Last week, more than 8 million Californians voted to pass Proposition 22, which allows companies like Uber, Lyft, and DoorDash to continue to treat their drivers as contractors, and to avoid the responsibilities of managing their entire workforce as full-fledged employees. While the most expensive ballot measure in state history has eaten up much of the attention and lobbying budget of the ride-sharing giants, foundational questions about their business model remain — even if they’re not required to shell out the hundreds of millions that it would have cost to provide benefits if Prop 22 had gone the other way. On the most recent episode of the New York podcast Pivot, co-hosts Kara Swisher and Scott Galloway sit down with Lyft president John Zimmer to discuss the challenges ahead (including getting to profitability) and the controversies still standing around their recent electoral victory.
Kara Swisher: John, welcome to Pivot. Let’s talk a little bit about what happens in California now that Prop 22 has been passed. Why don’t you give us the overview?
John Zimmer: Sounds good. First, this wasn’t a no on AB5; this was a yes on Prop 22, which adds benefits, allows drivers to remain independent contractors, adds benefits like health-care subsidies, disability protections, and more. This is a win-win for drivers, for riders, for the California economy, and obviously for Lyft. It allows us to continue to expand the number of earning opportunities we have in California. And it sets the stage for a new model of “independent contractor plus benefits” that we can work across the country to establish.
Swisher: Yeah, but you know people didn’t see it that way. It looked like you guys were spending enormously — what is it, $200 million against a smaller group — and trying to change employment law in a way that was not kind to the drivers.
Zimmer: I mean, voters nearly had 60 percent support for this measure. So I believe people did see it that way, the majority of people. Zooming out on the question — let’s look at labor law. Unions and workers have fought for decades to establish labor law. That is important. That is worthwhile. That is valuable. And let’s look at kind of the new work opportunities that exist today with platforms and say, How can we both get those protections while not taking a one-size-fits-all approach to people that are using this platform in hundreds of different ways? I could use it one hour one week. I could work full-time for three months and then never come back to work. I could skip two months. There are all these different ways I might use it. So the idea is, let’s have benefits that scale with the amount that you use this service.
Swisher: You’re taking a more conciliatory approach than Uber, which has been very aggressive on this. How do you get to a conciliatory approach, since this has been so not conciliatory?
Zimmer: We’ve taken that approach since the beginning. I came into this from a hospitality background, and knowing that the worker is incredibly important to the success of the business. We came into this to change transportation, to make our cities better, and we feel a huge weight of responsibility of what we’re doing in cities. And then while trying to change transportation, all of a sudden we created 2 million work opportunities where one percent of the U.S. workforce is earning income on the platform.
It’s our responsibility to listen to the workers, to listen to policy-makers, to listen to and talk to labor leaders and not be scared of that.
Scott Galloway: Look, to your point, almost two-thirds of California voters went for this. But let’s be clear, this doesn’t offer a minimum wage; it doesn’t offer access to paid leave.
Zimmer: Wait, wait. Should we talk about minimum wage? Because there’s 120 percent guarantee minimum wage …
Scott Galloway: When the app is on. So you could work for five hours and not make anything.
Galloway: So if I work at a McDonald’s and there’s no one in the restaurant, I still get paid.
Zimmer: Yeah, but let’s talk about that. That’s a good point and it’s a fair point. What we did is, we said 120 percent times minimum wage —
Galloway: When the app is on.
Zimmer: So if minimum wage goes up, it’s still 120 percent. When the app is on —
Galloway: When you have a rider in the back seat.
Zimmer: No, it’s during engaged time — when you’re on your way to a rider or when you’re with a rider. The one time that you’re pointing out that is not covered is when you’re sitting there with no requests coming to you. I could park in the middle of nowhere and not get any rides. And that’s why we went over minimum wage; we did 120 percent because there are times like that where that happens, where that is part of the work.
But if you were to do that for all times, what would happen is that the companies would have to create schedules. We would not be able to just have an app that you could turn on and earn money at any time no matter where you are. No competitive company could do that. Even if we did it, which wouldn’t make any sense, someone else wouldn’t do it. It just doesn’t work that way. If you had the app on and everyone was earning money from the second it went on, it would lead to shifts. Shifts don’t work for this workforce, and that’s why we went over the minimum wage for the periods when you either are on your way to a rider or with a rider.
Galloway: No access to paid leave. No access to unemployment insurance, worker’s comp. No overtime or not a single day of paid sick leave when we’re facing a raging global pandemic. It’s basically made it impossible for gig workers to unionize. Where do I get that wrong?
