Is Uber the Napster of Transportation?

If you’ve been following the “Taxi App Wars” in the media, you’ll have heard of companies like Uber, Sidecar and Lyft.  A lot of hoopla has been made about this fracas, from people who want to see these new services shut down to those who want to see them dismantle the current system of taxis and limos in most cities.  Both sides make a lot of arguments against the other, and most of these are red herrings.  For example, it is not about monopolies and taxi lobbyists on one hand, and it isn’t about the so-called safety of drivers that don’t have taxi licenses on the other.

The real issue comes down to why the taxi/limo/livery system started and persists through 120 years of history, through multiple phases of deregulation followed rapidly by re-regulation in many cities. Check 1979-1983 Seattle for one example.

Bottom line is this: Grandma needs a ride home from the supermarket on a random-access basis (not just the bus) for a price she can afford.

This one goal of keeping random access ground transit affordable – that cities all over the world come to again and again through history – perturbs the entire “free market” structure that so many pundits around this story suggest: just let supply and prices float and everything will be fine. Not so. Been done. Doesn’t work. Many reasons. Becomes a mess fast.

Regulating prices is not a great way to do things, but in most cities, the number of wealthy people that can bid up the price of a ride exceeds supply, even when supply is liberal. Grandma gets left at the curb. This leads organically to the introduction of price-regulated meters. Once you have meters, you have people tampering with meters. And that leads to the department of weights and measures having to spot-check and certify meters…same as they do the scale at the meat department at the grocery store.

(By the way, who thinks metering rides with iPhones is a good idea? Terrible. Who but a 1-percenter is comfortable hopping in a car, not knowing what the ride will cost, and then relying on a driver’s iPhone to tell him accurately where you are and how much to charge? How long would it take some of our hacker friends to game that? And I don’t know about you, but my iPhone puts me in the middle of the Pacific frequently when I’m standing in San Francisco’s financial district’s tall buildings…do we really want to trust a smartphone GPS with the distance measure used to calculate the cost of the ride?)

Right now we have an unsustainable situation: a group of drivers who are obliged to charge what the meter in their car says, and now a group of drivers who can charge whatever they like (or rather, whatever these services choose to charge without regard to city fare regulations). This cannot stand. Two obvious paths to balancing this equation: 1) eliminate the meter in the taxis and let them charge whatever they want; 2) put validated city meters into Uber/Sidecar/Lyft/etc. Presumably nobody wants to see 2, and with 1, we are back to grandma getting left at the curb. (We’ve done this test…drivers who can get floating bids on a smartphone quickly wait for the higher bids and leave the meter-price rides to someone else…which means nobody. )

Flywheel (full disclosure…I’m a founder and investor) took a long look at this and found a better solution. Because Flywheel provides a cloud-based dispatch system as well as providing a unit in the car and an app for the passenger, it can tell when drivers are turning down “shorts”…what I’m calling the “grandma fare” here. We found a way to essentially turn the practice of picking up grandma reliably and consistently into “table-stakes” for high-bid dynamic priced fares. If a driver wants that airport ride, or the bid-up offer from a high-roller out at club in the Mission on a Friday night in the rain, he better be responding to all his dispatch fares, and not ditching people on the way to pick them up.

I believe this approach, invented by Flywheel at great cost and by listening intently to passengers, drivers, dispatchers, fleet owners, regulators and others since 2008 when the company began as a student innovation project, is the long-run solution to the deep issues that cause so much historic dissatisfaction in city ground transit. It took us three years of really understanding the nuances of city ground transit to figure this out. And once implemented, I believe it will mean more money for drivers, and a reliable ride for everyone from the busy lawyer to grandma.

The CEO of Uber likes to say that he “breaks things to fix them.” Break it to fix it has been tried with taxis a dozen times since the early 1900′s. I’m an innovator and have broken many things to fix them over 25 years in business. But the biggest thing I learned while breaking things is that it is usually a good idea to understand what you are trying to change before you either cause a mess or simply repeat history.

Are the Ubers of the world innovating? Maybe.

But maybe they’re simply destined to be the Napster of transit: the companies we thank for shaking things up, and which are then shaken out.

Take a look at Flywheel. In the long run, I think it is the better approach. I’m biased, of course.

