Uber vs Lyft: The $500 Million Battle to Decide How You Ride

We keep thinking we have innovated, disrupted, embraced change and otherwise put the past behind us. We can possibly be forgiven our vanity, but should be reminded of our monocular world view.

Transportation seems an unlikely locus for the concentration of our hopes and dreams, let alone our ideological position. It is both essential and rather boring, not a subject which would ordinarily cause voices or blood pressure to rise (unless delayed by traffic).  Yet the competition between the ride-sharing services Uber and Lyft has brought these issues to the fore.

The state of California, in which both have found warm, loving and prosperous homes refers to them as TNCs, transportation network companies. This permits regulators to get around the complaints of established taxi companies who are watching their revenues decline and the value of the licenses for which they paid handsomely, disappear.

Disparate libertarian and sharing-economy avatars have focused their beliefs on the fortunes of this nascent 'industry,' believing it incorporates their vision of a brighter future. But the reality is that whoever can deliver the cheaper ride fastest will almost certainly win, philosophical purity be damned. JL

Marcus Wohlsen reports in Wired:

Lyft tries to distinguish itself from Uber by emphasizing the “sharing” part of ride-sharing, while Uber focuses on the “ride.” Now that the two are on more equal financial footing, the contest can truly get underway to determine which vision will decide the future of transportation — and whether sharing will really have anything to do with it at all.
The pink mustache on the front of the car is the giveaway. Lyft isn’t like a regular taxi company. In fact, Lyft will tell you it’s not a taxi company at all. Instead, the company markets itself as a way to share rides: regular people with their own cars making their empty seats available to strangers via an app in exchange for money.
All that sharing has apparently started to add up. Yesterday, Lyft announced it had made a deal for $250 million in new financing. The company plans to use the money to expand its ride-sharing service across the U.S. and around the world after growing from two cities to thirty over the past year, says CEO Logan Green. Ride-sharing rival Uber secured about the same amount last summer. Lyft tries to distinguish itself from Uber by emphasizing the “sharing” part of ride-sharing, while Uber focuses on the “ride.” Now that the two are on more equal financial footing, the contest can truly get underway to determine which vision will decide the future of transportation — and whether sharing will really have anything to do with it at all.
Green is convinced that the warm, fuzzy feeling of community symbolized by Lyft’s fuzzy pink mustaches is essential to changing the culture of transportation in cities. Transportation shouldn’t be seen as an asset, he says. That is, it’s not mainly about owning a car. It should be seen as a service that city residents provide to each other. “We raised this round to focus on what we do best, and that’s building peer-to-peer, community-powered transportation systems,” Green tells WIRED. “The ambition of our mission is to bring people together through transportation.”

‘The ambition of our mission is to bring people together through transportation’

In the ideal “sharing economy” vision of Lyft, the company and its app act merely as a hyper-efficient means of connecting would-be passengers with empty car seats that would otherwise go to waste. As with room-sharing on Airbnb, however, the reality has not been so simple. City governments have taken to cracking down on Lyft and its competitors as if they were merely unlicensed taxi companies. That isn’t quite right. But neither are these services just the app age’s version of a college ride-sharing board. As with Uber — and regular taxis — Lyft charges passengers based on time and distance, vets its drivers and their vehicles, provides insurance, and takes payments.
Unlike traditional cabbies, however, Lyft drivers can ostensibly work whenever and wherever they want. There is no central dispatcher. Also, they are driving their own cars. (The situation gets even more complicated with Uber, which also includes licensed limos and sometimes even yellow cabs in its mix, though still technically working for themselves.) Many cities, often backed by taxi companies, have used this complexity as an excuse to simply shut Lyft, Uber, and others down.
In California, on the other hand, where both Lyft and Uber started, state regulators have tried to carve out a new category — the transportation network company, or TNC — to officially sanction such services. And in a way, officials had little choice. Uber and Lyft are here, and they’re popular. They also have become emblems of innovation in the current tech boom. The political incentive to figure out something that works is strong.
But even this effort to give Lyft and Uber legal legitimacy comes with restrictions that, by their very existence, imply the view that idealized marketplaces based purely on trust can’t always be trusted. This grates on the free-market faith of Lyft and Uber, which like to promote their marketplaces as self-regulating — bad reviews will weed out bad actors, whether drivers or passengers. Ride-sharing companies also have their own obvious vested interest in ensuring the safety and quality of the rides they deliver, regardless of the law. But asserting that market forces alone are enough to underwrite good intentions is to stake out an unavoidably partisan position. Sharing can’t escape the vortex of politics, which means the future of sharing will still be messy.
This leaves the ride. Often lost in the debates over ride-sharing is the key role technology plays behind the scenes to connect riders and drivers. The competition between Lyft and Uber is very much about who can build the algorithms that best solve the basic underlying logistical problem of getting a ride. Both companies have moved aggressively to build powerhouse data science teams. Lyft recently hired the former head of analytics at Netflix, and Green says the new funding will mean a rapid increase in the size of its tech team.
But while the math and science behind ride-sharing is complex, the answer to the question of which company will win probably isn’t. It’s whoever can provide the cheapest, safest ride the fastest. The power of that simple premise is already on full display as Lyft and Uber eat into the traditional taxi market. Both companies offer a better way to get people rides that they like. This means the taxi industry will ultimately lose the battle to regulate them out of existence: customers are ultimately a more powerful constituency.
And so raw competition remains. And on the one hand, it’s hard to imagine success in ride-sharing as anything but a zero-sum game. Faster and cheaper win, period. But cities are fickle creatures, and no one city is just like another. Perhaps in the future we will have Uber cities and Lyft cities, the National League and American League of ride-sharing. Now that each team has a quarter-billion dollars in its pocket, the World Series can begin.