[Editor's Note: The following is an excerpt from TDV Homegrown by TDV editor, Gary Gibson.]
The Internet has yet again found a way for you to make money with minimal start-up costs…and the government is right there ready to ruin it on behalf of some entrenched interests.
We've already covered how to start up your own B-N-B ("Bed, No Breakfast") via Airbnb. We've also covered how the hotel lobbies in various popular cities have appealed to local and state governments to shut down Airbnb so that the individual entrepreneurs it enables don't pose a threat to the hotel industry's income. All in the name of "safety", of course.
Now the same thing is happening in the cab industry. Lyft is allowing people to use their existing cars to become cab drivers after a vetting process. Lyft calls itself "on-demand ridesharing". The San Francisco-based company lets people use mobile phones for peer-to-peer ridesharing by letting people who need a ride request them from people who have cars and are willing to drive them. Nothing could be simpler. At least until the forces of crony capitalism ("crapitalism") get involved…
From an article in Forbes:
It’s a long standing contention of mine that one of the reasons for slowing economic growth in recent decades has been the morass of regulation that deters people from doing anything new: doing something new being one of those definitions of economic growth of course. At which point we get this gobsmacking story from California:
At San Francisco International Airport, they’re arresting car drivers for ride-sharing. Police officers approach the cars and start asking questions, and then, a few minutes later, airport officials arrive with the arrest papers.
The problem is that these drivers are offering rides through ride-sharing companies such as Uber and Lyft, using cars that aren’t certified as taxis or limos and thus not meeting the airport’s regulations for who can provide paid pickup and drop-off. So far, according to SFO spokesman Doug Yakel, eleven Uber drivers and one Lyft driver have been cited for misdemeanor unlawful trespassing. “We’re certainly open to new business concepts, but not at the expense of safety,” Yakel says.
The two services, Lyft and (this part of) Uber are simply electronic methods of hitching a ride. That electronic thumb replacing the one waving by the side of the road. That’s it, really, that’s all they are: and yet airport authorities are arresting people for doing this?
That's right: peer-to-peer drivers have been arrested for offering a ride via electronic means. It's just like the criminalization of the Airbnb which is essentially internet-based couch surfing. The hobgoblin of "safety" is trotted out to scare the kids and woo lawmakers. Liscenced taxi operators are supposed to be inherently safer than some weirdo you find using the internet, right? But as a free market operation Lyft is very aware that both the perception of safety along with the actual safety of its users is sort of essential to its continued existence. From Wikipedia:
One key to Lyft's success has been establishing trust among its users. Lyft claims that its safety precautions are more stringent than those performed by taxi and limousine companies, and that it only accepts 6 percent of its driver applicants. Beyond requiring every driver to join Lyft through their personal Facebook account and subjecting drivers to a 5-star rating assessment from passengers following each ride, the company carefully vets potential Lyft drivers through performing the following additional screening functions:
DMV and criminal background checks
In-person interviews by Lyft employees
Vehicle inspections and a two-hour training and safety session
Drivers must be 23 years or older and have a driver's license for more than 3 years;
Zero tolerance drug and alcohol policy
Although Lyft drivers are classified as independent contractors, Lyft also insures each driver with a $1 million per-occurrence liability policy. Finally, any driver averaging less than a 4.5 star rating by users is dropped from the service. The company believes that these safeguards, as well as its community focus, account for the fact that the service has not only earned the trust of its users, but also explains why the majority of their passengers are females aged 18 to 35.
That sounds pretty damned safety conscious to me. Of course, what the taxi industry is worried about isn't customer safety…it's profit-draining compeition. That's a valid worry for any business. But a valid response to this worry isn't going to the local thugs to intimidate and shut down the competition.
The capitalistic force is with Lyft. Like any new competitor should, Lyft offers customers both lower transportation costs — about 30% or so — and higher quality of service with acclaim for making commercial transportation "more uplifting and more fun." For this Lyft has been issued fines and a cease and desist order from the Los Angeles Department of Transportation.
When you see the politicians and entrenched interests ganging up to take something down, you know that something is a free market winner. Like Airbnb, Lyft uses the connective power of the internet "to use what's lying around" to make money. You can rather easily turn your home or your car into money-makers with services like this.
In fact, sharing services like AirBnB and Lyft could be the wave of the future. We recently told subscribers to our TDV Homegrown newsletter how all our Homegrown advice so far about these things can add up to a very tidy income largely free of state interference (i.e., not very taxable). To join our subscribers and learn more, just click here.