Market transitions, Uncategorized

Neither Uber nor Lyft believe sharing is the future

lyft-188_2… at least for cars.

Uber is well-known for having pushed autonomous vehicles. And when it first floated the idea, somewhat bemused onlookers wondered how this fit with their short-term goals of attracting drivers. But when Uber set up a major R&D facility in Pittsburgh — gutting Carnegie Mellon’s computer science department — it seemed they were serious.

Along the way, Elon Musk released his updated Master Plan which included the idea of autonomous vehicles being shared through some market. Musk’s vision there was standard sharing economy — people would own their cars and they would rent them out. It wouldn’t be an employment opportunity but it would be an asset sharing opportunity much as AirBnB allows sharing of accommodations.

However, the model changed fundamentally when Lyft got into the game. The other day, Lyft co-founder, John Zimmer released his vision for the future. It was predicated on the autonomous vehicle future and, in particular, how this would reshape cities. He noted, as sharing economy start-ups often do, that the average vehicle is used only 4% of the time and parked the other 96%. This was surely economically efficient. Wouldn’t it be better to up that use ratio dramatically if not to save the cars but reclaim their footprint.

Then came the kicker:

Last January, Lyft announced a partnership with General Motors to launch an on-demand network of autonomous vehicles. If you live in San Francisco or Phoenix, you may have seen these cars on the road, and within five years a fully autonomous fleet of cars will provide the majority of Lyft rides across the country.

Tesla CEO Elon Musk believes the transition to autonomous vehicles will happen through a network of autonomous car owners renting their vehicles to others. Elon is right that a network of vehicles is critical, but the transition to an autonomous future will not occur primarily through individually owned cars. It will be both more practical and appealing to access autonomous vehicles when they are part of Lyft’s networked fleet.

See that? No individual ownership. No sharing. Lyft’s vision is for large fleet ownership. Explicitly corporate. Explicitly non-sharing.

He goes further:

Why? For starters, our fleet will provide significantly more consistency and availability than a patchwork of privately owned cars. That kind of program will have a hard time scaling because individual car owners won’t want to rent their cars to strangers. And most importantly, passengers expect clean and well-maintained vehicles, which can be best achieved through Lyft’s fleet operations. Today, our business is dependent on being experts at maximizing utilization and managing peak hours, which allow us to provide the most affordable rides. This core competency translates when we move to an autonomous network. In other words, Lyft will provide a better value and a superior experience to customers.

Call me crazy but that sounds precisely like the views taxi operators had pre-sharing. To hear it from Lyft of all places is somewhat amazing.

What is going on here? It seems that the sharing economy was a transitional state from private ownership to corporate ownership. The point is that if the technology that allows sharing is good enough, the incentive to own a car — even to rent it out — goes down. And it goes down potentially all the way to zero. In other words, what we are seeing now is not considered an equilibrium outcome. There are interesting times ahead.

10 thoughts on “Neither Uber nor Lyft believe sharing is the future

  1. Perhaps, but Lyft’s main argument is that “individual car owners won’t want to rent their cars to strangers. And most importantly, passengers expect clean and well-maintained vehicles”

    The same could be said of apartments, and yet Airbnb seems to be doing ok. What is so different exactly?

  2. ‘Sharing’ just doesn’t work, neither of them would ever be able to become profitable. That is why they are all betting on self driving technology. But there will be a bigger challenge ahead for Uber and Lyft: this technology will be available and affordable for so many other potential competitors. Right now, the only reason they are kind of running wild by themselves is because is hard to find other companies willing to throw money just to create the ‘client base’, but once the self driving technology will be in place, there will be way more than that and is not going to be Uber or Lyft that has an advantage at all. Their ‘client base’ will simply not matter anymore, it will be the service / price and there will be much more powerful global and local companies who will be able to do that very well. Even at any city level this could become part of ‘public transportation’ just like the subways, buses etc. and we may even see this business controlled by them. All possibilities are on the table, the game will totally change.

