jay_beckner

I play poker and trade options, seeking edges from study, reflection and analytics.

Lyft and Uber Newbies - Ride or Die

Lyft and Uber Newbies - Ride or Die

My parents used to say tough or unpleasant jobs would make me appreciate getting a good education. I guess their framework, as primary and secondary school teachers, assumed the traditional path leads to a rewarding career. Experience has taught me that paths are often diverted, for countless reasons unrelated to how much one values academic achievement.

Many people in the gig economy, your Lyft and Uber drivers, Airbnb hosts, DogVacay sitters and the like, are just normal folks at various life/career stages engaging their community in new ways - with an economic incentive. Others, like me, are testing new income opportunities to reduce the variability of freelance or similar work. Some just need that $200 bonus!

I drove for Lyft over 30 days last July (2016). The experience freshened my perspective on time maximization and how much entrepreneurial variance I can tolerate. Flatly, performing such a low-reward service made me much more resilient to the swings in poker and trading (my website’s main topics).

I didn't tell anyone I was lyfting. I guess I thought it implied failure? For a Gen Xer growing up in the framework described above, the experience was humbling. It was also adventurous and ultimately rewarding in an unexpected way.

If you’re considering driving for Lyft or Uber (many drivers do both), get ready for a jog up the down escalator → Low fares and tips. Empty miles and hours. High operating costs. Outsized risks.

To Lyft

Becoming a driver was easy. Of course, I had the three most important things: a newer car, a clean record and a smartphone/data plan. If you can check those boxes, and still want to drive by this post’s end, I recommend these starter items:

Don’t get sucked into all the driver tips on YouTube (e.g. offer riders cold bottled water). The upside for the extra effort just isn’t there. Peppermints (and smiles) were the only “rider extras” that made sense. They are cheap, popular and great icebreakers.

Or Not to Lyft

My activity, driving a 4-passenger vehicle, from June 27th to July 26th, 2016 in Louisville, KY:

  • Week 1 - 20 rides - $231.51 (fares) + $23 (in-app tips) - $57.92 (Lyft fees) in 18 hours 53 mins (in driver mode)
  • Week 2 - 19 rides - $132.73 + $32 - $33.20 in 18 hours 05 mins
  • Week 3 - 11 rides - $99.01 + $19 - $24.77 in 9 hours 0 mins
  • Week 4 - 3 rides - $16.29 + $2 - $4.08 in 3 hours 33 mins
  • Totals - 53 rides - $479.54 + $101 (including $25 cash) - $119.97 = $460.57 in 49 hours 31 minutes

Stats:

  • $9.30 earned per hour before expenses and taxes
  • $6.78 average fare (after Lyft fees)
  • 28/53 rides (53%) involved a tip, $1.91 per ride
  • 4.9/5 driver rating (very good)
  • 750 miles driven (I initially tracked mileage with MileIQ, but my earnings didn’t justify a $6/mo. subscription)
  • $0.61 earned per mile (compare to 2015 tax deduction of $0.575 per mile, qualifying mileage outlined below)
Deductible mileage for Lyft and Uber drivers | Infographic credit: The Rideshare Guy

Deductible mileage for Lyft and Uber drivers | Infographic credit: The Rideshare Guy

If the earning potential appears limited, just look at the costs. As a driver, you must present a clean and safe vehicle. Regular washes might be cheap, but repairs from accelerated vehicle "wear and tear" can be costly (not to mention faster depreciation). Fuel is the most obvious and immediate cost, and it is far from immaterial. Don't forget insurance. At this point, you might be wondering if it makes more sense to sell your car and start hailing rides instead!

Challenges

A recent survey says 38% of Uber drivers are dissatisfied. The survey implies Lyft drivers don’t feel much better about their work.

When I signed up (with Lyft), the bonus offer was $200 for giving 50 rides in 30 days. The hurdle is now 30 rides, and I’m sure rider demand and driver churn factored into the downward adjustment.

Long wait times between rides and min-fare (< $3) zero-tip trips are discouraging and frequent. I applied game theory to boost my activity (i.e. toggling between rider and driver modes for positional advantage), but it didn’t help much.

Traffic delays and high ETAs increase rider cancellations, a problem in spread out markets like Louisville. Under certain circumstances, Lyft compensates drivers for cancellations, but I rarely qualified for the “bonus” despite significant effort and dislocation.

Consider this scenario: Your main market is Northeast Louisville from which you are occasionally pinged for rides in Southern Indiana. It normally takes 10 minutes to get there, but it’s now 25 minutes in traffic. Eyeing your acceptance rate, you tap-to-accept such a request. In the next few minutes, you reach the bridge - the point of no return. Then, the rider cancels and you're stuck in traffic for the next twenty minutes, earning nothing. You may look for a spot on the other side to park/wait for another ride or spend another 20 minutes, plus all associated costs, backtracking.

Is there a sweet spot for drivers? Maybe. IF you are in a good market AND already own Lyft Plus approved 6-passenger hybrid vehicle AND you need the work AND you use the inevitable down time to work on other things, then it might be worth it during peak hours.

Qualities of good ridesharing cities | Infographic credit: entrepreneur.com

Qualities of good ridesharing cities | Infographic credit: entrepreneur.com

Concerns

The clock is ticking on ridesharing for drivers. Check out this Entrepreneur article’s second paragraph where Lyft acknowledges drivers might be replaced with a fleet of self-driving cars.

This Bloomberg article discusses racial discrimination in ridesharing. Parsing the research data for time of day (i.e. after dark) and crime rate might show that drivers are less discriminatory and more safety conscious. Try searching Google News for “Lyft driver robbed.”

When picking up new riders without ratings or those without profile pictures or the phone that made the request, in unfamiliar or potentially dangerous places, risk goes up. Adding it to the tangible costs of ridesharing and considering the low fares, one can see why drivers might use “excess discretion” at times.

I had my share of driver angst. One day after work, I found a ragged, sharp kitchen knife (gasp) between the passenger seat and center console! Another day, I spent over an hour with an ATM hopping, check cashing couple en route to the airport; they didn’t have the phone from which the ride was requested to tip or otherwise be identified. On my last trip, I drove to a McDonald’s 17 minutes from my location. I tapped-to-arrive, waited for several minutes, then tried to connect by phone. Just before cancelling, someone approached, and I asked if he was “so and so.” He softly responded in the affirmative, got in and we started toward the preset destination, an Amazon fulfillment center another 11 minutes out of the way. During the ride, unsure if the person in my back seat actually requested the ride, Lyft called my phone. I quickly cancelled it because I didn’t want to alarm the person in my car (if he wasn't supposed to be there). After completing the ride, on the long drive back, I decided my lyfting days were over.

Insights

Thinking back on my Lyft experience, my brain wants to match it with a 1997 Juvenile & Lil Wayne song title, Ride or Die… I empathize with drivers ridesharing for a living. The compensation and flexibility doesn’t justify the costs and risks. Go be a barista! You will earn far more, be safer and receive benefits like health insurance. For part-timers, ridesharing isn’t a bad way to pay the cable bill or help others - I really enjoyed helping the blind in my community.

As I mentioned in last month’s Q1 Report, driving for Lyft freshened my perspective on the value of time and money. I am more resilient to poker and trading downswings in the context of their incomparably higher expected value. My entrepreneurial energy is now focused on the highest-value activities, matched with purpose and new goals.

Stay in the passenger seat, my friends.


If you enjoyed this post and are interested in Lyft, please use these referral links:

Ride https://www.lyft.com/invite/JAY519203

Drive https://www.lyft.com/drivers/JAY519203

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