The Good, The Bad and the Unknown of Uber and Lyft

Alejandro Henao
May 9, 2019 · 14 min read

By Alejandro Henao

*The views expressed in the article are personal opinions and do not represent the views of the institutions I have studied/worked for

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Photo by Antonio DiCaterina on Unsplash

May 9, 2019

I grow up in Cali, Colombia. Mobility for a middle-class teenager in a developing-world city means a family of five shared one car so I had to travel around by getting rides, carpooling, using public transportation, walking, biking, and occasionally taking taxis. Taxis were not cheap (or at least for our income) and we would use them occasionally for trips to the airport, to the stadium, for a graduation party, or a special event. I liked Cali yellow taxis but I always wonder why there were so many of them (on the streets, waiting on the hospitals and/or at the mall) generating congestion as I saw many of the taxi drivers cruising around without passengers.

Fast forward two decades later, I never thought I would be driving for two ride-hailing companies (it’s just a tech term to describe taxis that are hailed thru an app, but anyone with some minimal requirements can sign up for it). When I first signed up for Lyft in 2014, I met an “ambassador” in-person to go over paperwork, to verify my identity/capability, and answer any questions I might have (note: this stopped happening a long time ago). I might say I signed up out of curiosity but in reality, I just got tired of these companies not sharing data (note: most cities/researchers today still experience this), and saw this as an opportunity to obtain answers that are critical to transportation and my way to delve into an issue that needs to be seriously explored. And well, you can’t do a PhD without data.

Most of this idea was thanks to my PhD advisor, professor Wesley Marshall, who fully supported, defended and promoted this idea (I have heard of other students having similar ideas but didn’t get their faculty support or didn’t follow thru with it). My wife was first worried about my safety, I remember her saying: “Do you really want to give rides to strangers in our car?” (these companies weren’t as popular back then) but after a few rides she was 100% on board and I couldn’t ask for a better partner and supporter. It wasn’t easy, it takes a lot of hard work, will, perseverance and grit to do it but it was all worth it. I (and I don’t think anyone) could not have learned what I learned without fully immersing myself into this system as a driver. In research this is called ethnographic studies. I still joke that as researchers we struggle to get few survey responses (even paying for it), while with this ethnographic method I got paid (even if it was around minimum wage) to get a response rate of 87.5%. I did hundreds of rides with a final sample of 416 rides with 311 passenger surveys for the PhD dissertation.

You might say that’s “not enough” but let’s compare the PhD data with what Uber said in their IPO is representative of their business (see Fig 1). I wish more students, researchers, cities would do similar data collection and studies (such as what MAPC did in Boston) to help us better understand the ride-hailing impacts in cities.

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Figure 1. Comparison of PhD data and Uber I.P.O. document

I can talk a lot about the fun experiences as a driver but let’s get to the point. Here are my thoughts on how I see ride-hailing playing a role in our cities.

The Good:

Positive #1. Ride-hailing as an avenue to increase clean vehicles: Given different car ownership cost, ride-hailing drivers are better off by choosing a higher fuel efficiency car or an electric vehicle (EV). As with many things in a capitalist world, this is driven by economics (drivers can lower vehicle expenses) but this needs to be supported by infrastructure, policy and incentives. Check for example the type of ride-hailing cars that you get picked-up by at Seattle-Tacoma airport.

Positive #2. Reduce Parking and Restructure the landscape: Uber and Lyft are shifting parking demand at airports and certain destinations in major U.S. cities. This is a good thing since we can reallocate parking spaces –which don’t make for great places– to other land use and/or better manage the curb by allocating more space to people and monetize car trips (including private cars, ride-hailing and others). I caution cities providing free curb-space as we don’t want to write the next version of Shoup’s book along the lines of “The High Cost of Free Curbspace”. Also, even if it’s minimal or a net-zero charge, that’s one way to collect data.

