Thursday, August 25, 2011

How To Make Cab Companies And Medallion Holders Go Livid At The Same Time. My Vision Of a Near Perfect Taxi Industry. By John Han.

Photo by John Han.
The other day I contemplated a formula for how to make cab companies and medallion holders both want to run someone out of town for good.  

It involves a vision for a close to perfect taxi industry as may be possible for San Francisco.  

It goes something like this....

The City and County of San Francisco would revoke ALL traditional full-time medallions back to itself and act as the holder.  For the ones already sold, it would buy them back.  Single operators are another story.     

As holder of all 1535 full-time regular medallions, San Francisco would lease all of its medallions directly to licensed cab companies at the same rate as cab companies are currently paying out to individual holders.  

This could conceivably eliminate illegal brokering.  (You industry savvy people should be able to see why it could eliminate illegal brokering.  The brokers would have to do business with the City regulators, and not individual holders who may be out of range of regulatory resources.  If, hypothetically, a City regulator were to be caught doing unwarranted business with non-licensed brokers, the accountability could be far greater for the administrator than would be for an individual holder, because things of that nature tend to make news headlines.)  

At a loose, and rough average of $2000.00 a month per medallion, 1535 full-time medallions would generate $3,070,000.00 per month in revenue, or $36,840,000 in revenue per year.  At $2200 per medallion, that loose figure would be $40,524,000 per year.  And at $2500 per medallion, it would be $46,050,000 per year.   

The imperative part of this is that the money would first be used to provide qualified, full-time drivers with healthcare and pension industrywide.  Smart people at the MTA could do the research and determine what the actual costs would be.  (What if there was enough money in there to include part-time drivers?  Probably not, but what if?)

Some would say that this is exactly what MTA Director Malcolm Heinicke attempted to do when the MTA first took over regulation of the industry.  He wanted to take all the medallions back and turn them over for profits for the MTA.  

I think Heinicke was halfway on the right track.  But he's not a cab driver so how could he know the full story?  

The meaningful difference here is that if the City were to act as the medallion holder for all of its full-time medallions, the revenue would be reinvested into the taxi industry, mainly for driver healthcare and pension.  That's a BIG, BIG DIFFERENCE from what Heinicke proposed at first a couple of years ago. 

Any surplus gains after reinvesting into the taxi industry could go to the MTAs general fund or wherever.  

This could possibly satisfy much of the drivers' worries about their lives as cab drivers, and also allow whatever surplus gains from the revenue to benefit the City's budget. 

Also, it may or may not make drivers less resistant to issuing new medallions, if doing so meant drivers had more money going towards their pensions, or lower insurance deductibles at every hospital visit.  That's just a maybe.   

In creating municipal medallions, there could be other advantages too.  For example...

Eliminating individual medallion holders could allow the City to establish staggered, but standardized shift hours so that more drivers across the board could be offered more reasonable work hours, thus balancing out the workforce and improving overall working conditions.   

This is because medallion holders often want to work a shift like a 2pm to 12am shift, or a 2pm to 2am shift.  

They have that prerogative because they are the medallion holder.  Two o'clock in the afternoon is an excellent hour to start an evening shift, and the cab companies they work with have to give it to them.  Also, medallion holders feel they've worked crummy shifts themselves for a long time before they got their medallion and now they deserve any shift they want.  Fair enough.  

On the other hand, when a medallion holder does that, they leave difficult shifts for the people below them, like crumbs off of the table.  It's not necessarily the best hierarchical organizational structure since historically, it has divided the industry into factions, i.e., medallion holders and cab companies vs drivers.   

When a medallion holder commands a 2pm to 2am shift, the best that a company can, in turn, offer a gate and gas driver on that medallion would be a 2am to 2pm shift or a 4am to 2pm.  That's not horrible, but it certainly isn't great.  Some drivers may actually like that shift.  But anecdotally, most gate and gas drivers with a shift like that, only work it because that's what's available.  

I've also heard gate and gas drivers speak of no choice but to work a more difficult 3am to 1pm shift, because a medallion holder wants to start their shift at 1pm... or an intolerable 9pm to 9am shift, because the holder wants to get going at 11am. 

