Ira Israel rants against deregulated capitalism. Happy New Year.
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In 500 years when deregulated, highly competitive capitalism is next to feudalism and communism in the dustbin of history, professors will argue how the Amazon business model decimated our society.
Many years ago there was a joke flying around that went like this: “Amazon is losing money on every sale. But they are making up for it in volume!“
When I was at university there were political theorists who posited that we won the Cold War in a very calculated manner: because we were able to outspend the Russians and thus bankrupt their economy as they tried to keep up with our military spending. It was planned in the early 1970s and in December of 1991 the once mighty Soviet Union disintegrated into fifteen separate countries. Crippling their economy enabled us to avoid the “mutually assured destruction” (MAD) of any nuclear attack.
Similarly, companies with deep pockets like Uber can also win races to the bottom. But sadly the business model appears to be more similar to that of crack cocaine than that of anything sustainable. They get you hooked and once addicted you do not notice the predatory price surges until it is too late. Like so many people did this weekend when they woke up with “Uber Hangovers.”
And this is how and why deregulated capitalism is cannibalizing itself: because it exploits the worst aspects of human nature, such as slothfulness.
For example, when the stock of Blockbuster Video (remember them?) was exploding, the company was not earning most of their profits from rentals; they were earning their profits from late fees and thus taking advantage of people’s laziness.
Magazines will always send you 3-6 free copies because they know that enough people will be too lazy to cancel their subscriptions at the end of the trial period. Again, taking advantage of people’s inherent slothfulness.
How much do movies theaters earn from your $13.50 tickets? Zero. Movie theaters earn 100% of their profits from popcorn and soda which they buy for pennies and sell for $6-$10 per serving.
Regulations—like speed limits—exist to protect people. Sometimes from other people; sometimes from themselves. For example, people smarter than you and me spent years studying complicated algorithms to maximize safety on our roads. And yet when we are pulled over for speeding we do not thank the cop for potentially saving our lives: we think of the idiot who ruined our day trying to meet his monthly ticket quota.
Similarly, taxis are highly regulated and insured to protect consumers. But not Uber or Lyft. Not yet, at least.
The first time I took an Uber it was under $5 to get me 15 miles from Malibu to Santa Monica. Awesome. The second time it was $12 each way back and forth to Beverly Hills. Great.
Going to dinner at 10:30pm on New Year’s Eve I took an Uber to Beverly Hills and due to a surge it cost $18. Reasonable. At 12:30 when I pressed the button for Uber Pool (share the car with another passenger) I noticed the inconspicuous “Estimated Charge” icon and tapped it: $70 popped up. I cancelled the Uber and ordered a Lyft shared ride for $45. That was the good news; the bad news was that the screen read “Your driver is 4 minutes away” for the next 35 minutes. At 1:15am I managed to flag down a taxi that got me home for $41 plus tip. Cancelled the Lyft. Priceless.
If $70 for 10 miles in a Prius is not price gouging then I’m Ronald Reagan, the myopic imbecile who started the deregulation that pivoted our culture away from a meritocracy and onto an axis of unbridled nepotism, bribery, greed, inequality, and corruption.
And if all of the above is not sufficient cause for regulation, then talk to Uber and Lyft drivers whose turnover rate is excessively high. 12-14 hours per day sitting in their cars, paying for gas, paying for their own auto insurance, no benefits and no health insurance, and reimbursed with not much more than minimum wage.
In the long-run this is clearly an unsustainable lose-lose situation.
I remember chatting many years with a taxi driver in Manhattan as he explained that he could no longer park near any McDonalds to use their restrooms so he was forced to pee into a modified plastic water bottle. At the next traffic light he opened the door and spilled a full bottle of urine onto 5th Avenue.
Ahhhh… the good old days 🙂
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Photo: spacesgallery / flickr
This article is unintentionally one of the better arguments I’ve seen for market economics on some time. Can you imagine a planner or planners like the author trying to set prices and allocate resources based on such petty gripes and anectdotes? Surprised that I’m a free system prices respond to supply and demand? Loves uber when it’s a cheap ride but heaven forfend the price goes up at what might be the single highest demand hour if the year. Author only likes it when it is extremely cheap, but that doesn’t prevent him from complaining about drivers’ low pay. Meditating… Read more »
your assessment of why the Soviet Union collapsed or who you think Ronald Reagon was is based on years of yoga training? or is it third hand MSM popular epithets that have no foundations in history, economics, culture, nor international relations? it would be very interesting to have a discussion about the end of the SOVIET and how America is repeating the same mistakes, driving down the same road – maybe even with Uber at the wheel. PS – 15 YEARS as a Military Analyst for RUSSIA/ SOVIET UNION, BA in Russia International Studies, minor in Econ: MPA in Healthcare… Read more »