Mass Transit: Bus vs. Carpooling vs. Vanpooling

I'm a huge fan of Freakonomics as it disrupts conventional wisdom and reveals the truth to unseen patterns.


Due to the recent tragedy in New York with hurricane Sandy, Freakonomics highlighted the fact that New York has the smallest per-capita carbon footprint in the U.S. as subways and buses move 7 MM passengers a day.

Buses in NY are efficient, but in reality, they could be less efficient than driving alone in your car to work.  The truth is, an average bus in many American cities carry only 10 passengers.  In Los Angeles, many buses go empty.

An average vanpool carries 8-12 passengers and is the most efficient method of transportation as almost all seats are occupied less 1-2 seat empty per vanpool.

Vanpooling is a sustainable mass transit solution for cities without proper subways or the funds to afford a rail infrastructure.  In addition, vanpooling is flexible as the routes are dynamic and aligns with the movement of employers and jobs.

At Rideshare 2.0, we plan to crowdsource and build a collaborative vanpool network and fill those empty seats.  By helping vanpools maximize their efficiency and making it easier for drivers to start their own vanpools, we'll help make vanpooling the mass transit of the future.



Original Article
http://www.freakonomics.com/2012/11/15/mass-transit-hysteria-a-new-marketplace-podcast/

Entrepreneur vs. Founder

The word entrepreneur has its origin as a French word meaning to undertake a task.  Surprisingly, the French are credited with inventing many transportation related items: the first documented taxi, scooter, hot air balloon, bicycle, and many more in a time when things like that never existed before.

Currently the term entrepreneur is loosely coined.  Entrepreneurs are kids with their own lemonade stand at the corner to those who build successful companies off an idea on a piece of napkin into a public company with a billion dollar valuation.  VC Fred Wilson says an entrepreneur is a personality disorder you are born with.

There is a new term emerging in America, in Silicon Valley, that differentiates entrepreneurs to those who additionally recognize patterns and opportunities, those who have the intelligence, commitment and work ethics, those who are willing to make sacrifices and take calculated risks, and those who are passionate and visionary on an idea enough to execute, disrupt, and make a difference to the lives of millions of people.  These people a rare, we need them, and they are leaders and game changes who boldly venture into an unknown and untested business models.  Steve Blank refers to these entrepreneurs as those individuals searching for a profitable and scalable business model.  I call these individuals and companies Founders at Founder Institute.

Founder Institute helped me redefined my definition of an entrepreneur and instead, be a Founder.  Not many entrepreneurs are given more than one or two opportunities in their lifetime to build a meaningful business as costly mistakes, tunnel vision, and lack of knowledge can end an idea or opportunity that would have helped millions.  Founder Institute helped me validate and refined my idea.  I’ve made costly mistakes in the past when I was an entrepreneur and not a Founder.  Now that I’m a Founder, I have the proper education and training along with the tools, network, and confidence to compete, win and succeed in all my future endeavors.

I would like to thank Founder Institute for helping me recognize myself as a true Founder & Entrepreneur along with a burning passion (French) for Liberty, Equality, and Fraternity during this Internet Revolution.

Bill Ford Predicts Technology Will Break Global Gridlock

Bill Ford Predicts Technology Will Break Global Gridlock

To revisit Bill Ford's prediction of the future, there are many solutions today to break Global Gridlock:

1. Very well thought out solutions:
http://www.bukisa.com/articles/524774_dear-bill-ford-executive-chairman-of-ford-motor-company-i-have-the-solution-for-global-gridlock 

2. A connected transportation system in Christ Murphy's article in Information Week:
http://www.informationweek.com/news/global-cio/interviews/240002801

3. Improve public transit as mentioned by Joel Epstein of the Huffington Post: http://www.huffingtonpost.com/joel-epstein/the-orange-line-extension_b_1644049.html


4. Work from home by Derek Kreindler:
http://www.thetruthaboutcars.com/2012/02/bill-fords-blueprint-for-mobility-calls-for-cars-bicycles-pedestrians-in-integrated-network/


Additional References:

1)      Nathan Bomey of USA Today - http://goo.gl/aVSP1

2)      Will Oremus of Slate.com - http://goo.gl/PUUK7

3)      Caitlin Berens of Inc. – http://goo.gl/4k54O

4)      Ezra Klein of Washington Post - http://goo.gl/JmQT3

5)      Ted Mann of WSJ - http://goo.gl/5ALMw

6)      Darius Monsef of Tech Crunch - http://goo.gl/wUAVr

7)      Alissa Walker of Good - http://goo.gl/LRkOa

8)      Eric Savitz of Forbes - http://goo.gl/DODtj

9)      Marth Groves of LA Times - http://goo.gl/bWp45

Car-pooling Headlines NY Times

http://www.nytimes.com/2012/07/05/technology/technology-makes-car-pooling-safer-and-easier.html?pagewanted=1&_r=1

Thanks Mickey Meece for the article and awareness of "Carpooling" and "Ridesharing" and I'm sure your feelings resonate with MANY who do not or ever carpooled or rideshared before on a regular basis :-).

