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Why Invest in Lyft or Uber? What Am I Missing?

Posted on April 16, 2019 in General

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?

 

Interview by “The Rideshare Guy”

Posted on April 9, 2019 in Interviews

Harry Campbell, who calls himself “The Rideshare Guy,” runs a blog and podcast specifically for Uber and Lyft drivers.  In a new podcast, he interviews me a broad range of topics, not just Uber and Lyft.  He gets me going on how transit works, and how I got into the business, in addition to the effects of rideshare.

You can listen right here.  We get going at 3:20.

US Congress Considering Freedom-Based Measures of Project Success

Posted on March 18, 2019 in Access, Mobility, Philosophy

It’s hard to capture what good news this is.  Through a bipartisan bill, Congress is seriously considering a plan to give more weight to how proposed transit investments improve access to jobs and opportunity.  The bureaucratic word for this is accessibility, but I like to call it physical freedom, because the presence of meaningful choices in your life lies in whether you can get to them in a reasonable time, which is exactly what this measures.  From the Transportation For America website:

The incredibly blunt metrics that most planners or communities have used since the 1960s, like overall traffic congestion and on-time performance for transit, paint a grossly two-dimensional picture of the challenges people face while trying to reach jobs and services. They don’t provide sufficient information for agencies to make accurate decisions about what to build in order to best connect people to the places they need to go. These 1960s metrics lead to singular and expensive solutions (like highway expansions), while often failing to solve the problem or even creating new ones.

Today, precise new tools allow communities to accurately calculate accessibility to employment opportunities, daily errands, public services, and much more. These tools allow states and MPOs to better understand where people are traveling and to design transportation networks to maximize the ability of people to travel. It also allows states and MPOs to optimize their transportation networks to utilize all modes of transportation and even to understand how their investments interact with land use policies.

We use these tools all the time in our bus network redesigns, though we are limited, by available data, to studying access to jobs.  It is great to see people working on better data layers to capture errands, shopping, and so on.  I am not sure how much of this granularity is necessary, but it doesn’t hurt.

Implicit in this news is the idea that ridership prediction could decline in importance, which would be great news.  We are much too deferential to predictive algorithms for things that may not be predictable, such as human preferences and attitudes 20 or 30 years from now.

There’s one other caution.  When planning fixed infrastructure investment, hard thinking has to go into what facts from today are assumed to be permanent.  For example, when we talk about access to public services, will we just analyze outcomes based on the often terrible locations of these services, thereby enabling continued terrible location decisions?  If we dare to predict better urban form in response to public investments, on what basis will we predict that?

The conversation about access therefore needs to reflect on what aspects of urban form and location are likely to last for decades, like the larger scale urban form and the likely trip generation it implies.   (We may build more dense urban fabric, but we are unlikely to tear it down.)  This is another reason why too much granularity could distract us; it leads us back into obsessive descriptions of the present, some aspects of which could be different next year.

So this is difficult philosophical stuff.  I’m trying to grapple with it in the next book.  Feel free to nag me about how it’s going!

Video: My 2018 RailVolution Keynote

Posted on March 9, 2019 in Video

My keynote at RailVolution in Pittsburgh last fall is now available on video below.  It’s one of the best I’ve done in a while, pulling together most of what’s on my mind these days.  Enjoy!

Greater Salt Lake City: Your Choices for Transit Service

Posted on March 8, 2019 in Salt Lake City

Photo credit: Garrett, Creative Commons Attribution 2.0.

Utah Transit Authority (UTA) has launched Service Choices, a public conversation about the future of bus service in the big “Wasatch Front” metro area that includes Salt Lake City, Provo, Ogden, and everything around and between them.  We worked with UTA to develop the survey, and we’ll be helping them figure out how to develop a new vision for the bus network based on what they year.  Salt Lake Tribune covers the kickoff here.

The big question, of course, is the ridership-coverage trade-off.  Utah Transit Authority covers a huge area, with many suburban cities at a range of densities.  Spreading bus service over all of that area (to meet a coverage goal) would spread the service very thin, meaning poor frequencies and thus a service that not many people would find useful.  Concentrating service in high-density places, so that you can run high frequency there, is the key to a ridership goal, but that means no service to vast low-density areas.  We explain it in detail here.

As in the concurrent Cleveland study, we’re also asking about how coverage service should be deployed.  Given that UTA is going to run a certain amount of predictably low-ridership service for non-ridership reasons, should the priority for that service be:

  • addressing severe needs and equity?  This would focus coverage service on places of low income, high senior population or other indicator of need.
  • serving new horizontal development?  This would put service into newly developing area while they are still under construction.
  • providing a little service to everyone?  This would spread the service thinnest of all, but responds to the “we pay taxes too” argument for service.

The online survey is the most powerful way for lots of people to give us feedback, but there will also be putlic meetings and other outreach events, which will be posted here.

Please encourage everyone you know in the greater Wasatch Front area to engage with this study.  This outreach is not just for bus riders!  UTA works for every resident, every business, and every taxpayer, so everyone’s opinion counts.

 

Notes on SimCity at 30

Posted on March 7, 2019 in Simulation

Car oriented development looks a lot more viable when you hide all the parking!

