Tsering comes from a small tropical country called Bhutan. The 800, 000 population nation is known for its ever-green tropics, strict anti-smoking laws, and deeply religious communities. Tsering left the Himalayan nation in pursuit of the oldest drug in the known universe, love. The allure led him to the flesh-eating streets of Manhattan, and here he earns his living as an Uber driver.
“Business is much better now, Mr. Thembekwayo,” he remarks. “We’ve come out of a spate of suicides of yellow cab drivers because of the medallion,” he adds.
The medallion is a plaque embossed on the bonnet of the yellow cab. It is the license for the taxi and the driver to operate in the city and the State of New York. What has since resulted is the monetization of the medallion with a series of financial schemes that — at the face of each — connect the future earnings capacity of a cab driver and the cab to loans and other financial products. These schemes have created multi-millionaires in the form of the brokers of the medallions, but the devastation and loss of human life have also been remarkable. The New York Times reports that over 950 medallion owners have filed for bankruptcy since the introduction of the scheme and many a New Yorker fear that it may finally destroy the enduring yellow cab industry.
Many of the medallion owners began by lashing out at the ubiquitous Uber taxi drivers. This is the most human response to disruption and change. Blame the human being perceived to benefit from your pain.
However, closer examination shows that in-fact the grantors of the credit to the yellow cab drivers were unscrupulous and willfully negligent in their credit scoring processes. This behaviour has led to a bubble in the valuation of the medallion and an inability to pay that had little to do with the activity of the cab. You see, the idea was that the yellow cab owner could borrow large amounts of money against the “potential earnings” of their cab. These funds were used to finance their homes, other cars, credit cards, and various other short-term loans that the driver required. It is estimated that between 2004 and 2014 the value of the medallion rose from $200,000 to over $1,000,000 while the earnings of the drivers remained relatively stagnant. Consider too, the introduction of ride-hailing services such as Uber and Lyft and what results in a crucible of feces ready to hit the proverbial.
But the basis of the medallion was that it guarantees its holder a license to operate a taxi service in one of the busiest cities in the world. So the allure is never diminished. Quite the contrary, with the bankruptcies and even suicides of some medallion holders, banks and hedge funds have bought those medallions for cents on the dollar and are marketing them for circulation again.
This is a lesson in disruption, greed, and the arrogance of tested business models. Those affected by the aforementioned tend to throw their unhappiness at the feet of immigrants and lowly individuals who themselves are simply seeking a better life for themselves and their families. Immigrants like Tsering.
Every industry has a medallion: a license to print money whose existence is seen as unquestionable and along which various profiteers align their businesses.
What is the medallion of your industry?
Speaker | Investor | Dragon Slayer