-in cost per mile but I
    stand by my original, general assertion in this regard nonetheless."

    but you have not supported your assertion in any way nor shown a single reason why a cabbie who leases a cab on dayrate from yellowcab would be any more sophisticated than an uber driver. in my experience, the opposite is true.

    i think you are making a bunch of assumptions that lack basis and then extrapolating from them.

  22. morgan.c.frank:


    Uber driver-partners (hourly earnings) Taxi drivers and chauffeurs (hourly wages) Boston $19.06 $12.31 Chicago $16.20 $11.87 Washington, D.C. $17.79 $13.10 Los Angeles $16.98 $11.73 New York $30.35 $15.17 San Francisco $23.52 $13.72 BSG Survey Uber Market $19.04 $12.90 Source: Uber and the Occupational Employment Statistics Survey

    so, here's your data.

    expenses are not as different as you might think. as an owner operator, a cabbie has it MUCH harder. they have to pay for the car, insurance (and more for them due to commercial plates and cdl), a medallion, and everything else.

    lower wages, high costs seems like a real losing proposition.

    if they lease shifts from the cab company, perhaps it's predictable, but it's also expensive. the cab company has to charge them for all the car expenses, and the medallion, and make a return. it might even be worse for the cabbie. (depending on costs of capital)

    the simple fact is this: uber drivers are making MORE per hour than cab drivers and have fewer expenses to offset.

    this idea that they are being "screwed" is simply not accurate.

  23. marque2:

    It would be interesting to learn what the average Taxi driver has to pay for. Usually they don't own the cars. I would assume they are responsible for gas, but repairs? Then again they might do something similar to a triple lease.

    Good to know the folks know their costs. It isn't an easy calculation and you have several assumptions to make. Do you use the federal 7 year new to zero depreciation based on 12k miles per year, do you assume residual value at the end of the depreciation period. I did the calc for my car a few months ago and came out with between 30-40¢ per mile based on various assumption (my latest job is a 160 mile rt commute so in was trying to see if it was cheaper to drive or live in hotels, turns out it is a wash, but both are cheaper than renting/sharing an apartment in Irvine. Orange county housing, super expensive) Note I drive an old car, and do some of the maintenance myself. Newer car/mechanic would easily get you in the 60¢ range. Things like additional maintenance (repairs beyond scheduled service) are hard to factor in as well.

  24. morgan.c.frank:

    "Additionally, about 40% of Uber drivers surveyed had college degrees,
    compared with about 15% among the professional taxi drivers and

    this also seems to refute the notion of uber drivers somehow being the ones unable to figure out the cost/benefit.

    nearly 3 times as many have college degrees.

  25. Mercury:

    I am simply making a bunch of assertions and I would be interested in a decent chunk of hard data that supports or refutes those assertions.

    I am fairly confident that: every locale has a different set of circumstances, that governments (generally) won't take this lying down and that the independent contractor model of the “sharing
    economy” usually means zero benefits and zero safety net for labor (also anall-in cost factor…which should really be the cost per mile on the car plus the cost per hour for the driver) which may not be that wisest choice for many people.
    My guess is that Uber stays alive but shakes out after a while, shedding many moonlighters and dreamers and prices resetting higher.
    BTW - unless you lease your car for free, yes you do have to figure in that cost in as well. Uber drivers spend their time, money and assets to get a revenue stream that may or may not be greater than that combined value and may or may not net out to what they think.

  26. morgan.c.frank:


    those are not so much assertions are assumptions. it seems you are not basing them on anything tangible.

    the costs are lower than if they rent a cab.

    they have to cover the car, the insurance, etc, sure, but not repairs (they are generally leased and under warranty). a cab pays this, but at higher rates because of commercial plates and insurance. then they pay for a medallion. then you add a profit margin for the cab company. the overall nut drivers have to cover is MUCH higher with a cab.

    and the hourly income for a cab driver is lower.

    (see the data i linked below).

    so, i think the absilute opposite of what you assume is going to happen. uber is going to grow and thrive. 3 years from now, it will be 4-10 times this size. anywhere they are allowed to operate, it's the cabs that are done for.

    cab drivers make less, have less flexibility, and pay more.

    they also then have to go get and pay for their own car if they want to have one. an uber driver just takes theirs home.

    i have actually seen the uber financials. i got a deck during their last round and saw their unit economics as well (and some very interesting plans to do car finance for drivers). your guess on the economics of their drivers is simply wrong.

  27. morgan.c.frank:

    "Good to know the folks know their costs. It isn't an easy calculation
    and you have several assumptions to make. Do you use the federal 7 year
    new to zero depreciation based on 12k miles per year, do you assume
    residual value at the end of the depreciation period."

    why would you need to do either?

    you lease a car for 3 years and then you give it back. thus, it's covered by warranty the whole time you have it, there is no resale or residual. you just pay per month. you do know that uber does financing for this sort of thing and so do a number of specialty leasing companies, yes?

    the calculation you are doing is for a depreciating asset that requires maintenance.

    for a leased car used for uber, it's just a simple cash flow calculation. residuals and depreciation are irrelevant as you are not planning to keep the car. (or if you are, they are already specified in the lease)

    i think you are making this out to be more complex than it is.

