Lyft Off, St. Louis’ Embrace of Tech Off to Rocky Start

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Can St. Louis become the next tech hub?” asked an April 8th CNN Money headline. Ten days later as Lyft opened service in St. Louis, city government answered with a resounding, “No”.

News in other cities has been flooded with stories about ride-share companies for the last year or more, but Lyft was the first major ride-share (or TNC) to dip its toe into the St. Louis water. As TNC service has expanded into mid-size markets around the country, local regulatory approaches around have ranged from an awkward embrace to outright hostility.

Here, our mayor’s office, and by extension our Metropolitan Taxi Commission (MTC), hewed decidedly towards hostility, pulling over Lyft drivers within 90 minutes of service beginning and sending them on their way with court summons for operating an illegal taxi service.

The charge was led by Lou Hamilton, chair of the MTC, who professionally earns his living as a local lobbyist for companies like AB-In Bev, Quik Trip, and the St. Louis Cardinals. (When those companies make a campaign donation, Hamilton is generally the guy who hands you the check.)

To understand what happened to Lyft drivers on Friday, you first have to consider how selective all law enforcement is. We live with an incredible number of local and state laws, and we rely on the honor system for compliance with most of them. A coordinated, immediate crackdown on a business is far outside of our ordinary approach. The completely illegal, unpermitted car storage operation in the middle my neighborhood that’s been operating for 90 days without a court summons is only one example.

You should also know how many mundane things are actually illegal in St. Louis. Freelance graphic design from your home computer without a business license: illegal. Editing a book from your home office without a zoning waiver: illegal. Walking a dog on a leash longer than 6 feet: illegal. Manufacturing candles downtown: illegal!

Regardless of whether or not Lyft is complying with the MTC’s rules for taxis (and they aren’t), it’s still clear the Mayor’s office decided this was a place to draw a line in the sand and demand strict compliance with the letter of the law. No compromise here.

Was that the right call? No, it wasn’t. If you’re thinking the MTC was making a principled stand, lest the Lyft scofflaws undermine our collective respect for the law, take a look at MTC chairman Lou Hamilton’s twitter feed. (@hamiltonstl)

It speaks for itself, not searching for a way forward, but demonizing St. Louis residents who might want to drive for Lyft or use the service. Hamilton calls the drivers “Snidely Whiplash” and ride-share companies “Incredibly arrogant”. Other St. Louis division heads chimed in as well, calling drivers, “Creepy guy(s)”. There’s much more, but you get the point.

Technology changes markets. Markets evolve, people’s tastes change, and society evolves in conjunction. Governing bodies either adapt their rules to maintain cultural relevance, or people simply decide to ignore them. MTC’s insistence that TNC companies can operate only as long as they operate exactly like traditional cab services pushes them dangerously close to irrelevance. The solution is for the MTC to write new rules that acknowledge the inherent difference in this new class of companies. So far they’re made no effort to do so, despite a number of emerging strategies from other cities grappling with the same issue.

The long term arc of this story is predictable. If people like using these ride-share services, St. Louis will adapt rules to let them operate above board. Will St. Louis be an island of traditional taxi service in national ocean that’s rapidly showing a taste for ride-share? I doubt it.

The best reason for regulatory caution with ride-share isn’t protectionism (especially for an industry that doesn’t have very good protections for employees in the first place). It’s guaranteeing service to low-income areas that may be only marginally profitable for taxi companies. Should TNC’s push traditional taxi service out of business, there is the risk that essential service to low-income areas will suffer. (Of course, some taxi drivers already illegally deny pick-up to residents, but that’s another story.)

If we had a functional, nimble MTC, they’d be thinking ahead and looking for solutions to that potential problem. Here’s one solution: If we need to guarantee service, lets just subsidize rides from the lowest income areas. If this sounds crazy, it’s exactly how St. Louis has approached expanding youth employment in the summer. We just pay employers to hire teenagers.

But there are plenty of potential benefits as well: The St. Louis region’s long history of lax drunk driving enforcement (and resulting injuries and deaths) is one obvious area. Faster ride service could very well mean fewer drunk driving fatalities. Increased mobility options for seniors is another application. Reduced cost for low-income residents using taxis on an emergency basis to get to work. An easier travelling experience for tourists. For some families, ride-share access might even mean they can ditch one of their own cars, reducing their cost living by thousands of dollars a year.

What no one is talking about: The taxi / ride market isn’t static. Access to TNC’s might simply expand the overall market. People may choose to use a TNC rather than drive to dinner or a baseball game and pay for parking. They may use it instead of a lengthy bus transfer.

