Tag Archives: Uber

Transit, Ride-Hailing, & Class-Mixing

As venture capital-backed ride-hailing services like Uber and Lyft continue to expand, there has been a lot of speculation on the impact of these services on transit. Will they replace transit services, as riders defect to faster car trips, or will they complement transit services, as riders use them for last mile connections? And, if riders who can afford to defect to ride-hailing services do so, will that lead to a vicious cycle of worsening transit, as decreasing ridership and political leverage cause further reductions in service?

On the first question, time will tell, but it seems like things could go either way. In congested cities, transit has considerable geometric advantages over cars, provided it has its own exclusive or semi-exclusive guideway. However, if transit does not have its own right-of-way or lanes, it offers little advantage over driving, and ride-hailing trips might replace transit trips. This could lead to a socially suboptimal Nash equilibrium, where everyone would be better off if some people took transit but no individual has the incentive to do so. (Ignore, for simplicity’s sake, the potential to introduce congestion charges, or the question if ride-hailing services will be able to scale and be profitable.)

In addition, many smaller cities in the US do not suffer from appreciable congestion, and in these places transit’s geometric advantages are less relevant. Again assuming they can be operated profitably, ride-hailing services might be able to capture some trips in these cities as well.

Does that spell disaster for transit services? I don’t think so. Voters in many US cities have shown their willingness to increase their own taxes to fund capital improvements to transit, even in cities with relatively low transit mode share like Los Angeles, Denver, and San Jose. While funding for operations and maintenance remains a major issue for many agencies, it doesn’t seem unreasonable to think that voters could be persuaded to fund O&M as well. (In LA, at least, some funds from voter-approved measures do go to operations.)

There is also concern that loss of ridership to ride-hailing services would reduce mixing of classes that occurs on transit but not in other transportation modes. Transit itself usually already has an informal hierarchy that separates classes, with commuter rail at the top, followed by rapid transit, and then local bus. (There’s even stratification within modes; I’ve had people tell me why the Ventura County Line is a better Metrolink line to ride than then Antelope Valley Line.) So ride-hailing services may reduce class mixing, though mixing and interaction are not the same thing. A person is probably more likely to talk to their taxi driver or ride-sharing companion than a random person on a transit vehicle.

However, even interaction does not compel understanding. It’s usually remarkably easy to get people to open up and talk about their lives if you want to listen. It’s even easier to just make small talk, or not talk at all. Meaningful interaction with different people only happens if we want it. Expecting a transportation technology to make it happen seems about as fruitful as expecting ride-hailing technology to solve our poor land-use policies.

Ride-Sharing and Innovation in Transportation

Though they are funded by venture capital and make apps, ride-hailing companies like Uber and Lyft are different from traditional tech companies. One of their biggest innovations was political: creating large enough constituencies of drivers and riders fast enough to be able to get the regulations over taxi service changed in many cities and states. Regulation, not technology, limited the number of taxis available in most places.

Improved taxi dispatching is an innovation, since computers should be able to dispatch better than a human. But much of ride-hailing companies’ apparent advantage in dispatching is from having more drivers, not allocating the pool of drivers more efficiently. Treating drivers as contractors instead of employees, combined with surge pricing, made short wait times possible. These practices allow ride-sharing companies to supply drivers for peak periods without accruing costs of paying employees during off-peak periods. (Scheduling driver shifts around peak periods is one of the biggest challenges for transit agencies.) Of course, it remains to be seen if regulators and labor organizations will let either of practices stand in the long run.

However, I wonder if ride-hailing apps could have a larger impact on carpooling than expected.

The biggest impediment to carpooling is that it requires all the participants to set a rigid schedule. You have to leave for work or school or home at the same time as everyone else in your carpool every day. The rigid schedule requirements make carpooling much less appealing than driving alone. You can’t get to work 15 minutes early if you have an east coast conference call, you can’t stay 15 minutes late if you’re in a meeting, you can’t go out for a drink or coffee after work.

Most trips are repeated trips – that is, we make the same trips to work or school or home day after day after day – but our desired departure times vary day to day, just enough to make it hard to carpool. We know there are many people making the same trip as us, but we don’t know who they are, and we can’t possibly know enough of them to allow flexibility to depart whenever we want. Could a widely use ride-sharing app change that? Perhaps. If enough people are using the service, it should be possible to match riders and drivers.

This is sort of the idea behind Uber Pool and Lyft Line, but they are still based on the premise that the driver is just a driver, carrying around people whose trips are close enough to be put together. In a true carpool, the driver is making the trip for their own utility. I carpool to work with the person I live with. They aren’t driving for the sole purpose of getting me to work; they’re driving to get themselves to work, and my trip is piggybacking on. In a true carpool, the driver is already deriving utility from the trip. So a carpooling app would not be dispatching paid drivers to carry people around, it would be matching potential riders with potential drivers.

