Uber has had a tough pandemic. Ridership has cratered and it has laid off 25% of its workforce in the last few months. Yet, despite the pain, it feels like Uber is very well positioned when we finally return to something resembling “normal”. And the reason is that public transit is in big trouble.
Uber’s flywheel has been discussed at great length (I referenced it here). Jim Collins has written a book about flywheels, why they matter, and how to get one spinning. The flywheel is now a part of the business lexicon, inevitably destined to become as useless a term as ‘disruption’ or ‘platform’.
The less discussed evil twin of the flywheel is the death spiral. Much like a flywheel, a death spiral occurs when the combination of components in a system act as an accelerant on the system itself. The difference of course is that the flywheel accelerates growth, while the death spiral accelerates, well, death.
I’m fairly concerned that public transit across the globe is heading into a death spiral. This is what it would look like:
Let’s walk through this:
If we take the pre-pandemic volume of public transit riders as a baseline of 100, there is no chance that we return to this level for years, if ever; that results in…
Lower revenues for public transit systems, with a cost base that is little changed (whether there’s 1 person or 1000 people on the train, it still costs roughly the same amount to operate), leading to…
Lower ongoing investment in public transit systems, which are often expected to run largely as standalone entities, which causes…
A degradation of service quality, which ultimately discourages people from riding public transit, and brings us back to…
Fewer riders
And that doesn’t even consider some of the macro things that are happening outside of the death spiral, like moves towards pedestrianisation of roads in major urban centres or soaring government debts that will make investment in public transport less likely. It doesn’t look pretty.
Uber, on the other hand, looks pretty good. Its model is geared towards personal space (whether car, bike or scooter). It is geographically diversified in the extreme, and will have a birds eye view of (and exposure to) how this plays out all over the world, whether in its own operations or in those of its investments in China, SE Asia, Russia, the Middle East. And it is already making its first forays into partnering with government.
Governments could step in a stop the flywheel by making big investments in transit infrastructure, but with ridership down and debt way up that seems unlikely to happen (remember Penn Station?). It will be much easier for the government to throw this problem over the fence to the private sector. Just look at how quickly the UK government has gone from scooter haters to scooter lovers.
Whether or not this is a good outcome remains to be seen. But it looks pretty likely that we’ll end up with much more privatised transit systems.