Last week Miami-Dade County auctioned off six new taxicab medallions and bidders paid record prices to get one.
The story was covered by Local10.com the local ABC affiliate in South Florida.
“The least expensive medallion was purchased with bid of $312,000; the most expensive fetched $431,000.”
The minimum bid was $140,000, the price the last Medallion was sold at.
“It’s insanity,” said Joel Barbanell, president of Flamingo Taxi in Miami, who, as a taxi company owner, was not allowed to bid.
“But there’s a good reason for it.”
“These people who get a medallion can do what they want with it. ”
“They can sell it, lease it, keep it as an investment.”
Lonnie Sorkin submitted a winning bid of $430,000 for a taxi medallion and called it a good deal.
“It has a lot of value,” Sorkin said. “It’s the first time in quite a while that medallions have been available.”
“A cab driver will not be able to buy a medallion in the near future. It’s just too expensive”
Sound familar?
Why would someone with no plans to use a Taxi Medallion to drive a taxi spend $400K to buy one?
Well like Mr. Barbanell stated its an asset that allows you to do one of several things with it, one of which is to lease it to someone who will use it.
I know in Miami the going rate is $100 a shift for someone to lease a taxi. I don’t know how that $100 is spilt up but clearly the medallion owner gets a share and therefore Taxi Medallions like good domain names, are income producing assets.
Assets which make money.
In an economy where CD rates are below 1% a year, $400,000 in cash would make just $4,000 a year in interest.
So if you could invest that same $400K a buy buying a Taxi license which produce tens of thousands of dollars in revenue a year, like a domain name its a no brainier a great investment and therefore no surprise how the value continue to rise.
When it comes to Taxi Medallions, New York of course is the king.
The .com of taxi medallions if you will.
Great analogy.
Clearly there is value in these medallions, but the difference with domains is that the government can issue more medallions if they want to, the supply is technically unlimited and each medallion could do the same thing. With domains, there are no two domains that are exactly the same before and after the dot. There must be some strict restrictions on how many of these taxi medallions can be issued for them to have so much value.
Anyone not actually driving a taxi that owns a medallion is squatting on it! 😉
” but the difference with domains is that the government can issue more medallions if they want to, the supply is technically unlimited”
So what exactly is the gtld program.
If anything domains are unlimited. You can dream up an endless combination of letters and numbers. Medallions do not have to deal with an endless supply, facebook, apps, gtld programs, udrp cases, theft, trademark infringement and have a high barrier to entry. Anyone with 6.99 can be a “domainer”
Not sure how you could possibly use this argument to pimp your domains to someone.
Let’s see. The price of medallions is linked to government issue numbers (false scarcity). The price of a fare is linked to government mandates (false value).
Have a thought for the poor cab drivers who have to lease this from the investor – does about $200 a shift sound right? I’d like to see how many people would take on a career where they start off in that hole every night.
That said. No relation to domaining at all.. just another bubble waiting to burst.
http://www.slate.com/articles/news_and_politics/explainer/2009/08/the_halfmilliondollar_wiener.html
great story, however ask the greek guys that did the same over years and lost all their money after the IMF asked greece to stop the rectrictive policy on taxi licences and cut rules and regulations. I definitely prefer domains oder taxi medallions.
Sorry could someone confirm this:
In the US in order to drive a cab you need a Taxi Medallion which in NY can cost $300,000?
Is that right?
Back
In the US in order to drive a taxi in Most major cities you need to have a Taxi Medallion which can be bought but is more typically leased.
The price varies by city as I said last week auction in Miami the Medallion went for between $350K & $450K
In New York last year two sold for $1M dollars each.
unknown
“”Just another bubble waiting to burst.””
Well regarding the taxi medallions its a bubble that has lasted 40 years.
Eventually everything tanks for a period but the question is how long are you going to live
When your invested in something for $25K 40 years ago now worth $1M I think you did pretty well in your life especially if you own like someone I know 12 of them
Another similar analogy that always comes to mind involves cars, as well.
Many small businesses operate on small budgets. Some of these businesses need some sort of a company car for errands. They might look for a used vehicle in the 5,000 to 10,000 range.
But, many of these same small businesses balk and even become angry at the thought of spending 5k-10k on a good domain name.
A good domain would have an annual maintenance cost of 10 to 15 dollars.
Try that with a used car.
It will not wear out and need to be replaced like the company car will.
Is their resistance due to a lack of understanding domains? I don’t know.
But, I do know it is not going to be the average Joe domainer that is going to educate the masses about the marketing and branding value of good domains.
The large auction houses probably have the resources an ability to do it, once they get past the “buy now at wholesale prices” phase of selling domains.
MHB –
Thanks.
About the only similarity is that there is an artificial monopoly which drives up the value – and for domains that’s only at the TLD level.