The driver who told me about his 9pm to 9am shift said he drives it, not because he prefers graveyard hours, but because that's all that the company could make available to him as part of his schedule.  

There is a small percentage of drivers who work shifts like this because they like them.  But I'd say the anecdote is most drivers work them because they have to.  (This is a significant reason why I think independent contractor status is bogus to a significant degree, and why cab drivers should always be covered under Workers Comp.  Gate and gas drivers are not necessarily proprietors because they have no control to set their own business hours.  Since the profitability of taxi service is highly dependent upon which hours are spent in service, that control is a crucial factor in determining income.)

With no individual medallion holders, the City could regulate staggered shifts at, (just as an example), 3am to 3pm, 4am to 4pm, and 5am to 5pm for days, and 3pm to 3am, 4pm to 4am, and 5pm to 5am for nights, (consideration could also be given to people who like graveyard shifts).  

These are just rough examples though.  They are not by any means perfect shifts, but they are better than 3am to 1pm, generally speaking, or a 9pm to 9am shifts.  

But a more balanced workforce, and one that could also perhaps have at least its full-time drivers receive healthcare and pensions, would be a better workforce overall.

Improving the Dispatch:

Secondly, the City could use whatever money left over from medallion revenue to help subsidize costs for a Centralized Dispatching system... not 'integrated dispatch'... but a real Centralized Dispatch... one that has no affiliation to any color scheme. 

The need for Centralized Dispatch could be principled upon the fact that cab companies have no direct financial incentive to ensure that the public receive taxi services on time, or even at all.  Cab companies are vehicle leasing businesses that view the taxi drivers as the customers to whom they provide dispatch services to, not the public.

Let me reiterate that.

In our system, the cab companies consider the taxi driver as the patron and beneficiary of the dispatch services, not the public.

In my opinion, this is a flawed system.  And this is not commonly understood by the general public.  The public believes that when calling for taxis, it is the customer.    

Since cab companies have no direct financial incentive to oblige the public rider-ship in services, then companies should not be allowed to maintain exclusive control over dispatching systems, as doing so may run contrary to the public's interests.

It is unfair to the public rider-ship to forcefully restrict it to the use of cab company dispatch systems (and their limited fleets) in order to access taxicabs, when cab companies are not directly financially dependent upon the public's patronage of those services.   

I am not an economist, but allowing this would seem contrary to the idea of free enterprise, which is highly principled upon the idea of money being paid in exchange for goods and services.

Since their is no direct relationship between the public rider-ship paying money to cab companies in exchange for services rendered by the cab companies, the cab companies should therefore not be allowed to continue in its monopolization of the dispatch systems, because the business relationship between the companies and the public rider-ship is peculiar.  

Both Centralized Dispatching (true Centralized Dispatching, not "integrated") and a municipal medallion system could dramatically change the industry's landscape, but also have the potential to drastically improve the City's taxi industry overall.

Centralized Dispatching could make some smaller companies expand and larger companies downsize, thus incurring the wrath and fury of the larger cab companies.  Municipal medallions would most likely make medallion holders and owners livid beyond description.

Hence, the recipe for successfully making cab companies and medallion holders go livid at the same time could possibly be to - VASTLY IMPROVE THE TAXI INDUSTRY!!!

If done right, both Centralized Dispatch and municipal medallions could make things better overall for the industry and for the City... perhaps even significantly better.  Passengers calling for cabs would be able to access the City's entire fleet (not a company's limited fleet) via dispatch regardless of color scheme and cab drivers could have restored dignity and feel better about their jobs with healthcare and pensions.

Best of all, San Francisco would once again have one of the most uniquely structured industries in America. 

Might as well also throw in some smart phone apps like Cabulous, Uber, or Taxi Magic being standard equipment in all taxis and there may be a functional industry.      

I must now pinch myself and wake up from this dream.    

39 comments:

  1. John,

    Good ideas. I've been preaching a similar solution to anyone who would listen for several months. I disagree with you however on the centralized dispatch. The companies not being financially rewarded for providing good dispatch does play a role but drivers do as well. There are many drivers out there who get into their cab and turn the radio or computer system off because they have no intent of taking dispatch calls. If you reward cab companies for providing good service (and this can be done with some slight additions to this type of plan) then they compete for that reward and nothing helps customer service more than competition. Certainly not government running dispatch.

