How I Built This with Guy Raz - How I Built Resilience: John Zimmer of Lyft

Episode Date: September 26, 2020

This year has brought unexpected challenges to Lyft, starting with a 75 percent drop in rideshares at the beginning of the pandemic. But co-founder John Zimmer says ride-hailing is returning, and the company is continuing to diversify with car, scooter, and bike rentals. John also answers questions about whether app-based drivers should be thought of as part-time employees or independent contractors. These conversations are excerpts from our How I Built Resilience series, where Guy talks online with founders and entrepreneurs about how they're navigating turbulent times.Order the How I Built This book at:https://smarturl.it/HowIBuiltThisSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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Hey, everyone, and welcome to how I built this resilience edition. On these episodes, we're talking with entrepreneurs and other business leaders about how they're coping during this very challenging time. And today, we're going to hear from John Zimmer, the co-founder of the ride-haling app Lyft. We first spoke with John back in 2017, but now, fast forward a few years. And like most of us, John is dealing with challenges. never anticipated. But when we spoke a few days ago, he sounded pretty optimistic.

Personally, I'm doing okay. I think, you know, the business has had a tough time, but has seen some really strong recovery since the bottom. We were down about 75% at the peak in terms of ride-chair rides. We've now returned to a little under half down, which is actually good progress. You know, we've always been a very long-term-minded company. We've had hard times before. We've always been the Challenger brand. And so actually, I think moments like this are opportunities for us and our team to shine. And so happy to share some of that with you today.

Yeah, I want to talk about that. I mean, let's first talk about, like, kind of drill down into some of the challenges first. There's no question that this has to be the most challenging time in your, you know, in your leadership of Lyft. I think it's the most challenging time for any business leader or founder around the world today for a variety of reasons. And as you mentioned, it's been a tough year for Lyft. You had to have some layoffs in May, I think about a thousand layoffs, which could not have been easy for you to go through. So as you began to see the pandemic having a significant impact on your business, what kinds of conversations were you having with your leadership team, with your co-founder, Logan, about ways to kind of begin to build resilience? One of the conversations that we've had, or one of the challenges throughout is how many different audiences.

groups of people that we're working to take care of throughout this, right? So we have our drivers, we have our riders, we have our employees, within employees, there's those that are working in person to help drivers at operation centers, and there are those that could work from home. So all different populations that we want to take care of, investors as well, who are judging those decisions we make. So I think that's been a really interesting conversation. Also, the conversations around short-term thinking versus long-term thinking, there are short-term decisions we need to make in order to preserve the long-term mission that we have as a company. And those have been really key decisions. You talked about the layoff. That was very, very difficult. It forced us to

make hard decisions, some of which I think actually, in hindsight, were very healthy for the business, but very difficult to make, especially for people that are all in this tough time where the job market is difficult. Those were not easy decisions. Let's talk about some of the short-term decisions that you had to take. I mean, you are a publicly traded company. So you're obviously accountable to investors and everything's on the table. You have to review. You can't hide anything. First of all, just to keep the business operating and to get you through this time, because this is going to be a challenging year. And there may be a recovery next year for you. We'll talk about that in a moment. But you knew this was going to be a tough year.

So was one of those decisions to retain as much cash on hand? Was that one of the, initial decisions that you guys had to take? Yeah, obviously, so we look at the cash that we have on hand. We also raised our first debt to add cushion. We're actually in quite a strong position. We're lucky that we went public when we did and have nearly $3 billion in the bank. What we did to start is we ran all different scenarios. We said, okay, if we were 75% down for six months or two quarters, you know, what would the situation be like for cash? If we were down, you know, for four quarters, what would it be like for cash? We ran, you know, the worst case scenarios, the medium case scenarios, and the best case scenarios, and then made the decision that, you know, raising the debt was kind of

a no regrets move. But then also to your point, preserving the cash that we do have on hand, making decisions about expenses that we had in the office that were more of a luxury, making decisions around certain teams that we needed to tighten up, for example, on the operating side, there were some markets where we had to close some of our centers. What are you finding out from users? Like, why, what is it that is preventing them from using Lyft? Is it basically that they just don't have anywhere to go, or is it the fear of being in a car with somebody else?

It's a mix of both. You know, first, I think it's people changing their transportation behavior, their actual transportation behavior. And then secondarily, it's obviously the questions around health safety, and I'd love to walk through what we're doing on that end. As you open the app, we ask both driver and rider to confirm that they're wearing a mask. We ask driver and rider confirm that they haven't been in contact with anyone that has COVID, and we ask everyone to keep their areas clean and open windows if possible. So that's gone a long way. I mean, if you zoom out, actually, the fact that half as many rides are being taken now as before, I'm actually quite happy with in a strange way

because I know many people that are, they're not going into the office. So that's a huge change in transportation. So the fact that one out of two rides are still present even in this environment shows some flexibility in the model because we've seen different types of rides. We've seen a lot of essential workers using this way more because there are other options potentially public transportation are things that they're more concerned about from a health safety perspective. And so we've seen those rides increase. I mean, one of the things that you did before the pandemic was to diversify. I mean, Lyft invested in bike share programs and in the scooter programs in certain urban areas around the country.