  3. “Sharing economy” is such a misnomer. Uber & Lyft drivers don’t share their cars–they buy new cars, invest their money to fuel and maintain them, and work for profit. Kind of like a job. It is a rapidly increased economy, but the “disrupting” force is reliable, fast access through technology, not sharing.

  4. “Ridesharing” and the “Sharing Economy” were lies from day one. No large scale transportation company (or consumer service company of any type) could ever function by utilizing the slack capacity of the cars owned by hundreds of thousands of individuals. The economics of every transportation company depend critically of the highly centralized ownership of capacity, and incredibly sophisticated systems managing long term capital requirements and short term scheduling against highly volatile demand and competitive environments. If Uber had discovered powerful “Sharing” economics, why doesn’t UPS stop spending billions on fleet management and scheduling systems and just get a smartphone app that can contact guys who can then deliver packages when their pickup trucks would otherwise be sitting idle? Why haven’t any of the hundreds of startups who were going to exploit these “Sharing” economics and become the “Uber of” food delivery or office supplies or other industries ever succeed? Because these “Sharing” economies don’t exist and never had anything to do with Uber’s growth.
    The issue is not Uber’s business model, but willingness of the media to present false/vacuous Uber/Lyft PR claims as the explanation for their growth and valuation. Is Uber a “ridesharing” company? No more than United Airlines is a “planesharing” company; large transport operations must always be highly centralized, corporate operations. Does Uber’s innovative “ridesharing” model improve efficiency and empower its “entrepreneurial” drivers? No, it is not innovative or empowering; taxis began using “independent contractors” in the 1970s and the only purpose was to shift income from drivers to fleet owners and to shift risk in the other direction, and Uber’s approach simply transfers even more wealth from labor to capital. Uber spent years lying about driver earnings (at one point claiming median earnings of $90,000 in one city) and misleading drivers about the true cost and risk of providing commercial vehicles for Uber service. A recent independent study showed that if you properly account for vehicle costs, Uber drivers took home less per hour than the already miserably paid drivers at traditional cab companies. No it is not efficient; in its fifth year of operation Uber lost $2 billion, with a negative 140 percent profit margin. Uber’s “ridesharing” model cannot produce car service as efficiently as traditional operators; its growth is entirely explained by massive investor subsidies from Silicon Valley billionaires who charge riders 40% of their actual costs in order to drive existing operators (who have to cover 100% of their actual costs out of fares) out of business. Didn’t Uber’s success in America prove it would inevitably achieve total global dominance? Not if it ever faces an even bigger competitor (Didi Chuxing) willing to fund even bigger losses in an even more ruthless pursuit of monopoly. Wasn’t Uber going to use technology to rapidly grow to the point that using Uber would be cheaper than owning private cars? All total lies. Uber’s ordering and “surge pricing” software are incredibly primitive compared to what airlines have used for years, and they have done absolutely nothing to reduce the total cost of urban car service. Hundreds of other companies have neat consumer apps, but none have any impact on competition, and certainly none created $68 billion in corporate value. In the 100 years of motorized tazis, there has been zero evidence of powerful scale economies, and despite massive growth, Uber’s margins didn’t improve at all between 2012 and 2015. Margins did improve somewhat in the first half of 2016 but entirely because Uber cut driver wages, and kept more of the passenger fare for itself.
    None of the thousands of media stories on Uber/Lyft can explain its “innovative technology” in terms of “innovative technology” in use in any other industry or in terms of actual impact on productive efficiency, but ever story treats these companies as technological leaders. No one can explain how the concept of “ridesharing” actually reduces the cost of taxi service, or how it could scale to a massive level, or why no one else can find value here, but every story still talks about “ridesharing” as a major breakthrough. No one can explain why anyone should expect the cost of driving people in cars should dramatically fall as an individual operator grew. No one can explain billions in operating losses and subsidies. No, $2 billion in annual losses is not an “equilibrium outcome”—why would anyone think it was?

  5. The “sharing economy” was always a misnomer. If anything it was the “gig economy” to transfer from an employee-employer relationship to a contractor-employer relationship on the way to having it be a payer-employer relationship

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