People have been safely carpooling for over 30 years in cities like San Francisco and Washington D.C.

http://slug-lines.com/
http://www.sfcasualcarpool.com/

The same sentiments on lack of recognition for the potential opportunity for social carpooling was seen with Caitlin Berens's article at Inc. (http://goo.gl/4k54O).  As a society, we should encourage and promote a sustainable solution to prevent "Global Gridlock" as quote by Bill Ford in his TED speech.  


http://www.ted.com/talks/bill_ford_a_future_beyond_traffic_gridlock.html

David Burwell (http://carnegieendowment.org/experts/?fa=expert_view&expert_id=477) is an excellent resource for sustainable transportation and any policies and grants making transportation more efficient and safe by a true advocate will help make these new disruptive transportation solutions work.

Climate Change Follow Up

In our Meet Rideshare series, our Environment post went into some detail about the Local Pollutants we hope Rideshare can reduce. However, I thought we skimped a bit on the Climate Change aspect of it. I thought we might go into a little more detail today about Rideshare’s climate impact and why, in a world where climate change is the first thought of many an environmentally conscious consumer, Rideshare is not playing up this aspect of its business more.

Rideshare is committed to being an environmentally responsible company, and to being a force for good in the world, while still returning a good profit for our investors. However, the reason we don’t play up the climate change aspect of our business more is simply because we cannot make the same impact on Climate Change as we can on Local Pollutants.


To understand why this is, recall from our earlier post that unlike Nitrous Oxides or Mercury, Carbon is not a local pollutant. That is, carbon emissions affect the whole planet, and in the exact same way and to the same degree, regardless of where they have been emitted from. Climate change is thus the sum of ALL carbon emissions from all over the planet. Although Rideshare’s service will indeed reduce carbon emissions just as it will reduce emissions of other pollutants, these reductions will not have the same impact as they would in the case of other pollutants. The climate change we experience is just as much a result of China’s emissions as of ours, and vice versa. While Rideshare will reduce the amount of carbon emissions in the city of Los Angeles considerably, that does the city of Los Angeles little good. It represents only a drop in the bucket of ALL the carbon emissions of the world, which is the only number that matters.


Nevertheless, no one should doubt that Rideshare does have a positive impact on climate change. Every gallon of gasoline we save by keeping a car at home reduces carbon emissions by roughly 20 pounds of CO2 equivalent. The best way to think about this might be to translate that figure into a dollar value. Currently several companies offer carbon offsets for roughly $10/short ton, or roughly $0.01 per gallon of gasoline. Each corporate commuter who leaves his own car in the garage and rides with someone else is saving roughly 3 gallons of gasoline a day on average(20 miles each trip plus idling delays). Divided evenly between the driver and the passenger, this translates to roughly $0.015 per day of carbon “benefits”. However, many experts have suggested that the market undervalues carbon offsets, because the United States does not currently cap carbon emissions. According to the Environmental Defense Fund, a more “socially responsible” carbon cost(i.e. one that accounts for all the negative externalities of carbon) would be $80/short ton, which would translate into daily benefits of $0.18 per member, or roughly $90 per year assuming they used our service regularly.

Car Savings

In discussing the potential savings from using our service, we have focused a lot on what a businessman would call “operational expenditures.” These are the expenses that are incurred on a day to day basis to carry out daily activities. Watching my own father get to work every day, though, I wonder if I missed out on a potential big savings that might be the biggest of all. This savings would be more properly characterized as a “capital expenditure”, or an expenditure of funds to procure something which will serve for a number of years.


Simple question: How many people, if they signed up for our service, could do with one less car in the family?


In a country with 308 million people in it, there are a little over 200 million cars and light trucks in operation. Given that roughly 60 million people in this country are too young to drive, and that there are a little over 24 million people who have a severe disability making it difficult or impossible to drive themselves, and just about everyone who can drive a car owns one. This will come as no surprise to California residents, who have probably seen every one of them during rush hour in Los Angeles. But given that fact, it seems logical that a high number of corporate commuters(who after all do not need to go anywhere except to and from work during the busiest times of day) own one of their cars solely for the purpose of getting themselves to and from work. If Rideshare could furnish a convenient and reasonably priced alternative to doing that, corporate commuters might be able to save on the costs of the car completely by not replacing the oldest car in their family when it dies. That would represent a major savings and an additional incentive to use our service.


So just how much would the average corporate commuter save if they had one less car in the garage?


Kelley Blue Book has the average price of a new car in 2011 around $30,000. Of course, not everyone buys cars new. But for everyone who buys a used car there is someone who sells one, and then has to replace it with a new one, so any reduction in the total demand for cars will ultimately find its way into the new car market. Now, not everyone who uses our service will reduce the number of cars in their family, obviously, but let’s take that number and calculate the savings for someone who does.