On the other hand, I know there are lots of people downtown who are driving to Glendale. Why need an app? Why don’t I just go stand on the corner, stick my thumb out, and shout “Glendale”?

As it happens, we have an existing case study of where this type of carpooling does happen in real life. Many years ago, the Washington DC area built HOV lanes on their freeways that required 3 or more occupants. A spontaneous system of flexible carpooling arose, known as slugging. You can read all of the fascinating details here, but the idea is simple. Potential passengers line up in a few known pick up points (park-and-ride lots, major business areas, and so on), and potential drivers go to those spots and pick up two passengers going to the same destination.

In other words, potential drivers and potential passengers created an informal system of very flexible carpooling. The requirement for 3 occupants is thought to have been key, because it makes everyone feel safer. Picking up one stranger feels more dangerous than picking up two, in the same way that a full transit vehicle often feels safer than a vehicle with only one or two other riders.

In the case of slugging, no money is exchanged – this is one of the informal rules. The driver benefits by getting to use the HOV lane and the passengers benefit by being able to get to work. For a broader casual carpooling app, there would probably need to be some payment to the driver, since not all trips have carpool lanes available. Since the driver is already deriving utility from the trip, their cost would be low, and the relationship between the app-maker and drivers would not need to be employer-employee. (On the other hand, you wouldn’t want the system to become a de facto below minimum wage taxi service with desperate people acting as driers for very low wages, something that would need to be addressed.)

The shared ride services being offered by the ride-hailing companies are fairly labor intensive, requiring a driver to serve only two or three trips at a time. The companies clearly intend to move to autonomous vehicles in the future, but that will simply trade a labor intensive operation for a capital intensive one. A true flexible carpooling app might offer the possibility to increase mobility by making better use of trips that are already being made.

Will Microtransit Startups Find a Role in Urban Transportation?

There was some interesting discussion on Twitter the other day about “microtransit” startups, which are worth commenting on at further length.

What is Microtransit?

First, what is microtransit, especially in the context of venture capital backed tech startups? Vox calls it “Uber for buses”, a description more apt than one might realize at first. Like a micro apartment that would have just been called an efficiency, bachelor, or single-room occupancy in years past, the basic service being provided by Uber – the taxi ride – is not new. Likewise, microtransit services have long existed under names like vanpools, jitneys, dollar vans, and so on. Unlike the smartphone, for example, these startups do not offer services that were not available, or at least technologically possible, in the past. Shared ride vans have been plying the streets of NYC’s outer boroughs and Bergen County, NJ for decades.

What is the Innovation?

Since these services are being branded as tech startups, it’s worth asking what innovation they are offering. In the case of Uber, the innovation is software that lowers the transaction costs of buying and selling taxi services. By transaction costs, we mean the difficulty of matching buyers and sellers, i.e. finding someone willing to drive you to a place you want to go, at the time you want to go, for a price you’re willing to pay. Uber’s software and app are essential to this; imagine how hard it would be to run Uber if everyone who wanted a price quote for a ride had to call a central dispatch, and then the dispatch had to call all potential drivers to see who was willing to make the ride.

However, there’s another innovation in Uber’s model, one which is just as significant, if not more: they created, almost overnight, a political constituency powerful enough to challenge entrenched players in a heavily regulated industry. The key here is that taxi services were undersupplied, as a result of regulation and the influence of dominant taxi companies. This allowed owners of cabs and medallions to engage in rent-seeking, meaning that they profited without contributing anything to the system. Medallions in NYC were famously worth over $1 million, even though they conferred nothing other than permission from the government to offer taxi services.

A few individuals trying to buck this system would quickly find themselves squashed by regulators (except where, as in parts of NYC, taxi services were so egregiously undersupplied that regulators looked the other way most of the time). By creating an enormous constituency of both taxi drivers and taxi riders, Uber made it politically possible to crack the regulatory stranglehold on taxi services. This is no small achievement; consider the fate of the Chinatown buses, which, despite having grown into proven businesses with considerable ridership, have increasingly found themselves the target of regulatory actions that conveniently benefit larger, more established bus companies.

Does This Translate to Buses?

So, how does this relate to microtransit and startups that are challenging buses? For sure, their software will greatly facilitate matching potential drivers with potential riders. However, while bus service is also heavily regulated, it is regulated in a much different way than taxi services.