There is no evidence yet that one additional ride-share ride means one less taxi ride. This week in Chicago I saw many late-night workers using it rather than waiting for a bus at the end of their shift. For all we know, ride-share is the end of the paid parking or bicycle industry, not the taxi industry. The world is unpredictable.

After two years of buzz from every civic leader about St. Louis’ emergence as a “Tech Hub”, this has been a dismal week in dealing with what being a tech hub looks like. One tech company mainstay is disrupting existing markets. I personally don’t put much faith in technology to always improve our lives, but I also recognize technology and market evolution happens anyway. If we want to continue to regulate the ‘car for hire’ industry (and we probably do to some extent) we can’t assume the industry is still operating like it was in 2003.

The “shared economy” isn’t very old, and St. Louis is hardly ground zero for its affects. In fact, as usual, we have ample opportunity to learn from the experience of other cities. And as usual, we aren’t. Using police in an attempt to stop the evolution of the transportation industry is no more likely to succeed than using police to stop rogue license-less home web designers. Gumming up our courts with Lyft drivers isn’t a sensible use of public resources.

The 700 people who interviewed for jobs as Lyft drivers weren’t moonlighting Cardinals lobbyists and corporate attorneys, they were St. Louisans trying to earn more. Sticking it to Lyft drivers is the equivalent to sticking it to pizza delivery drivers. Its not working-class friendly. The MTC can, and should, update their rules to let these companies operate legally. California has already built the legal framework, and we can copy it. While we’re at it, maybe we should legalize graphic design too.

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  • MRNHS

    Very well written Scott. It seems that the MTC’s argument originally centered around “safety”. They were saying that Lyft drivers are not background checked or properly insured. That was squashed. Then, the real reason they were against Lyft quickly came through; they are hurting the earnings potential of cab drivers! While this may be true, it is absolutely groundless for them to use that as a reason to block them from doing business. Lyft charges less, I get it. There are thousands of real world examples, but here is a quick one: Scottrade charges a much, much lower commission to trade a stock than Edward Jones does. However, both companies co-exist because Edward Jones provides a value to its customers that makes the higher commission worth it to them. In the case of the cab companies, if they can provide better, more reliable service, proving their service is worth the added cost, people will pay more and both services can co-exist. If I can get on an app and hail a Lyft driver, but there is already a cab nearby (or I can get one quicker than I can a Lyft driver), I will get in the cab. Maybe instead of trying to “outlaw” competition, maybe the cab companies should look internally at their own business models and figure out where THEY can improve.

    • brian

      It has nothing to do with the possibility of hurting the earnings of cab drivers. It is all about stopping the potential hurt to the earnings of the politically connected people that own the cab companies.

      • next314

        BINGO! BINGO!

      • flyover

        It is about control. Dem or GOP, doesn’t matter. They both like the control. They like selling licenses. They like saying who can operate in the City and who can operate in the County and who can get in line at the airport. That notwithstanding, I still have a problem with insurance. I would not feel comfortable riding with someone whose insurance I know would disqualify the claim because private coverage does not cover commercial applications and I would be suspicious of the million dollar policy the company claims it offers each of its drivers. I’d really like to hear more about how that works. If the drivers are not “employees,” how do you extend coverage? I think the company needs to be more forthcoming about this.

  • Scott

    there is no reason both cannot exist (as MRNHS indicated below) in the same environment. a few months back i was in Indy staying with friends. we used Lyft to head to dinner, where we drank the entire evening, using Lyft to drive us home as well. i assure you, i have been in this situation before Lyft and we never did that with a taxi. Someone in the group would stay sober and drive us both ways (and paying for parking often wherever we go). Lyft being a cheaper alternative, allowed us to bypass the sober driver for a nominal amount. A cab’s cost (particularly charging per person, for instance, plus the added wait times…) would have not allowed us to do this…nor is it convenient to get a taxi in a residential neighborhood.

    at the same time, when i fly into any city for work, i hail a cab at the airport to take me into the city and/or to get me to my hotel. it is readily available, and the added cost is worth the convenience. people don’t like to wait, and Lyft (or others) will often (but not always) allow an individual to wait less.

    also, think to a day like Mardi Gras…where you call a cab company and it’s a 4 hour wait…Lyft would allow a relief on these busier dates, and (as suggested in the article) would significantly reduce drunk/buzzed driving. In fact, similar to my trip to Indy, i would even argue that Lyft encourages additional spending at local establishments…i assure you that my group that night in Indy spent more on food and drinks as a direct result of the freedom of not being tied to a car that evening.

    cab companies have been around forever (50+ years?) and have not innovated in the slightest during that period. what is stopping those companies from producing an app that would track driver location, wait times, etc.? if Apple didn’t innovate and create new exciting products, even Apple would be out of business with time…

    also, just a question, but is anything stopping a cab driver from becoming a Lyft driver? perhaps they could do both and find out which is more lucrative for the individual?