At current interest rates, interest expense for buyers with good credit are very low, so to reduce the math here and to be conservative with our estimates, we’ll set the interest cost at 0 and just use the purchase price. A five-year loan is most common, so that’s 60 months. A person who elected to forego a new car and its five year payment plan would save $500 a month in car payments. New cars need an oil change once every five months(the so called experts used to say three, now its five), which costs about $30. So that’s $6 more a month in oil changes. Figure a one-time tune-up when the car hit the 50,000 mile marker. Let’s be conservative again and say that’s only $500. Throw in new tires and new brakes once every couple of years, insurance for the extra vehicle. All told, you get something like this:


Car Payment $500
Oil Change $6
Tune-up(monthly distributed cost) $6.33
New tires(monthly distributed cost) $7.67
Brakes(monthly distributed cost) $5
Insurance $95


I made the new tires $460 and $300, since those are the conservative numbers for good quality of both, which new car buyers usually spring for. If our member foregoes the purchase of a used car, the car payment is lower, but the maintenance and repair costs are higher. So figure everyone comes to around $620 a month in car savings. That outweighs even the other savings we discussed in our Meet Rideshare series. While obviously not everyone will take advantage of these savings, the very high penetration of car ownership amongst possible buyers(upwards of 90% according to the data above) means that quite a few of them might. Add the cost of fuel and that number is around $8,000 a year or 15% - 25% of an individual's income for the cost of transportation.

Highways as Public Goods

And why are highways, unlike so many other forms of investment, deserving of public support for their construction and maintenance?

Let’s start with why highways are publicly supported. Transportation links are different from most other forms of private investment because transportation links generate large spillover benefits(the technical term economists use is “positive externalities”) for the general public. Spillover benefits are essentially third party benefits. When you get a vaccination against a contagious disease, for example, the doctor gets a benefit(what you paid for the vaccination), and you get a benefit as well (a higher probability of staying in good health). But the rest of the general public gets a benefit as well. They also are more likely to stay in good health because of your being vaccinated, since if you don’t get sick they can’t catch the disease from you. However, the private market, which communicates via prices paid, doesn’t see external benefits to third parties. It only sees the benefits to the people who are actually paying and receiving the money changing hands. This means that the private market sees all the costs of vaccination(the doctor will incorporate those costs into the price of the vaccine) but only part of the benefits(the patient will not pay for the good health of others, only his own good health). So the private market underestimates the benefits of vaccination and how much vaccination is socially efficient. Highways also generate substantial third party benefits. What this means is that if the private market was left to it’s own devices it would underfund the highway system, making less investment in it than it should.

The spillover benefit of a highway system, or any transportation system for that matter, actually has a lot of different names among economists. Two of my college professors call it “market expansion”, others call it “competition support”, etc. But it might be best to illustrate just with another example.
Say there are two cities, each with one car manufacturer plant in them. There are no highways to travel between these two cities(though there must be roads within the cities that they use, or else there wouldn’t be a car manufacturer right?) Because there are no inter-city roads, each car manufacturer has a monopoly on car sales in their city. Each car costs $10,000 to make, including fair return on capital, and each customer in the city derives a benefit of $15,000 from their car. This means that the car manufacturers in each city are deriving $5,000 in monopoly profits on each car. They sell each car for the full $15,000 that a customer is willing to pay, because there is no competition to force them to charge a fair price closer to the actual cost of production.


What, you say, does any of this have to do with highways? Let’s say there are 50,000 cars sold in each city each year. Also say that a highway costs $20 million to build between the two cities and will last for 20 years. And finally, say it costs $100 to drive a car from one city to the other.
With a highway now built and a cost of $100 to move a car from one city to the other, prices start to fall. TWO car manufacturers are now competing with one another. They begin to offer lower prices hoping to win away customers from the other manufacturer. As each cuts prices, customers benefit. Eventually prices will fall to $10,100. Why? Because that is the cost of going to get your car in the other city if the car manufacturer is not offering you a good deal. $10,000 to build the car, plus $100 to ship it to the other city.


But wait a minute. Each car manufacturer has one last insight. “If my competitor CANNOT charge less than $10,100 without losing money, than I have an advantage in my own city. I don’t have to pay the $100 to ship the car on the highway when I am selling to customers in my own city. So I can charge $10,099 to customers in my own city and they will never buy a car from the other city, since it will always be cheaper to buy it here.” So the price drops to $10,099.


BUT, that means NO ONE is shipping cars on the highway. Those car buying customers are not contributing one dollar towards the highway that is saving them $5 million a year total in car costs.
Highways have large, uncompensated positive externalities because they increase the size of markets. They bring many smaller markets together to form one larger market with more competition and lower prices for consumers. But because what actually travels on the highway is only a small fraction of the goods that have seen their prices drop, highway builders are never fully compensated for this market effect. This persistent underfunding of transportation links is what necessitates public investment in the nation’s transportation infrastructure.