Zimmer: Let’s talk about those two points. That’s totally fair. First of all, it does include a health-care subsidy, which is cash for your health care. At 15 hours of that engaged time or more, you’re getting 50 percent of that subsidy. At 25 hours or more, you’re getting 100 percent of that subsidy. I hear you on sick leave. And on these other pieces like sick leave, what I think is a great national policy is to create a savings account for these workers for portable benefits, where they can use it for things like sick leave or health care, whatever is most important to that individual.
On the unionization piece, I’ve had union leaders come and tell me, “We do not believe we could unionize your workers because they are so transient in nature.” So my point is, let’s work together; let’s create a new model. We don’t have to be at odds. We can create a new model of work together. I am not against that.
Galloway: Californians voted. You got almost two-thirds. Let’s talk about the business. I look at ride-hailing, and I see a business right now that doesn’t look to be profitable. And then I look at Lyft, which right now doesn’t have the scale of Uber. If you look at this as a duopoly, how do you, John Zimmer, differentiate from Uber? How do you guys carve out something that results in greater profitability? What is your strategy as it relates to the bigger player?
Zimmer: We are 100 percent focused on creating the best consumer transportation platform. We’re not trying to do everything like our competitor is. So what does that mean? That means that if you’re in New York City and you want to take a bike — we actually own Citi Bike; we own Bay Wheels; we own the Divvy system in Chicago. So we’ve stayed invested in bike-share while they’ve divested. We’ve created a rental-car business, consumer rental-car business, as well as a fleet business for our drivers while they’ve divested that. And we have other pieces of the kind of consumer transportation stack that they won’t have. So as we create a subscription service in transportation, where this is heading, if you want to get access to all the different ways of getting around, you will only be able to get that with Lyft.
Galloway: How might Lyft be a subscription transportation service? What’s your vision, or what’s the possibility there?
Zimmer: In the same way that you have an AT&T, Verizon, or T-Mobile plan, I see the future of transportation is that, instead of minutes, you get your miles, and maybe unlimited access to bikes and transit and things like that to provide your full portfolio of transportation. Today, the average American household spends $9,000 every year owning and operating a car. And they use the car 4 percent of the time. That was the light bulb for me. From a hospitality perspective, this is horrible occupancy. So the idea is, instead, for less money than $9,000 a year, we can get you a monthly subscription plan to give you all your transportation. You never have to deal with car insurance, maintenance, any of that ever again. That’s where this is heading. And if you do not have all the different modes, which Lyft has and Uber doesn’t, then you will not have the best consumer experience. So that’s how we win.
As for the bikes, we took a slightly different approach. Everyone was saying, “Hey, let’s throw a bunch of scooters into the market. Let’s throw a bunch of e-bikes into the market.” And we went and looked at the company, it was called Motivate, that owned Citi Bike, that owned these bike systems in all major cities. And they had these docks, right? The stations, if you’re familiar, in New York City. And everyone said, “That’s the old dinosaur technology. It’s all dockless. It’s all scooters.” And we were like, “I’m not so sure.” I mean, in a city, in Manhattan, obviously if you have bikes and scooters strewn everywhere, New Yorkers won’t take that. So we saw the future of bike-share is a station-based system where you can actually charge in the station, which we’re experimenting with now. And we have an exclusive contract with the City of New York to do that. So we’ve taken a different approach. We participated in some of that early kind of scooter action, but we’ve scaled down, and I think right-sized that as well.
Galloway: What would you describe as Lyft’s superpowers? Is it technology? Is it marketing? When you think, This is the competence or the domain expertise that we really want to invest in, that we’re better at than most other companies, what is your superpower?
Zimmer: It’s infusing hospitality with technology. It’s in being human. I think you guys have talked about it a lot. If you just build a tech-only business to optimize metrics and numbers, and you forget what’s behind the number, ultimately that’s bad for society. We’re still seeing whether or not it’s bad for business. But I’m out to prove that when you infuse humanity — or the way I talk about it, hospitality with technology — and that you don’t forget what’s behind those numbers, that you can do a lot of good. And we’ve got a lot of way left to prove that. But people have counted us out when Uber had 30 times more cash than us, and said we would die, and we’ve tripled our market share since then. So we’ve made progress. We have more to do. And that’s what we’re going to prove.
Pivot is produced by Rebecca Sananes. Erica Anderson is the executive producer.
This transcript has been edited for length and clarity.