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An Economy of Trust

Eat With ; Hummus Brunch with Naama Shefi & Noam Bonnie ; Photo By: Eilon Paz

In a few previous posts I explored the dynamic of new commercial enterprises like Uber (read Uber Libertarians in American Thinker)  that defied the ability of the regulatory state to deal with the rapid development of very large commercial communities. More on that from The Freeman, Fifty More Ways to Leave Leviathan. (tips to Carpe Diem)

a few excerpts:

7. Put that car to use with Getaround. You have to get somewhere, but it is not always easy because government transit systems are so terrible. Now there is a way to share your car with others and make money at the same time. This app, one of many such services, allows you to rent a nearby car for the day, putting idle resources to work without crazy government mandates for carpooling and public transport. It’s the market at work fixing yet another big problem.

8. Your house becomes a restaurant with EatWith. Why should the regulators say what is and what isn’t a restaurant? If you have a kitchen or an appetite, there are others who might want to make an exchange with you. Such services are busy every day busting up the eating cartels. They are also helping to bring back the dinner party.

10. Monitor overlords with copblocking. It’s become a thing now that the police are filmed by regular citizens all across the United States and the world. Ten years ago, filming a cop might have gotten you arrested. Today, there is nothing they can do about it, since everyone carries a video maker in her pocket. Filming is not a perfect solution, but it sure makes the cops more accountable. Livestreaming means that the video is still out there even if your phone is confiscated or smashed. Copblocking has become a way of life.

11. Try mobile health care. Time was when health care came to you. As the industry became more cartelized and expensive, the industry dictated the terms and you had to go to them. But regulations have pushed matters so far that the system is breaking down, and many providers are seceding toward a consumer-driven model. Even companies like Uber are looking into putting doctors and nurses on wheels. Such services will only be for the well-to-do — for now. But just as mobile phones got better, faster, and cheaper, so will health care delivery. Mobile health care startups are already attracting a lot of venture capital. First up: Uber for hangovers. (Note: Uber Logistics is coming soon.)


Most of these are small apps that pose little threat to the Leviathan, but the ability of Uber, Airbnb, Amazon, Facebook, Twitter and others to scale up remarkably fast and create huge commercial communities build strong constituencies that challenge the entrenched communities that profit from the regulatory state.  But these apps are important that they increase suppliers and empower consumers.  It is also worth noting that these apps assume and encourage a stronger community in their dependence on human trust. Regulatory structures that claim to protect consumers often end up just protecting entrenched interests.  This need to protect is contrary to the principles of trust that the new enterprises assume.

With Uber, Airbnb and Eatwith anyone with a decent car and home with a kitchen and an extra bedroom could tap multiple streams of income.  This new economy of trust could engender a new generation of eentrepreneurs

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Great Investment Advice

16 Rules for Investors to Live By by Morgan Housel in The Wall Street Journal.

my 3 favorites: (all are worthy and valuable tips)

Most bubbles begin with a rational idea that gets taken to an irrational extreme.

Dot-com companies did change the world, land is limited and precious metals can hedge against inflation. But none of these stories justified paying outlandish prices for stocks, houses or gold. Bubbles are so easy to fall for precisely because, at least in part, they are based on solid logic.

“I don’t know” are three of the most underused words in investing.

I don’t know what the market will do next month. I don’t know when interest rates will rise. I don’t know how low oil prices will go. Nobody does. Listening to people who say they do will cost you a lot of money. Alas, you can’t charge a consulting fee for humility.

You are only diversified if some of your investments are performing worse than others.

Losing money on even a portion of your portfolio is hard for some people to swallow, so they gravitate toward what is performing well at the moment, often at their own expense.



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The Uber Factor


I  flew into Houston Hobby Airport a few days ago, touched the Uber App (i had set up some time ago).  I put in the destination and It said there was a ride two minutes away.  I learned that even if the driver is standing right next to you it will say they are two minutes away. This was my first Uber booking.

A nice face shot of Lateefah and her license plate showed up also noting she had a Honda Pilot. (you can spec SUVs and Black Cars if you want a more limo style ride.)  She had just dropped off a fare at Hobby and responded literally in seconds (they have 15 seconds to respond).  She quickly called me to establish a rendezvous,  I noticed the phone number was a Cleveland number.  She explained that was because it was provided from Uber.  The App also quoted the fare as between $20 and $28 depending on traffic and delays.  It ended up being $22.12

After I was dropped off the fare is charged to my credit card.  No cash changes hands, no tips.

I was able to see a rating of Lateefah before I accepted .  She had a 4.8 out of 5.0.  I gave her a 5.0. The drivers also rate the passengers.  If you are a rowdy trouble maker who has thrown up in a cab, you may have a tough time getting a ride.  Lateefah will not pick up a low rated passenger.

Drivers with a lot of customer complaints get yanked.  Lateefah said some cabbies who have driven for years bring bad attitudes with them when they drive for Uber and do not last long.

In Houston a low end ride – the Uber X charges $1 base, $.15/ minute, $1.10 per mile, a minimum of $5 and a cancellation fee of $6

The Uber XL (bigger car)- $2.85 base, $.30/ minute, $2.20 a mile, $7 minimum and $6 cancellation

The Black car (Luxury – Cadillac/ Lincoln/ Mercedes)- $7 base, $.35 a minute, $3.45/ mile, $15 minimum and $10 cancellation.

The SUV- $14 base, $.45/minute, $4 per mile, $25 minimum, $10 cancellation.

The final charge is computed by Uber and a invoice is on your phone within a minute of reaching your destination. Your then rate your driver from one to five stars.