About John Wolpert

Hands-on product planning and strategy executive with Board and capital funding experience. Specializing in conceiving, designing and building new ventures at the international, government, Fortune 100 and startup levels. http://linkedin.com/in/johnwolpert
This entry was posted in Uncategorized. Bookmark the permalink.
  • http://www.facebook.com/mortro Morton Fredrick Weinstein

    I read your piece, and overall, I agree with it. In fact is, the Techno-Gypsies have done us all a great favor. The transformation of urban ground transportation is in process. The disruptors and disintermediators have, at the very least, brought attention to the growing need for transportation services.

  • innosanity

    Here is an exchange of comments from the Slate article I referenced that’s worth re-posting here:

    jencanfield7

    There are validated meters in Uber, SideCar, and Lyft. It isn’t up to the driver what the fare is. It’s pre-metered, and stated on all their websites and inside the apps. I think what you’re doing with Flywheel is smart, getting the cabs on your side vs against you is going to prove a lot easier.

    That being said, you misrepresent these companies. Lyft and SideCar aren’t a built for the 1%. I can take a SideCar across the city for $8, often times cheaper than a cab, and Lyft isn’t much more expensive. Not to mention their model is a by the people for the people driving model… All of their drivers are everyday San Franciscan’s who need jobs. Their drivers are vetted, smart, capable, and a pleasure to ride with, unlike my experience in cabs in San Francisco. I do agree that Uber is the more expensive 1% option you are talking about, but even Uber offers UberX and now Uber ridesharing.

    Again, I think what Flywheel is doing is a great, innovatie idea. And a fresh spin on the transportation problem in large urban areas, but it would be a mistake to paint Lyft, Uber, and Sidecar as

    1. only for the 1%
    2. can charge whatever fare they please – this is simply not true, fares are stated plain and clear on their websites. Sidecar even tells you the cost of the fare before you book the trip.

    —————-
    John Wolpert replied:

    Thanks for the thoughtful comment.

    I like that Sidecar states the cost before the trip is booked. IMO, everyone should. But this is odd in Sidecar’s case, because they make a big deal (importantly) about how the fee is only “suggested.” This, of course, to get around the letter of the law regarding unregistered for-fee livery services.

    To your point about the drivers being great…sure – that was my original point. I’ve never had a bad driver with any of these services. Uber drivers…well, you get what you pay for, and given that the last ride I took cost me $60 from Pacific Heights to Downtown SF, that driver better be terrific. (Note, I took Flywheel back that night on the same route, and it cost me $11.)

    The quality of the drivers (and whether any of them are axe murderers simply because they didn’t get a taxi driver license) is a red herring. Not a factor. Not an issue. That was my point.

    I did make a couple comments about the 1%, but they were not in connection with who uses Lyft or Sidecar. It’s true that – for now – these two options are relatively inexpensive. Remains to be seen how this plays out, but there are historical cases of this kind of unregulated supply making quite a mess of things before cities reasserted regulation and stopped amateur drivers from providing rides for pay. The future is never fixed by the past, but the past should be understood by those trying to change the present.

    Finally, to your first point, there really are no regulated, valid taxi meters in these services. They “meter” with iPhones and set their own prices. It’s not the same thing. (See my point above about the wisdom of letting an iPhone GPS reading calculate the fee.) There are taxi meters installed separately in taxis using Uber-x…though in my experience they don’t use them when booked through that service.

    Last point about Flywheel. You mentioned that it is great in large urban areas. I’d like to point out that large urban areas are where Uber, Lyft and Sidecar are most likely to do ok. Hailo also. Because each of these services relies on building a “two sided market” – both passengers and drivers must be present in critical mass for the system to have value – there is a lot of expense involved. This might be worth it in SF, Chicago and NY. But what about smaller cities and towns? This is where Flywheel shines. Flywheel put 100 cars in Cleveland, San Diego and other cities on the map in a day, and they stayed on the map, because the taxi fleets were using Flywheel’s cloud-based dispatch system to run their business. This means Flywheel can spread to every city and town on the planet faster and cheaper. And I suspect in the long run, that’s where the real benefit will be found…when a business can book travel from anywhere to anywhere and always be sure there are Flywheel cars available where they need them.

  • Pingback: The future of local transportation startups: Is Uber doomed to follow in Napster’s footsteps? | kfarr

  • http://www.facebook.com/ewindsor Elijah Windsor

    Pretty deep, man…