Given that the ride share part of your business is still the core part of your business, what are conversations you're having internally about creating other revenue streams in the future to, you know, If ride share doesn't recover as quickly as you hope or expect, or if, you know, if ride chair is a completely different thing in the future, what other kind of places are you looking to diversify? Yeah. So, I mean, the good news is transportation is fundamental and is something that through the recovery is going to be important and people will need. So one on bikes, you know, we own the system city bike in New York City, Bay Wheels in the Bay, DIVY and Chicago, and you can access them through Lyft. And for City Bike in New York, I believe it was last weekend, we hit our record of over 100,000 rides in one day.

And so we're actually seeing faster recovery and not as deep downside on those modes, which has been really helpful. The other area we've looked at is delivery. So we have no intention to be another kind of food delivery consumer app. We will not do that. But there's a lot of small and local businesses that are having to pay 30, 20% of their revenue to be on those platforms. And so we think there's a huge opportunity to help those small and local businesses have their own kind of capabilities and provide more jobs

for drivers. So we're experimenting with that. We started that with essential deliveries. We've worked with partners to deliver millions of meals for people in need during this time. So I think that's another really interesting opportunity on the driver's side. I want to ask you about an initiative that you recently put out, I think it's called Resilient Streets, where you asked urban planners to sketch out plans for what cities will look like with fewer cars. Basically, you know, city streets that are designed for more bikes and e-scooters and e-bikes and so on. I mean, it's interesting because, you know, your business model depends on cars and ride shares. So walk me through the thinking behind this and how would that affect your business model in the future?

Yeah, so if you zoom out and you think about our, our mission, improve people's lives with the world's best transportation. From the beginning, we looked at the fact that Americans spend $9,000 every year owning and operating a car that they use 4% of the time. They spend more money on their car than they do on food, than they do on health care. The only thing they spend more money on than their car is their house. And to us, that doesn't make any sense. So we want to create a whole new way for people to access transportation because we think by doing that, we can allow cities to be built around people instead of car ownership, right? We have so much parking everywhere.

Studies show when you build more streets, you get more traffic. And so especially in a moment like now, when you can rethink everything or that you're forced to rethink everything, thinking about street design is critical. You know, we have the bikes, as I mentioned, across the country. There would be a lot more people using bikes if there was safe bike infrastructure. There would be a lot more people walking and enjoying local commerce and cities if it was always safe for pedestrians and there was easy access throughout the city. There is going to be transportation in cars, in vehicles.

That will always be important. But the infrastructure needed, whether that's parking or the number of streets that we have, or the lack of safe streets for bikes and pedestrians need. to change. So, I mean, could you imagine a future where the bulk of your business comes from people using bicycles and e- scooters and other modes of transport? I think in like a very urban core. I mean, Manhattan is a great example. I forget the average speed of a car in Manhattan. Yeah, it's like seven miles an hour or something. It's single digits. It's not very impressive. So in urban cores, micro mobility or bikes and scooters, as those vehicles get better and better and safer and

safer, and as the street infrastructure adapts to make the environment safer, absolutely it can be the best way, the fastest way, the cleanest way, and the most enjoyable way to get around your city. All right, let's get to some questions, John. Actually, Madeline Chen had a question that I think we just answered. Her question was, is Lyft considering diversifying beyond ride-sharing transportation? Well, one other, if it's okay, one other mode that we've been really excited to to launch or to grow even in this environment has been a rental service that we created.

So car rentals, as we get people out of car ownership, there are use cases if you go away on a weekend on a, you know, two hour drive and you don't own a car, having easy access to a car rental is important. So with lift rentals, you get a lift to the car rental location that we operate. And then you can just grab the keys and go. There's no counter. It's really fast and easy and in COVID, we launched a kind of contactless experience to get the car. We also announced a partnership with Sixth, which is a European car rental operator, such that we brought that technology and that access through our app to their vehicles as well. This is a question from Kyle Ashcraft from Facebook.

