Taxis and the Next New Thing

New York City's taxi system, like many others, has been for generations a well-protected one.  Periodically, the city auctions off small numbers of taxi medallions -- essentially the right to operate a single cab -- at prices of $1 million or more.

Over time, this has resulted in less than ideal results for taxi customers.  There have not been enough taxis in the city -- particularly in the outer boroughs -- and a politically motivated group, the medallion owners, have fought to keep things that way.  Who needs competition?

One example of the problem has been the sad fact that there are 20 percent fewer taxis on Manhattan streets during evening rush hour than at any other time of the day.

In 2004, the city attempted to address the situation by adding a $1 surcharge to taxi fares between 4 p.m.  and 8 p.m. on weekdays.  Seven years later, a New York Times article explained that this had not worked:

     "The hour from 4 to 5 p.m. has long been considered the low tide of taxi service, the maddening
     moment when, in apparent violation of the laws of supply and demand, entire fleets of empty
     yellow cabs flip on their off-duty lights and proceed past the outstretched hands of office
     workers seeking a ride home."

It turned out that cab drivers worked 12-hour shifts and changed shifts in the late afternoon, dropping their cars at stations located outside expensive Manhattan.  When it was suggested that the shift could be changed earlier -- say at 2 p.m. -- second-shift drivers objected because they did not want to miss the lucrative 2 a.m. rush of drinkers seeking cabs after bars closed each night.

So when taxis were most needed, the industry preferred not to be there.

There were other problems -- reluctance to pick up minority passengers, the illegal adjustment of rate calculators to assess higher charges, drivers taking naive tourists on roundabout routes from airports into the city -- that were just accepted as part of the system.

In short, you could say the taxi industry was not customer-facing.


Destructive Innovation

So in came ride-sharing companies that offered an alternative to traditional taxicabs.

Using well-designed cellphone apps, rideshare companies allow would-be taxi patrons to hail private cars.  When riders contact these rideshare companies, the apps locate nearby drivers, specify where riders want to go, negotiate and collect fees for trips and notify riders when their cars will arrive, even tracking the cars as they approach.

The rideshare companies are very lean operations.  They do not own cars but merely match private drivers with those seeking rides.  After deducting a portion of each fare, they transfer money to the driver, who receives a 1099 for tax purposes at the end of the year.  The companies also track and make available passengers' and drivers' ratings of each other, providing some quality-control information before rides are signed up.

There are now a number of these companies -- DiscountCab, Sidecar, Gett, Zimride, Ridejoy, Hailo, Uber and of course Lyft, which is best known for placing silly pink mustaches on the grills of its cars.

Not surprisingly, the traditional taxi regimes are fighting back.  City taxi regulators raise safety and liability concerns, all in the interest of protecting the riding public.  Taxi companies have tried to enlist government in banning rideshare companies.  Taxi drivers in Europe have been particularly aggressive in fighting the new operators.

Change is never easy.



The Battle for Market Share

The rideshare industry is new, but it already is consolidating.  Hailo recently pulled out of the North American market altogether after two years of failing to establish significant market share.

Various of the companies are fighting to get governments to grant them exclusive rights to send cars to airports to pick up and drop off passengers.

In January, the small rideshare company Gett charged that Uber employees had ordered and then cancelled 100 Gett rides in a three-day period and that Uber had tried to convince Gett drivers to join the Uber network.

Several months ago Lyft charged that Uber employees engaged in a similar effort involving false credit card numbers and the ordering of 5,500 rides that were then cancelled, often after a Lyft driver had arrived to pick up a passenger.

Uber has countercharged that Lyft has done the same thing.

These companies aren't competing for customers.  Each is trying to drive the other out of the market and to create a monopoly.

So far, Uber is the biggest company in the rideshare space.  It is valued at $18 billion and probably is looking to mount an IPO.  Pretty good money for a cellphone app.

It also is getting involved in government, as taxi companies used to do.  Recently it hired David Plouffe, who previously worked as a congressional aide and campaign strategist. NPR's story on the hiring carried the headline, "Uber Greases the Wheel with Obama's Old Campaign Manager."