Positive #3. Full-filling a gap in our transport system. Need an early ride to the airport? Need a late-night ride home? And not just for going out and drinking; people also work late (when transit is not frequent, for example). Taxis have been filling this gap in the past but their issues with bookings, waiting times (note that Uber and Lyft always take longer than they say in the app but not to the magnitude of taxis in the past), cost and payment, customer service, convenience, and quality in general needed some help. Ride-hailing saw this opportunity and is fulfilling this gap with better service.

Positive #4. Non-car Market: Uber and Lyft are expanding their business into non-car shorter-trips market (the tech-term these days is micromobility). This provides an opportunity to leverage what many transportation advocates in the U.S. have been trying to do for decades with biking. The good thing with this is that some of the biking, walking and transit trips that ride-hailing had replaced are now being replaced back with micromobility. This might be helpful as we know what the lobbying of these companies can do in the U.S. political spectrum.

Others: The reader might be thinking I am missing the potential for car ownership reduction, carpooling, first/last mile connectivity to public transportation, and equity opportunities but I cover all of them.

The Bad:

Negative #1. Not-so-Sharing: Uber and Lyft wrongly called themselves ridesharing. Wrongly because what we know in transportation as ridesharing is where two or more people share the same ride (a.k.a. carpooling). With ride-hailing we normally shared a driver with an asset (his/her car). I cover the potential of carpooling in the unknown section; but what we know now is that most ride-hailing trips are with solo-passenger, with an average occupancy of around 1.3 passengers per-mile when passengers are on board (not including deadheading, more below). In regard to data, we would hope that companies proclaiming to be “sharing” would share data, but we know that it is not the case.

Negative #2. Deadheading: What I saw as a kid in Colombia with the taxi drivers traveling around without passenger is what the transportation industry called deadheading or empty-miles (empty-kilometers). It is well known that single occupancy drivers (or SOVs) are the biggest contributors to congestion so having zero-occupant riders (ZORs) is even worse. Even using conservative deadheading rates (~40% of total driving miles), the vehicle occupancy average is around 0.8 in a per-mile basis. In Uber and Lyft defense, the deadheading rate of ride-hailing is better than the one from taxis and that from a family or friend giving you a ride to the airport. Private cars also incur some minimal deadheading in dense areas as private drivers search for parking (such as in downtown areas). But ride-hailing deadheading is worrisome as we know how much ride-hailing is growing.

Negative #3A. Replacement of Sustainable Modes of Transportation: Ride-hailing replaces all kinds of modes (SOV, carpooling, public transportation, taxi, carsharing, biking, walking, crawling) but when we look more specifically at trip distance, trip purpose, and proportionality to current mode share, it is scary to know what it could do to the way we move around and the efficiency of our transportation systems. Below I go into more detail about public transportation.

Negative #3B. Public Transportation: There is a famous Colombian idiom that fits perfectly in the relationship between public transportation and ride-hailing: “les das la mano y te cogen el brazo”, which translate to: “you give them a hand and they take your arm”. I don’t doubt there are benefits from ride-hailing to public transportation (first/last mile connection, used for one leg of a tour, or used as a backup option/only if needed) but when you look at the big picture, these are minimal since for every ride-hailing rider that combines with public transport about ten rides substitute public transportation. After the Uber IPO document, there is no secret that they are going for the “4.4 trillion miles per year of public transportation worldwide” market. Some partnership between ride-hailing and transit might be good ideas (filling a service gap in low dense areas off-peak, special rides) but transit agencies need to be careful as it can create fare and cap issues. Public transportation is at the core of the transportation system for a city functionality, the last thing we need is for city officials to say: “well, we don’t need to invest in public transportation because the Ubers and the Lyfts are replacing it”. When in reality, we actually need to spend more to make our public transportation more robust and stronger, so it’s resilient to emerging modes that might not be as sustainable, equitable, or efficient. What this could spark is a discussion of public-private partnership in the U.S. to run public transportation, as there are good examples around the World (Europe, Asia, South America), as long as we keep equity and societal benefits in place.