Yes, the first attempt at a comprehensive city planning game, Sim City, is 30 years old.  Jessica Roy in the Los Angeles Times has a good piece on how the game helped turn people onto city planning …

Along the way, the games have introduced millions of players to the joys and frustrations of zoning, street grids and infrastructure funding — and influenced a generation of people who plan cities for a living. For many urban and transit planners, architects, government officials and activists, “SimCity” was their first taste of running a city. It was the first time they realized that neighborhoods, towns and cities were things that were planned, and that it was someone’s job to decide where streets, schools, bus stops and stores were supposed to go.

… while also reinforcing some bad 20th century ideologies.  Sim City …

  • conceals the impacts of parking, thereby making car-dependent development look more functional and attractive than it is.
  • requires single-use zoning.  You can’t live above your shop, or have a grocery store in your office building.
  • requires car access to every building.  Pedestrianized urban cores are impossible, no matter the density.
  • treats transit very superficially, not allowing the user to specify routes and frequencies, and giving the misleading impression that any kind of transit, anywhere, produces some vague benefit.  Thus there is nothing to stop you from common mistakes like building high density in culdesacs, where efficient transit could never get to it.

Recently, I did a quick look at available iPad city planning games.  I tried Megapolis, Designer City, Pocket City, and Sim City: BuildIt.   They’re all built on the same four fallacies, and their handling of transit ranges from comical to nonexistent.  (Sim City BuildIt actually starts with a greenfield freeway interchange, leaving no doubt what kind of city they expect you to build.)

My past articles on SimCity are here, here, here, and here.   Sim City gets credit as a pioneer, but it’s run its course.  I hope we see more planning games that try to get transportation right, and games that try to do transit in particular.  If you’re working on one, let’s talk!

  (Photo: BLDGBLOG)

 

Cleveland: Kicking Off a Transit Plan

Posted on February 28, 2019 in Cleveland, General

(Photo:  GCRTA)

I’m just back from a week in Cleveland, where I introduced our new transit planning project to members of the transit agency board and began the process of working with staff to develop network concepts that will help the public think about their choices.  Press coverage of my presentation is here, here, and here.  The local advocates at Clevelanders for Public Transit are also on the case.

Cleveland is in a challenging situation.  The city has been losing population for years and most growth has been in outer suburbs that were designed for total car dependence.  Low-wage industrial jobs are appearing in places that are otherwise almost rural, requiring low-income people to commute long distances.

All this is heightening the difficulty of the ridership-coverage tradeoff.  The agency faces understandable demands to run long routes to reach remote community colleges and low-wage jobs, but because these services require driving long distances to reach few people, they are always low-ridership services compared to what the agency could achieve if it focused more on Cleveland and its denser inner suburbs.   There’s no right or wrong answer about what to do.  The community must figure out its own priorities.

To that end, we have helped the agency launch a web survey to help people figure out what the agency should focus on.  In April, we’ll release two contrasting maps that illustrate the tradeoff more explicitly, and again ask people what they think.  Only then will we think about developing recommendations.

If you live in Cuyahoga County, please engage by taking the survey!

 

A US Density Revolution?

Posted on February 27, 2019 in Frequent Networks, General, Urban Structure

These two things are connected!

In major cities and some states across the US, the tide seems to suddenly be turning in favor of density.  James Brasuell at Planetizen has a thorough survey of these efforts.  Read the whole thing.

An inescapable trend emerged in recent years and months: a large and growing number of communities are now engaged in comprehensive plans and zoning code revisions, and they’re doing that planning work in the hopes of creating a future that is fundamentally distinct from the 20th century model of planning.

But the revolution Brasuell describes is about much more than planning documents.  The story is political:  In response to the housing crisis, both city and state politicians are producing legislation that makes it easier to build densely by:

  • reducing off-street parking requirements, which makes denser development pencil out and can also make units more affordable
  • streamlining transit-oriented development, including around frequent bus corridors and
  • most controversially, allowing more density in neighborhoods that have long been legally protected as exclusively for single family homes.

All this is great news, not because everybody wants to live at high density but because more people want it than can currently afford it.  The extreme cost of living in dense and walkable cities is the sound of the market screaming at us to build more of them, and finally that’s becoming possible.

From a transit perspective, I have one note of caution when it comes to upzoning absolutely everywhere.  Most cities have places that are hard for transit to get to, and where a few more people will create transit demand that is very expensive to serve.  Sometimes they are physically hard to reach: long cul-de-sacs, squiggly streets, etc.  But sometimes too they are so sparsely populated that they are poor transit markets and adding a few more people isn’t enough to make them better.

Gentle upzoning of single-family areas — allowing second and third units on formerly single-family parcels — is mostly helpful, but not always in these tough spots.  In any case, serious density must be organized around the frequent transit network — bus and rail — so that more people end up in places where transit can be really useful to them.   Don’t know where yours is?  There should be a map of it somewhere, reflecting a policy adopted by both your transit agency and your city government!  It should be on the wall in both the transit agency and the city’s planning and traffic offices.  (See Chapter 16 of my book, Human Transit, for more on this tool.)

Transit is expensive.  It succeeds when it can run in straight lines through dense and walkable places, so that it has enough ridership over a short enough distance that it can afford high frequency.  A policy frequent network, agreed upon by the transit agency and the city government(s) and manifested in both zoning and traffic planning, was critical to jumpstarting the growth of transit in Seattle, which is now one of the US’s great success stories.  It could make a difference for your city too.

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