Killing the Middlemen in the Rideshare Industry
Killing the Middlemen in the Rideshare Industry
An organizer explains how to make drivers cooperatives a reality.
Erik Forman has been a labor activist for decades. In 2008, at the age of 23, he was fired by Starbucks for trying to unionize a store in Minneapolis on behalf of the IWW. He later spent years organizing rideshare drivers, and in 2020 became one of the founders of The Drivers Cooperative (TDC) a successful New York-based effort to build a cooperative driver-owned ride hailing app to compete with Uber and Lyft.
Last month, the Minneapolis City Council passed a law guaranteeing a minimum wage for rideshare drivers in the city. In response, Uber and Lyft, being the caring employers that they are, announced that they would pull out of the city when the law takes effect on May 1. State politicians are still scrambling to find a compromise to appease the companies—but Forman and The Drivers Cooperative saw an opportunity. TDC is now one of several companies trying to fill the gap that would be left by Uber and Lyft’s exit. If successful, they could pave the way for the creating of the first major US city to move its rideshare business to a fully cooperative model, cutting out the middlemen and setting drivers up for a better living.
I talked to Forman about the TDC’s plans, its efforts to change one of the most nakedly extractive industries in the world for the better, and what you can do to help.
How Things Work: We've spoken before about your work with The Drivers Cooperative, but can you briefly tell us the origin story of that group, and how it's gone since it launched in NYC?
Erik Forman: It's been a wild ride, as you might expect of an effort to achieve worker ownership of the means of production in a sector that was conjured into existence by venture capital. As of right now The Drivers Cooperative is just about breaking even with around $6 million in revenue per year. It's at a good place, and it's primed for more substantial growth. It's been a long road to get here though, with lots of learning experiences along the way. The story did start with labor organizing. I got interested in worker ownership because of my experiences as a labor organizer. I salted Starbucks in the Mall of America way back in 2006, got fired for organizing by 2008, got reinstated, and then spent about a half decade as a rank-and-file organizer at Starbucks as well as places like Jimmy John's. These campaigns were maybe tragically ahead of their time. They made gains but did not achieve lasting organization (what can you expect– we dealt with so much illegal nonsense from the employers), but everything is a learning experience. I ended up learning a lot about the nuts and bolts and elemental forces that drive businesses, and a lot about how difficult it is to achieve lasting change in companies that are structurally founded on extracting profit from workers' labor. It got me wondering about other approaches to social and economic change. I learned that one of the companies I had been organizing at—a Jimmy John's franchise—had been capitalized with a few hundred thousand dollars of government-backed loans. It made me realize: the amount of capital required to start a business was probably not out of reach for a well-organized group of workers.
It made me wonder, could we just start companies that are owned by workers from the start, and are therefore run by workers in their own interests, and return wealth to the community instead of extracting it? Maybe worker ownership can be a way out of the ragnarok of eternal class struggle our society seems stuck in.
It seemed like an experiment worth running. So I started laying the foundation for The Drivers Cooperative in 2019, when I got a grant to conduct a participatory action research project with drivers on how or if cooperative ownership could change the New York City rideshare industry. We weren't the first people to think about this of course. One example that I find particularly inspiring is this roadmap for a municipalist/cooperative reorganization of the taxi industry put out by a rank-and-file organization in the taxi workers' union in NYC in the 1970s. We decided to go for it. After the class I was running ended, in 2020, I incorporated the business in the first weeks of the pandemic with a group of newly-unemployed rideshare drivers. Incorporating and writing bylaws was the easy part. It took about a year to raise the capital and get the tech in place to launch. In that time we ran a membership drive that recruited about 2500 drivers. This is out of a total active workforce of about 70,000 drivers in New York City. We launched with about $300,000 in loans, most of which was provided by cooperative loan funds like Shared Capital Cooperative (please support them so they can support more co-ops, by the way). This was not nearly enough money, but with the support of social movement allies, over 60,000 riders downloaded the app in the first couple months of operations. The problem became that we couldn't keep up with demand on the driver side. It's a numbers game. New York City is a vast geographic area stretched across multiple islands. We just weren't able to onboard enough drivers fast enough to make the "network effects" work in those first months of rapid growth. However, despite the challenges of on-demand transportation, we found that we were well-equipped to provide paratransit and non-emergency medical transportation, which because they are prescheduled, are way easier to service, and also allow us to make a difference for the riders who need transportation the most. With this focus, we were able to pilot a guaranteed hourly minimum wage for drivers of $30/hr (before expenses), which demonstrated that it would be possible for companies like Uber and Lyft to adopt an employee model. After all, if our tiny worker co-op can do it, they could too. So we built a sustainable business, and demonstrated that this industry could be run in a way that would be far better for workers.
Over the years that followed, about 12,000 drivers signed up with the co-op, and we built a new platform that comes close to Uber and Lyft in terms of scalability and functionality (we got access to some really great APIs from Google in fact, and use basically the same back-end as larger rideshare players, which is awesome), so at this point, we're primed for a fresh marketing effort in New York– or, as it turns out, in Minneapolis.
How Things Work: Is the idea of expanding to Minneapolis something that you've thought of before, or is this totally a move of opportunity? And more generally, have you given thought in the past to this very possibility of Uber and Lyft pulling out of cities in response to regulation, and then moving in to take their place?
