Business Meets Personal: Next Pittsburgh As Mesh City

The Old School was pretty clear: business was business, and personal was personal. An interesting sociopolitical question was raised by this week's focus on Lyft-Uber and The Sharing Economy. Used to be (U2B) you were a Consumer or a Producer; now you're a Consumer and a Producer. Sometimes, mixing previously unmixable categories is too hard to think about, it's disturbing and even revolting. Maybe we're prosumers (thanks to C.Briem !)

The lines between business and personal seem to be collapsing, and with any change there's winners, losers, angst and noise.

Your car, which used to be a private vehicle, is now sometimes also a kinda-taxi (except it's not, wink-wink) but you do carry passengers for hire. A few quibbling points:

• Some people have CDLs (commercial drivers licenses), some don't
• there are difference insurance and inspection requirements for commercial vehicles
• there are different parking and zoning implications for personal vehicles
• in some cities, commercial vehicles can only use certain roadways
• commercial drivers face drug testing

You build a wonderful home theater in your basement. Big, big screen. Stadium seats for fifteen, tremendous sound system, serving table for food. You've had friends over for ballgames and movies for years. Now, you're having paying guests over for Netflix and Steelers games. You're doing the same thing as you used to do, but you're charging for it. Funny thing is, all the licenses for your content are strictly for not-for-revenue personal, non-commercial use. Fughedaboutit.

Zoning. In an attempt to structure our cities and counties in accordance with the public desire, we enact zoning laws that designate what kinds of development are permitted. Some places are zoned for personal residences, some places are zoned for business, some places are zoned joint use.

Hotels. I love hotels, I get the NYTimes and they've got a pool. But now there's AirBnB and my neighbor has transients traipsing in and out because he's sharing his guest bedroom. We're zoned for residential, but wow: brave new world.

Drones. You can go out and buy some really cool drones and quadricopters, and you can outfit them with some really cool cameras. You can fly them in a lot of places (but not around DC). The rules say you can only do this as a personal activity, you cannot do it for commercial use; you can't do it for compensation. Wink, wink, nudge, nudge.

Taxes: Personal purchases pays sales tax; commercial use doesn't. That's not trivial; start messing with personal and commercial and the entire tax structure is in play. (Ask Al Capone about taxes) Note how states are now collecting Amazon taxes and cities are focusing on AirBnB scofflaws.

Finance: Personal banking, Business banking: very different things.

How did we come to have such clear schisms between personal use and business use? What are the truly essential safeguards that we need to convey into the future, to ensure public safety from malefactors? How much of the commercial legislation is defending incumbents and restricting competition and innovation, and how much is protecting the public from blackguards and the extremes of capitalism?

What are the implications of tearing down those (anachronistic) distinctions? Because the Mesh isn't going to wait for the old rules to change, it's going to unleash creative destruction and swamp the unprepared.

Locally, it seems like Pittsburgh is going to be a Mesh City, which could be #FunToWatch, what with winners and losers n'at.

One could assert that Pittsburgh is uniquely positioned for the business-personal amiguity, blessed with the mullet: business in the front, party in the back. In the end, everything comes full circle to Yinzers.

Lyft says they're not a taxi company. I believe them.

I would like to deviate from my previous comments about Lyft, which were pretty much fact- and evidence-based, and move into absolute speculation. So: Beware. Fair Warning.

When Lyft says that they are not a taxi company, and that they are not a transport company, I believe them. Let me tell you why.

It's puzzling to me that such high-power venture capitalists would invest in shuttle services. Sure, they can break the monopoly of Yellow Cab or medallion cabs, but VC's are sharks going after max rates of return - why are they pursuing this activity? It doesn't make sense.

A web-bud kept asking, How is Lyft different from a Jitney? He's a smart guy so I pondered it. My first pass was: Jitneys are black-operated in black neighborhoods. My second pass was: although jitney drivers know their customers, it's a cash operation; no receipts, no records, no footprint. Lyft is all digital; there's records everywhere. Don't want to use Lyft to get to your assignation or dealer (although inevitably people will).

So I thought about the loss of privacy with Lyft. Even Yellow Cabs are anonymous if you hail a cab in the street. Sure, there's video cameras but that requires extraction and that's exceptional; the norm is anonymity.

When you see smart people (VC's) doing something that doesn't make sense, either they're foolish or (more likely) you don't hear the music they're dancing to. Then I realized; the loss of privacy with Lyft isn't a bug, it's a feature. It fact, information gathering is Lyft's core profitability.

• In a digital transaction, the information gleaned can be more valuable than the goods and currency exchanged, particularly when leveraged over the lifetime value of the customer.
• You've probably heard this before: Google isn't a search-engine company; Google is an advertising company that happens to have a search engine, among other things.
• Lyft isn't a taxi company. Lyft is a marketing company using drivers and their cars. (This is my speculation)

Let me explain myself. Facebook has billions of users, and Facebook is an advertising company. The better they can understand and quantify who their users are, the better they can sell their advertising. So Facebook knows that SteelerBoi1992 has certain demographics, likes certain bands, has certain friends, goes to certain other websites - they've got a pretty good portfolio on SteelerBoi1992. They watch him move around on his mobile phone, that helps a lot. Facebook has a pretty good handle on the Zip code where he sleeps, and where he spends his time during daylight hours on weekdays.

So Facebook can sell SteelerBoi1992's profile for a lot of money, and they can sell ads to SteelerBoi1992 at a higher rate because they can target him very specifically. Some people don't use Facebook on their smartphones, can you believe it? Facebook doesn't make as much money off their profiles.

The point is, the more enriched the Facebook profile, the more valuable the individual profile and the more valuable the overall portfolio is.