EPA Climate Change Report

http://epa.gov/climatechange/emissions/downloads11/US-GHG-Inventory-2011-Executive-Summary.pdf


The United States Environmental Protection Agency released its annual Greenhouse Gas Inventory, basically a compilation of all the data we have of all carbon emissions from all sources in the U.S. As we’ve discussed, Rideshare does not have the same impact on climate gases as it does on Local Pollutants, but as an environmentally responsible company we wanted to give a shout-out to the results anyway.


Power Plants continue to represent an ever larger share of total U.S. emissions, as high gas prices and tighter fuel efficiency regulations reduce U.S. emissions growth from the Transportation sector. Power plants now constitute 42% of all carbon emission in the United States, up from approximately 1/3 of emissions in the 2000 report. Transportation represents about 34%, about the same as a decade ago, although a smaller proportion than a few years ago. The other major sources are certain industrial production activities, including glass, cement, and steel production, as well as deforestation. Agriculture is also a major contributor to greenhouse gas emissions, both from deforestation and other land use pattern changes as well as the more intensive utilization of nitrates and other fertilizers to boost crop production per acre. Ironically, one of the things incentivizing farmers to use more climate changing nitrates is the high price of corn caused by the ethanol industry, which was originally supposed to reduce carbon emissions.

Airport Shuttles

Although most corporate commutes involve traveling from home to the office, a substantial portion of our customer base is asked to travel for work from time to time. As such, Rideshare is interested in establishing routes not only from residential areas to commercial areas, but also from residential areas to airports. In order to give our members some idea of the savings that would be possible in such a scenario, we’re going to spend a little time breaking down the numbers.


Anyone traveling to the airport who doesn’t have a friend or relative to drop them off will incur either two cab fares or a gasoline bill and a parking bill(if they drive themselves). Since parking costs are paid by day and cab fares are flat rate, obviously the more days you are gone the more sense it makes to take a cab instead of driving yourself. Conversely, the further away you live from the airport the less sense it makes to take a cab, since cabs charge per mile fares and your savings driving yourself over a cab go up the further away from the airport you live.


Whether you are commuting to the office or commuting to the airport to work in another city, Rideshare can help accommodate and help save the corporate commuter time and money.

Atlanta Highway Comparison

With things getting closer to launch in Los Angeles I just thought we might talk a little bit about Rideshare’s plans for future growth outside of California. I also thought this might be a good time to take another systemic look at the whole issue of rush hour congestion and inefficient use of highway resources.


Atlanta is certainly a prime candidate for a service like ours. The December 10th, 2011 issue of The Economist weekly magazine ran an article detailing an upcoming vote in Atlanta on whether to spend an additional $6 billion building new highways, ramps, overhangs, and bridges to reduce congestion on highways. Atlanta could certainly use the extra capacity: its average rush hour commute is a staggering 127 minutes.


But there is still the question of whether this is the best way to add capacity. Just to reiterate, the proposed expansion will cost almost $6 billion, and it will have a substantial but less than revolutionary impact: only 800,000 people will see their commute cut to 45 minutes or less, roughly half the time of the current commute.


So how much would it cost Rideshare to achieve the same degree of savings?
It’s a little hard to convert minutes of commute into number of drivers, because of the synergistic effects we discussed earlier. Each additional driver you add to the highway slows down EVERY driver on the highway, which means still more drivers get added as people are on the highway longer, which adds still MORE drivers, and so on. Modeling this effect and writing a formula for it is very difficult.
Still, let’s take a crack at it. Remember that for a passenger on Rideshare’s service, one of the biggest benefits of the service is TIME. The passenger can spend the entire trip to and from the office working, sleeping, talking with family, streaming Netflix, or any other activity they desire. They are literally paying for time. Since time is the metric the article uses, let’s take that as our reference point.
Let’s assume a 1-1 driver passenger ratio. Cutting commuting times in half for 800,000 people is mathematically equivalent to eliminating “commute times”(i.e., time spent driving) for 400,000 people. A passenger in Rideshare’s service has essentially had their “commute time” cut to zero, since with modern laptops and smartphones they can work just as efficiently in the passenger seat of a car as they can in the office.


800,000 people using Rideshare’s service translates to taking 400,000 cars off the road and creating 400,000 time-enriched passengers, assuming a 1-1 driver-passenger ratio. Let’s assume right now that the people of Atlanta are making the same average commute as people in other cities, roughly 20 miles each way. Rideshare’s $0.55 per mile charge x 400,000 pairs = $44,000 per day. 250 commute-days per year translates into a yearly cost of $11 million.


The average service life of a road is somewhere between 30 and 100 years, according to the Department of Transportation. The wide range is due to the fact that in the United States many decrepit roads are left in service long after reaching the end of their useful life spans, which imposes other costs on drivers such as higher vehicle repair costs. Whether through maintenance costs on roads or vehicle repair costs on unmaintained roads, drivers pay for the roads. But never mind. Let’s be extremely conservative and give credit for the full 100 years to the road, AND let’s even assume NO maintenance or vehicle repair costs for that whole period(unlikely). $6 billion divided by 100 years STILL equals $60 million a year in current costs. That’s almost SIX TIMES Rideshare’s costs to achieve the same reductions.