Negative #4. Car-use: An Uber or Lyft trip is a car trip. Uber and Lyft are famously known for the promise to end car ownership since passengers are able (or will be able) to rely less on privately-owned cars shifting from a car owner/driver pattern to a user/rider pattern (potentially shared and multimodal). The positive effect of being “car-free” is that the sunk cost of car ownership is gone, so the probability of the next trip being a car trip goes down. I’m a big supporter of this paradigm shift but I don’t see this happening and here is why:

1. The focus needs to be on car-use and not so-much on car-ownership: What do we get if a car owner sells the car and shifts to be a ride-hailing solo passenger? We actually end up with more congestion (because of deadheading).

2. For most Americans (except for a few U.S. urban cities where public transportation is very robust and car ownership is very expensive), personal cars is still the best option (considering monetary, travel time cost) to get around. So, do we really think that people are going to stop owning cars because of ride-hailing? If a person spends around $7,000 to drive 10,000 miles in a year on his/her own car, do we really think he/she is going to cut car miles by more than half to pay $2.50-$3.20 per mile in ride-hailing? And ride the rest in UberPool/LyftShare, public transportation, biking, and scooter? I am all on-board but this kumbaya mentality doesn’t add up

3. I have read in papers I reviewed something along the lines of: “ride-hailing users use more transit and own fewer cars compared to the general population”. The author can also state that: “transit users and non-car owners, use more ride-hailing compared to general population”. I caution on this correlation and direction of causation.

4. We usually look at this issue from our experiences and perspectives but forget about some populations that are normally affected the most for mobility (such as lower incomes that are car-less and not car-free). Car ownership is an aspiration for many people and the way the transportation system is designed (for the car), not having a car could mean you are restricted for mobility, employment, and other basic needs.

5. The conversations about car ownership tend to focus on passengers but what about those providing the rides? On this blog post, I present the hypothesis that ride-hailing drivers could be affecting car ownership.

The bottom line is that there are stronger socio-economic indicators (income, employment, children) and other factors (car cost, public transportation and other modes availability) that contribute to car-ownership. We should focus less on car ownership and more on car-use. Decreasing single car-use (regardless of if it is in a private car or ride-hailing) provides the biggest benefit to the efficiency of our transportation systems.

The Unknowns:

Unknown #1. Safety: Ride-hailing companies seem to be paying more attention to safety lately after the very sad events including murders in the U.S. and Worldwide. While murder is, of course, a big concern; we should be talking about safety in general: safety within the vehicle (passengers and drivers), and those outside the vehicle (pedestrians, bicyclists and other mode users). Safety needs to be a top priority for these companies, but we don’t know if it is. I am concerned about their “quantity over quality” mentality/mistake, where rushing to get volume (million/billions/trillions of rides/passenger/drivers) they compromise other factors, including SAFETY. Their need to get a critical mass of drivers made them lower their standards and affect safety (background checks, driver training/education, experience, monitoring of working hours for fatigue/drowsiness, distraction by multitasking with a cell phone, passenger demands). There have been some studies showing positive and negative safety effects, but I believe some of these researchers did not take into account key variables (such as phone use while driving) in their econometric analysis on traffic fatalities. Until Uber and Lyft start sharing data and let researchers do independent analysis based on statistics to compare incidents (crashes, deaths) of ride-hailing in a per-mile (or ride) basis versus those for taxis, private driving, and/or other modes, we won’t really know if safety is better or worst.

Unknown #2. Equity: During my driver experience for Uber and Lyft, I had a few passengers with disabilities. They shared how positively these services have changed their quality of live (for example, allowing them to easily request a ride thru the app and do a trip to the doctor in 25 minutes while it would have taken them two hours in public transportation) but they also shared concerns about discrimination and affordability. Knowing that billions of dollars are on the line with Uber and Lyft investors, I am not sure how much they will really focus on equity. There are also interesting studies with mixed-results about area of coverage, waiting times, and discrimination issues.

