- - Thursday, April 11, 2019

In the old days — say, all the way back in 2009 — the way a person got from point A to point B without using public transportation, or a personal car or bike, was by taxi. In large cities taxis were everywhere, and in small towns they were … somewhere. The industry thrived on a simple model of aggregation, and was efficient because of its silo-like nature.

Cab companies bought cars, maintained them and insured them. They also ran centralized dispatch centers to match riders with drivers. Their customers were the drivers that leased the cars, responded to calls for transportation and collected payment from the riders. Then the world changed.

Uber arrived on the scene, then Lyft showed up, and soon countless other smaller localized ride-sharing services jumped in as well. They’ve been hailed as “disrupters” and “industry changing” companies.

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But are they?

Uber is really just a cab company that uses the Internet instead of telephones and radios to match drivers with passengers. Yes, there are a few other subtle differences, but they are again mostly operational. Uber drivers use their own cars, but they are probably financed with the bank so there is really little difference except who they pay each month, and, Uber will lease them a car just like a traditional taxi company. Uber also collects and processes the passenger fares, but that’s really just bookkeeping.

What began as an electronic way to connect private drivers with riders has evolved into the old-school taxi business, just with lower barriers to entry. And, in case you haven’t noticed, taxi fares and ridesharing fares are converging. With the surge-pricing model used by Uber, Lyft and the rest of the gang, there are now many situations when their fares are even higher than a traditional taxi.

And yet: What the Internet did to taxi cabs it’s about to do to ride-sharing, only this time there won’t be any silos. One word will forever alter the business — “blockchain.” Yes, that mysterious system that none of us really understands, and that somehow lets crypto currencies exist, is about to really disrupt the entire transportation-for-hire industry.

What, exactly, is blockchain? Imagine a ledger that exists everywhere in everybody’s smartphone or computer. It’s the same public notebook for everyone, and its contents are a record of everything that everyone has done — only securely locked so each person can only see or change their own entries. It’s not a central database, it’s a rolling public record existing everywhere for everyone, but with access only to the parts that affect each individual.

Now imagine a blockchain ledger whose entries are the criminal and driving records, as well as customer reviews, of anyone who wants to drive for a living. Couple that with entries of every person who has ever hired or wanted to hire someone to drive them around. People seeking rides can securely review and select drivers, who likewise can securely review and select riders. And, both parties negotiate and agree on price without it being set by a central authority. It’s peer-to-peer ridesharing — no middleman — and no Uber or Lyft needed.

The triumph of the free market will be the end of taxi and ridesharing business silos. Riders will be able to directly request a specific driver, or select a new one by reviewing the blockchain information on them. Drivers will be able to post their availability, and even their prices if they wish, and select the riders and trips that they want to take. Everyone will have access to the same information at the same time through the blockchain.

No centralized booking, no guessing who will be your driver or rider, and no middleman to take a piece of the pie from both the driver and rider. Sound too good to be true? It’s already happening. Hundreds of community-based peer-to-peer ridesharing blockchains are already running, or being developed. Apps like Chasyr, SnagRide and Arcade City are already connecting drivers and riders without any central authority as a wedge in the price.

The disrupters are about to be disrupted.

And really, they weren’t that good at running a business anyway. It seems like every day we hear of some Uber or Lyft altercation between drivers and riders. And, with Lyft’s recent public stock offering, we know that while they pocketed more than $2 billion in revenue last year, they had an operating loss of more than $900 million. And Uber, while taking in more than $11 billion in revenue, lost almost $2 billion. Now that sounds like something the free market needs to disrupt.

• Kevin Cochrane teaches economics and business at Colorado Mesa University, and is a visiting professor of economics at the University of International Relations in Beijing.

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