The big losers are clearly the cab companies which are slow to respond and generally a poor quality ride.  The rental car companies will also take a hit.  I would rather Uber than rent, if it is an Uber friendly city.  Less stress, no hassle or time wasted at the rental car kiosk(even thought this has been streamlined quite well) and no parking fees  Short Hertz and Avis.  No more worrying about getting ripped off with their gas reimbursement or insurance charges, or worrying about how to find the drop off when you return to the airport.

The winners are consumers who get a whole new level of quality and service that was not there before for a wide market.  Downtown bars and restaurants benefit from customers who no longer choose between driving and drinking or staying at home.  Safety improves. You can afford a bit of luxury by getting a Black car on very short notice (literally minutes)  without having to book a limo for an entire evening. Uber offers more than a replacement for a cab ride.  It is a whole new experience.

Uber has unleashed  idle asset and thus created an opportunity for thousands of car owners who would like to supplement their income.  Most of the drivers were part time, or were able to work whenever they wished.  They were given an opportunity to run their own business.  They had to meet certain standards but their real boss was the passenger and their very simple and very timely rating system.  Bad customer service and you are quickly out of job. Imagine that level of accountability with your cab experiences.

I had two more Uber experiences before I left Houston and both were great. The App allows you you to see how many vehicles are in the area and the approximate wait times.  You can check on the various quality rides: X, XL, Black Car r SUV, and see which one will get to you faster.

Uber has fostered a community.  If you had presented to me a business model that consisted of an App to allow me to quickly contact a perfect stranger in an unmarked car to transport me in a strange city, I would never have given it a chance.  I would have been very wrong.  The highly regulated taxi business is understandably outraged at this new unregulated competition.  The biggest loser may not be the cabs, but government regulations of the industry and the income this regulation generated.   The rapid growth of Uber has caught regulators off guard.  The conflict is more than between Uber and the cab companies; it lies more predominantly between the Uber Community (independent drivers and very satisfied customers) and government regulators.

Uber now has a market cap of $18 billion.  AirBNB is the Uber of the hotel business and this story is largely repeated there.  I imagine the users are largely younger and will have a new more involved look at the impact of regulations on their lives.

Uber seems a near perfect name from a marketing perspective.  They now own the word and it has become synonymous with the industry.  You do not call a”private contractor transportation service”, you “Uber” a ride.  A marketing dream name.


From The American Interest, Piece by Piece, The Blue Model Sickens and Dies

 The old regulated taxi system was one of the classic examples of the blue model system: a regulated, quasi-monopoly that seemed to many people to be the best and indeed the only way to combine the ideals of protection for consumers and a decent living for providers of services. Over time the taxi system everywhere tended to become less effective if only because of a tendency toward regulatory capture by crony capitalists—often, owners of companies who owned many of the artificially limited taxi medallions—who channeled campaign contributions and other sources of influence into focused efforts to limit the supply of medallions, raising prices for consumers and, often, leading to low incomes for the drivers who had to lease medallions at high prices from the handful of sources.

Consumer discontent with the old system, plus driver discontent (many drivers report better earnings and more flexible incomes from the internet-empowered dispatch services), plus the technological advancements and creative entrepreneurial thinking that mades it possible for Uber and Lyft to replace both Manhattan style street taxis and the car dispatching services found in many other cities, is now driving the destruction of the old system.



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Protecting the Entrenched


The government’s protection of the entrenched is most noted by local efforts to ban Uber and the Tesla distribution model.  Of course, like most protectionist legislation, the stated objective is to protect the public, but the end game is to protect the existing companies from the competition of better ideas.

Recently in Louisville I called a cab for a ride to the airport. 45 minutes later a dirty cab- inside and out- driven by a man in his pajamas, still yawning from being called to work from  his deep sleep, arrived.  This is what they are protecting.

For slightly more than the price of a dingy cab, Uber will send me a clean SUV. No cash is exchanged.  The cab industry will have to improve or die.

Tesla is in demand and efforts to thwart their simplified distribution model will not likely be thwarted by efforts to protect their competition,

The younger more tech savvy voter will lean toward the party that refuses to stand in the way of market progress and their choices.

Electronic Car Maker Telsa Reports Quarterly Earnings

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Why Tax Cuts are Disproportionate

Kevin Williamson writes Blue Voodoo in National Review.


 The cartoon version of conservative economic thinking — that we should subsidize gazillionaires in order to create work opportunities for yacht painters, monocle polishers, and truffle graters — is fundamentally at odds with the facts. The supply-siders may have wrong economic ideas, but they do not have those wrong economic ideas. President Ronald Reagan, for example, loved to boast of the number of poor and modestly-off Americans his policies had removed from the federal tax rolls entirely. George W. Bush promised that he’d take the poorest fifth of taxpaying U.S. households off the federal tax rolls; Heritage estimates that he succeeded in doing so for about 10 million low-income households.

One of the perverse consequences of conservatives’ success in lowering the federal income-tax burdens of those on the left half of the earnings bell curve is that we have finally arrived at the point where our critics are partly correct: Most conservative plans for tax cuts at this point in history do disproportionately favor the wealthy and the high-income, for the mathematically unavoidable reason that they pay a steeply disproportionate share of federal income taxes, making it very difficult to design a tax-cut plan that does not disproportionately benefit them. It’s hard to cut taxes without cutting them for the taxpayers.


The more progressive the tax system is the more that the economy is dependent on the wealthy and thus subject to the same volatility. Tax cuts will favor the rich if the lower income have paid no taxes.