John Davies wrote:
Is buying a Plate in today’s uncertain climate, a Gamble or a Calculated Risk?
It has been suggested that speculating large amounts of money on buying a plate in today’s climate of uncertainty is still a wise investment.
However, when does an investment become a Gamble and when does it become a calculated risk?
For those amongst us who like to have control over our own destiny it may appear that investing large amounts of money on something that we have no control over may be too much of a Gamble.
In today’s climate of uncertainty with regards to licensing bodies restricting taxi numbers should we discount what logic tells us or should we gamble on an uncertainty?
Do we calculate on the “probability or possibility” that a council will never de restrict numbers?
When calculating the probabilities what information should we take on board in reaching our decision?
Do we take on board the fact that there is legislation that narrows a licensing authorities powers when determining a numbers policy, Do we need to take into consideration the OFT report which instructs councils to de restrict numbers, should we consider the Transport select committee report which says a council is best judged to determine a numbers policy and finally should we take on board the comments of the Governments reply to all these reports.
Whether it be a long term or short term investment, at the end of the day you want to know how secure your investment is going to be. Therefore it is incumbent on the investor to define any risk attached to the investment.
Most people will invest their hard earned cash on the probability that their money is safe. Not many people will take a risk that amounts to a Gamble, especially when the likelihood is losing all.
So what about buying a plate in today’s climate? Buying a plate has always had an element of risk about it but since 1986 those risks have become even more pronounced.
In the early years of the 85 act becoming law, there was considerable uncertainty as to how to apply the definition of unmet demand. It was because of this uncertainty that several councils deregulated numbers.
A degree of stability came about when Lord Justice Woolf said that a Council can refuse to issue licences until it had measured demand. Lord Woolfs ruling was counter to the ruling of Justice Nolan who had previously made it clear that a council “who was not satisfied of the demand, must issue licences until it was”.
So with L J Woolfs ruling we had a little clarity to go on in the years preceding the recent OFT report.
The Government guidance for Licensing Authorities which is supposed to be issued soon may not be what some people expect. So how does this guidance effect ones ability to make a calculated judgement on whether to buy a plate?
Could one conceivably contemplate buying a plate without first knowing what that guidance might be? Would it be a complete Gamble to buy a plate without first knowing how high the Government is going to raise the bar for councils who wish to restrict numbers? Would it be “reckless” to invest large amounts of money without first knowing all the facts?
So we come to the element of doubt. How do we define a Gamble in these circumstances? Does a gamble mean not knowing the outcome of an event or does it mean having no control over the event which is taking place?
It may be suggested that both those definitions apply to the word Gamble but is there a correlation with those two definitions and buying a plate?
Applying the first definition, we have to ask ourselves do we really know that a person in authority will never de restrict numbers either in the long term, short term or intermediate term?
The obvious answer to that question is that we do not know. So do we invest our money when not knowing the answer to that question?
The second definition is closely related to the first because it asks the question do we have any control over the decision to de regulate numbers?
There may be two trains of thought on this definition because there may be those who think they do have a degree of control on the outcome of de restricting numbers. On the other hand, I assume the majority of people will think they don’t have control on the outcome of the decision to restrict numbers.
If you have a substantial amount of money to invest you may think that having no control over the item you are investing in is a bad risk. So when does that risk become calculated?
Is it calculated by virtue of taking into consideration the likelihood of losing all or part of your investment or does it become calculated when after weighing up all the options, you realise that the risk is not a risk at all, but a pure Gamble of which you have no control over?
Perhaps we can define “risk” as meaning the chance, likelihood, uncertainty or probability of something happening. We can expand on that and say that investing money in a plate has an element of all the above.
Risk could refer to a range of possible outcomes especially if money was invested in a venture which supported several different scenarios. However, when buying a plate, there is only one scenario that will benefit the investor and that is through a council restricting numbers.
How important is it to calculate a Risk? What importance should be placed on the calculated likelihood of an unacceptable event occurring.
The Chance element refers to the likelihood or probability of something occurring. Is there enough evidence to support the view that something is going to happen or nothing is going to happen at all?
The Uncertainty element is borne out by the fact that no one knows which Authority is going to be next in line to de limit numbers. All we know is that it will happen.
Is the risk and uncertainty of buying a plate worth the sleepless nights you might have from now until such time as you feel completely satisfied that the money you have invested in a plate is completely safe? Can you ever be certain that that day will ever come?
In industry, Engineers, mathematicians and other experts have devised many tools to help us understand uncertainty and to evaluate and mitigate risk but can we apply those tools to what in theory in today’s climate may well be a Gamble?
Each individual will no doubt have his or her own mitigating risk factors. It could be anyone of number things but at the end of the day it is that mitigation which should undoubtedly lead to your ultimate decision.
I have made references to the word Calculated and for good reason. Most everything we do in life has an element of calculation attached to it. In most peoples life’s a Gamble is not an everyday occurrence. Therefore when we calculate something we assume that it has been “carefully thought out in advance”. Therein lies the tool with which one should apply to buying a plate. For anything that is not thought out becomes a complete Gamble or high risk.
You can equate Gamble to a smoker, the smoker gambles with his health because he is aware that smoking cause’s cancer, it tells us on every packet of cigarettes we buy. So the Smoker is taking a gamble that the cigarettes he smokes won’t affect his health in the long or short term.
We all have access to the same information for evaluating the risk factor of smoking but whereas some of us will calculate that the risks far outweigh the benefits, the smoker no doubt thinks that the pleasure he derives from smoking is worth the risk of an early grave. Now I assume that is one of the ultimate gambles.
To conclude this rather large post I would just like to say that buying a plate has a certain amount of risk and uncertainty attached to it. The financial rewards over someone renting a track or being on a private hire circuit are very negligible indeed.
In my opinion you should only invest large amounts of money when you know that the risk factor is very minimal or even zero. If you are offered a plate ask the person who is selling the plate his reasons for selling. If you feel the person is selling their plate because they are uncertain of the future then you should also take on board those reservations.
Never think for one moment that de restriction may never happen because it can, it does and it most likely will. The decision making is entirely up to the person doing the buying but whether the decision is calculated or otherwise it’s a decision you’re going to have to live with.
Best Wishes
JD
Have you abandoned the other thread where this topic was first raised?
Is this longwinded drivel just to save face ?
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