Need a Lyft?
Ride-sharing companies push the limits of real-world peer-to-peer services
Published: October 30, 2013
Since Oct. 17, and at least until or unless a cease-and-desist order comes from state regulators, Baltimoreans have been able to download an application to their smartphones and summon an ordinary car to wherever they are, tell them to drop them off wherever they want, and pay the driver whatever—or nothing.
Lyft, one of several new phone-based ride-sharing companies, launched in Baltimore last week, and the company’s co-founder met reporters at the Emerging Technology Center in Canton.
Lyft takes the tradition of (illegal) “hacking” and makes it high-tech by channeling the dispatch and payments through a smartphone application. The company says it screens drivers for criminal and bad-driving offenses, inspects each vehicle, and insures the drivers it accepts for $1 million liability. Baltimore is the 16th city the company has come to.
For the past year and a half, taxi companies have complained to public service commissions around the country about Lyft and similar outfits, claiming they infringe on taxi turf. This is certainly true. The question is, is that bad?
Spokesperson Erin Simpson says Lyft’s Washington, D.C. debut was just smoothed by a regulator’s decision to allow the company to operate there, at least temporarily. Last month California regulators green-lighted the company’s business plan for at least a year, but the path looks clear now for Lyft and similar companies—Sidecar, Uber, and others.
“We’re starting tonight,” says Simpson. “We have people who are teachers, ex-military, a photographer. . . . They’re excited about being able to give rides to folks to cover the cost of their cars. They have a little extra time.”
Lyft co-founder John Zimmer has the relaxed demeanor and straight white teeth of the Greenwich, Conn. native he is. He’s also an alumnus of Lehman Brothers, the investment bank that sank in 2008, setting off the financial panic and recession from which the country has not yet recovered. Lyft is 17 months old, but Zimmer’s partner, Logan Green, had a precursor company called Zimride.
“He named it after Zimbabwe,” Zimmer says. “It was before he met me.”
As Zimmer tells the tale, Green was a student at UC Santa Barbara. Then he went to Zimbabwe and observed “people sharing rides out of necessity.” When he came back, he started a ride-share website called Zimride to honor Zimbabwe. This one started at Cornell in 2007, and by then Zimmer—still at Lehman Bros.—was a partner, according to the Wikipage for Zimride that the company posted in July.
The pair sold Zimride to Enterprise Rent-A-Car’s parent company in July for an undisclosed sum.
Lyft picks cities according to population density and transportation options—Baltimore is a good fit because its mass transit system is so fragmented. “You can connect all the dots with something like Lyft,” Zimmer says.
The big idea: 80 percent of seats in cars and trucks on the road are empty. Filling them up means people get around more efficiently. It could mean less traffic. It certainly fits with the current trend of young people not owning cars. America’s car culture is dying—not least because a proper Detroit hot rod now costs $45,000, far beyond the means of a typical young worker.
“It’s a phone culture now,” Zimmer says, pulling out his white iPhone 5.
Lyft is the largest peer-to-peer option, he says. “Uber has done a good job in taxis and limos.”
This is an important distinction. Uber contracts with licensed livery providers and gives them a better and wider dispatch service. Rates are set—like any “town car” or limo company already has. Lyft (and Sidecar) contract with everyday car owners. They are not professional drivers and they are not licensed by the state to ferry passengers. Lyft is one step further beyond existing law than Uber, which is currently operating in Baltimore but is still fighting with the Public Service Commission.
“You’ve heard of Air BnB—that’s the sort of thing we do,” says Zimmer.
Air BnB, currently in a legal battle with New York’s attorney general over the state’s hotel tax, allows anyone with a home to rent it to anyone who wants to pay. It neatly sidesteps lodging regulations as well as the hefty tourism taxes that a lot of formerly industrialized cities over-rely on.
Lyft’s big sell is the social angle; the company has designed its ride-sharing “experience” to mimic friendship. Customers are encouraged to bump fists with the driver when they get in the car—front seat, please. Drivers know your taste in music, because the app asks and you tell it. “People meet [in Lyft cars], they form companies,” Zimmer says. “They start bands.” He says 60 percent of the company’s riders are female.
The regulations will adjust, Zimmer thinks, if the main purpose of them is rider safety.
In Maryland, the Public Service Commission has not yet taken up any case with Lyft. Communications director Regina Davis sent City Paper an email stating the commission’s position:
“The outcome of the Uber case (i.e., whether an app-based transportation business model falls under the PSC’s purview), could possibly have an impact on other such companies. There exists the likelihood that Lyft and/or other such companies may come before the Commission in a future proceeding; therefore, the Commission cannot make any statements regarding the present legal status of Lyft.”
Uber has been operating since late January, when the Public Service Commission denied Yellow Cab’s request to stop them. But the question is not settled. The PSC subpoenaed Uber for a list of its drivers, and Uber has tried to quash the subpoena in court. “Uber’s argument was that it is not a public service company, and consequently is not required to provide the information sought by Staff,” says a Sept. 25 order by the Commission, which obviously disagrees. The case was in Baltimore City Circuit Court on Oct. 22. (It was dismissed, but the judge gave the company two weeks to appeal.)
Zimmer sidesteps regulatory questions and plays up the community aspect of Lyft. “People crave real interaction,” he says. “We’re trying to build a movement. There is something about the design of the experience when you’re sitting next to someone.”
The cost of a Lyft ride is about half of Uber and maybe 80 percent of a taxi ride, Zimmer says—but, of course, the cost could be zero, because you don’t have to pay, technically (but you run the risk of being blacklisted if you don’t).
“It’s extremely discretionary. You [the rider] have control. The real reason we did it is because in a peer-to-peer world, it best gives the passenger the ability to pay the value they got out of the service.”
The company keeps track of what drivers are paid, he says (that’s how Lyft gets its 20 percent cut, after all), and issues them tax forms so they can pay income taxes on the money—even though every cent is technically a gift from each rider to each driver. Lyft’s lawyers advised him to be “conservative” on the tax matter, Zimmer says.
“The vision is that everyone could be a Lyft driver,” Zimmer says. “The efficiency comes from the information infrastructure, not the physical infrastructure.”
But can anyone make a living as a Lyft driver?
Zimmer doesn’t say directly that none of his drivers should depend on the service for their livelihood. He says “they are mostly people who have other things going on. We have a middle school teacher. Musicians. A grad student engineer.
“People like to mix and match” their livelihoods, says Zimmer, whose company has reportedly raised $75 million from venture capitalists so far. “I think it’s the future for a lot of people.”
> Email Edward Ericson Jr.