    Chris Sweis
    Chair: SFMTA Taxi Advisory Council
    CEO: City Wide Dispatch/Royal Taxi/Big Dog Cab

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  2. Nope. The centralization of dispatch is the correct solution. ALL cab dispatch people now get money under table for selling calls.

    OTA please!

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  3. Hi Chris, thanks for the feedback. You should put your ideas out there so others could hear them.

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  4. Johnny walker sez,

    I would call this a very good start, good article John Han!

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  5. LIVID DREAMS AND DISCHARGE OF THE HIGH PUBLIC TRUST ... not just best business practices: GOOD DREAM JOHN!
    Prop K which pretty much created the current system until the SFMTA took over, was a reaction to old Yellow's parent company's bankruptcy. While medallion holders were enabled thereafter, the benefits for the grunt drivers went to hell and also Prop K didn't address centralized dispatch.
    You would think that a regulatory agency such as the SFMTA which discharges the city's power to regulate transportation public utilities would be interested in optimal passenger service represented by true centralized dispatch as you mentioned and also that it would promote working poor driver welfare including medical coverage.
    But perhaps some regulators are conflicted between private business and its mantra "best business practices" which often screw grunt workers and the bench-mark of government regulation which is the discharge of the high public trust with the highest duty of care. Geez maybe that conflict in the SFMTA is embodied in it's very own website link: sfmta.com instead of SFMTA.gov representing the execution of the highest degree of care. What a com job!
    Nice dream John ... one that many of us share. We could dream further and exercise eminent domain for the ultimate benefit of all cept of course the bottom line of the big company bosses and their families who benefit by the squeeze on the working grunts.


    . . . dave schneider

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  6. I wonder how the medallion holders at Royal Cab feel about the CEO recommending the City taking their medallions away from them?
    I wonder how Royal's CEO would feel about it if he ever had driven a cab himself. Didn't he vote to give himself a medallion without having to do the driving? What was he about 10 years old when he got on the list?
    Right. Take the money away from guys that earned a medallion sweating their rent money and give that money to Muni to waste. Good thinking

    ReplyDelete
  7. Hi Anonymous,

    You said, "Right. Take the money away from guys that earned a medallion sweating their rent money and give that money to Muni to waste. Good thinking"

    It wouldn't be giving the money to the MTA to waste if the money were put towards driver pensions, benefits, and better dispatching. More drivers could benefit. Too bad it's wishful thinking at this point.

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  8. Let's see. Under this scenario, will the SFMTA return the interest I have paid on the $250,000 loan I took to buy my medallion? Will they pay me the expenses of incorporating the medallion I purchased to protect my investment from a devastating lawsuit? Will the SFMTA pay all the other expenses I incurred including legal fees, accounting fees, ect? Will they reimburse me for lost opportunities to invest my money elsewhere instead of planning and tying it up for a year ahead of time in anticipation of purchasing my medallion? And finally, will they reimburse the drivers fund $50,000 which I contributed cash when I made my down payment? I think the 100 plus new medallion holders who purchased their medallions and must run it like a business would have a serious problem with this plan.

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  9. To anonymous,

    The biggest shocker about John's plan is if it was done abruptly. Transition is just as important as the plan itself. The permit holders that earned their permits so far should certainly keep them.

    -Chris Sweis

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  10. Hi Erik,

    You make some really good points that must be addressed. The answer to all of your questions is probably 'yes', the SFMTA probably could do all those things. If mere money were the object, consider this...

    Based on the numbers put out by the MTA Taxi Services as of August 8, 2011, there have been 135 medallions sold. At $250,000 each, that totals $33,750,000.00.

    That amount would be less than one year's hypothetical revenue if the MTA could arrive on the scene as the medallion holder to all of the 1535 medallions. Based on a low rough average of $2000.00 per month per medallion, with an annual revenue of $36,840,000, the MTA could afford the costs to buy back 135 medallions with one year's revenue.

