With Uber and Lyft’s Return to Austin, the Future of Rideshare is Cooperative

by Jesse Basham | Death by Migas

At this point, there’s no going back. The solution doesn’t rest in improving weekly ridership metrics enough to survive another week, but in shifting towards a radically different model that incorporates the needs of drivers, users, and the city.

What’s Next for RideAustin Now That Uber and Lyft Are Back?

The Austin rideshare landscape has seen a whirlwind of upheaval since the passage of HB 100, the Texas law overturning municipal TNC regulations.

Fare is out. Uber and Lyft are back in. Everyone else’s future is uncertain at best.

Some may not see this as a bad thing — they prefer the brand recognition and reliable familiarity of the two rideshare behemoths, not to mention cheaper fares subsidized by investors from Silicon Valley and Wall Street, driven down further by exploiting the contractors who drive for them. After all, there are those whose city pride seems to be threatened by the idea of having to hail an off-brand rideshare. It’s understandable, given the disastrous performance of other ride-hailing apps during South by Southwest.

With Fare conceding the market indefinitely, we’re witnessing what could hyperbolically be described as Austin rideshare’s Lehman moment — the first domino to fall in a mass reckoning that will leave little in its wake but a smoldering pyre of venture capital the size of the Bay Area and a workforce of disgruntled non-employees.

We could go ahead and coin it now. The Great Concession. It’s the moment when “Californians” have finally taken over and Austinites no longer care about supporting local business.

Of course, the only local player in this game is the nonprofit RideAustin. Let’s say we can lose Fare, Get Me, or Fasten’s over-designed, slick-for-no-reason user interface — how is our homegrown rideshare, er, faring in all of this?

Not good, it turns out.

Ridership is down at least 62% in the weeks since Uber and Lyft’s return, from 58,000 weekly passengers to 22,000 at last count — a sharp drop even adjusting for the student population’s summer exodus. RideAustin leadership has stated that the company must maintain 20,000 trips a week in order to survive. That’s cutting it close.

The organization recently dropped its rates in an effort to appeal to more price-sensitive riders. Jeff Kirk has argued that this is little more than a race to the bottom, with evidence that local passengers are willing to pay a premium to use Uber and Lyft. It’s hard to see that changing as long as RideAustin positions itself as a copycat rideshare app with less sophisticated usability and reliability, regardless of the fact that it represents a local, more ethical option whose mission involves giving back to the community.

At this point, there’s no going back. The solution doesn’t rest in improving weekly ridership metrics enough to survive another week, but in shifting towards a radically different model that incorporates the needs of drivers, users, and the city. RideAustin offers competitive compensation and supports the local community through its Round Up initiative and open data promise. This isn’t something we should give up without a fight. It’s also not something we should keep to ourselves.

Could the Future of RideAustin Be a Network of Driver-owned Co-ops?

What if there were effectively a RideHouston, a RideDenver, or a RideNYC, with each driver pool collectively owned and operated by the drivers themselves rather than bootstrapped by a hypergrown nonprofit organization? What if there were a single app that could be used in each city? Imagine RideAustin as a mobile SaaS platform for license to driver-owned rideshare networks across the country, with local rates, features, and functionality based on service area and a user’s geolocation. With a little rebranding, passengers wouldn’t even have to download a new app each time they step foot in a new city.

There are two main advantages to this strategy:

  1. It allows RideAustin to shift its focus from maximizing the profitability of each trip towards maintaining and improving the platform itself. Revenue is generated through licensing instead of competing against a loss-leader model for an arbitrary number of Austin rideshare trips per week.
  2. Drivers are given greater autonomy and control by collectively setting wages, rates, and benefits. Collective ownership among drivers would be a condition of the platform license, regardless of whether the organization’s underlying legal structure is a worker cooperative, LLC, B-corp, or something else.

The basis of the platform and organizational infrastructure are already in place. A willing, able driver pool exists in a major city. All that’s missing is the ambition to scale RideAustin’s mission and values to a much larger base. The best way to do that could be to separate the tech platform from the labor pool, creating a balanced stakeholder model that incorporates the interests of drivers, users, and their cities without the need for a central figure to manage it.

A successful precedent for transit co-ops already exists. Many cooperatively-owned taxi companies operate in cities across the country including Austin. Since its launch last year, ATX Coop Taxi has been an overwhelming success. Jointly owned by mostly immigrants and refugees, the green cabs you’ve seen around town have held their own against the local Yellow Cab franchise.

Why a Co-op Over a More Traditional Business Structure?

This isn’t some Old Austin hippie fantasy. You’ve likely done business with a cooperative, whether it was R.E.I., Ace Hardware and True Value, Ocean Spray, or your local credit union. Historically, cooperatives have helped farmers survive drought and economic downturn. They brought electricity and telephone service to the rural south when Big Business had no profit incentive to do so. Historical data suggests that cooperatives are better able to withstand market downturns — or, say, the market pressure of new competition.

