New York City is considering a congestion charge for drivers entering Manhattan below 60th street. It is part of Governor Cuomo’s Fix NYC plan. But we all know how difficult these things are to implement.

Last month, Felix Salmon wrote a piece in Wired where he argued that our cities are dying of traffic congestion and that the cause is ride-hailing services like Uber and Lyft. The solution: A tax on ride-hailing services.

The article elicited a few reactions, including this one by Charles Komanoff over at Streetblogs and this one by Joe Cortright over at City Observatory. Joe’s message: “The problem isn’t the ride-hailed vehicles, it’s the under-priced street.” 

Precisely.

Felix later followed-up with a post on his blog where he clarified that the reason he loves this idea – of taxing ride-hailing companies, not riders – is that it’s far more politically palatable than a blanket tax on all cars. I don’t disagree.

Which is why I think my idea is something which is eminently politically possible, in contrast to congestion pricing, which has been implemented exactly nowhere in the USA.

Americans love their cars, and they love the freedom that cars represent, and they hate the idea that they should be taxed for driving their cars. Tolls on roads and bridges are bad enough, but a fee just to drive in to a city?

That said, I’m with Charles and Joe. 

Last year, it was reported that roughly 25% of all Uber trips in New York City were UberPool trips. I’m not sure what the number is today, but these are people who are car pooling to get around. That’s generally considered to be a positive thing.

Are these really the trips we want to be discouraging (and singling out) with a charge simply because we don’t have the moxie to do what is right and makes rational sense?

Photo by Austin Scherbarth on Unsplash

I was searching around trying to find data on long-term real estate prices and I came across a paper by Tom Nicholas and Anna Scherbina called, Real Estate Prices During the Roaring Twenties and the Great Depression.

Here are some stats about Manhattan real estate (from the paper) that you all might find interesting:

- In 1930, Manhattan housed 1.5% of the US population, but had approximately 4% of all US real estate wealth.

- To construct their price indices the authors randomly collected 30 real estate transactions per month in Manhattan between 1920 and 1939. The mean price per square foot in 1929 was $6.91 (year of Black Tuesday). And the mean price per square foot in 1939 – 10 years later – was $2.29.

- Buildings containing a store at grade tended to sell at higher prices. The authors speculate that this could be because a zoning change in 1916 made it difficult to open stores in “residential” areas.

- Buildings with three, four and five storeys tended to sell at a discount. Six storeys or higher and the buildings generally had an elevator, which resulted in higher pricing.

- Manhattan real estate prices reached their highest level in Q3-1929 before falling 67% by 1932. Prices remained more or less flat during the Great Depression.

- If you bought a “typical property” in 1920, it would have retained only 56% of its value (in nominal dollars) by 1939. In fact, it took until 1960 for assessed property values in Manhattan to exceed their pre-Depression pricing.

- An investment in the stock market index during this same time period, 1920-1939, would have outperformed real estate by a factor of 5.2x.

Much of this probably seems hard to believe given the market today. Imagine waiting 40 years for the value of your property to come back.

Photo by jesse orrico on Unsplash

I find the topic of pricing incredibly interesting. How much is someone willing to pay for item X? I’ve said this before, but pricing was one of my favorite classes in business school.

Here is a line that I really liked from a recent blog post by Tomasz Tunguz’s on price anchoring:

“Relative pricing comparisons are among the most common method of price rationalization.”

The topic of his post may not be all that interesting to this audience – it’s about software as service platforms – but the principles should be. 

In Tomasz’s post he talks about how companies building SaaS products aimed at salespeople will often have their pricing compared to that of Salesforce. In other words, people might say to themselves: Salesforce costs $X per seat. Is this other product worth half of $X? Salesforce is the anchor.

I can tell you that I do this all the time. (Do you?) I’ll say to myself, condos of this build quality are selling for $Y in this neighborhood. Is this other neighborhood better or worse? If better, how much of a premium might someone apply to it?

So if you’re in the business of pricing products, you may want to give some thought to how your customers might be anchored when assessing your offering. Relative pricing comparisons allow us to rationalize dollars in our mind.