    You mentioned the added expenses but don't provide hard numbers, so it's hard to respond. But if I were to very loosely assume that the added expenses you mention such as legal and accounting fees, lost investment opportunities elsewhere, etc., if they were to double the value of the purchases of 135 medallions, making each medallion worth $500,000, then the MTA could pay the total cost of the buy back in about 2 years.

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  11. Hi John,

    What you say about the centralized dispatch and the companies not being motivated to give service is certainly true.

    As for the rest of it ... why would the MTA give drivers medical benefits or a pension?

    Since the taxi's would be leased, the drivers would still live out the fiction of being "independent contractors" and, as such, Heinicke can use them primarily for his "income streams."

    Now, if you want to change the dream so that drivers are employees and work for the MTA - maybe.

    But your dream is a nightmare. As it is, the only power that drivers have is the medallion - without it or without real unions - drivers are just serfs and slaves - with no way out. Under your system no driver could work for 15 years to gain a piece of the cake or buy his or her way in.

    The name for your dream "Misery Loves Company."

    Ed Healy

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  12. Hi Ed,

    The question is not, 'why would the MTA give drivers healthcare or pension?', the question is, 'what if' the MTA were to give drivers healthcare and pension.

    If the MTA were to do so, I'd say we'd have a pretty good cab industry. There's no asking 'why'.

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  13. Healy,

    Because of the medallions, drivers have become serfs or rather second class

    Citizens, so why would drivers care if medallion owners lose their medallions

    That they have no legal possession of anymore?

    The truth of the matter is, the sun is setting for owners, so get used to it Healy.

    Johnny Walker

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  14. Would anyone know if those 25 medallions that were supposedly to go to the people on the list is happening. After reading Johns blog and then Eds me poor head is done inn. This ship is sinking fast, it kind of reminds me of the Titanic, the slave drivers such as meself are the third class passengers who never even got a chance to jump. If someone could tell me also is Christian Hiyashi still manning the ship or is she gone also when is the next meeting happening. Thanks, Dick.

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  15. Hi Dick,

    As far as anyone knows, the MTA Board of Directors did indeed authorize the 25 medallions to the list, and those should be issued in roughly a couple of months whenever all 87 get issued.

    As far as all the other stuff, I don't know. The next TAC meeting, i think, is September 12 but don't quote me. We'll be getting updates.

    Tuesday, Sept 6 is the next MTA Board meeting. They're at City Hall Room 400 at 1pm. I don't know if there's any taxi items that day because the agenda's not up yet.

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  16. ... oh yeah. Sorry to make your head feel that way.

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  17. Hi John,

    "What if?" Yeah - right. What if the Sugar Plum Fairy came to life - which has just about the same odds as you scenario.

    The medallion holders didn't create the serfdom, the independent contract ,and the cab companies use of it, did.

    Without driver power (either ownership or union), it doesn't matter who is in control - they'll screw you. You might even be worse off under the MTA. You would have no other recourse if they did do you.

    ED Healy

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  18. Getting rid of the medallion owners, is a good start, Healy.

    Any and all issues pertaining to the SFMTA will be dealt with, in a jurisdiction,

    Federal on nature.

    Johnny Walker

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  19. THIS IS A GREAT PLAN. THIS WAY A LOT OF THE TAXI INDUSTRY LOOP HOLES AND PROBLEMS CAN BE FIXED INSTANTLY.

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  20. I AM WAITING FOR THE DAY WHEN PEOPLE CAN CALL A CITY OWNED PHONE NUMBER TO ORDER A CAB. ALL CAB COMPANY PHONE NUMBERS SHOULD BE ABOLISHED, AND ANY NON-CITY DISPATCH SYSTEMS SHOULD BE MADE ILLEGAL OPERATION.

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  21. Under MTA it is better because there will be NO medallion sales anymore!

    ReplyDelete
  22. Seize the medallions and toss out the owners, their greed has caused a lot

    Of problems with drivers getting shifts on time and besides, how can owners

    Profit from a medallion they never invested in the first place, in other

    Words, owners have no legal standing And never did, that's why Healy coninues

    To bloviate on and on......................Til the break of dawn..............

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  23. Say "Goodbye" to your integrity, John.

