My Sunday Washington Post Business Section column is out. This morning, we look at future of business, and the role disruption of entrenched interests is going to play.
The print version had the full headline “On Uber and the business model of disruption” while the online version is merely The future of new business is disrupting old business.
The issue isn’t merely the application of technology, but identifying a business where entrenched incumbents have managed to artificially constrain the proper functioning of markets.
Here’s an excerpt from the column:
“Consider Uber. How are the cabs in your city? In Manhattan, where I work, they are rather awful. They are uncomfortable and not especially safe (who wants to slam his face into a plexiglass wall covered with metal projections?). As bad as they are, they are typically unavailable when you need one. The second it begins to rain, it is nearly impossible to find one. And what idiot decided to do shift changes at 5 p.m. — right at the start of rush hour, when swarms of riders need cars, all of whom are unavailable as they are returning to the outer boroughs for their daily change of drivers?
But the biggest inefficiency is the limit on the total number of cabs, as mandated by Taxi and Limousine Commission rules. Hence, that monopoly supply limitation thwarted competition, reduced the available number of cars and allowed the value of medallions to skyrocket. The cabs are dirty and ugly, and the service is awful, but at least they are expensive and unavailable when you need one!
Until Uber rolled in. Since then, the value of a medallion has fallen substantially. The same is true in other cities where Uber operates…”
When “Rentiers” can limit supply, reduce competitors, or thwart new entrants, they can extract monopoly profits. Technology an break that artifice of the market.
Go read the entire thing.
The future of new business is disrupting old business
Washington Post, February 1 2015