Everyone is glad not to be Mark Zuckerberg
XCIX
Hello and welcome to Oversharing, a newsletter about the proverbial sharing economy.
If you're returning from last week, thanks! If you're new, nice to have you! (Over)share the love and tell your friends to sign up here. This is issue ninety-nine, published April 10, 2018.
Sorry I'm not sorry.
Today everyone is glad not to be Mark Zuckerberg. Facebook's CEO is scheduled to make his first of two appearances before Congress over a growing scandal linking Facebook to Cambridge Analytica, a political consulting firm with ties to the Trump campaign. The grilling begins in the Senate at 2:15pm today and continues before the House at 10am tomorrow.
Why do I mention this? Because Facebook has been a blessing to Uber. The ride-hailing startup is working to clean up its act, but there is nothing that takes the attention and title of Worst Tech Company away from you like another company doing a bunch of stuff that seems even sketchier and more terrible. When Uber's driverless car struck and killed a pedestrian in Tempe, Arizona, it wasn't even the biggest tech story of the day because everything happening with Facebook was crazier.
What is Zuck expected to discuss? "Accountability," "owning the bigger problem," and "action," according to the the talking points that were leaked to Axios and CNNby Facebook comms, I mean, er, "sources." It promises to be the ultimate non-apology. "As a company, we were too idealistic and optimistic and didn't focus enough on preventing abuse or thinking through how people could use the tools our platform provides to do harm." Facebook didn't have bad intentions, it didn't deliberately ignore the critics and warnings. It was too good, too idealistic, too optimistic.
You know who else tried the non-apology? Uber! Sorry-not-sorry was the default for Travis Kalanick, who never backtracked until it became absolutely necessary. Uber didn't offer tipping because tipping is a flawed labor practice, and its drivers came first. Uber cut rates over the protests of drivers who said their earnings fell because it felt confident that increased demand would make up for it. Uber slung mud at politicians and bowled over regulators because they were out of touch and it alone saw a better future.
A common affliction in the technology industry is to frame your failures as successes. It's a sort of perverse extension of that classic job interview question, what is your greatest weakness? Your greatest weakness is that you try too hard, you are too idealistic, you commit too much to achieving the goal. This is a quintessential value in Silicon Valley: failure is never really failure, but rather the stepping stone to success. Fail fast, fail often, fail everywhere.
At Uber, it took a new CEO and in many ways an outsider to begin taking failure seriously. Dara Khosrowshahi has now spent months on an international apology tour designed to smooth over the mistakes of his predecessor. At Facebook, the problem runs even deeper. The company is older, the founder more idealistic and defensive, the entire platform more entrenched. Anyone watching for a genuine apology from Zuckerberg is likely to be disappointed. In the meantime, Uber is enjoying a long-awaited breather.
Fare questions.
Last week, a guy named Darryl ordered a Lyft to get from where he was staying in Hermosa Beach to Los Angeles International Airport (LAX). Darryl is a pilot for a major airline and that day he was rushing to make a 7:30am flight. So he was dismayed when the first driver Lyft dispatched cancelled the ride, and the second, after making the pickup, decided to drop him off in a Trader Joe's parking lot mid-trip.
Darryl, like many a frustrated modern consumer, whipped out his smartphone and started to film:
DARRYL: I've done nothing wrong and you're kicking me out of the car?
DRIVER: I have the right to refuse service. I just drove from LAX to pick you up, that was like, almost 13 minutes drive. Now it's a 30-minute drive so in 45 minutes I'm going to make about $6.
Darryl went on to get a new Lyft to take him the rest of the way to LAX. He later contacted Lyft customer support, which assured him that he would never be paired with the driver who had left him in the parking lot again. "I thought, 'You gotta be kidding me,' Darryl told the local news station. "He still works for Lyft?"
It's easy to side with Darryl on this one, because, after all, the guy did get abandoned in a random parking lot by his Lyft driver. But it seems like the real blame lies not with the driver but with Lyft. Ride-hailing is all about balancing marketplaces. That means charging a price the consumer is willing to pay at a rate the driver is willing to work. If Lyft drops its rates so low that the driver realizes a trip isn't worth his time, that's a totally predictable outcome that Lyft should take responsibility for. In Darryl's case it seems clear that's what happened, especially since the first driver the company dispatched cancelled the trip before even making the pickup. You might expect the driver to eat the cost instead of kicking out the passenger for fear of being deactivated, but maybe this one was at the end of his rope.
Elsewhere in driver earnings, the Seattle city council on Monday (April 9) unanimously resolved to explore setting a minimum base rate of $2.40 per mile for ride-hailing drivers, up from the $1.35 per mile that Uber and Lyft currently charge and close to the $2.70 per mile charged by taxis. Seattle has been the most progressive city in the US on driver rights, with the city council in 2015 passing legislation that allows ride-hailing drivers to unionize. Seattle city attorney Pete Holmes has called Uber's rates "starvation wages." Uber, meanwhile, has circulated a petition urging users not to let the city council "take away affordable transportation."
Should the plan move forward, Seattle could end up being a testing ground for an economics paper Uber produced in October 2017, arguing that raising fares wouldn't actually help drivers make more money. The logic in the paper is that Uber is a totally open market, meaning basically anyone can sign up to drive and work as many hours as they want. Were Uber to raise its rates, the paper argues, drivers would opt to work more hours (labor supply would expand) while customers would take the same number of rides or possibly fewer (demand would stay the same or fall), leading drivers to have less work overall. Drivers might earn more per trip, but they would end up with fewer trips, so their hourly earnings would stay about the same.