The Washington Post  explained why Uber hired an expensive fixer.

     "Uber is the latest Silicon Valley heavyweight to discover that tech disruption requires
     overcoming political and regulatory barriers.  The past 20 years have been littered with
     examples of companies, from Microsoft to Apple to Facebook, learning, often late, that
     they must play in politics to continue to grow."


Plus ca change, plus c'est la meme chose.

Menendez and Melgen, BFFs: Why?

Senator Robert Menendez

"(Robert) Menendez is the boss in Hudson County, which is ground zero for the state's corruption problem."

This 2005 quote, from an editorial writer for New Jersey's largest, mostly left-wing newspaper, appeared in a book published in 2012.

Being called the boss of the crookedest county in New Jersey is no compliment.  New Jersey is nothing like those goo-goo states (Colorado? Maine?) where politicians mostly play by the rules.  Still, Jerseyans are used to it.

So reports yesterday that one of Robert Menendez's best buddies was in the news again didn't set off shock waves in Jersey.  Nary a ruffle.

Still, there is a question to be answered:  Why does Menendez stick with this guy?

Salomon Melgen, an ophthalmologist and friend of Menendez, was the nation's highest-billing Medicare doctor in 2012.  He collected almost $21 million from the agency.

Dr. Melgen has a large practice in Florida, and most of his income appears to come from injections of the drug Lucentis, the most expensive of several drugs that treat macular degeneration, a problem for many older people.  Novartis, the company that makes Lucentis, is reported by the New York Times to pay generous rebates to doctors who use the drug.

Before that, the federal government had forced Melgen to forfeit $8.9 million for overpayments collected from Medicare.  Sen. Menendez defended Dr. Melgen, saying Medicare's rules were unclear. The doctor still is seeking the return of his money.  Dr. Melgen was banned from seeing Medicare patients for a time but, obviously, is now back in the business.  This suggests inside help.

(Think about it:  If your doctor had collected $8.9 million in overpayments from a government program, would be he or she be allowed to participate in the program again, even from Club Fed?  I don't think so.)

Doctor Salomon Melgen

Dr. Melgen is a big supporter of Sen. Menendez.  His firm donated more than $700,000 to a PAC run by ex aides to Senate Majority Leader Harry Reid.  The PAC then gave $582,000 to Menendez's re-election campaign last year.  In addition, Dr. Melgen and his relatives have personally contributed almost $100,000 to Melendez campaigns since 1992.  There are reports that the Melgen family has contributed more than $1million, directly and indirectly, to Menendez.

But so what?  Menendez was appointed to his seat when Jon Corzine got tired of being a senator and bought himself the New Jersey governorship in 2005.  At that point Menendez had a war chest of over $4 million and no serious opposition; he won election easily in 2006 and then re-election in 2012.  New Jersey is a blue state and not likely to elect a Republican senate candidate anytime soon.

And Menendez, a prodigious fund-raiser and a member of the Senate Finance Committee, raised more than $15 million between 2009 and the end of 2013.  He has plenty of time to raise another pile of cash for his re-election campaign in 2018.

Think about it.  Why should Menendez exert himself on behalf of a creep like Melgen for a crappy million bucks?

It's a mystery, but this isn't the only case in which Menendez has gone to bat for Dr. Melgen.

We in New Jersey remember when it was reported that Menendez traveled on Dr. Melgen's private jet to the Dominican Republic for at least two pleasant vacations at the doctor's $20 million gated estate.  Members of Congress are paid pretty well and get decent perks and generous retirements, in part to encourage them to avoid these kinds of conflicts of interest.  It was almost three years later, after the facts about Menendez's vacations came out, before Menendez paid Melgen for the good times.

 (There also were reports that a friend of Melgen's in the Dominican Republic arranged escorts, perhaps underage, for Menendez, who is divorced. These never have been substantiated.  If Menendez was smart enough to climb the greasy pole of Hudson County politics, it seems unlikely to me that he would make that kind of a mistake.)

