Author Archive | Jarrett

Uber and Lyft — especially Lyft — want you to think that they are partners of public transit, eager to help more people get to rapid transit stations.  Lyft and Uber have both created partnerships with transit agencies to provide “last mile” service.  When people talk about the “last mile” problem of access to transit (a problem that exists mostly in suburban areas or late at night) Lyft and Uber are eager to seem part of the solution.

I would like to believe this.  Here are two reasons I don’t.

1.  Uber/Lyft Drivers Don’t Want Short Trips

First, no Uber or Lyft driver really wants to offer a “last mile” because a mile is too short a trip to make sense to them.  The hassles of each trip are constant regardless of the trip’s length, so long trips are always preferred.  In the old days of taxis, whenever I booked a taxi ride to a transit station, the driver always pitched me to give me a ride all the way to my destination.  And if I approached a long taxi queue at a suburban rail station and told the driver I wanted to go a mile, he’d be unhappy to say the least, because he spent a lot of time waiting for my fare.

That’s why the partnerships between Uber/Lyft and transit agencies for “last mile” service inevitably involve public subsidy, which means that they compete with other kinds of transit service for those funds.  (This can be OK if transit agencies have really decided that this is the best use of funds given all of their other needs.)

2.  Uber/Lyft Drivers Can’t Find Transit Station Entrances

Uber and Lyft drivers mostly use mapping software that can’t find many transit station entrances.  If connecting with transit were a critical part of their business, this would have been fixed by now.

The nearest rapid transit station to my home in Portland (Bybee Blvd) looks like this:

This is a typical suburban arrangement (although this is not really suburbia).  The station is alongside a highway (labeled McLoughlin Blvd.).  The pedestrian access to the station is from the overpass. The little roofs are the elevators and stairs.

But the mapping apps think that the station entrance is on the highway.

So it is impossible to call Uber or Lyft to this station, because the software tells the driver to go down the highway, where all they’ll find is a fence.  I can text them to correct it, but not all drivers pay attention to texts (nor should they, while driving.)  And even if I correct it, I’ll then wait an extra 10 minutes as they get themselves turned around and navigated to the right spot.

This is the example I deal with all the time, but I’ve found many suburban rail stations in many cities where drivers don’t have clear directions about station locations.  For example, call Lyft or Uber to Van Dorn Metro Station in Alexandria, Virginia, and you can expect the driver to wander all over the adjacent interchange.

Some people clearly need to go to work accurately coding the location of every entrance to every transit station, but it’s clearly not being done.  Why not?  It must not be that important to these companies.

So Do Uber and Lyft Want to Go to Transit?

It makes sense that Uber and Lyft would want to do long trips to rapid transit, more than a few miles.  For example, in San Francisco, Uber and Lyft do a good business to regional rapid transit stations (BART and Caltrain) but since each system has only one line in the city, these can be trips of several miles (often competing with the abundant local bus and light rail system).

And Uber and Lyft certainly want to be subsidized to do more “last mile” work, via partnerships with transit agencies.

But the drivers’ inability to find transit station entrances — and the fact that this problem has been tolerated for years — is what really decides it for me.  Companies that really want to connect with transit would have made sure that they can navigate a driver to any entrance of any rapid transit station.  But they don’t.

Lyft has completed its Initial Public Offering, and at this writing the price has since fallen 35%.  Uber’s IPO is expected soon.  Both will now be publicly traded companies, reliant on many people’s judgments about whether they can be good investments.  Uber loses billions of US dollars every year, while Lyft, which is smaller but growing faster, is getting close to losing $1 billon/year for the first time.

Why invest in these companies?

Anyone who says “Amazon lost money too at first” is just not thinking about transportation.  Amazon can grow more profitable as they grow larger, because they can do things more efficiently at the larger scale.

Uber and Lyft are not like this, because their dominant cost, the driver’s time, is entirely unrelated to the company’s size.   For every customer hour there must be a driver hour.  Prior to automation, this means that no matter how big these companies get, there is no reason to expect improvement on their bottom line.  Any Uber or Lyft driver will tell you that these companies have cut compensation to the bone, and that they already require drivers to pay costs that most other companies would pay themselves, like fuel and maintenance.

If Uber and Lyft could rapidly grow their shared ride products, where your driver picks up other customers while driving you where you’re going, that could change the math.  But shared ride services don’t seem to be taking off.  My Lyft app rarely offers me the option, even when I’m at a huge destination like an airport, and when they do it isn’t much of a savings, which suggests that it’s not really scaling for them.

Of course Uber and Lyft could also go into another business, such as bike and scooter rental, but in doing that they’re entering an already crowded market with no particular advantage apart from capital.  The single-customer ride-hailing is the essence of why these companies exist, and there’s no point in investing in them unless you think that product can succeed.

Please correct me if I’m wrong, but it seems to me the possible universe of reasons someone would invest in these companies is the following:

• Confusion about the basic math of ridehailing, outlined above.  Hand-waving comparisons to Amazon are a good sign that this mistake is being made.
• Extreme optimism about Level 5 automation, which would indeed transform the math by eliminating drivers.  I no longer hear many people saying that commercial rollout of Level 5, in all situations and weathers, is imminent, as many people believed around the time Uber and Lyft were founded.   (And no, it makes no sense to have a huge crew of drivers ready to take the wheel only when the weather looks bad.  Nobody can live on that kind of erratic compensation.)
• A naive belief that if you love a product, or find it essential to your own life, it must therefore be a good investment (a rookie investing mistake).
• A belief that while you don’t believe any of those three things, enough other people do that those people will drive the price up, and you can get out before they discover the truth.  If this goal were intended clearly and honestly, it would be Ponzi scheme.  So surely it can’t be that.

So I must be missing something.  What am I missing?

The Orlando Economic Partnership‘s Alliance for Regional Transportation has invited me to speak at a lunch event this Thursday, March 14.  Admission is $40, but they apparently feed you.  Details and registration here.