The actual number is of course even higher. There WILL be maintenance costs, and vehicle repair costs, and we haven’t even counted Rideshare’s pollution, climate change, gas savings, parking savings, or other benefits yet. Atlanta, like every other major city in America, is prime real estate for Rideshare.

Buses, Vans, and Cabs Oh My!

Okay, so I know I take my artistic license a little far sometimes. So to make up for it, today my topic is going to be the law, which is about as far from art as you can get.


Your service sounds like it could be a winner, but is what you do…..you know…..legal? Do you have a license?

That was actually my dad talking, not a potential Rideshare customer as he lives out of state. And no, we don’t exactly have a license. But we don’t exactly need one.


Most industries today are regulated in one form or another, and ours is no different. Indeed, since Rideshare is trying to bring together several previously separate industries(public transportation, carpooling), we have to be familiar with the regulations for each of them. Today we want to talk a little bit about how those regulations impact our business plan, and what we plan to do to stay on the right side of them.

The regulatory world we find ourselves in does limit our options somewhat. Specifically, the taxi licensing regulations. Although taxi regulation is a state and local matter, thus making it hard to make general statements that are true throughout the United States, a few general principles hold true throughout.

1. It is illegal to operate a taxi service, or the functional equivalent, without a state license.
2. These licenses are far fewer in number than the market equilibrium would dictate, producing an acute shortage of point-to-point transportation services
3. The difference between a carpool/vanpool service and a taxi service is generally defined as the difference between paying a driver to travel to a destination he otherwise would not visit, and one he was already planning to go to before he picked up his passenger.

Point 2 is what makes our business viable. Point 1 is what might make our business harder to operate, and Point 3 is how we plan to avoid any regulatory troubles.


Because of the regulations governing taxi services, Rideshare does not and will never employ professional drivers who are paid to convey people from place to place. We are a peer-to-peer network that coordinate the activities of members who already intend to travel to a specified location. As such, we are NOT a taxi service, and do not require a license to operate our app. What we do is no different than what thousands of friends, family members, and coworkers do every day. Except that we bring all those small carpools together into one larger service, affording everyone more flexibility and reliability in their carpool.


Public transportation is not so much regulated as it is exclusive. By definition, only the government can provide “public” transportation. But, there is no law saying that other companies cannot provide alternative means of achieving the same ends as public transportation, as long as they don’t fraudulently claim to be a government agency, which of course we don’t. But just in case you somehow thought otherwise, here is an official disclaimer:


“Rideshare is not an official government agency. We are a private company providing a for-profit service in a socially responsible way."


Please remember that we are all stuck in traffic together. We all breathe the same polluted air from millions of vehicle emissions. If we use the fuel that drives us to be good, we can live socially and responsibly through collaborative consumption.

Uber Dynamic Pricing

http://allthingsd.com/20120103/was-new-years-eve-a-netflix-moment-for-uber/?refcat=commerce

According to some old adage(I’ve no idea which one or where from), stupid men do not learn from their mistakes. Smart men do learn from their mistakes. And Wise Men learn from others mistakes.

Even as a business, we never take pleasure in the travails of a competitor. But I saw the above article today and couldn’t help but feel there is a powerful lesson in there for Rideshare and for all of us in this market.

Rideshare is not the first carpooling web-based service out there.  Among  the more established competitors we have are Zimride, Avego, Ridejoy, and last but not least, Uber.

Uber is a service very similar to ours, except for the fact that it does not have a set price per mile. Rather, it is more of a marketplace, where passengers bid on drivers services to try to get them to pick them up. The driver looks at the highest and closest bids and has the choice of either accepting it or just going home. And like any marketplace, prices fluctuate.

The rather extreme price fluctuations seen over the holidays, where prices as much as tripled, illustrates the emphasis that potential customers of services like ours place on reliability. Too much price volatility can turn customers away from our service as they never know how much they will be charged until they go to book the return trip, and by then they have already left their car at home and are dependent on our service to get them back home no matter the price. Customers will only put themselves in this position if they trust our service to deliver quality service at an affordable and predictable price.

Rideshare is committed to a fixed-price model that charges a flat  per zone mileage similar to public transportation. This is an integral part of our brand, and a big part of the value proposition we offer to our customers. We are committed to maintaining this pricing model moving forward. We believe our Rideshare commuters are fueled by good and our fixed rate parallels our “fare” share model philosophy.

National Security

There was an interesting article today about the energy balance of trade in the United States. After two decades of ever increasing oil imports, the United States is becoming somewhat less addicted to foreign oil. Over the last five years, there has been a significant improvement in the oil deficit in the U.S. Oil imports, which constituted 61% of total oil consumption in 2005, fell to 49% of oil consumption in 2010. Even more significantly, imports from Canada and Mexico, already representing 30% of our imports in 2005, actually rose over this period, so that oil imports from overseas areas, in some of the more unstable parts of the world, have been cut almost in half over the last five years.