But still.  After an experience like that, most politicians would stop taking phone calls even from the most ardent and wealthy supporter.

Not Menendez.  In fact he has tried to help Dr. Melgen on at least one other occasion.

Menendez was reported to be often at odds with the Obama administration for its failure to block importation of illegal drugs to the United States from the Dominican Republic.  Then, when the administration announced plans to give the Dominican Republic sophisticated drug-detection equipment for its ports, Menendez objected.

By that point, curiously, Dr. Melgen, with no security experience whatever, had formed a port security company, Boarder (sic) Support Services, an LLC based in Florida.  Dr. Melgen's plan was to buy the port security equipment privately, place it in the Dominican Republic and collect rental revenues for its use from the Dominican government.  Estimated returns ranged as high as $500 million for Melgen's company.

Menendez staffers went on the offensive, opposing the administration plan but never mentioning their preferred security provider.

It was reported that a former Menendez aide would run the operations of Melgen's Dominican security program.

By February of 2013, even the blue New York Times opinion page had had enough.  It called on Menendez to resign his chairmanship of the Senate Foreign Relations Committee, at least temporarily.  Menendez stayed put and is still there.  Go figure.

Best Friends Forever, Apparently

There are many other interesting/puzzling stories about Robert Menendez and his political career in New Jersey.  I will leave them for another day.

Mary Barra Under Siege

News reports have not been kind to General Motors of late.  Its new CEO, Mary Barra, seems to be spending most of her time being harangued by members of Congress for the company's failure to report problems with GM cars.

Looking up from the newspaper yesterday, the Significant Other posed an excellent question.

"Did somebody say, 'Let's set her (Mary Barra) up to be the fall person on this thing'?" he asked.

In fact, the GM problems arose long before Ms. Barra took her recent position.

Legislators got hold of a 2005 internal document in which GM managers decided against a recall to replace a faulty 90-cent ignition part, an action that would have prevented more than a few of the 13 deaths ascribed to the problem.

Ms. Barra took the reins at GM in January of this year.

Corporations compile audited financial reports at the end of every year; such filings are required to acknowledge potential liabilities if they are material.  These statements are shared with the SEC and with shareholders.  In addition, GM filed for bankruptcy in 2009 and was sold to another entity whose shareholders were its unions and the US government.  Companies in bankruptcy are required to enumerate liabilities as part of their filings or face prosecution for bankruptcy fraud.

Long story short, this information should have been made public long ago.

So why is it coming up now, three months into Ms. Barra's presidency?

Surely GM's past corporate officers and board members read those financial documents.  Large shareholders should have read them as well.  So, for that matter, should have journalists covering the auto industry.

So what is it?  Were the potential liabilities never reported on financial statements, or did a bunch of people who should have been paying attention drop the ball?

If I were a member of Congress, those are the questions I'd want answered.

Ms. Barra is making the usual CEO noises, saying she was unaware of the company's failure to act.  She said the failure was "unacceptable" and that, today, GM has a brand new, totally different culture than it had in the bad old days.

Toyota

Just last week, Toyota agreed to pay $1.2 billion in criminal fines based on its handling of  an unintended acceleration problem, in addition to recalling 8.1 million vehicles since 2009 over the alleged problem.

I say "alleged" because the problem boiled down to dealership misplacement of floor mats in two cars, causing five deaths, and a bunch of accidents caused by drivers who mistook the accelerator for the brake pedal.

The Toyota fine was for covering up information.

Eric Holder, the US Attorney General, held a press conference after the announcement.  Here's some of what he said:

"Today, we can say for certain that Toyota intentionally concealed information and misled the public about safety issues behind these recalls.  Put simply, Toyota's conduct was shameful."

It will be interesting to see what punishment the Justice Department exacts for what appears to be a much broader malfeasance by an American automaker, particularly one that was bailed out at government expense.