Beyond that, apples and oranges. You don’t need a specific domain name to carry on any business undertaking the way you do need a taxi plate to put a cab on the road.
Mark
A Lot of industries and things of value like commodities operate as “artificial monopoly” as you call them
Diamonds are one
De Beers controls the flow of Diamonds which they have for almost 100 years by controlling production they keep the values high
http://en.wikipedia.org/wiki/De_Beers
Oil is another, where countries place production caps on the product to keep the cost high
So?
and a particular end user may very well need a specific domain
Cab medallions, restricted species crabbing endorsements, grandfathered liquor licenses, civilian transferable machine guns (in the US), old commercial zoning, imported Brazilian Rosewood or Elephant Ivory…
Whenever the government puts a cap on something but allows existing owners to freely transfer them, you can expect that thing to rise dramatically in value.
In the case of cab medallions, their ‘value’ is derived from the fact that they are a very direct, cash flowing asset. The catch is, one tweak in the law- perhaps to say that only drivers or established cab companies can own them- and the ‘investor’ dollars vanish, prices return to very different levels.
Add to the above- the government is not oblivious to what happens when they intercede.
“Carbon Credits” would be an example of their leveraging the phenomenon to create revenue.
Great analogy there, not sure what the equivalent of the taxi medallion costs here, but it works almost the same way, lease revenue is way higher than interest revenue and here we work on 8% interest.
@Zak: lol, just like someone owning a plot downtown and leasing it, instead of using it, squatters the lot of them. 😉
@SF: Totally correct, domains offer the lowest total cost of ownership, even when bought at a premium, specially when you consider they appreciate and not depreciate over time like other capital goods.
Just sold a two-character .tv for $6550 – paid $230 for it one year ago.
That’s an awesome analogy.
It looks like it is all about timing b/c I don’t have roughly 50 years to wait for domains to appreciate to that level. Hopefully, I won’t need to. 🙂
Zak what if the taxi is parked ? They must be squatting that medallion too right ?
Mike, if you think your logic through, this isn’t really an argument you want to be making. You end up implying that domains derive their value from said artificial monopolies. Given that you are a prolific domain investor, I would think you would want domains to derive their innate value from some other, intrinsic basis than what makes a taxi plate valuable.
Mark
Great Domains are rare one of a kind.
Medallions are rare as well.
Commodities like gold and diamonds are rare
Liquor licenses like LS point out are rare as well
Why they are rare is irrelevant, the point being people see the value of income producing assets that are rare
Like domains
perhaps it comes down to how comfortable one is with the idea that markets and the investors that participate in them are NOT always rational.
perhaps it’s not a question of whether you “understand” a peculiar demand for something, but it’s a question of whether you can accept it and even exploit it.
does the seller have to believe in the value of what she’s selling? or does only the buyer need to believe?
who was that domainer who posed the question: “what is value anyway?”
MHB, regarding your final quote about the progressive increase in New York taxi medallions, and “how that value continues to rise in an accelerated fashion through the years.”
Think about how much money $25,000 was in 1963 though. A hell of a lot. I’m not so sure this isn’t more of a reflection of how far the dollar has been devalued in the last 50 years. Its likely that if anything the medallions have held their value when adjusted for inflation. Imagine if the internet as we know it today existed in 1963. No prices would be what they are today. PPC for Mesothelioma would probably be $1 instead of $100, and Sex.com would have sold in 1963 for $500k or something like that.
I get that the taxi medallions are an income producing asset, I just think their rise in price is more a reflection of inflation, and not the perfect analogy to domains as the fastest rising assets in history (as the infamous saying goes). also I’m no economist, but its just my takeaway
Domain
Your right if you lock into the 1963 of $25K in today money its worth $180K
Lets look at the 2005 number of $336K
now worth $1M
a 3X return in less than 7 years
@MHB
Maybe it will burst when we go green and manhattan goes all pedestrian!
Your right. 40 years is a long time.. and I’m sure many people sold when they thought the bubble bursting was coming in 1970, 1980, 1990, and 2012 🙂
Not factoring in for compounding inflation is absolutely the #1 biggest mistake every ‘long term investor’ makes. Trying to beat it is a bitch, “buy more gold!” isn’t enough.
Watch, over the next 5-10 years as ‘certain things’ magically become more expensive even in market environs that don’t seem to be supporting the increases.
The reason for that being, the world’s money supply has been grotesquely expanded for the past decade or so. The miracle of inflation is that it isn’t a headshot- it’s a long, drawn out cancer that by the time you realize what’s happening, it’s in your bones and approaching too late.
A good domain name is like a good phone number, I know I have a good phone number because every time I give it to someone they say, that’s a good number. I don’t tell them I bought it for 200.00 in a bar. Domains are like phone numbers if you have a good one people will notice and it and it lets them know you understand the importance of a good name. A good domain is one you can tell someone and they do not need to write it down.