DISCLAIMER: Before I start this piece, I want to make clear that I am not a financial advisor, and nothing below should be interpreted as investment advice. In addition, I own (& owned) some shares in Uber and was previously a shareholder of Lyft as well. I invested in both companies, but not when they were privately held and controlled by venture investment funds. No matter how inconsequential to my opinions I perceive the investments to be, I wanted to disclose that.
The Rise of Uber & Lyft. The Demand for A Union & Representation
Many NYC TLC rideshare, delivery drivers and other NYC “gig economy” workers have had enough. There are many legitimate complaints that NYC TLC drivers and other self-employed contractors working for app companies have about how these companies operate. From “guilty, until proven innocent” deactivations to confusing earnings discrepancies between what a passenger pays and what a driver receives, the complaints are based in genuine frustrations.
For example, while drivers appreciate that Uber and Lyft provide a lot of trip volume, 20%+ commissions seem high, especially when drivers are still on the hook for car expenses, insurance and other costs. Companies like The Drivers Cooperative are trying to change the status quo, by creating a driver-owned ridehailing platform, hoping to collapse the “middleman economics” of platforms like Uber. Another prominent mechanism of pushback is as old as the labor movement itself… forming a union. The idea being that hundreds of thousands of NYC TLC drivers and other gig economy workers can make their demands heard effectively as a collective. As you saw with the recent yellow taxi medallion driver strike, the power of unions (or union-like) organizations shouldn’t be underestimated.
This article isn’t about why the idea below is better than forming a union or driver-owned rideshare platform, it’s simply an idea I think should be explored. Multiple ideas and organizations can co-exist together as well.
“Gig Activism” Can Be a New Type of Shareholder Activism
What if all drivers bought a stake in Uber and/or Lyft? Remember, these companies are publicly-listed so buying shares is now quite easy. If enough drivers collectively bought shares it stands to reason, taking a play out of the shareholder activism playbook, that that group could effectively demand changes at Uber or Lyft. You don’t have to own the whole company, if a driver group owned as little as 1% or 2% of Uber and/or Lyft, it would make that group one of the largest shareholders of the companies.
Owning .000001% of Uber or Lyft is Not Going to Change Anything. Why This Thinking is Wrong?
This is probably the first pushback on this concept. Many drivers and labor groups understand anyone can buy a few shares in Uber or Lyft, but often think that is not going to move the needle. Such thinking lacks imagination because the gig economy (and unions as well) has always been about the law of large numbers. Part of the reason Uber and Lyft are influential relates to the fact that they’ve created a several million strong “flex labor force.”
The Independent Drivers Guild (IDG) is a union-like organization that is said to represent over 80,000 NYC for-hire drivers and 250,000 drivers collectively across New York, New Jersey, Connecticut, Massachusetts and Illinois. Now, imagine if each of those 250,000 drivers owned $500 worth of Lyft shares. The power of large numbers becomes apparent.
250,000 x $500 worth of shares = $125 million or about 1% of Lyft (as in the entire company) based on today’s market value!
Some may still shrug their shoulders and say, “well owning 1% of Lyft is not really that big of a deal.” However, an aligned shareholder group owning 1% of a large publicly-listed company will make that group very influential and could likely get you a meeting with management. Meeting with a CEO and executives as a large shareholder group AND independent contractor workforce will completely redefine the discussion. Also, aligning financial incentives between labor and management is likely an efficient road to an equitable and balanced outcome for all parties.
As famous investor and Warren Buffett partner Charlie Munger once said, “Show me the incentives and I will show you the outcome.”
“Greed Is Good.” What Can We Learn From Gordon Gekko & Carl Icahn?
Gordon Gekko, the iconic and controversial character played by Michael Douglas in the movie Wall Street, is famous for the infamous “Greed is Good” speech. While Gekko ends up being a bad player that trades on inside information and doesn’t really care about labor (he promises his young protégé Bud Fox, played by Charlie Sheen a chance to turnaround his father’s failing airline only to renege on his promise later), Gekko is perhaps half right, in that many people in America today feel as he may have felt back in the 1980s. The executive and management “class” seem to be unfairly benefiting from the work of others. In other words, executives get all the benefits, financial and otherwise, while the average shareholder and worker is left with little or nothing for their investment and work.
As Gekko, says in his Wall Street “Greed is Good” speech, “Teldar Paper [the company Gekko is going after] has 33 different vice presidents, each earning over $200,000 a year. Now, I have spent the last two months analyzing what all these guys do, and I still can’t figure it out.”
Recently, I was watching a documentary on Wall Street legend Carl Icahn, who many believe Gekko is based on. While you may agree or disagree with Icahn and people like him, what comes across in the documentary is that he genuinely believes in driving change at companies via becoming a shareholder. He is the quintessential shareholder activist, buying stakes in companies to drive change, from pressuring management to pushing for a sale. Separately, his story from a middle class family in Queens to a billionaire is also interesting to understand, regardless of your opinion of him as a person.
Conclusion
What I am suggesting is a LONG SHOT. However, things that facilitate meaningful change, from business to politics, are usually long shots in the beginning. I believe that an educated and open-minded person can often turn their hatred or skepticism of Wall Street “types” and tactics into tools that they can use to facilitate change. In addition, these tactics are not unethical or illegal. If drivers owned shares in Uber and/or Lyft, they could get a seat at the table.
In addition, there would be a financial incentive for all parties involved to reach agreeable outcomes. For example, if drivers are happier, driver turnover goes down which in turn reduces driver marketing and incentive spend, increasing profits for all shareholders, including drivers.
This is a topic we’ll return to again, including practical ways to facilitate the idea and help drivers understand how these businesses actually work. Oftentimes, the first step is to deeply understand how a company works before you can drive change. Finally, both Uber and Lyft stock prices are at 12-month lows, so it might be as good a time as any to start down this rabbit hole.
Let us know your thoughts? Do you think driving change via drivers becoming shareholders is a viable strategy? What don’t you or do you like about the idea?