    • John R

      Just curious, how much cheaper is Lyft than say a taxi? Let’s say I live in Benton Park and want to go out to CWE for the evening…. what might I be looking at for reasonable cost using Lyft? And Taxi?

      • Scott

        it probably depends on many factors, but as a general guideline from my very minimal experience, and more so the experience of my Indy friends who utilize it more often, i would say the “donation” is ~50% of a cab fee + tip. again though, even if priced more similarly, i think the time savings/ability to know when someone will be there/know where they are currently/simplicity is just so much more convenient.

        i was in minneapolis last week for work, and my cab from my hotel to the airport (not really that far, probably similar to here in STL) was $55 w/ tip. that seems excessive to me. i could however wave a cab down on the street, thereby it was very convenient.

        • John R

          Thanks. Yeah, I can see where the convenience would be a big bonus… as for pricing, it would be good to know what an average cabbie versus lyfter makes; hopefully there is room for both and everyone is getting decent wages.

          • moe

            But they wont because the cabbies have to pay taxes on that income. Do you foresee Lyft drivers willingly reporting their income on Schedule SE, Form 1040? I don’t.

          • rgbose

            Lyft doesn’t issue 1099s?

          • John R

            The whole independent contractor/employee thing is a concern…. I haven’t looked into it much, but these types of relationships can be anti-worker. Here Is a lawsuit in SanFran:

            http://www.bizjournals.com/sanfrancisco/blog/2013/09/drivers-suit-says-lyft-is-his-employer.html

  • Ann Wimsatt

    Good point. The vitriolic and hysterical reaction to e-hailing, a widely accepted millennial innovation is a good indicator that Saint Louis is NOT a tech hub. SF cabbies hate the ride-share system too but they responded with their own e-hailing app, https://www.flywheel.com/

    Contrary to the hype, Saint Louis faces a steep challenge to raise its profile as a ‘tech hub’. For one thing, the leading tech hubs aren’t resting on their heels. They are busy building entire tech oriented universities (http://tech.cornell.edu/future-campus/) and raising the amount they award to start-ups ($120K for 7% equity stake at YCombinator in Mountain View).

    Every city on the planet wants to be get on the tech profit field. It would be nice if the local media was slightly more realistic about the global competition. (See map below to see the miniscule size of the STL ‘tech hub’ status.

    http://techcrunch.com/2012/11/20/startup-genome-ranks-the-worlds-top-startup-ecosystems-silicon-valley-tel-aviv-l-a-lead-the-way/

    • Adam

      i’m pretty sure that nobody anywhere has claimed that St. Louis is already a tech hub. every headline i’ve seen claims that St. Louis is striving to become one. i agree this Lyft thing is embarrassing and a set-back, but let’s not get carried away with comparisons to long-established tech hubs.

  • doth protest too much

    Lyft fights back in St. Louis; launches in 24 new markets
    Taxi commission falsely stated that Lyft driver had been arrested
    ^ seen at stltoday home page. Gotta love it when “trusted sources” get attorneys to make false claims in court.

  • Murphy Lee

    I’m not sure it’s fair to look at this in such broad, detached terms. Focusing on the broader narrative (“St. Louis isn’t embracing new technology!”) can make you lose focus on the details of the case at hand. We’re talking about a taxi company that by your own admission should fall under the regulations making a massively publicized entrance into the market in which they openly flaunt the regulations (by offering to pay the tickets of any of their drivers who are punished under them). It’s not really analogous to someone quietly operating an unlicensed neighborhood shop or a home graphic design business. If a traditional taxi company were to do this, do you really think they’d be treated any differently?

    If you think it’s unreasonable to regulate taxis, that’s all well and good. But in that case, I think the solution is to repeal the regulations, not to just let someone flaunt them this blatantly and publicly out of fear of being seen as “backward.”

  • city guy

    Fair points. What was deeply embarrassing though as a city resident was to see how orchestrated the powers-to-be were on cracking down on this like it was a grave threat to our well-being. I think Nashville authorities hit the sweet spot by acknowledging that Lyft’s entrance was a gray area with their existing regulatory scheme but that they would not ticket drivers while new rules and regs were worked out to reasonably accommodate these new services. Very rational and reasonable. This should all get worked out here, too, but the actions of city leadership and the commission were pretty scary, in my opinion. Hopefully common sense is prevailing on them now.

    • city guy

      oops, that comment was intended as a reply to Murphy Lee’s…. could it be the Murphy Lee?

