Coyote Blog

Waaaay back in April of 2015, I prophesied that California's efforts to turn Uber drivers into employees would kill Uber, though it would take some years to bleed out.  California has since embodied that court ruling into law (a law which Uber is currently ignoring).  Now, New Jersey is going after Uber:

Two months after Uber decided to ignore new ignore new California legislation requiring companies to reclassify contract workers as employees - a measure which would affect up to one million residents who work as contractors and drastically impact Uber's bottom line - more states are lining up to demand a pound of flesh from the world's formerly most valuable startup (and subsequently one of the year's worst IPOs).

On Thursday, New Jersey picked up where California left off and found that Uber owes the state about $650 million in unemployment and disability insurance taxes because the rideshare company has been misclassifying drivers as independent contractors, the state’s labor department said.

As Bloomberg reports, Uber and its subsidiary Rasier LLC were assessed $523 million in past-due taxes over the last four years, the state Department of Labor and Workforce Development said in a pair of letters to the companies. The rideshare businesses also are on the hook for as much as $119 million in interest and penalties on the unpaid amounts, according to other internal department documents.

The New Jersey labor department has been after Uber for unpaid employment taxes for at least four years, according to the documents, which Bloomberg Law obtained through an open public records request. The legal battle goes back to 2015, when New Jersey first informed Uber that it had obtained a court judgment ordering the company to pay about $54 million in overdue unemployment and temporary disability insurance contributions. It’s not clear whether the company ever paid any of that bill.

The tax issue in my mind is not the biggest problem.  I still think that the worker "protections" states are starting to insist Uber adopt (e.g. minimum wage, shift lengths, shift scheduling, etc) are death for their whole labor model, and in fact will hurt most of their workers by killing what attracted drivers to Uber in the first place.  To summarize that article, there is a huge irony in that for decades labor advocates have been decrying the loss of agency by hourly workers in a capitalist economy.  Uber has given its drivers agency they don't have in almost any other hourly job, and labor advocates are doing all they can to kill it.

To the surprise of no one who reads this blog, Phoenix Light Rail continues to fail at every goal it set for itself, despite over $2 billion in cumulative expenditures and over 10 years of time to "catch on."  In fact, the only goal it has succeeded in is to allow our local leaders to virtue signal with their peers that they have a "modern" transit system, "modern" for some reason defined as increasing the use of a 150-year-old transit technology.

Here are the numbers, relatively fresh from Valley Metro's ridership reports.  Valley Metro has stopped (for reasons likely to become clear in a moment) publishing long-term ridership trend charts, so I have made my own from their data.

The original Phoenix light rail line cost about $1.4 billion.  The one line was expanded midway through the 2016 fiscal year by 31% in length and 36% in cumulative dollars spent (to very little obvious effect).  To date, well over $2 billion has been spent on the line.

What we can see here is exactly what Randall O'Toole of Cato has been saying for years -- that light rail projects tend to actually hurt total transit use as they scavenge resources from other modes, like buses.  This is because light rail costs so much more to move a passenger, both in terms of capital investment and operating cost, so $X shifted from buses to rail reduces total system capacity and ridership substantially.  We have seen this in Phoenix, as light rail costs have forced closing or reduced services in a number of bus routes, with obvious results in the ridership numbers.

There are a couple of ways to look at the ridership numbers and our $2+ billion light rail investment.  First, this investment has gained us an additional 1.25 million round trips on the system, at a capital cost of $1600 per added annual round trip ($2B divided by 1.25MM).   For someone who commutes 250 days a year, this means the Phoenix taxpayer has spent $400,000 per incremental daily commuter on the system.  I used to predict that we could more cheaply buy every rider a Prius with the money we spent on the system, but I obviously underestimated how bad it was.

Another way to look at this is that in fact we did not increase ridership at all, but decreased it.  From 1997 to 2008 the system increased ridership by an average of 5.6% a year.  Had the same growth rate obtained for the last 11 years since light rail was put in place (and certainly Phoenix has continued its fast growth in this period) the ridership of the system should have been north of 110 million trips a year.  By this metric, we spent $2 billion to shift to a costlier, less flexible transit mode that lost us 45 million annual trips.  Even if transit had just grown with population we should have seen 80 million or so trips in 2019.