Note:  Micheline Maynard, the renowned journalist on automotive issues, also has floated the notion in Forbes that Mary Barra may have been set up to take the fall at GM.  Since most of my readers do not read Ms. Maynard's reports and since I came up with the idea at the same time, I'm going with it.

The Oso Slide

Above is a recent photograph of an area in Oso, Washington.  Last month, a massive landslide of earth, loosened by a month of torrential rains, slid down the hillside and buried a street of homes at the bottom of the slope near the Stillaguamish Riveer.

Most of the reports have been of people lost and dead. The excavation will continue for a long time.  The loss of life has been great and tragic.  We need to understand what happened.

This Sunday, in the New York Times Review section, Timothy Egan discussed the slide, praising fly fishermen, Native Americans and wise biologists.  He also took a big swipe at the lumber industry, saying this:

"A federal survey determined that nearly 50 percent of the entire basin above Deer Creek had been logged over a 30-year period.  It didn't take a degree in forestry to see how one event led to the other (the slide)."

In one sense, Egan is right.  It didn't take a degree in forestry.  What it took was some understanding of geology.

Big slides on the same hillside were recorded in 1949, 1951, 1967, 1988 and 2006.  The slides started before the logging Egan deplores, most likely hundreds of years before anyone besides Native Americans arrived in the area.

The slide in January 2006 re-arranged the course of the Stillaguamish River, and not for the first time.  There were reports of "the eerie sound of trees constantly snapping as the river pushed them over."  Meanwhile, work continued on five new homes on Steelhead Drive, which now is buried in mud.  Another home was added in 2009, and a new double-wide mobile home was located on the street in 2013. One question that deserves an answer is why Snohomish County didn't act long ago to stop development on Steelhead Drive.

The dangers had been reported.  Warnings came in a 1997 watershed analysis by the State of Washington that apparently never was implemented.  In a 1999 report by the Army Corps of Engineers.  In a 2010 report by the Snohomish County Department of Emergency Management.

Take a look at the slide area at the base of mountain below.  What you see are many large trees uprooted and carried down the hill.  In fact, the heavy rains in March seem to have saturated the ground to a level below tree roots.  That the slide washed so many trees down the slope suggests that tree roots were not enough to hold the land in place.

I was raised in the Pacific Northwest, and I actually know a few foresters.  I talked with a couple of them yesterday.

They reminded me of a few facts.  First, when forest areas are clearcut, the tree roots remain and decompose over a period of years, slowly releasing their hold on the land beneath.  Meantime, forests are replanted (as required by law) and grow to replace the trees that were cut.  If Egan had gone back last month to the clearcut area he observed 25 years ago, he would have found substantial stands of large trees.

"Look at the photos from the slide in Washington," one forester told me.  "There are trees, big ones, at the top of the area.  The idea that this was caused by over logging, especially 25 years ago, is b------t."

Back to Mr. Egan. "Yes, but who wants to listen to warnings by pesky scientists, to pay heed to predictions by environmental nags, or allow an intrusive government to limit private property rights?  That's how these issues get cast.  And that's why reports like the ones done on the Stillaguamish get shelved.  The people living near Oso said no one ever informed them of the past predictions (of hillside slides)."

It seems to me that the "pesky scientists" who were ignored were the geologists who warned repeatedly that the hillside was unstable and that mud slides, including big ones, were inevitable.

As for the environmentalists, whom Egan imagines are regarded by loggers as "environmental nags," they also seemed to be concerned about the hillside.

"I don't think that the fact that the slide happened surprised anyone who has looked at this area before," said a conservation expert at Oregon Wild, a nonprofit group.  "It wasn't really a matter of if, but when."

There's a lot of snark in Egan's article and disdain for people asserting property rights.  He resents that the company that owned the land at the top of the hillside pushed hard to log it.  And it appears there may have been an extra acre logged on top of the hillside.  In fact, the logging took place in what has been described as a pie-shaped slice, with the narrow tip near the crest of the hillside.  The slide originated from a much broader area.

It's unfortunate the New York Times couldn't find a commenter who was less absorbed with righteous certainty and better acquainted with the facts on the ground in Oso.