    This is a pretty amazingly dreadful fantasy. Apparently you would wreak your revenge for your own situation, in which you personally acknowledge you will never get a medallion under the present rules, by revoking all the other drivers' medallions. Sour grapes for you, no grapes for anybody else. So, if you can't have one, I guess you reckon that you should just advocate Newsom's and Heinecke's original idea, and not let anybody have one... even if they had paid in years, decades even, of sweat equity! Tell the public it's in their interest, bring them on board to the MTA corruption?

    You told me you originally started the "single operator," or more accurately the "gypsy cab" idea because it was a way for you yourself to get a medallion, and that later you realized you wouldn't even get one, but you led me to believe, I mean you told me, that you went on with the fight for the sake of other drivers. Now we know who you're fighting for. I guess that now that you know you won't get a medallion after all the work you did for Heinecke, you've thrown in the towel to him.

    The extremity of this position bespeaks a sell-out to your now obvious boss on the MTA Board.

    Your credibility on the TAC has ceased to exist: you are no longer advising the MTA from the industry: you are trying to guide the industry for the MTA. You have often said you plan to leave the industry - this latest post makes it sound as though you are just passing through, to do the worst possible business for the MTA... to strip us of our futures and make all our work into an MTA income stream... perhaps on your way to your next assignment as somebody's agent?

    After all, Heinecke publicly thanked you for all you have done, helping him create the gypsy cabs. That was at the MTA Board meeting where the drivers got forty cents, and the Board created over 100 new medallions. It's on tape forever for all to see and hear.

    The best thing that can be done for the public is to create Open Taxi Access. Somebody will always believe it is "in the public interest" to create a slave force, but it's elementary ethics not to dispossess the drivers. You've reached the absolute edge of your credibility as an independant representative of the drivers' interests. I want everybody to know that I believe John Han is working for the MTA.

    John, right now you don't sound like the friend of any patient, hard-working and long-suffering driver... with or without a medallion.

    ReplyDelete
  24. Christopher,

    I don't get paid by the MTA and I'm not working for the agency.

    You're absolutely right that I proposed the single operator medallion as a way for people who most likely could not get a regular medallion to have a kind of second best opportunity. Of course I offered this idea based on my own self-experience, thinking a single operator would be a good opportunity for comparatively younger drivers a chance to own their own cabs and operate them like a business when they want.

    When it was suggested that single operators should go to the most senior drivers on the A-card list, I could not think of any moral argument against that. That is a compelling moral argument and fair is fair. Therefore, I decided I would continue to support the single operator nonetheless, regardless of whether I could or could not have one.

    There is no secret, and there is nothing to hide here.

    I do not work for the MTA. Do a public information request and see if I'm on the payroll. It's simply not true. I should also point out that while you were openly opposed to single operators, most of the attendees at town hall meetings expressed a support for them, and the TAC overwhelmingly voted in favor of recommendations that included Single Operators.

    Your assumption that my suggesting municipal medallions would be out of revenge is understandable, given the timing of this article. But actually, I've believed in the idea of municipal medallions for quite a while.

    I doubt anyone would recall but myself, but I in fact quietly spoke up at one of the earliest town hall meetings for the Medallion Sales Pilot Program, (before I ever proposed the Single Operator), and suggested medallions be converted to municipal holder-ship, and revenue be re-invested into Drivers’ health care benefits and pensions.

    But in a room full of medallion holders, this obviously had no legs then, as medallion holders would viscously oppose it now.

    The reason I began to think of municipal medallions is not because I personally may or may not get a medallion, but because of driver friends telling me that they could only get a 3am-1pm shift, or 9pm to 9am shift, even if those are not the hours they hoped to get. These kinds of shifts exist because of medallion holders commanding their own shifts, leaving companies to fill the undesirable remaining shifts with non-medallion drivers. If the MTA were medallion holder, shifts could be more uniform.

    Continued on next comment...

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  25. ... continued.

    The summary of my idea is this –

    Non-medallion taxi drivers are classified as independent contractors. But it is debatable whether they actually function like true proprietors, or whether they may be more like outsourced public transit workers with no benefits.

    If the MTA were medallion holder and received the revenue, but acknowledged the bulk of the City's taxi drivers as outsourced public transit workers, and therefore, were to re-invest the medallion revenue into a Drivers' health benefits and pension, it could vastly help to ameliorate the complications of questionable independent contractor status, and medallions would benefit a far greater percentage of working taxi drivers than just the medallion holders themselves.