  28. Matthew Slyfield:

    "Uber drivers are at a disadvantage because they don't know the vagaries of London traffic"

    Why would you think that? Is Uber shipping drivers in from the US or Germany? Those drivers are likely mostly London residents.

  29. mx:

    It doesn't make any sense to say that a hotel "called a minicab for someone" where minicab means "uber." The only want to request an Uber is through the app, which requires an account with a credit card attached. If the hotel summoned an Uber for a guest, the hotel would have to pay the bill for the ride.

  30. markm:

    London is a quite different regulatory environment, so all the posts about medallions are off base. This does sound like a labor dispute between the "black cab" (Hackney-licensed) drivers, who can pick up fares who hail them on the street, and the minicabs, who must be dispatched from a central office for pickup - Uber is regulated under this category, but if the hotel calls the minicab for you, it's not Uber.

    For the privilege of picking up customers who hail them, the black cab drivers have to memorize every street in London (which is a medieval maze), and pass stringent tests on their ability to navigate between any two addresses.

    It's a quite impressive training program, averaging nearly 3 years before one may begin driving, and it's one of the few stringent regulatory programs that actually improved customer service - but that's mostly past tense now that GPS lets anyone navigate the maze. (A driver with The Knowledge may be able to pick out a better route depending on traffic, but anyone who spends all day driving in London will soon learn the good routes and use GPS only for the last few twisty roads.) The cabs also must be purpose-built to meet specifications, which must considerably increase the cost. There does not seem to be any rationing, aside from the difficulty of getting licensed.

    In 1961, someone noticed that the regulations did not apply if a company picked up only customers who contacted the office for pickup, and the minicabs were born. Since then, some regulations have been written for minicabs (and Uber is included), but they are much lighter than the black cabs, or the taxi regulations in most American cities.

    So the overall regulatory concept is that, if you contact a company to have a cab sent to you, there are some very basic minimal standards, but mostly consumers are protected by companies' interest in maintaining their reputation. If you hail a cab on the street, you might not know the company but you know just what you will get both in the vehicle and in the driver's navigational abilities.

  31. herdgadfly:

    Costs represent an irrelevant consideration in this argument. Service pricing has nothing to do with cost and everything to do with the price for the same services by competitors. Quality of service and extras wend into the final decisions made by customers - but customers do not give a damn about costs of operations.

  32. morgan.c.frank:

    "Service pricing has nothing to do with cost and everything to do with the price for the same services by competitors."

    actually, no, this is not true at all and counter to basic econ 101. price gets set by the marginal costs of the highest cost producer. competitor pricing and costs are not independent variables.

    customers might not care what your costs are, but your competitors do. if i know it costs you $10 to make a widget and i can make one for $7, i'll price mine at 9,99 and take the whole market.

    of course, if someone else can produce at $9, then i have to price to $8.99 to take the whole market. if they can, just like me, produce at $7, then we fight it out and price settles in at $7 + whatever return to capital the less demanding of us accepts. (under perfect competition, this is zero, but, obviously, in any business with a cost to entry, competition cannot be perfect in an economist's sense as that requires costless entry)

    my price is set by your/their costs. costs have everything to do with this.

    uber knows that full well and have been deliberately pricing at around the costs of cab companies (and well under their rates). they are not pricing at cabbie prices, they are pricing at cabbie costs (or just under them) to make it damn near impossible for them to compete.

  33. marque2:

    Your grasp of accounting, and leases is weak. If you have a new car, and they give you free oil changes for a year, yea sure the maintenance costs are low, but then you are making large car payments, and are suffering from the greatest depreciation of the car. In fact first year ownership costs the most.
    Leases can be deadly, because they great until you go over mileage. Put more mileage in your lease and the lease goes way up as well. A lease isn't a free lunch. Best deal is my situation where I have a 13 year old car, whose value is largely dependent on the amount of gas in tank, which gets fairly good mileage and under normal driving conditions (about 14000 miles per year) costs about a grand a year in repairs and maintenance. Even then with 32 mpg the cost is about 35 cents a mile. Would I be able to Uber in an old car with a rusty door, probably not, I would need a new Prius or similar car.
    Again, Mercury has a valid point, and you have a mass of bloviation to cover that you don't really have an answer. You have done this to me before. And then the final blow is that you come up with some kind of argument flaw that you claim I am doing, which I am not engaging in, but you use your "authority" to claim - oh yeah, that is ad hoc facto absurbum ...
    I highly doubt most Uber drivers have really done the math and really have a concept of how much the drives are costing them. They may still be earning decent money, but it will kick them in the end when the car unexpectedly dissolves on the driveway.

  34. marque2:

    Snore, still didn't answer Mercury's question, you answered something else. Nice.

  35. marque2:

    Snore ...

  36. Daniel Curry:

    Coyote, I highly recommend St. Ermin's in Westminster. Within walking distance of the Cathedral, Buckingham Palace, Parliament and Big Ben, and a Tube station (St. Jame's Park) is right around the corner.

  37. Mercury:

    This just in: (Asia version of WSJ for easy-access reading...aka "sharing")