I bring this up because Rideshare has the potential to make another significant contribution to reducing our oil use. Maybe this belongs in our Meet Rideshare series, but we’ve already closed that so I’m just going to fire it up here. How much can Rideshare reduce oil imports?

The United States uses some 9 million barrels per day of gasoline, as well as 4 million barrels more per day of diesel fuel. It also uses 7 million barrels per day for other uses, including jet fuel for airplanes. As you may recall from our previous post, corporate commuting represents some 50% of the vehicle miles driven in a major city, or somewhere there abouts, but obviously much less in suburban or rural areas. On the other hand, some of the vehicle miles driven represent trucks using diesel fuel to ship goods. So corporate commuting actually represents substantially more than half of the gasoline consumption in a major city. Let’s ballpark it and say that corporate commuting accounts for half of the gasoline used in the United States every year, which is probably not a ludicrously out of line estimate. That is 4.5 million barrels per day. Or, more than we import from Canada and Mexico combined. Put another way, if those 4.5 million barrels per day were to somehow stop being used, the United States would ONLY need to import oil from Canada and Mexico, without relying on the Persian Gulf, Russia, or Venezuela at all.

Obviously, even if everyone started using Rideshare the number would not fall to zero. But this gives you an idea of what a large proportion of total oil use corporate commuting represents.
Rideshare is initially aiming for a 1-1 passenger-driver ratio in its carpools, though over time it hopes to bring this higher, and vanpools will have higher ratios right from the off. Transforming half of corporate commuters into passengers will cut the number of cars on the road in rush hour by half but cut oil use by considerably more than half, since drivers will spend much less time idling in traffic. Idling contributes about a third of total energy consumption in corporate commuting according to our calculations. So let’s assume that a 50% cut in drivers reduces idling by 75%(some idling is due to accidents, construction, etc.) This would mean that each percentage point of market penetration nationwide by Rideshare would reduce oil usage by 30,000 barrels per day, with a ceiling potential of 3 million barrels per day if we could somehow achieve 100% market penetration. Even 50% market penetration would reduce oil consumption by 1.5 million barrels per day, which is more than the United States imports from Saudi Arabia.

So, clearly, while it can’t do the whole job, Rideshare can make a substantial contribution to the U.S. national security by reducing our reliance on foreign oil considerably.

Cell Carrier Data Plans

Last week we discussed the need for smartphones to use Rideshare’s service and whether or not they should be accounted as a “cost” under our economic model. I think we’ve covered that pretty well, so here was our conclusion in a nutshell: the only marginal cost Rideshare might impose would be the need for some people who do not currently have data plans to get them. To examine what effect that would have on our analysis of Rideshare’s appeal to our members, I did some research on cell phone data plans.

Rideshare uses a low-data volume app, so we are not going to be consuming Gigabytes of data the way the Netflix or Pandora apps do. Most carriers have reduced price data plans for relatively low intensity users like that. Sprint is the only exception, as they only offer one tier of data: Unlimited, at full price. However, because unlimited data is such a large part of the Sprint brand, very few people who do not have data plans on their phones are likely to be found there, so very few Rideshare members who didn’t already have data plans and decided to get them for our service would likely be found at Sprint. The lowest cost 3G/4G data plans each carrier offers are:

AT&T: $20 300 MB $20/300 MB
Verizon: $20 1 GB $10/GB
Sprint $30 Unlimited Not Applicable
T-Mobile $10 200 MB $0.10/MB

Either of the two largest networks(AT&T and Verizon) charge $20. T-Mobile is the cheapest, but also the smallest carrier with the smallest national network. However, since Rideshare is a service dedicated to arresting traffic gridlock in cities, T-Mobile’s lack of coverage in rural areas isn’t really an issue. Presumably someone who doesn’t already have a data plan is going to be a diligent cost shopper and keep the expense to a minimum, so let’s use T-Mobile as the baseline.

Adding $10 to the monthly cost of Rideshare’s service translates to adding $0.40 per day, on top of the $10 that the average Rideshare passenger will pay. While a 4% increase in price is higher than zero, it is a relatively small cost component in the grand scheme of things. And this is assuming that all of Rideshare’s members need to buy a new data plan solely for the purpose of carpooling that they otherwise wouldn’t purchase, which obviously isn’t true. The actual number of our members who fall into this category is surely much smaller. Even half sounds way too high, but that alone would cut the average daily cost of a new data plan down to $0.20 a day, only 2% of costs.

Even assuming for arguments sake that a small number of our members may need to purchase data plans, Rideshare is not the only use for such plans, and thus should not be accounted all of the accompanying cost. That same data plan will also be used to get work done while the passenger is driving, by allowing them to communicate with coworkers via email in the car and even send completed or pending documents to coworkers and supervisors for approval or revision. This could potentially save them up to 10 hours a week of time at the office they can instead spend on personal activities. Even assuming all our members made minimum wage(they don’t), the time value of those savings would be $4,000 a year. And that is well worth $10 a month for a small data plan.