The real irony of this paper, currently under review, is that it implicitly argues for capping the number of drivers who can participate in the market. If raising rates will just cause more drivers to come online, decreasing available work and depressing wages, then one solution to that is to limit the amount of drivers who can work, as New York City has long done with taxi drivers. This, of course, is anathema to Uber, as it would most likely increase wait times and prices for riders, and make the service less convenient overall. It would also mean that fewer people could work for Uber, thereby denying earning opportunities to drivers who didn't make the cut. But it would likely have the effect of actually increasing wages for workers on the platform.
Meal planning.
Have you looked at Blue Apron's stock recently? It's ugly. The shares are down to $1.80, an 82% drop from their $10 IPO price (and that was after Blue Apron cut its range). Once valued at $2 billion by private investors, Blue Apron now has a market cap of less than $350 million in the public markets.
But forget about Blue Apron. PlateJoy is a meal-planning startup that maps out meals for its users, customizing recipes to dietary preferences (“low carb,” “gluten free,” “paleo”), lifestyle goals (“trying to lose weight”), and available cooking time and appliances. Customers can buy the groceries themselves, or pay extra to order everything through Instacart. PlateJoy's meal-planning services cost $14 a month or $69 for a six-month plan and $99 for a 12-month plan (remember, the food isn't included).
PlateJoy is doing something interesting. In February, the company debuted a nutrition plan designed to prevent diabetes that is covered by five Blue Cross Blue Shield health insurance plans, plus employers Kroger, Dignity Health, and Express Scripts. Customers who qualify for insurance coverage pay nothing out of pocket. PlateJoy submits claims to insurers or employers when users of its pre-diabetes program hit specific health-related milestones, such as losing 5% of their starting body weight. CEO Christina Bognet calls it a "pay-for-performance model."
Preventing diabetes isn’t the kind of sexy business you hear a lot about in Silicon Valley. But by focusing on diabetes and getting insurers to pay for the meal plans, PlateJoy may have hit upon a model that works. Many of the best funded meal-kit companies have struggled to keep their businesses going after an initial wave of interest. Regular customers turn out to be finicky, and many people who sign up for a service to get a new user discount don't end up sticking with it. Blue Apron famously makes it difficult to unsubscribe from its weekly meal shipments, to the point that many people I know indefinitely delay their next order instead of going through the unsubscribe process.
Insurers are a different story, and in theory a much more stable line of business. PlateJoy appeals to health-conscious consumers but also budget-savvy insurers. Research has found that "lifestyle intervention"—changes in diet and physical activity—can be more effective than medication in preventing pre-diabetes from progressing to full type 2 diabetes, the version of the disease most common among US adults. It's much cheaper for insurers to pay for a healthy meal plan now than years of medical treatment later.
Elsewhere in meal-kits: Albertsons to roll out Plated meal kits to hundreds of its stores by end of year.
WeSynergies.
How goes the WeWorld? Good, great, thanks for asking. The co-working-living-learning startup is busy expanding the Flatiron School, the Manhattan coding school it purchased last October, to a new location in Houston where it will sponsor a Facebook bootcamp. Flatiron School CEO Adam Enbar is enthused about the plans, saying WeWork is "obviously phenomenal" at "literally the logistics of opening and running physical locations." That is indeed a good thing to be phenomenal at if you are a property rental and management company, especially when you believe, as WeWork does, that space can't be measured in square footage alone. Flatiron School only had one location when WeWork bought it, and now it's up to four.
Meanwhile over in Maryland, WeWork is building its first-ever college location on the campus of University of Maryland in College Park, just outside of Washington DC. The college location will offer the typical shared offices, conference rooms, and hot desks. It will be interesting to see what WeWork decides to do about the beer taps, a standard fixture of most WeWork locations, at a location where a reasonable share of their users might be underage (pink lady apple kombucha, anyone?). Also, pricing. College students are experts at getting stuff for free. Coffee, pizza, Amazon Prime. It's really hard to imagine them paying $220 a month for a hot desk when they could go to a coffee shop or library, much less $450 a month for a private office.
Of course there are potential "synergies." It's useful for WeWork to have a pipeline of nascent startups that may grow into bigger startups and seek out bigger contracts in its workspaces. The University of Maryland WeWork could also help WeWork recruit candidates for its WeLive building in Crystal City, Virginia, the perfect living setup for people who aren't ready to give up the dorm life yet. Maybe some of them will even want to continue their education at the Flatiron School! There is, conveniently, a DC location. The WeWorld is of course boundless in scope but along the way to embracing its infinite horizons, the greater DC area seems like as good a place as any to test out all the things.
"WeWork will help bridge the gap between dorm room and laboratory startup to the next phase, providing students and faculty a world-class coworking and office environment to incubate their nascent businesses," says Harry Geller, UMD's entrepreneur-in-residence, who has clearly had a little too much of the pink lady apple kombucha kool-aid himself.
Other stuff.
Supervalu contemplates a sale. Steve Jurvetson, accused of sexual harassment, starts his own firm. European VC Stefan Glaenzer steps down over 2012 sexual assault conviction. Hungryroot raises $22 million for health foods business. Qwil raises $5 million for service to pay independent contractors. Hong Kong hoteliers want tougher laws on Airbnb. Singapore fines two men $45,800 each for illegal Airbnb rentals. New York wins $1 million case against couple with illegal Airbnbs. Uber buys Jump Bikes for a reported $200 million. Hourly work platform Snagajob rebrands as Snag. Lyft expands subscriptions rides to more than two dozen cities. Iowa lawmakers weigh sales tax for Uber and Lyft. How Uber and Lyft grew the market. Grab CEO thinks local champions will rise. Instacart raises another $150 million. HEB rolls out new grocery delivery service. Amazon expands Whole Foods delivery to Los Angeles. Postmates adds pickup. Postmates backtracks on Facebook slight. Postmates and Doordash discussed merger. What the gig economy can learn from microfinance. Buyer beware. Micromobility wars.
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