The overarching scheme of taxi regulation is to force the undersupply of taxi services, thereby creating excess profits that can be skimmed by owners of cabs and medallions. The overarching scheme of bus regulation is to force the oversupply of services, such that providers of bus services almost always lose money. (Note: we’re only saying bus service is oversupplied from the perspective of profitability given other external factors; from the perspective of societal benefit, service is undersupplied.) Again, this is not always the case; dollar vans are profitable in NYC on routes not served by NYCMTA bus. But most likely, bus startups are not going to find some high-demand route that’s not already being served by some type of fixed route service.

Unlike Uber, which was tapping into unmet demand, a startup will probably only be able to compete with existing bus services if it is faster, pays lower wages, and operates on the highest demand routes. A service will only be able to do so by eliminating low-demand stops and routes, something that transit agencies often try to do but it is a huge political challenge because of equity issues. In other words, the political “innovation” here would be something much less desirable: the ability to take away service from the least profitable routes and stops, and the ability to circumvent higher wages earned by transit agency drivers. This will probably prove to be politically unpalatable; without unmet demand to create a pool of new drivers and riders, services directly competing with municipal buses will face increasing regulatory pressure to conform to the same requirements as publicly provided services.

On the other hand, suppose you had the option of taking an Uber for a certain cost or a shared-ride van for, say, 60%-75% of that cost. This is a situation where the shared-ride microtransit services should be able to compete. By pooling rides among passengers willing to tolerate a longer trip, they could offer lower fares and possibly higher wages. This suggests that microtransit will be more likely to compete with taxi services than with bus services, and my guess is that Uber understands this and that’s why they’re trying to get into the game with Uber Pool. It makes a lot more sense to compete for taxi service profits that exist than for practically non-existent municipal bus profits.

A Role for Tech in Transit

I do think there’s a separate transportation market where the technology being developed by these startups might be beneficial: demand response paratransit.

Demand response service refers to transit service provided to disabled persons who are not able to use standard fixed route bus and rail services. Paratransit functions similarly to shared-ride services for this submarket, and it tends to be both inconvenient and inefficient. Persons using the service must often call to request a ride hours, if not a full day, in advance of the trip, which requires careful planning and limits the freedom of mobility. Meanwhile, transit agencies report typical per-trip costs of $30-$45, with NYCMTA reporting a single paratransit trip costs the system almost $72, meaning these trips require large subsidies.

Software algorithms similar to those developed by Uber and the shared-ride startups might be able to greatly improve transit services. By more efficiently pooling rides, we could both reduce the cost of paratransit and reduce the onerous advance-planning requirements for riders, increasing their personal mobility and freedom. The services still wouldn’t be profitable per se, but the savings from more efficient service might allow transit agencies to offer a fair profit to someone developing the software.

It’s not as flashy as a startup bus, and I’m not sure if there’s enough demand to allow significant efficiency gains, but it if feasible it would improve services that could really use it.

H8ers Gon H8: BART Strike Edition

Well, here we are, about a month after my post Shuttle Envy, and with BART transit workers on strike, the shuttles, along with apps like Uber and Lyft, are back in the news. Kevin Roose published a piece postulating that the rise of the shuttles and ride-share apps is contributing to the poor quality of public transportation services, and eliminating the incentives for policy makers to improve service. Matthew Yglesias and Reihan Salam, with an assist from Stephen Smith of Market Urbanism, do most of the dirty work in showing that the shuttles and apps are largely irrelevant to the quality of Bay Area public transit. Salam’s third point is essentially what I was saying in Shuttle Envy.

However, I’d go two steps further. First, it is a dubious proposition that because a wider cross-section of people in NYC use transit, a transit strike would be more effective in getting politicians to improve service. Rich people in New York have other options too – that’s one of the advantages of being rich. And as Salam says, poor people in New York have other options, like the dollar cabs and Chinatown vans. Note that these services are also mercilessly attacked by both the taxi cartel on one side and public transit services on the other, for stealing ridership, but since they serve low-income people instead of Silicon Valley Millenials, they’re not ripe targets for progressive equity and social justice attacks.

But even beyond that, the whole issue at hand here – the BART strike – has literally nothing to do with the quality of public transit services. The unions are asking for higher pay, smaller health care cost increases, better pension benefits, and some tangential safety items. They are not asking for proof-of-payment fare collection, or modern signaling and driverless trains, or better maintenance practices, or any of the many things that would have a positive impact for riders. If management gives in to all of the union’s demands, the quality of BART will be exactly the same as it was June 30.

And that brings us to one of the real problems with public transit in the US, the heart of the Shuttle Envy post: the first step to fixing a problem is to admit that you have a problem and that not exercising control is part of the problem. Public transit services in the US are not poor because Mark Zuckerberg runs private shuttles, they’re not poor because Lyft stuck a bunch of pink mustaches on the fronts of cars, and they’re not poor because BART management is holding out against the unions. They’re poor because we allow them to be and don’t demand any accountability.