Kyle asks, what do you see as a future for subscription-based ride sharing? I know we talked about that at the how I built the summit, which was you had a vision for in the future, you know, people will have subscriptions for bikes and for, you know, e-scooters and for lift rides. What's the status of that? Yeah, I love that question. We have a program called Lift Pink, which is our subscription service. And so you pay a monthly fee to get a 15% discount on all ride-chair rides, as well as access to bikes and scooters. We're even testing unlimited access to bikes and scooters. So this is live. We're going to be testing, you know, upgrades on your car rental. So by having all these different consumer transportation options,

Lyft Pink can become your transportation wallet, can become the most affordable way to access transportation. When we come back in just a moment, I'll ask John about one of the biggest debates in the world of ride hailing, whether drivers should be thought of as independent contractors or employees. Stay with us. I'm Guy Raz, and you're listening to How I Built This Resilience Edition from NPR. Hey, welcome back to how I built this Resilience, edition, and I'm speaking with John Zimmer of Lyft. And you may have seen the company in the news

this summer because it's been lobbying hard for a California ballot initiative called Proposition 22. And I'm oversimplifying here, but basically, if it passes, it will overturn a state law that would require companies like Uber and Lyft to treat their drivers as W-2 employees, not contractors. But as you can imagine, the issue is pretty heated. A lot of people are angry in all sides of this. There are drivers who support the initiative, drivers who oppose the initiative, consumers who support and oppose it. So first of all, can you explain from your perspective,

why would it be so hard to treat your drivers like part-time in place? Well, I think first it's starting with the fact that many of our drivers already have full-time work. The majority, something like 80% of our drivers, maybe in California it's 86% of drivers, drive less than 20 hours a week. This is something someone does. maybe five hours a week, 10 hours a week.

Of course, there's people that are doing it 40 hours a week, but the far majority are doing it less. And I think it's important to zoom out and have the nuance part of the conversation, which is what do we want to accomplish? What is the right thing to do here? The right thing to do is to get benefits for drivers depending on how much they work.

If you're going to drive for five hours for three months to save money for a wedding or for a medical expense, the way we're being forced into employment, would make that not tenable. And so what we're saying is, okay, so let's look at this new form of work. Let's not ignore that these drivers deserve benefits, but let's have the benefits scale with the amount of work that we do. And so Prop 22 is that middle ground. We're saying here's a better solution that provides health care for drivers driving, you know, 15 hours or greater. So just to clarify me, your position is we don't oppose providing benefits to

people who drive for lift, but we want to be able to scale those. So if you drive more, we want to be able to offer those benefits, but you're essentially saying you don't want the state to legislate and regulate and force you to do this? No, I mean, we're not, you know, the type of company that says that is against regulations. We think regulations make a lot of sense. We think labor protections make a lot of sense. I think the labor movement in this country has been critical for workers in America. And I think we have a new form of work that five years ago, I went to our general counsel and said, how can we get benefits to drivers that are driving more on the platform. And she said, well, you'd have to classify everyone as an employee. And then 80 to 90 percent of drivers likely wouldn't be able to drive on the

platform. And so we've been trying to find a portable benefit type structure for a while. Four to one, driver's support Prop 22 versus the alternative. And so we've heard their voices and we've incorporated that into Prop 22. When you go to Sacramento, when you make this argument to legislators, you know, what is it that you're not able to convince them of? The politics, honestly. So I've not only spoken to legislators and politicians, I've talked to labor leaders, listened and provided this viewpoint, listened to drivers, listen to all these constituents, and the majority, if not all, agree to a certain extent. The challenges is political. We're living in a time where nuanced opinions and non-extreme opinions are harder to, to

legislate are harder to get through. And so there's like a political survival aspect. And so we have to be part of creating the political conditions by having drivers have a voice, demonstrating that drivers four to one want this versus the alternative, demonstrating the true consequences of 80% of people, at least articulating them and hoping not to demonstrate them in practice. But I think the challenges have been, it's been hypothetical because it hasn't been real and because political, conversations favor kind of extreme opposing views versus kind of nuanced compromise. I mean, I wonder if we're kind of in a moment where, you know, people are sort of fed up with this idea of trusting businesses, right? I mean, in a sense, what you're saying is, hey, you know, we operate

in good faith. We can be trusted to operate as a responsible employer and as a responsible business because the market is going to judge us. Users won't use us if we're not doing that. And that make sense, but at the same time, you know, we're at a moment now where people have heard that message in the past and haven't seen it, right? They haven't seen it realize. I don't think people trust businesses. And I don't think that's crazy. I'm not saying trust us. I'm saying let's legislate a solution that works well for drivers, works well for riders, works well for the business, works well for labor. You know, the same thing happened in the early days of Lyft when seven, eight years ago, it was wild to get into someone else's car. It was absolutely something that people

said would not happen. And we started doing background checks. We started doing driving record checks before there was a rule to do it. And I did used to have that philosophy of, oh, well, look, we're doing it. You know, trust us. But then I learned quickly. And I went to the regulator and I said, you know, we received a cease and desist. And I said, look, like, here's what we're doing, but don't take my word for it. Regulate this. And that led to the state law in California. now known as the TNC category, and that got brought across the country. So I agree with you. I think people are fed up listening to not only businesses but leaders saying,

trust me. And that's not what I'm saying. I'm saying listen to the drivers and let's create a new regulation. All right. Let's get to some more questions about Lyft. This from Daniel Kramer. Daniel asks, are you going to start to focus more on autonomous vehicles in part because of COVID?