Unknown #3. Potential of carpooling going up again. Analogous to how ride-hailing is just a taxi alteration using tech terminology; pooling can be seen as the tech-version of hitchhiking. Despite the low percentage of UberPool and LyftShare (formerly LyftLine) in their business model (including differentiation between actual matches and requests) we could be optimistic as there is a lot of room for improvement. But heavier monetary discounts (not just the self-imposed Uber and Lyft pricing dynamics) and other incentives need to be in place to support getting more buds in the Uber and Lyft seats. Airports are early innovators in how fees can be structured based on vehicle occupancy and how curb space infrastructure can be allocated to support these shifts (we should restructure our system such as if 2+ passenger are being dropped-off/picked-up or a solo-rider is willing to share a ride, we let them use the space adjacent to the terminal but the solo-riders have to go to a designated space not-adjacent to the terminal?). It is still yet to be know if this carpooling potential with UberPool and LyftLine (and others such as WazeCarpool) could be materialized.

Unknown #4. The Sharing Economy: Economists (especially within the ride-hailing companies) like to point out the benefits of ride-hailing in the sharing economy (supply and demand relationships, dynamic pricing, flexibility of working times for drivers, etc.) but shouldn’t the most basic needs be met? Wouldn’t ride-hailing drivers make at least minimum wage? Or, at least present them with a better picture of what they can take home, the hours they drive, and the expenses based on the ride-hailing miles they drive (with and without passengers). During my PhD dissertation I found that pay (when taking into account the companies cut and driving expenses) doesn’t even meet minimum wage for most drivers in Colorado. Some people argue, that “drivers are willing to work for less than minimum wage”, but aren’t people willing to work for less than minimum wage at McDonalds, Walmart, or similar (if minimum wage wasn’t in place)? Minimum wage is set-up for a reason, equity being the most important one! I can’t imagine what would happen if we experience a fuel price shock increase! (BTW: Uber include “drivers’ classification as employees instead of independent contractors” and “attract/maintain a critical mass of drivers” as risk factors in the Uber IPO document but did not include “fuel price” as a risk factor within the “impact of economic conditions”)

Unknown #5. Quantity and Quality of Travel: Ride-hailing can induce or reduce travel (including the number and length of trips) but we should think about trip purpose and quality of service as well (Do we judge a trip to the doctor the same way as other trips?). We tend to argue about whether increasing vehicle miles traveled (VMT) is good or bad for society. Every VMT has value (regardless of personal car, ride-hailing or bus) but it also has a cost so focusing only on VMT is very short-sighted. Measurements/metrics such as vehicle occupancy in conjunction with VMT are key to better understand the functionality of different modes.

Unknown #6. Their Business Model: I am not an economist but just looking at their I.P.O. documents re-affirms me that there might not be a path to profitability. Will their drivers and the mass of regular people investing in the Uber and Lyft stock market make money? Or just the early founders/investors that are already millionaires/billionaires? Making money in transportation is not easy, and should we allow profitability without ensuring basic mobility needs are met? Similar to the health, housing, and food sectors; shouldn’t we be talking about Universal Basic Mobility first to ensure that we provide a minimum level of mobility to all members of society? Ride-hailing “profits” from an unregulated scarce asset as they don’t pay for the road nor parking. Yes to regulating ALL vehicles (such as congestion pricing) but right now we can’t afford to give a free pass to ride-hailing as is occurring in most U.S. cities.

Family, friends, and more recently a reporter have asked me for my thoughts on the Lyft and Uber stock. I hesitate to buy (or short-sell) their stock. I am afraid of the many “conflicts of interest” that this would raise. I don’t think we should be going for (or against) a company stock, I think we should cheer for the positive and mitigate the negative of ride-hailing. If Lyft and/or Uber are going to make sure we have clean cars, meet the gaps of our transportation system with quality over quantity, restructure their business model to prioritize true ridesharing, invest more heavily on biking and more sustainable infrastructure, support public transportation, minimize deadheading with the right supply of drivers given the demand, increase safety, increase equity, and do the right think for the drivers then I would sell my soccer collection and invest on them. Meanwhile, I continue to do research on ride-hailing. I feel like I already bet on them with my PhD (at the time I started drafting my proposal, they were unknown and the risk of them “not making it” was there). There is a place for ride-hailing in our transportation system but not to the masses that their executives and stakeholder are envisioning. If they focus on “quality over quantity” they (and all of us) will be all right!

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