Smartphones - Using Mobile to Rideshare

If Rideshare needs a mobile smartphone just to operate, doesn’t that make it more expensive than driving? Smartphones cost like $800!!!

This comment from a prospective Rideshare member not too long ago deserves an answer. And the answer is good news: no, it doesn’t make Rideshare more expensive than driving. In fact, it needn’t increase the cost of ridesharing one single dollar.
First of all, smartphone penetration is increasing all the time. There are now over 120 million smartphones in operation amongst the United States 330 million cell phone users, according to the latest Nielsen and Pew surveys.  Under-18s and over-65s were the two LEAST likely groups to have smartphones, so the 19-64 crowd, where our corporate commuters are located, are probably over represented in the smartphone population already, and face no incremental expense to download and use our free app.

Secondly, that number is only going up. Those same reports show that smartphones now account for 55% of all NEW phone sales, up from 34% just one year ago. So the smartphone population is growing rapidly, and this is becoming less and less of an issue every day.
Thirdly, is that price accurate? Do smartphones really cost $800? Let’s take a stroll through the “Big Four”(AT&T, Verizon, Sprint, and T-Mobile) websites and browse the smartphone selection.
The only $800 smartphone on the market is the iPhone 4S 64GB, the most expensive smartphone in history. And that is the unsubsidized price. Smartphones don’t do you much good without a carrier network to operate them on, and most carriers will subsidize a smartphone up to $450. That subsidy is free and doesn’t impose any marginal cost on the member. So what is the price that a person will actually pay out of pocket for a smartphone? Below are some examples:

                AT&T Verizon Sprint T-Mobile
iPhone 4S 64 GB $399.99 $399.99 $399.99 Not Carried
iPhone 4S 16 GB $199.99 $199.99 $199.99 Not Carried
Samsung Galaxy S2 $149.99 Not Carried $199.99 $229.99
HTC Vivid/EVO/Amaze $199.99 $149.99 $99.99 $179.99
HTC T-bolt/Inspire/WildfireFree Free Free Free
iPhone 3GS Free Not Carried Not Carried Not Carried

Different carriers have different names for the same or similar phones, so I am not sure I have “paired” the various models correctly. But at any rate you get the picture. While there certainly are expensive smartphones out there for people who want to buy expensive smartphones, there are plenty of options for the cost conscious customer. And certainly after the carrier subsidy no one is paying anywhere close to $800.

Perhaps the most salient point is the ever growing list of smartphones available for free after carrier subsidy, including, for the first time, an iPhone model. This means that a person may upgrade their current phone to a smartphone without paying a dime out of pocket. So while Rideshare does require a smartphone to operate, purchasing that smartphone does not have to cost our members any more than they are prepared to pay, including those who don’t want to pay at all.

The only exception to this would be the data plans that come with the smartphone. Customers who don’t have smartphones don’t need data plans, customers that do have them need them. This is a potential new cost for a small portion of our customers that don’t currently possess smartphones. We will examine this point more in the next post.

Highway Congestion

The last major participant we will cover in the Meet Rideshare series is, again, a somewhat, er, ethereal participant. It is the highway system itself, which is scarcely able to breathe at rush hour times, poor fellow, because of how clogged its “arteries”(highways) are. What kind of impact will Rideshare realistically have on congestion on the highways? The answer is, potentially, massive.

Congestion, like pollution, operates on a synergistic basis. Congestion breeds more congestion. This is because congestion forces everyone to slow down. It is amazing how fast a 65 mph highway can turn into a 5 mph in the city of Los Angeles. And the really amazing thing is just how few cars it takes to make it happen.

Highways have a capacity limit, like most networks do. They are built to hold and move a certain number of vehicles, just like cable systems are built to hold a certain number of channels or cell phones are built to move a certain number of bits per second. However, congestion on the highways differs from congestion in cable or cellular systems in one important respect: excludability.

What this means is that when a cable system doesn’t have room to add another channel, it can refuse to do so. The cable operator is coordinating the system, and makes sure that the cable system isn’t asked to carry more channels than it can handle. If a cable system tries to cram five channels into four slots, the picture will become all pixelated and distorted, and customers will not have four or five channels to enjoy. They will have zero. Congestion slows down everyone in the system, not just the newcomer there’s no room for.

Cellular networks, if asked to transmit more data at one time than they have, have a different control mechanism. They simply slow everyone’s transmission speed to the level the system will bear. But even though each individual’s transmission may move somewhat more slowly, the system itself is still working at maximum capacity. A system meant to transmit 1 Mbps for 100 people may instead transmit .5 Mbps for 20 people for example. But A total of 10 Mbps is always moving through the pipes.

