Matt Lynley on Lyft

by Reihan Salam

Business Insider’s Matt Lynley has a short article on Lyft, an innovative transportation service that is currently limited to San Francisco. I found the following passage particularly interesting:


BUSINESS INSIDER: Can you give me a little bit of background on Zimride and Lyft?

JOHN ZIMMER: Lyft started three months ago, and Zimride started about 5 years go. Zimride and Lyft were founded by myself and Logan Green, my cofounder and CEO of Zimride. He has a background in transportation hacking, he built the first car-share program at University of California at Santa Barbara, before even Zipcar. He was on the transportation board in Santa Barbara working on buses. He was frustrated that public transportation was based on tax revenue, so only about 30 percent of the operating costs were covered by fares. When a bus line folded, he couldn’t add more bus lines, so he wanted to build a transportation form that would get better as it got used.

I went to Cornell’s hotel school. I studied hospitality and when I took a green cities class, we were looking at transportation. I saw a slide on the evolution of transportation, from canals to highways, and I thought about what would be the next slide. I thought it would be a layer of efficiency on top of our current cars and road systems, going back to that idea of occupancy I was learning in the program. 80 percent of our seats are empty and I thought if you could get that 20 percent occupancy up by even 10 percentage points, you’d have an incredible social, financial and utilitarian solution. [Emphasis added]

Whereas the better-known Uber relies on professional drivers, Lyft is a real-time car-sharing app that allows non-professionals to pick up passengers in exchange for a small payment, which is usually 20-30 percent less than what one would pay for a taxi. As such, Lyft can give cash-strapped car owners a new revenue stream. 

At this point, you’re no doubt wondering about the regulatory barriers. Taxi drivers, who are obligated to purchase or to lease medallions, are not happy about the advent of Lyft and services like it. Yet Lyft sidesteps regulation by making its fees a suggested donation rather than a mandatory payment. And because drivers and passengers have profiles, a passenger who doesn’t pay will receive a negative evaluation, which in turn will mean that other drivers will be less likely to pick her up. 

C.W. Nevius, a columnist for the Chronicle, has described how San Francisco taxis have responded to this new competition: among other things, they’ve installed credit card readers and embraced GPS technology. He also notes a concern:

“In one sense, you can’t blame the market,” says [Ed] Reiskin [director of the San Francisco Transportation Agency]. “But with services like SideCar and Lyft, you are talking about being completely unregulated. Things like insurance and background checks are completely absent.”

In theory, the reputation management systems embedded in Lyft can allay any concerns. But this will no doubt be an issue for the company as it grows.