The problem with light rail (and the reason it is popular with government officials) is that it is an upper middle class boondoggle.  There can be no higher use of transit than to provide mobility to poorer people who can't afford reliable automobiles.  Buses fulfill this goal better than any mode of transit.  They are flexible and can reach into many corners of the city.  The problem with buses, from the perspective of government officials, is that upper middle class people don't like to ride on them.  They like trains.  So the government builds hugely expensive trains for these influential, wealthier voters. Since the trains are so expensive, the government can only build a few routes, so those routes end up being down upper middle class commuting corridors.  As the costs mount for the trains, the bus routes that serve the poor and their dispersed commuting destinations are steadily cut.

Some of my other posts on Phoenix light rail are here.  As you can see from this 2008 article, I am not just a Monday morning QB but predicted exactly this failure in advance and explained why from data.

My sister has a podcast that seems to be doing well on theater and its potential trans-formative effect on people and communities.  The Princeton Alumni Weekly wrote about it here.

My son has a blog on economics as applied to Sci Fi/Fantasy realms and board games.   Having survived a period of sometimes nearly debilitating OCD issues, he is also writing about what he learned, eg here.

My daughter continues to work through art school (which is like a million times more work than my engineering degree, shattering a lot of stereotypes I had).  She has updated her portfolio here.

Sorry for the absence, I have taken a bit of vacation and simultaneously been consumed in a deluge of interest for our company's new offerings.

I saw this story a while back, titled "Japan's General Staff Office Knew About Hiroshima and Nagasaki Atomic Bombing in Advance and Did Nothing, According to 2011 NHK Documentary"  I am only going by the author's summary because I can't understand the Japanese original, but this fits in with a whole class of revisionist history of which I have written before.  A historian digs through piles and piles of intelligence reports and decrypts and finds 2 or 3 that seem to point in advance to some catastrophic event in advance of that event.  A classic example was the revisionist claim that FDR knew in advance of Pearl Harbor but willfully ignored the warnings because he wanted a reason to pull isolationist US into the war with Germany.  More recently, whole conspiracy theories rest on similar hints that the GWB White House knew about the 9/11 attacks in advance.

The problem with all these theories is that they are reading history backwards.  Intelligence agencies weed through thousands of rumors, decrypts, and hints every day.  The historian can wade through this mass and latch onto the couple of correct and prescient such rumors because she knows how history turns out.  She knows Japan bombed Pearl Harbor so she knows how to jump right to the needle in the haystack.  But officials at the time had no such foreknowledge.  Sure there may have been hints of attacks on 9/11 but there were also likely hints that turned out to be incorrect on scores of other potential plots and attacks, plots that would have (at the time) looked no more or less realistic than a hinted attack on 9/11.

There is a related problem that is a pet peeve of mine related to probability.  Let's say I offered you a 50/50 bet that you would win if a 6-sided die came up 1-5 but lose if the die came up 6.  Clearly, all day long the right decision is to take the bet.  But then imagine you took the bet and the day came up 6.  Was this, in retrospect, a bad decision?  I would argue absolutely not, you made a great decision that simply did not work out this one time, but over time making similar decisions will be a winner.  On the flip side, imagine someone who took the opposite side of the bet, a 50/50 bet that only pays off with a 6.  If a 6 comes up, did they make a good decision?  Absolutely not.  It was a terrible decision that they got bailed out on by luck, but over time they are going to bankrupt themselves.

These may seem like contrived examples, but I see exactly this sort of bad analysis all the time of risky decisions taken in an array of fields from sports to business.  I am sorry, but a football coach that goes for it on 4th and 8 from his own 30 and makes a first down did NOT make a good decision, despite the fact it worked out okay this one time.  But almost everyone in the media brings a retrospective bias to analysis of such decisions, rating them a good decision if they worked out all right and a bad decision if it did not work out all right, irrespective of whether the decision, when made, made a lick of sense.