The Holy Grail is to break through the avatars and UserNames and get past the charade of SteelerBoi1992 and find out that this individual is really Walter Johnson, 22 years old, of 1313 Elmhurst Street, and what his credit card number is. Boy, when you can attach the online profile to the IRL (in real life) profile you've just multiplied the value of this file in a big way. That's a play that's worth the VC's time and money.

That's what Lyft does. Lyft connects online identities with real-life identities and then enriches the profile with location and demographic data from the driver. That's what's brilliant about Lyft targeting young, moneyed Millenials.

When the Customer wants a Lyft, they sign in through Facebook as SteelerBoi1992 to get a car. The App knows that they're also Walter Johnson. Walter identifies where he is and where he's going. Those are all datapoints that are stored. Lyft gets the Facebook username, the photo, and the real name. After the ride, the driver enters a few items into the Customer Profile. I'm going to be very disappointed if there aren't some demographics and econometrics in there. Then the Customer pays through the App with their Credit Card, which gives Lyft entree into Walter's financial data. This is a marketing wet dream.

When Lyft goes into a City, they're using shuttle services to enrich Facebook marketing data on young professionals who can afford car services. Imagine the tremendous value for Facebook in enriching the database for a population like San Francisco. This is why they're moving into every city.

This is how Lyft is undercutting Yellow Cabs on price. They don't have to make their money on the rides. They're making it elsewhere. They can probably lose a few cents on every ride and still be quite profitable.

In the old days, when they said "it's not about the money", it was about the money.
In the Nu 2.0, when they say "we're not a cab company", they're not. It's about the data.

#LyftPgh

Pittsburgh Lyft: Yellow Cabs, White Jitneys, Gray Areas

There's a new player in town, and there's a lot of chutzpah around the rollout: New Taxi Service Lyft Set To Go In Pittsburgh (Volunteer Drivers Face Insurance Questions). (Post Gazette, Feb.6 2014)

Another great article was in Pittsburgh City Paper: Bumpy Road Ahead?: At least one ride-share company plans to launch here this week, but how long it will be allowed to operate is another story (CityPaper, Feb 5 2014)

What's Lyft, How's It Work?

This is a pretty neutral description. Customers download a smartphone App that they use Facebook to login to. They tell the App when they want a Lyft. The App notifies the nearest Driver that's available (on-duty). The Driver gets the location, destination, a picture of the customer, and sees the Customer Profile. If the Driver accepts the ride, they click YES.

When a driver accepts the ride, the Customer gets a picture of the driver and sees the Driver Profile and chooses to accept it. When both say YES, the driver comes over and picks the Customer up, in the car with a pink moustache on it. The driver and passenger exchange fist bumps. The passenger sits in the front, and gets to pick the radio station.

At the destination, no money changes hands. The Customer pays through the App, including the tip. The Customer rates the Driver. The Driver rates the Customer.

Sounds Innovative. What's the Problem?

It does sound kicky and fun but there are major issues, mostly like: legality, insurance, liability, definitions, taxes, ADA, race, and class. Things like that. But hey, the moustache is pink!

Lyft is not a taxi company (in spite of the PG headline). They don't have a taxi license. In fact, their website tells you that they're not a transit company. And their drivers are not employees, they're subcontractors which is an important legal and liability distinction.

Since Lyft isn't a taxi company, your driver isn't a taxi driver, and the car isn't a taxi: it's a jitney service. Jitney services are illegal. They've previously existed in mostly poor, black, and immigrant neighborhoods that legal cab companies don't serve. Jitney services face periodic, low-level law enforcement sweeps but they are clearly operating outside of the law. You get in a crash as a jitney passenger, you're not covered by anything.

Lyft is a jitney service for white people, with AEO-dressed drivers. This map shows Lyft's Pittsburgh coverage area and their "hot zones":

What's curious is that Lyft's illegal jitney service has been embraced by government officials in a way that the other (legacy, black-operated) jitneys haven't. In fact, Lyft has been embraced in a way that tax-paying Yellow Cabs hasn't been loved. If I was a Yellow Cab driver, or a Jitney driver, I'd be like WTF?

A few quotes from grown-ups who aren't paid by Lyft:

• Rosanne Placey, spokeswoman for the Pennsylvania Insurance Department: "Once you start using your vehicle for business, it's considered commercial, so you need a commercial policy or an add-on to your personal policy."
• Jennifer Kocher, spokeswoman for the Pennsylvania Public Utility Commission: "If the driver is receiving compensation, they are supposed to have a commercial license." she said. And, drivers who are found operating a commercial vehicle without a commercial license could face criminal charges, she added.

Why Pittsburgh and not Philadelphia? As a matter of fact, the CityPaper article talks about Sidecar launching a ride-share service in 2013 in the City of Brotherly Love, and maybe that's what Lyft is in Pittsburgh:

But when Sidecar launched its own ride-sharing service there last year, it was promptly shut down. "When we became aware of them operating, we conducted a sting operation," says James Ney, director of the Taxicab and Limousine Division of the Philadelphia Parking Authority. "We issued stiff citations and impounded the vehicles." Ney says Sidecar was fined for dispatching without a license; Sidecar drivers were charged with operating unauthorized taxis.

We have laws and regulations for reasons. They evolved out of a need to protect people. There are insurance, training, testing and licensing requirements for carrying passengers for money.

It's not an innovative business model to say, We're going to skirt the laws, we're going to hide behind a facade, and we're going to put young people at risk because they will have to cover their passengers - even though we know their insurance won't. That's why they're subcontractors and not employees. Lyft makes more money that way.

Cynical misrepresentation isn't business innovation.

Embracing companies that put the public at risk isn't responsible government.

It's all fun till somebody gets hurt.