Forman: Minneapolis has a special place in my heart because I spent so many years of my life there organizing in fast food. But besides that personal connection, somehow Minnesota is always at the forefront of progressive change in this country. Minnesota has an amazing history, from Finnish socialists starting cooperatives and unions in the Iron Range in the early 20th century, to the 1934 Teamsters' Strike which paved the way to passage of the National Labor Relations Act, to the racial justice movement of 2020. Now Minnesota will be leading the way in worker and community ownership as well.
That said—booting up a drivers' cooperative in Minnesota wasn't something I had planned on, but I have been in touch with MULDA for a few years now, and when Uber announced they were leaving, I knew we needed to do something. Uber has left other cities before. The most famous case study is Austin, TX. We actually recruited some of the engineers who helped build a nonprofit rideshare alternative when Uber left Austin. And we know from that experience that a community can come together to build a highly effective replacement to Uber that keeps the wealth generated by rideshare drivers' labor in the community. So Minneapolis is in many ways the right opportunity to bring this model to scale.
How Things Work: What's a realistic timeline for what's going to happen in Minneapolis, for both drivers and riders? Do you expect a working service to be up and running by May 1? How confident do you feel that a drivers cooperative can succeed there—and how long might it take to really achieve viability?
Forman: We're hustling hard for a May 1st launch. We configured the app to make it easy for Minnesotans to recruit drivers and riders using a QR code referral system, and so far nearly 2,000 drivers and over 4,000 riders have joined. There are around 7,500 active drivers in Minnesota, and 2/3 of the trips are done by 1/3 of the drivers, so we are close to having the entire core workforce united and on the platform already. That puts us in position for a strong start.
Workers are ready—the challenge has always been rider recruitment and raising capital, but we're confident we'll succeed at putting those pieces in place as well.
How Things Work: The cooperative model seems to make so much sense in the rideshare industry, since by eliminating the skim of the companies you can theoretically put more money in the pockets of drivers, even without raising prices for riders. What is the main thing holding back drivers' cooperatives from taking over this entire industry?
Forman: The main barrier is access to capital. We can build businesses that generate profit, but because the business is worker-owned, it doesn't fit in the normative forms that venture capital prefers, and there really isn't a large supply of risk capital for initiatives that serve a social purpose. It's kind of the entire problem of capitalism, right? Workers don't have capital. Definitionally. Otherwise we would not be workers. We have found a way to make it happen though. We're building businesses that generate real value for workers and the communities they serve. Without easy access to capital, we have had to be scrappy and bootstrap our way to growth. New York was probably also the hardest place to start because of the scale, and how much we needed to learn. But as they say, if you can make it there....
One interesting wrinkle here—a lot of the capital that VCs are playing with is actually workers’ capital. There is hundreds of millions of dollars of union pension fund money invested in Uber. Labor pension funds hold by some accounts 1/3 of the securities in the United States. But too often that money is managed in ways that actually hurt workers. Big picture, we need to figure out a way to align labor's capital with labor's interests. Or for that matter, government capital. The government plays a massive role in the economy through investment and procurement. What if we started to use that power to create businesses that solve social problems instead of creating them?
How Things Work: If the coop model can succeed in Minneapolis, that would significantly undermine the power of Uber and Lyft's threats to pull out of other cities in the future. Do you interact directly with those companies at all? Do they view you as a threat? Do they try to actively hold you back, or do they mostly leave you alone? What's your message to regular people about why they should use you, rather than those ubiquitous apps?
Forman: We're somewhere between the "first they ignore you" and "then they laugh at you" phases. People should use us because on average, we're a little cheaper than Uber, and drivers make 10% above the minimum wage. And it's worker-owned. We're building lasting power in this industry in a democratic, worker-controlled organization.
How Things Work: For people who can see the logic of a driver's cooperative, what's the best way to help—in Minneapolis, and also in cities that don't have such a thing yet?
Forman: For people who want to help—please download the app and share it with friends. We just created a new feature where you can see how many drivers and riders have been recruited in your area, and you can easily share the app with a QR code and other tools. Also, we certainly need funds to get this done. If you can, donate a bit to the effort to build a co-op in Minneapolis.
Related: Wage-Setting Algorithms Are an Abomination; Capitalism’s Washing Machine; Radical Capital.
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In the past week, I went on the Bad Faith podcast with Briahna Joy Gray to talk about labor, immigration, and politics. I also spoke to Democracy Now about the UAW’s plan to organize the South. I’ll be at the Labor Notes convention in Chicago through this weekend, feel free to come say hey if you see me walking around there. If there are no new posts at How Things Work before next week, that’s why.
Also I wrote a book called “The Hammer,” about the labor movement, which you can and should purchase wherever books are sold. Thank you to everyone who came out to my book events in Sacramento, Oakland, SF, and LA over the past week. I have a few more events coming up in the next week, come see me if you’re in Chicago or Minneapolis. And if you’d like to me to come speak in your city, email me:
Sunday, April 21: Chicago, IL— “The Hammer” book event and Labor Notes Conference after party at In These Times HQ, 2040 N. Milwaukee Ave. 5 pm. Get your free ticket here.
Tuesday, April 23: St. Paul, MN—At the East Side Freedom Library, 7 pm. Event link here.
[NEW] Wednesday, April 24: St. Paul, MN—Fundraiser for Trader Joe’s United, 7:30 PM at Black Hart of St. Paul. RSVP here.
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This is awesome. I'll share with all my buddies here in Minnesota. And I'll be there Tuesday night!
What a great idea! Start a drivers co-op to replace Uber and Lyft. I bet it's going to do amazingly well. Thanks for posting, Hamilton.