  • http://yastlblog.blogspot.com/ Kevin Barbeau

    More of a fan of the uber model which enlists actual cabs. Interesting debate nonetheless.

    If the opponents to Lyft REALLY want to make their point, they should just get the app and start taking rides all over the place without paying. Since it is, you know, a “donation”. That’ll get the drivers’ thinking!

    Also, since Lyft is now illegal, isn’t anyone riding it breaking the law too? Isnt it akin to soliciting a prostitute or buying on the black market? Saddle up, SLPD!

    • moe

      Maybe they’ll have condom dispensers in the car. After all…it’s always best to practice safe driving.

    • http://Facebook.com/justus.aguy Just Aguy

      Hey Kevin! Here’s why you won’t be seeing UberTaxi in any new markets that Uber enters. Have a read. http://bit.ly/1jzqlyh

  • RyleyinSTL

    The last time I attempted to pay a legal MTC taxi with my debit/credit card (airport run) I was berated by the driver for 5 minutes (a situation not unique to St. Louis). Screw that guy! I’d gladly pay more money to take a Lyft ride and skip the condescending attitude.

    • http://yastlblog.blogspot.com/ Kevin Barbeau

      Likewise. Approached one at the Amtrak station, said where I was going (Loughborough) and he “asked” that I pay in cash. I was able to, so away we went.

      Not sure the regulations in STL, but in Chicago, each cab has a placard explaining your Mays/May-Nots, including your right to pay by credit card (see below)

  • greenlight

    With red light revenue cameras popping up on every corner, it may in fact be accurate to call St. Louis a ‘tech hub’.

  • Mark Brown

    While I feel that St. Louis went overboard with issuing citations, I personally think it is extremely ridiculous to assert that ‘St. Louis’ Embrace of Tech Off To A Rocky Start’.

    Very unfair and angry-toned.

    Further, that assertion is patently false. And such an assertion and headline could potentially harm the region’s efforts to build a competitive tech hub. The headline doesn’t send a good message to tech community. To be fair, St. Louis has embraced and welcomed with open arms tech innovation and has created a district specifically for innovation. Downtown and Cortex are flourishing with bio and IT start-ups.

    For the record, Kansas City and Houston have recently considered challenges to Lyft and Uber. Los Angeles, a major tech hub, issued a cease and desist order. And in San Francisco – YES! San Francisco – drivers have been interrogated and arrested.

    Question: Were there articles and headlines suggesting that L.A. or S.F. were not embracing tech? I can’t find any.

    The Lyft and Uber ride-sharing programs are obviously different animals that happen to use technology and I personally feel that all cities should vet (not harass and rush to penalize) such ride-sharing programs.

    After vetting these programs to get a better understanding, the city should then leave them alone.

    Ultimately, the headline is just plain bad and melodramatic. It could potentially stereotype and achieve graver consequences for the region’s tech efforts.

  • pitbullstew
    • rgbose

      Scary. How are taxi drivers not strangers? How do the rates of accidents, people who shouldn’t have made it through the background checks compare at the taxi companies?

  • pitbullstew

    You’re not fooling us, Uber! 8 reasons why the “sharing economy” is all about corporate greed

    Or, how to make money for Silicon Valley venture capitalists while pretending to espouse progressive idealsANDREW LEONARD

    http://www.salon.com/2014/02/17/youre_not_fooling_us_uber_8_reasons_why_the_sharing_economy_is_all_about_corporate_greed/

  • http://Facebook.com/justus.aguy Just Aguy

    A Must Watch NBC UberX Expose
    http://t.co/JL9ZpgHuYj
    http://t.co/nb8iv34khR
    http://t.co/uhY79xAM4F

    This ONE screenshot says ALL that needs to be said about the #Ride-sharing #Insurance charade! http://t.co/4Edsw5xlCI

    A Peek Inside the UberWONDERFUL World of #Ride-sharing http://t.co/Y7TZDcOxZo
    Twitter @chi1cabby

  • Nathan Bookhout

    I see lots of valid points being made about insurance and common sense regulation of rideshare services, and the problems with and poor service from the city’s taxi services. Where is the MTC’s actions to improve their business model? There is obviously a demand for app based, GPS tracked cabs.

  • flyover

    Interesting look at Lyft and Uber

    http://recode.net/2014/04/30/lyft-and-uber-price-wars-leave-some-drivers-feeling-crunched/

    I am still confused. All the stories here talk about a “donation” where in this story it describes prices. Which is it?

  • Billiken21

    St Louis has the worst cabs of any city I’ve traveled to. Used Uber all the time in Seattle and Chicago and they were remarkably better then the piss poor service offered by Laclede and county cab in STL.