New York City is considering a congestion charge for drivers entering Manhattan below 60th street. It is part of Governor Cuomo’s Fix NYC plan. But we all know how difficult these things are to implement.

Last month, Felix Salmon wrote a piece in Wired where he argued that our cities are dying of traffic congestion and that the cause is ride-hailing services like Uber and Lyft. The solution: A tax on ride-hailing services.

The article elicited a few reactions, including this one by Charles Komanoff over at Streetblogs and this one by Joe Cortright over at City Observatory. Joe’s message: “The problem isn’t the ride-hailed vehicles, it’s the under-priced street.” 

Precisely.

Felix later followed-up with a post on his blog where he clarified that the reason he loves this idea – of taxing ride-hailing companies, not riders – is that it’s far more politically palatable than a blanket tax on all cars. I don’t disagree.

Which is why I think my idea is something which is eminently politically possible, in contrast to congestion pricing, which has been implemented exactly nowhere in the USA.

Americans love their cars, and they love the freedom that cars represent, and they hate the idea that they should be taxed for driving their cars. Tolls on roads and bridges are bad enough, but a fee just to drive in to a city?

That said, I’m with Charles and Joe. 

Last year, it was reported that roughly 25% of all Uber trips in New York City were UberPool trips. I’m not sure what the number is today, but these are people who are car pooling to get around. That’s generally considered to be a positive thing.

Are these really the trips we want to be discouraging (and singling out) with a charge simply because we don’t have the moxie to do what is right and makes rational sense?

Photo by Austin Scherbarth on Unsplash

I was searching around trying to find data on long-term real estate prices and I came across a paper by Tom Nicholas and Anna Scherbina called, Real Estate Prices During the Roaring Twenties and the Great Depression.

Here are some stats about Manhattan real estate (from the paper) that you all might find interesting:

- In 1930, Manhattan housed 1.5% of the US population, but had approximately 4% of all US real estate wealth.

- To construct their price indices the authors randomly collected 30 real estate transactions per month in Manhattan between 1920 and 1939. The mean price per square foot in 1929 was $6.91 (year of Black Tuesday). And the mean price per square foot in 1939 – 10 years later – was $2.29.

- Buildings containing a store at grade tended to sell at higher prices. The authors speculate that this could be because a zoning change in 1916 made it difficult to open stores in “residential” areas.

- Buildings with three, four and five storeys tended to sell at a discount. Six storeys or higher and the buildings generally had an elevator, which resulted in higher pricing.

- Manhattan real estate prices reached their highest level in Q3-1929 before falling 67% by 1932. Prices remained more or less flat during the Great Depression.

- If you bought a “typical property” in 1920, it would have retained only 56% of its value (in nominal dollars) by 1939. In fact, it took until 1960 for assessed property values in Manhattan to exceed their pre-Depression pricing.

- An investment in the stock market index during this same time period, 1920-1939, would have outperformed real estate by a factor of 5.2x.

Much of this probably seems hard to believe given the market today. Imagine waiting 40 years for the value of your property to come back.

Photo by jesse orrico on Unsplash

I find the topic of pricing incredibly interesting. How much is someone willing to pay for item X? I’ve said this before, but pricing was one of my favorite classes in business school.

Here is a line that I really liked from a recent blog post by Tomasz Tunguz’s on price anchoring:

“Relative pricing comparisons are among the most common method of price rationalization.”

The topic of his post may not be all that interesting to this audience – it’s about software as service platforms – but the principles should be. 

In Tomasz’s post he talks about how companies building SaaS products aimed at salespeople will often have their pricing compared to that of Salesforce. In other words, people might say to themselves: Salesforce costs $X per seat. Is this other product worth half of $X? Salesforce is the anchor.

I can tell you that I do this all the time. (Do you?) I’ll say to myself, condos of this build quality are selling for $Y in this neighborhood. Is this other neighborhood better or worse? If better, how much of a premium might someone apply to it?

So if you’re in the business of pricing products, you may want to give some thought to how your customers might be anchored when assessing your offering. Relative pricing comparisons allow us to rationalize dollars in our mind.