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Taxi medallions


rukawa
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Taxi cab industry had the best moat of all....political protection which prevented competition. The whole government was behind them...and still capitalists found a way to disrupt it. Is anything safe? I would be tempted to say that the medical profession. But who knows.

 

Taxi Medallions have dropped enormously in value:

https://www.nytimes.com/2017/09/10/nyregion/new-york-taxi-medallions-uber.html

 

Indebted drivers are committing suicide:

https://www.wired.com/story/why-are-new-york-taxi-drivers-committing-suicide/

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Not to nitpick, but I think regulatory moat are very much so not the best moats of all, exactly because the regulations can either change, or they lead an industry to become fat and unresponsive to customer's need, creating a huge umbrella under which better competitors can come in (often assisted by new technologies that give them an edge).

 

Regulatory moats seem more stable when they deal with B2B stuff rather than B2C.

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"Regulatory moats seem more stable when they deal with B2B stuff rather than B2C."

 

Why? Can you give example of stable B2B?

 

With the caveat that "more stable" doesn't mean "stable", because nothing is 100% stable forever...

 

MCO and SPGI, or things like aerospace parts (TDG, HEI).

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"Regulatory moats seem more stable when they deal with B2B stuff rather than B2C."

 

Why? Can you give example of stable B2B?

 

 

Canada's dairy industry?  Nobody buys directly from a dairy farmer (even the least processed dairy products, milk, is skimmed and pasteurized).  Between the farm business and the ultimate consumer, there is plenty of room to hide the regulatory producer surplus.

 

 

SJ

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Taxi cab drivers, MDs and others have (had) an occupational guild type of regulatory moat.

Guilds have good aspects but control of supply and artificial barriers to entry may work for a while but this kind of moat has limited value as it needs to be constantly "re-negotiated" and will rapidly disappear when adequate substitutes make it to the market.

 

In 1992(AR), interestingly, Mr. Buffett described three conditions for a "franchise" and the third condition was that the franchise should not be subject to price regulation (pricing power). However, over time and because of size, Mr. Buffett had to settle for lower returns when he decided to massively invest in regulated energy utilities.

 

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I think for regulatory to be a strong moat you have to have popular support as well. The problem for taxis was the popular support was for Uber. In New York the taxis were actually pretty good I found, but when I lived in LA you'd call them and they'd never show up.

 

Contrast with say oil pipelines... very difficult to get built. First you have to overcome political permitting, then you have to overcome popular uprisings.

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Not to nitpick, but I think regulatory moat are very much so not the best moats of all, exactly because the regulations can either change, or they lead an industry to become fat and unresponsive to customer's need, creating a huge umbrella under which better competitors can come in (often assisted by new technologies that give them an edge).

 

Regulatory moats seem more stable when they deal with B2B stuff rather than B2C.

 

The thing that surprised me about the taxi cab industry is that the regulations DIDN'T change until after the competitors were already fairly well established. I think its a rare thing when companies break the law in order to change the law. I can't think of a parallel anywhere else.

 

Even Tesla is not setting up direct sales in New Jersey and then fighting lawsuits. They are just complying with regulations even though most consumers are behind them.

 

The whole consumer angle I also find odd. If you proposed eliminating the licensing of taxi cabs 10 years ago editorialists, consumers etc would have objected. There was zero expressed desire for change by consumers for decades at the political level. Even today you will find it hard to find political for eliminating Canada's ridiculous supply management system.

 

Or even worse Canada's evil de minimis threshold which I would guess costs the average Canadian a few thousand dollars a year. Who on this board that is Canadian even cares?!

http://www.cbc.ca/news/opinion/cross-border-shopping-1.4226427

 

 

So I actually think these moats are pretty powerful and strong. What surprises me in the taxi case is that companies found a way to get around them.

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