Austin has a rich tradition of founding and supporting cooperatively-owned businesses dating back to the 19th century, long before Wheatsville or Black Star Co-op. A carpentry worker co-op operated in Austin by 1893, and University Co-op was founded three years later. On the surface, they’re no different than any other brand. It’s what lies beneath that matters.

A driver-owned cooperative places control into the hands of the workers. These aren’t contractors, but member-owners. They vote to collectively determine their own prices, wages, and benefits. Cooperatives allow for better pay by eliminating expensive upper management and executives or by capping the rate at which they can be paid, often based on the city’s average income and cost of living.

Workers are abandoning the sharing economy at an alarming rate. While convenient for users, platforms like Uber and Lyft skirt employment laws, denying workers basic guarantees such as overtime pay, health benefits, or retirement options, all while working them for pennies on the minimum-wage dollar. They also offer no insurance or compensation in cases of on-the-clock accidents. For these workers, the only thing shared is the risk.

While this type of economy forces workers to scrape from gig to gig, the cooperative economy empowers workers by giving them a real ownership stake in their companies. Why shouldn’t labor investment be treated the same as capital investment? This is a huge advantage for platforms competing to attract drivers. It’s not just another gig — it’s an entrepreneurship opportunity.

Affording more local control creates an agile, streamlined organization better able to meet market demands quickly and efficiently. A network of driver co-ops would allow RideAustin’s public good initiatives to scale to other cities without the struggle of managing their affairs from afar. It’s not just about maintaining support for local charities, either. An expansion of RideAustin’s open data policy could help fuel smarter transit nationwide.

What Would a Rideshare Cooperative Look Like?

Let’s say that RideAustin maintains control of the platform. Instead of hiring contract drivers or experimenting with W2 employees, it would license the platform to a newly-formed driver cooperative. The cooperative would collectively set its own wages and rates as well as decide on special promotions, features, and functionality based on the needs of the community.

Local personalization is something that the darlings of Silicon Valley simply can’t do — not the way we can. Imagine UT students hailing safe rides home using Bevo Bucks. How about special promotions during commencement season, election periods, or to newly opened businesses?

Suppose you’re on your way to an ACL Live taping or an album release at Mohawk. Why not have the ability to download the music on your phone and listen en route? Imagine it as part of a bundled admissions package that includes free transportation to and from the event, creating a seamless, unified experience from beginning to end. And the first beer’s on us for not drinking and driving.

Picture yourself downtown or near Barton Springs. You open your app and immediately see a pedicab option, thanks to the local co-op’s decision to include pedicab drivers as member-owners. Unique features like these would activate based on a user’s geolocation. Each co-op would have a defined service area determining rates, promotions, and special features.

Ever had an Airbnb or Couchsurfing host who made their own travel guides with curated recommendations for sightseeing destinations, food, and entertainment? Why not allow drivers the ability to create their own in-app content accessible during the ride, shifting focus from the brand towards the community and its members?

Unbeholden to the profit projections of venture capital, we can cater to communities that traditional rideshare companies ignore. Think transit vouchers for low-income passengers or free rides to polling stations. Elderly or low-income residents could schedule rides ahead of time to doctor’s appointments, job interviews, or simply to the grocery store and back. Think of all the simple things we unwittingly take for granted.

RideAustin CEO Andy Tryba has made clear that we will never beat the Silicon Valley giants in terms of pure technological prowess, but we have the competitive advantage when it comes to implementing thoughtful, creative enhancements through decentralization and local empowerment.

Taking Back the Power

I’m not the first to call for a rideshare cooperative. Mike Konczal of The Nation and the Roosevelt Institute called for transforming transportation network companies into worker-run firms in 2014. Other voices have explored the subject, each with its own set of assumptions about how such a model would work. A few are explained in depth here. More exotically, a union / co-op hybrid model could partner with an organization such as the Independent Drivers Guild. Cooperatives in different cities would be structured based on the independent needs of its drivers, passengers, and the city.

Alliances with the Austin Cooperative Business Association and its national counterpart along with organizations such as The New School’s Platform Cooperativism Consortium could provide the muscle needed for an initial proof of concept. Developing worker-owned rideshare networks in every major city will require financing by forward-thinking, like-minded credit unions and organizations, not to mention the resources needed for marketing and outreach.

HB 100 was a blow to self-determination and local governance so that Uber and Lyft could begin reestablishing their dominance over the urban rideshare landscape. That won’t stop us from imagining a better alternative both here and elsewhere, despite the wishes of Governor Greg Abbott, the Texas Legislature, or former Uber CEO and perpetual human trash heap Travis Kalanick.

Is it ambitious? Certainly. You could even call it disruptive, in the Kalanickian sense. We’re the ones who should dictate the rules of the game when it’s being played in our own backyard.

Austin’s future belongs to us, not to the lobbyists and dystopian visionaries of Silicon Valley.

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Jesse Basham is a freelance digital strategist and UX designer with experience working with both B2B and consumer brands as well as non-profits and small businesses.