Hey people! Welcome back to Forests Over Trees, your weekly tech strategy newsletter. It’s time to zoom-out, connect dots, and (try to) predict the future.
Last week, I saw this in the New York Times:
And I thought it was mildly interesting, so I included it in the bonus bullets™ of last week’s post.
But then, that thing happened. That thing where an idea festers and evolves. I couldn’t stop thinking about this vote by Minneapolis. Why? How? At what cost!?
Minneapolis, the city where one of my first consulting projects was. Where I tried every restaurant in a 5-mile radius of my client’s office. Where the number of kayaks I saw strapped to Subaru’s was greater than the number of kayaks I thought existed on planet Earth.
But you didn’t ask me about kayaks or Subaru’s, so let me get back to the tech story here.
What happened with rideshare in Minneapolis?
The city passed a minimum wage law for rideshare drivers. Uber and Lyft have to pay $1.4 per mile and $0.51 per minute. Based on the city’s analysis, this would net out at ~$15.57 per hour – matching the minimum wage.
In response, the companies said they would leave the city May 1st (the day it goes into effect). Holy ultimatum, Batman.
They now have 5 weeks to figure out a new deal. Or, they can put 10K+ drivers out of work and piss-off tons of riders.
Wild, right?
My first reaction – which I put in the bonus bullets™ – was that Uber/Lyft just want to avoid a domino effect starting here. They don’t want other cities to follow suit.
But it turns out that the dominoes have already been falling.
Have other cities tried this?
Yes! Several others have pushed for a minimum wage or other driver benefits.
According to The Verge, NYC passed a minimum wage in 2019, Seattle started requiring companies to pay sick time in 2020, and the entire UK passed a minimum wage for drivers in 2021.
Plus, in November 2023… this bomb dropped in the WSJ:
Damn, wage-theft sounds bad.
Apparently, the companies were deducting trip taxes and fees from rider payouts. This obviously hurt drivers, but it also boosted financial metrics from 2014-2017 (and they still weren’t profitable at the time!).
And the pain continued earlier this month in Australia. Uber had to payout $178M to settle a class action suit from taxi drivers… shall I go on!?
Anyway, the point is that there’s a real battle right now about rideshare wages and benefits.
Which got me wondering what makes “right now” such an important time for Uber and Lyft to fight back.
Because they are finally, consistently profitable
For years, rideshare was the example people pointed to when saying “don’t focus exclusively on growth”.
Because that’s what Uber & Lyft had done – growing their valuations and their service footprints without ever having a profitable year.
In response to those criticisms, the companies had experimented with other business units – including delivery, scooters, freight, and ads – trying like crazy to diversify and uncover a pot of gold somewhere.
And honestly, some of that experimentation worked! But it wasn’t until 2023 that they escaped the narrative.
Take Uber for example – here are their gross bookings (similar to operating revenue) for the last 8 quarters – do you notice anything?
To me, what sticks out is that the highest growth (and once again the biggest bookings contributor) is for mobility / rideshare – outgrowing the newer, shinier business units.
Now that they are financially firing on all cylinders (pun very much intended), the last thing they want is a Sysphus-ian slide back down the hill.
So what will happen next?
In the short term
Minneapolis and the companies will probably negotiate and find a compromise. Apparently, a separate compensation study run by Uber/Lyft showed that the actual levels needed to hit the minimum wage target are ~15-20% lower than the planned law – so they’ll argue they have the math on their side.
Plus, they have a ton of negotiating leverage.
When the rideshare companies first came out, they had to play nicer with cities, since the taxi incumbents were large and in charge. But those taxi muscles have atrophied.
In Minneapolis in 2014, there were ~2K cabs. Now, according to the Minnesota Star Tribune, there are – wait for it – 14 registered cabs.
Imagine city officials explaining to 10K+ drivers why they no longer have jobs. Imagine thousands of riders battling it out for 14 cabs. Hail no.
In the long term
Small fights are better: Uber and Lyft will do their best to keep battles local and isolated. They have more negotiating leverage when threatening to leave one city than they do when threatening to leave an entire country or a region. They will see the EU’s recent decision to allow each country to make their own labor rules as a big win. They will see the recent Valentines Day protest (24-hour driver strike in 17 US cities) as really scary.
Travis Kalanick’s dream is close: The founder and former CEO was infamous for saying he couldn’t wait until the tech allowed him to take the driver out of the front seat. And I absolutely hate the crass/insensitive wording of that. But it’s hard to refute the argument that self-driving will be a very good thing for Uber’s business. And it’s closer than ever. Uber is already partnering with Waymo on self-driving rides in Phoenix, and Lyft has delivered 100K+ self-driven rides in the US with their partner Motional. When self-driving becomes the rideshare rule – not the exception – labor disputes like this will go away.
Bonus Bullets
Quote of the Week
Often any decision, even the wrong decision, is better than no decision.
— Ben Horowitz, A16Z Co-Founder
Quick News Reactions
DoorDash partners with Alphabet’s Wing – They’re doing a US pilot program (pun intended) for drone deliveries in VA. The Uber vision for self-driving might just be a stepping-stone… let’s do flying instead!
East > West in AI Talent – New study shows ~50% of global AI talent is from China, vs. ~18% from the US. To keep leading in AI applications, the US needs to boost its homegrown talent pipeline and continue giving talented foreign researchers US jobs.
Threads Gets Sports (Scores) – Just like Twitter already does, the Twitter clone from Meta will have live scores. Beyond being an obvious rip-off of a competitor feature, they’re trying to seed sports community/discussion on Threads. It’s a great idea.
Overall Economy
This is the Weekly Economic Index published by the Dallas Fed. It’s made up of 10 different data sources from consumer to labor to production, and it’s designed to closely track US GDP.
Tech Equities & Bitcoin
The Nasdaq (blue) closely tracks tech equities, and I added the S&P 500 (green) and Bitcoin (orange) for comparison. Note: this is not investment advice, but it is interesting.
Tech Jobs Update
Layoffs from 2022-2024: (Source: Layoffs.FYI).
