Micro Enterprises from two continents

Continuing on my micro-entrepreneur story line, I was recently in New York and had an interesting conversation with the cab driver on the way to the airport.  Talking to him was interesting as it gave me an opportunity to compare him with a similar service provider from India, a local autorickshaw driver.

First the story about the New York cabbie.  Kwak was a great person to chat and told me all about his life & family on the 40 minute drive from Manhattan to Newark. He is an immigrant from Ghana and has been working in New York for 20 years. He had saved some money and returned to Ghana to start a business.  There he hit upon the idea of buying a gold mine in Uganda, which he did. No small timer, our man. But after two years of hard work and running through all his savings, he had shut to down the business with no gold in sight.  So he then returned to New York and the only job he could get was driving a taxi cab.  He is about 60 years old and drives from 4pm to 2am every day.

The economics of his business:

On average he pays US$135 / day for leasing the cab and US$20 for gas.  The least profit he takes home is US$100 and on a very good day he takes US$250.  So on average he takes home $2500 – 3500.  He pays $1000 for his apartment.

Assuming he gets 10 miles a gallon at US$2.60 a gallon.  On the revenue side, there is a fixed initial price of  US$2.50 and 40 cents for every 1/5th mile plus a bunch of surcharges. .  Assuming a typical trip of 2 miles, fare  will be US$ 6.50 and gross profits of US$5.98.  So make the lease payment, he has to make 22 such trips or drive 44 miles.  Assuming a US$1.50 tip / ride, he makes about US$33, still below his target of US$100 / day take home.

He told me he has been able to afford a laptop, a desktop and a media player.  The best part is he is always talking to support guys on the phone in India for problems with his computer.  Kwak has some form of group health insurance (though it is not great ) and was able to educate his kids through high school.  Now they are in college and I am not sure how that is being financed.

The Indian Side of the Story

Now the Indian autorickshaw (autos for short) driver.  I ride around in these a lot as they are always available and better than waiting for my driver.  All autos in Bangalore run on compressed natural gas and a 3 wheeled with the top covered and open sides.  A typical auto driver leases the vehicle for Rs. 150 / day (US$3).  Gas costs Rs. 35 / liter ( 75 cents) and runs for 10 kilometers.   So with a variable cost of Rs. 3.50, and per k charge is  Rs. 7, an autodriver needs to drive at least 42 kms a day to break even.

I think both the NYC cabbie and the Bangalore auto driver have a tough life.  A couple of key differences, the NYC cabbie has health insurance.  I have spoken to several auto drivers who live a hand-to-mouth existence.  During the swine flu scare in Bangalore, they all complained about how this could destroy their lives.  These guys cannot afford to fall sick, or else their families cannot eat or they cannot make daily payments to vendors and debtors.  So their health is such a critical aspect of their existence.  Secondly there are not peak hour or traffic delay surcharges in Bangalore, which are in place in NYC.  These are important as they account for the time and cost incurred by the auto driver.

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