Imagine you’re standing on a street corner in New York City, hand raised to hail a cab. Two cabs pull up to vie for your business; a beat-up late 60s sub-compact with no air conditioning, and a brand new mid-size sedan, with working air conditioner and an electronic meter.
It’s not hard to pick which door to open.
That’s the decision facing residents and visitors in Mumbai, India. As the city grows, so has the demand for clean and reliable taxis. The Meru cab company has answered that demand:
“Meru has become so popular that it has to turn away about half of the more than 10,000 calls it gets every day, and reservations have to be made about four hours in advance. “Nobody wants a black-and-white TV when you have LCD screens,” says (owner) Mr. Gupta.”
With such high demand, why haven’t new taxi companies sprouted all over Mumbai?
The reason is the disgruntled drivers of the old cabs. These drivers realize that the new cabs – equipped with such luxuries as GPS and functioning climate control – represent the end of their way of life. So, they’ve erected a pretty intimidating barrier to entry in the industry – physical violence.
Sheikh Shamin Ahmed… was eating chicken fried rice at a roadside stand next to his new, metallic-green cab when two old taxis full of old-taxi drivers rolled up and started to beat him. They told him his fancy new Mahindra Renault with its air conditioning and GPS navigation system had better stay away from their customers.
Now, although the violence is inexcusable, I don’t want to overlook the plight of the old cab driver. This new technology means they’ll have to learn a new skill set; older drivers who never learned to read in school may find themselves with no way to make a living. This often-painful process of new technology replacing old and outdated technology is called creative destruction, a term coined by the famous economist Joseph Schumpeter.
While the short-term consequences of creative destruction may be difficult for drivers of the old cabs, the long-term benefits to society are substantial. Modern cabs are safer, more comfortable, produce fewer harmful emissions, and allow cab drivers to update their skills and remain relevant for the 21st century. Additionally, free entry into the market for taxis ensures that consumers have a wide range of transportation options when they’re driving around Mumbai.
A growing city that wants to leap into modernity can’t support a taxi fleet that’s stuck in the 1960s. Just don’t tell those old taxi drivers I said so.
