Calling all cars: Please return to base immediately

May 26, 2015
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On Friday France’s Conseil Constitutionnel, the country’s judicial authority, announced its long-awaited ruling on Uber’s objections to the Loi Thévenoud.

For a quick recap, the Thévenoud Law (named after Thomas Thévenoud, former secretary of state who left the cabinet in a tax scandal last year) aims to handicap innovative on-demand transport companies like Uber and SnapCar (collectively referred to as VTC firms, voiture de tourisme avec chauffeur) by imposing a variety of legal constraints on the new entrants while sheltering the incumbent taxi firms.

I’m not sure which is worse, going down in history as a tax-evader or an innovation-hater, but my guess is that Monsieur Thévenoud will be remembered more for the silly anti-VTC law bearing his name than for his embarrassing unpaid tax bills and ‘administrative phobias’. (On a side note, at least France hasn’t adopted the American habit of naming controversial laws with misleading monikers like ‘freedom’ or ‘patriot’, but I digress).

Uber took umbrage with three specific aspects of the Loi Thévenoud:waiting-for-taxi

  1. the requirement that VTC operate only on reservation (i.e. prohibiting a customer from flagging a VTC in the street)
  2. the requirement that VTC return to base after each passenger
  3. the requirement that VTC disclose the full price of the ride at the time of the reservation

In summary, per its decision Friday, the Conseil Constitutionnel upheld much of the Loi Thévenoud, certainly points 1 and 2 above, striking down point 3 however. This Le Monde article about the ruling suggested all parties (the taxis, Uber, competing VTC firms) found something about which to claim a small victory. I submit that everybody loses, especially the French public.

calling_all_cars_rudevc

The most egregious aspect of the Loi Thévenoud in my opinion is the requirement that VTC drivers return to base in between bookings. Think about how ridiculous this is: a VTC whose base is in Issy-les-Moulineaux carries a passenger from central Paris to Charles de Gaulle airport (a distance of approximately 34km). After dropping off his fare at terminal 2A, the VTC driver — although fairly likely to find a new fare at the airport but since he cannot accept a passenger without reservation and must return to base — makes the sweeping u-turn through CDG terminals 2C, 2E, 2F, 2D, 2B and heads back to base in Issy-les-Moulineaux (42km). Tally: 76km driven, 9120 g CO2 emitted, 1 passenger.

If we take this theoretical example one step further, let’s say a new customer collects her luggage at CDG airport baggage claim and steps outside to hail a taxi, only to discover that the taxis are on strike (a purely theoretical example of course). So she calls her favorite VTC company to make a reservation. Unfortunately, their nearest car is over an hour away (the customer couldn’t see this on her smartphone, thanks to the Loi Thévenoud), so she calls a competing service. This second service happens to be the one based in Issy-les-Moulineaux, and they’re swamped with calls (remember, there’s a taxi strike). The customer is in luck: one of their drivers just returned to base (the very driver who was just at the airport), so they dispatch him right away to CDG. He collects her within 45 minutes (42km to the airport) and drops her off in central Paris (34km back). Total tally for the afternoon: 152km, 18 240 g CO2 dispensed, 2 passengers.

Why the government’s pro-pollution stance?

In this hypothetical example, the VTC driver travels an excess 84km due entirely to the Loi Thévenoud. Absent such legislation, he would have been able to collect the second passenger from CDG without returning to base, resulting in only 68km traveled, the entire time carrying a passenger. The Loi Thévenoud is solely responsible for generating an extra 10 080g of CO2 emissions — not to mention the wasted time, extra congestion on the autoroute, and wear on the roads — all unnecessarily. These figures are of course mere estimates, and I have a feeling the VTC firms may be able to perform a more accurate analysis with their proprietary data.

Anyway, I come not to bury Thomas Thévenoud (and certainly not to praise him), but rather to float up a few inimitably rude ideas that are of course impractical but perhaps could inspire some politicians to hold a few meaningful brainstorming sessions on some constructive solutions.

For the sake of advancing the debate, let’s acknowledge for a moment that the business model innovation brought to the French market by firms like Uber, SnapCar, Chauffeur Privé, and other VTC players presents a legitimate concern for public policymakers. Former economy minister Arnaud Montebourg clumsily explained it as subordinating consumer protection to ‘producer protection’. I think what he meant is: let’s not forget about those people who are harmed by the innovations brought forth by technological progress.

Fair enough. The taxi drivers who mortgaged their homes in order to purchase an artificially limited edition medallion license in hopes of repaying their 200k€+ investment some day are witnessing a black swan in their financial models. To channel P.M.Dawn, I feel for you; I really do.

However, inane legislation like the Loi Thévenoud generates new costs and solves nothing (seriously, does the government really endorse creating more pollution?). What if rather than imposing laws to thwart innovation, the government supports it in order to spread its benefits?

Redistribution of benefits is not exactly a heretical concept to a socialist politician, so now that I have your attention, what I’m referring to is something like the 1/1/1 philanthropy model championed by SalesForce.com and endorsed by several market-leading innovators like Google, Splunk, GoPro, Workday, and Box. These organizations have each pledged to allocate 1% of their equity, 1% of their time, and 1% of their product to worthy philanthropic causes.

Tech philanthropy

Granted, “spontaneous private sector philanthropy” may be a bit of an alien concept in France, but the government can nudge these companies into behaving more saintly. Based on latest valuation estimates, 1% of Uber’s equity might be worth half a billion these days. That’s a healthy chunk for philanthropic projects like providing universal mobile internet access or retraining workers disrupted by technology innovation, even if only a portion is allocated to France.

At this point, even a straight tax would be less damaging than imposing Kafka-esque rules which increase the costs of innovation not only to the disrupters but also to society overall.

Advances in technology are ushering in radical disruption to several industries, for which the ramifications are often beneficial, but not always, and not uniformly for all stakeholders. Politicians and technology innovators need to work together to address these challenges.