Two weeks ago, Lyft filed an affidavit in its lawsuit opposing New York City’s regulations aimed at increasing for-hire vehicle driver pay. The new minimum requires drivers to earn $17.22 per hour after expenses, up from $11.90 per hour. In that, Lyft argued it raised prices in order to comply with new pay rules, but this resulted in a “significant decrease” in rides. The company’s argument, as summarized by the newsletter Oversharing, is as follows:
Lyft believes that paying drivers higher rates, as mandated by the taxi commission, requires either that the company absorb enormous losses or raise rates on the passenger side, which depresses demand, which means less work and ultimately less money for drivers, undercutting the goal of the pay rules in the first place.
In other words: Lyft cannot afford to pay its drivers a living wage, or it would “absorb enormous losses.”
This is a remarkable argument for a company to make about its own business model in a court filing. Essentially, it is describing the exact logic people have been using to warn that the other shoe will eventually drop on ride-hailing apps: it’s not a good business.
The status quo Lyft is trying to restore can only exist because the company has received $4.9 billion in venture capital money over 18 funding rounds, according to Crunchbase, which goes towards directly subsidizing the actual cost of each ride.
Lyft has never made money; not in the way that, say, Amazon made massive profits on one part of their business but re-invested it in others. Lyft has been providing a service below cost and made up the difference with other people’s money, all in the hopes that some day they’ll go public and investors can cash in.
Well, today is that day. Lyft became the first ride-hailing company to go public, with a market value of about $30 billion (as of this writing, the share value continues to rise).
All that stuff about never making money, having no viable path to profitability, and its business being fundamentally threatened by the most basic worker wage protections—none of that apparently matters.
The only way to make any sense of this is to understand that Lyft is full of shit. The company has posed as one kind of business in public while operating like a completely different one in practice.
In public, it’s tried to be a friendlier, nicer Uber, one that cares about improving the environment, reducing traffic, and helping build livable cities. But it has not helped any of these goals. It has actively made some of them worse. And now, it’s execs, investors and others are extremely rich.
Lyft’s co-founders Logan Green and John Zimmer often say their goal is to reduce car ownership. On Bloomberg TV this morning, Zimmer claimed Lyft riders have ditched 300,000 cars to live the ride-hail lifestyle.
Green echoed this objective and plainly stated, “We see competing with the car parked in your driveway as the primary goal.”
First of all, if that’s Lyft’s goal, then it is failing. Car ownership is actually rising in the cities where Uber and Lyft are most heavily used, exceeding population growth in most of them. Certainly, these are partly due to trends outside of the company’s control like low gas prices. But Lyft has also been helping prospective drivers get access to cars for years.
But more to the point, Green’s phrasing is revealing in how Lyft wants to appear “anti-car” while missing the point on why reducing car usage in crowded cities can be a worthy goal. A car sitting in a driveway is not harming the environment, or worsening traffic. But cars constantly in motion, circling cities, clogging up roadways and making traffic vastly worse, including in some of the most congested roads in America looking for passengers—you know, what ride-hailing cars do every single hour of every single day—do harm the environment and worsen traffic.
This is precisely the point researchers have been making for years. In 2017, Regina Clewlow, a transportation researcher with UC Davis, told WIRED it doesn’t matter who owns the car: “It matters how many miles are driven on the road. So me swapping out a trip that I would have driven myself for a trip that I’m riding in is still the same number of miles.”
In fact, there’s growing evidence that ride-hailing creates more vehicle miles travelled than private car trips because of what’s known as “deadheading,” or the time for-hire vehicles are on the road without a passenger, either in route to pick one up or simply circling until they get a fare. Transportation researcher Bruce Schaller has published multiple studies finding that deadheading wipes out any potential benefits from reduced car ownership or pooled rides.
Lyft also likes to argue it’s not in competition with public transportation, but is instead complementary. One of its main corporate responsibility initiatives was dubbed “Friends With Transit” to highlight how people can take Lyft to and from transportation hubs. This was yet another urban-friendly corporate message out of step with the company’s real-world impact.
Ride-hailing services like Uber and Lyft appear to be replacing not so much other car trips, but public transit trips. The ride-hailing companies have played key roles in contributing to a near-universal decline in public transportation usage across the country even as populations in dense urban areas have risen.
A University of Kentucky study estimated that in San Francisco, Lyft’s home city, ride-hail companies have reduced bus ridership by 12.7 percent since they entered the market in 2010. A 2018 study by the Metropolitan Transportation Authority in New York, which has seen declining ridership on the subway since 2017 and the buses since 2012, starkly presented the symmetry in these trends with for-hire ridership growth:
Certainly, the subway and buses in many cities, including New York and Washington, D.C., have been a mess. And people are resorting to Uber and Lyft, despite the increased cost, partly as a result of poor service.
But Lyft can hardly proclaim innocence here. At the same time as they were running their Friends With Transit campaign, they were also paying for ads on public transit about how much better Lyft is than taking the subway, including one in a New York subway station that read “They say to dress in layers. It’s okay if one of those layers is a car.”
The company’s corporate responsibility messaging—or, as Zimmer put it in an interview with Time in 2017, “We’re woke. Our community is woke, and the U.S. population is woke.” Again, the appeal is basically being Uber, but with less obvious scumbag shenanigans that marked that company’s era under former CEO Travis Kalanick.
But this doesn’t scan with Lyft’s actual behavior. Aside from fighting the wage rules enacted by the New York Taxi and Limousine Commission, Lyft joined Uber fighting regulations in Austin, encourages drivers to listen to anti-union podcasts, supported efforts to kill a Seattle ordinance that would allow drivers to unionize, and opposed California legislation that required 100 percent of passenger miles in ride-hailing vehicles to be in zero-emission vehicles by 2028.
Some of its “woke” practices are really just ways to allow its riders to do woke things through the company, like rounding up fares to the nearest dollar and donating the change to the ACLU.
Lyft and Uber fill specific needs in cities; mainly, making it easier to go out drinking without driving or avoiding the hassle of parking. And the convenience of having a car on demand cannot be discounted, nor can the Lyft or Uber rides that have kept people from driving drunk, for example.
These are worthy and important goals, but they’re not, in themselves, billion-dollar ideas, mostly because those services already existed.
But ending car ownership? Or, as Green put it on Bloomberg TV when asked what the company’s five-year vision is, providing “transportation as a service?” That could sound like a billion-dollar idea, to a certain kind of person, a person who has never taken a bus.
Given the company’s valuation, it’s hard to interpret this as anything other than a resounding success for Lyft. Despite never making money and failing to accomplish any of the corporate goals they have outlined, they are now billionaires. They bluffed and bullshitted their way to $87.24 a share and a roughly $30 billion valuation.
And they’ll be back in New York court soon arguing why they can’t pay their drivers a minimum wage.