    In 2014, “Obama Care” will most likely kick in, requiring all Americans to have health insurance. This plan could allow taxi drivers with no health insurance, who are already low-income to have subsidized health coverage through a self-funded, municipally administered program.

    Alternatively...

    If the MTA were medallion holder and received revenue, but DID NOT reinvest into the taxi industry with Driver health care and pension, but instead just put 40 plus million dollars in annual revenue from the taxi industry into its coffers, that would be unacceptable, to say the least.

    Simple as that.

    But with re-investment, many more drivers could conceivably look forward to greater health coverage and retirement options regardless of whether they have a medallion or not. It would be based on time served in the industry.

    With regards to the distribution of cabs, you mention OTA.

    And as for OTA, it is a SECOND BEST alternative to true centralized dispatching. The best thing for distribution of cabs to the public would be true centralized dispatching, with OTA mandated as a secondary item in all cabs. Municipal medallions could most likely subsidize the costs of both items.

    This is what I mean by generating revenue, and then re-investing back into the industry.

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  26. Amen to that John Han, sez Jonny Walker.

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  27. I guess fulkerson expects a free pass on everything because he has PH.D at

    The end of his name.

    Respect is not given, it is earned, sez Johnny walker.

    ReplyDelete
  28. Respect is earned, not whipped up into a frenzy by anonymous falsehoods and insinuations, John Han. Just 'cause you type it doesn't make it true,

    ReplyDelete
  29. Hey John--have you ever given credit to to Tone Lee or others for his or their contributions to the deploymnent of single operator permits, or do you continue to claim that you deserve all credit f for the idea? Let us know.

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  30. John--are you or are you not joined at the hip with the self-promoting Tariq Mehmood? Inquiring minds want to know where you stand.

    ReplyDelete
  31. Hey John, many of us have heard you threaten to leave the industry and are looking forward to that result--any updates?

    ReplyDelete
  32. You and Johnny Walker have quite a mutual masturbation session going here.

    ReplyDelete
  33. Hey John! If you continue to state the obvious can you take credit for the idea? Keep trying, you've done fine so far.

    ReplyDelete
  34. To Anonymous,

    "Respect is earned, not whipped up into a frenzy by anonymous falsehoods and insinuations, John Han. Just 'cause you type it doesn't make it true,"

    - Not sure what "anonymous falsehoods" you're talking about. But speaking of "anonymous", you're posting anonymously. Despite the rude comments directed at me, I allow you to do it to ensure your freedom of speech.

    "Hey John--have you ever given credit to to Tone Lee or others for his or their contributions to the deploymnent of single operator permits, or do you continue to claim that you deserve all credit f for the idea? Let us know."

    - I don't claim ALL the credit, and never have. I was the spark that triggered the conversation. I am what got the enthusiasm started. It took off from their after which others weighed in.

    "John--are you or are you not joined at the hip with the self-promoting Tariq Mehmood? Inquiring minds want to know where you stand."

    - No.

    "Hey John, many of us have heard you threaten to leave the industry and are looking forward to that result--any updates?"

    - Threaten? I have expressed a possibility of leaving the industry. You call this expression a "threat"? It's actually quite flattering to refer to it as a "threat". You're saying my leaving would be considered a loss.

    "You and Johnny Walker have quite a mutual masturbation session going here."

    - Whoever you are, you have just debased yourself to the level of those whom people like you would criticize for posting trashy comments.

    "Hey John! If you continue to state the obvious can you take credit for the idea? Keep trying, you've done fine so far."

    - This is too vague. Be specific to what your referring to, and I'll answer it.

    ReplyDelete
  35. Hey Anonymous,

    I hope I've answered your questions to your satisfaction. Feel free to post comments here as you'd like.

    ReplyDelete
  36. Hey John I hear Hayashi told you in an email that you are full of s*it. How about posting that?

    ReplyDelete
  37. Johnny walker sez,

    " Hey John" must be off his meds.................................

    ReplyDelete
  38. Nice post. appreciable. thanks for sharing.

    ReplyDelete

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