Highways are different. A highway which can move 10000 cars at 60 mph cannot move 12000 cars at 50 mph. This is because each additional car on the roads forces every car on the road to move more slowly. What’s more, unlike with cable or cell systems, there is no controlling authority which can stop people from entering the highway once it’s capacity limit has been reached. So as the slower highway fails to get people to their destination, and off the highway, as quickly as before, more people are continuing to pile onto the highway, creating still more congestion which clogs the roads still further, causing the speed of the highway to be reduced again, causing more congestion, and so on. A highway which has even a little congestion on it therefore, or goes even slightly over capacity, quickly enters a death spiral, a negative feedback loop which destroys the utility of the highway for everyone.

Rideshare, however, makes this synergistic snowball effect run the other direction. Taking some cars off the road reduces congestion directly, of course, but it also has additional “knock-on” effects. Fewer cars and less congestion on the highways means that the cars that remain can move at something closer to the speed limit, covering more distance in less time and thus getting them off the highway faster. Getting them off the highway faster means that the remaining cars can move still faster, and get off the highway still faster, thus allowing the remaining cars to move faster, etc.

So you see, Rideshare doesn’t need to get that many people out of their own cars and into someone else’s to achieve a drastic reduction in highway congestion. Indeed, Rideshare’s ability to create clearer and faster highways for everyone in Los Angeles, including those who never use our service, far outweighs even our other positive social benefits. We can make a significant contribution to environmental protection and a somewhat smaller one to climate change, but Rideshare may just have the ability to all but eliminate highway congestion on its own, if we can get enough people onto our service.

The Environment

Having examined the three parties to the commercial transaction, I thought we’d take a little time to talk about a few more “interested parties” in corporate commuting, even though they perhaps are a little more, er, abstract. With that in mind, the next “participant” in the Meet Rideshare series is the environment.
Gasoline emits any number of pollutants, which can broadly be broken down into two categories. Local Pollutants are pollutants which linger in the immediate (i.e. same city) area in which they are emitted. The levels of these pollutants in a given city is therefore highly correlated to how much of them is emitted by that city. And so, therefore, actions to reduce emissions of these pollutants benefits primarily the city which has reduced them. Local pollutants include Volatile Organic Compounds, formaldehyde, nitrous oxides, hydrocarbons, carbon monoxide, and particulate matter, and produce such things as smog and soot. They contribute to lung and heart disease as well as just general blight on the horizon.
Global pollutants spread out beyond the immediate area in which they are emitted. The best known global pollutant is probably carbon dioxide, which pools in the upper atmosphere of the planet. Carbon emissions anywhere on the planet are therefore a reflection of carbon emissions throughout the planet, and so are somewhat harder to take action against, since reducing one’s own emissions of carbon does no good if everyone else does not simultaneously reduce theirs. Other Global pollutants include methane, sulfur dioxide, and mercury, which all tend to pool at either the nationwide or regional level.

For the reasons explained, Rideshare’s primary benefit to the environment will be the reduction of Local Pollutants. While Rideshare will also reduce emissions of Global Pollutants, such reductions are not large enough to alter the global balance of these pollutants, since in terms of global emissions one city’s rush hour transportation emissions are a drop in the bucket. A city’s rush hour transportation emissions do however constitute a substantial portion of the city’s own Local Pollutants, and so Rideshare’s ability to reduce such emissions will provide noticeable benefits to the citizens of Los Angeles; even the ones who never use our service.

Putting numbers on these benefits is a little harder. In the U.S., a total of 238 billion vehicle miles were traveled in December 2009. Los Angeles contains about 3% of the U.S. population, so our local vehicle miles traveled would probably equal about 8.1 billion VMT per month, assuming Los Angeles is somewhere close to the average U.S. number. Los Angeles corporate commuters represent, according to our prior calculations, about  4 billion VMT per month(20 miles per trip x 5 million commuters x 2 trips per day x 20 days per commuter per month). So corporate commuting represents close to half of L.A. vehicle miles travelled. We can maybe quibble over these numbers a little bit, but they’re almost certainly not grossly off the mark. According to the E.P.A., automotive emissions account for about half of nitrous oxide emissions and hydrocarbon emissions, and a staggering 95% of carbon monoxide emissions. So if half of L.A.’s corporate commuters join Rideshare, at a one to one Driver to Passenger ratio, total vehicle miles traveled will be reduced by an eighth. This means that CO emissions will be reduced by 12%, and NOx and HC emissions by about 6%.

While that may not sound like much, it is important to remember that environmental pollutants operate on a synergistic basis. That is, each additional pound of pollution does far more damage than the one before it. Reducing pollution by 6-12% reduces the damaging health effects of pollution by a far greater proportion. In fact, the EPA has set a goal of reducing the emissions in the Los Angeles area by half(this is what is required to earn the EPA’s designation of Los Angeles as an “attainment area”), since that is all that is required to eliminate the detrimental effects of the pollutants. Remove half the pollutants, and the other half become harmless. So while Rideshare will not do the whole job, it can make a big dent.