Does that change that equation for you at all? We have been working on autonomous vehicles. we have a program called Level 5. We have a great team and we're making great progress. We also have kind of a partnership model called Open Network, where we've partnered with Waymo and others to bring those vehicles to lift riders. We actually have some of those in Arizona. So this hasn't changed that.

I mean, I think, of course, the ability to create health safety through autonomous is definitely quite interesting and through designing the vehicle. But it's still a technology limitation and a cost-level. limitation at this point. And so those haven't changed materially during this time. Here's a question from William Curtis says he's a part-time lift driver. He wants to know when Lyft will require all riders to upload a photo of themselves for drivers to see. I love that question. Every year, at least once I drive on the platform, and I was driving, and I do it on New Year's and I was doing it this past New Year's and had the same thing happen

where a rider came with it without a photo, and then a rider came with a rider came with a, a photo and it was such a more delightful and obviously, you know, safe feeling experience when you had the photo. And right after that, which is the reason I drive and I will try to do it more frequently, right after that had a conversation with the team about improving the rate of photos uploaded. We don't want it to be a blocker in the sense that we don't want to get less rides, which would be less income earning opportunities for you and the company. But we have increased the percent of riders that are posting a photo and we're working on more features to kind of encourage that while they're in the ride to simply take a selfie and things like that.

So I agree and expect more from us on that. Just for clarification here, when you actually are a Lyft driver yourself, when you're out there and it says John, and I'm assuming you're in your Toyota Highlander. By the way, do you- We just upgraded to a minivan, a Honda Odyssey. All right. So if you see a John driving a Honda Odyssey, you know that it's going to be the co-founder of Lyft who's driving you around. and then you can ask you many questions you want. You know, a lot of people ask whether now is a good time to start a business.

I mean, you started what would become Lyft during the last financial crisis in 2008 with Logan, your co-founder, who you met on Facebook. Do you think that economic downturns are good moments to start businesses? I think so for two reasons. One, depending on the individual, your risk profile might be, you know, the job market might not be as good. and so there may be less risk to taking that risk and starting your own thing. But maybe even more importantly, things are changing. The world is changing. Business is changing.

People's preferences and needs are changing. And those are all opportunities. And so I think now is a great time to be an entrepreneur. John, you talk about Logan, your co-founder and I think we're a super close friend of yours, as being very kind of deliberate and methodical. and you're kind of slightly more emotional, which is a great balance to have. And, I mean, you talked about how you were the one

who was like kind of freaking out when things weren't quite going right. And I mean, now, you know, you're a big public company. You're valued at billions of dollars. And despite, obviously, the huge challenges you have this year, are you able to kind of manage stress better? Or actually, do you still have sleepless nights? Do you still have anxiety, even now?

Still have lots of anxiety, but much better. I guess with the few years and the kind of the experiences we've had with Lyft to manage that. For me, physical exercise helps a lot. It helps me get out of my head. Spending time with my daughters. I have a four-year-old and a one-year-old, and that is incredibly grounding. They say something funny to me. You know, I have to change a diaper or whatever. It is incredibly grounding and frankly brings joy to a tough day to kind of spend time with them. So that's been helpful as well. The last question for you, when we spoke at the summit, the high-built the summit in 2018, I asked you, you mentioned how you and Logan often ask yourselves, if we were starting over today, what would we do differently? Now that we are here in this very challenging moment, if you were starting over today, what would you do differently? Oh man, using my question against me. That's good. I think if we were starting over today, I might start with Pink, which we talked about as the subscription, as a way to get people to interact with Lyft, to say, hey, there's a membership service. It's going to be more affordable than owning a car. And we're going to go to battle for you to build the best transportation experience to give you access to bikes, cars, car rental. So I probably maybe start.

from pink and work backwards. Nice. John Zimmer, co-founder, president of Lyft, thank you so much. Thank you. That's an excerpt for my conversation with John Zimmer. To see our full interview, you can go to facebook.com slash how I built this. And if you want to see all of our past live interviews,

you can find them there or at YouTube.com slash NPR. And if you want to find out more about the Resilience series or other virtual NPR events, you can go to NPRPresents.org. This episode was produced by Candice Lim, with help from Will Mitchell, Matt Adams, El Manion, Gianna Cappadona, John Isabella, Julia Carney, Neva Grant, and Jeff Rogers. Thanks for listening. Stay safe, and I'll see you back here in a few days. I'm Guy Raz, and you've been listening to How I Built This.