Minibus startups like Chariot aren’t succeeding. But transit shouldn’t be judged on whether it turns a profit.
In 1914, during a streetcar strike in Los Angeles, a motorist in a newfangled private car began giving rides for a jitney—slang for nickel. The flexible service and novel automotive technology easily seduced passengers, and soon jitneys swept the nation, challenging run-down and crowded streetcar systems.
But they also clogged city streets, caused numerous crashes, and cannibalized transit ridership. Following a public outcry, many cities, including Los Angeles, decided by referendum to regulate them. By the mid-1920’s, jitneys had gone virtually extinct, replaced by tightly regulated taxi companies.
Today, a similar story is unfolding for microtransit. Microtransit is a for-profit bus service that caters to commuters willing to pay more for a ride that’s more direct and comfortable than those offered by existing public transportation. Since 2014, microtransit companies have been using sophisticated algorithms to plan fixed routes, based on demand, in San Francisco, Boston, and New York. The model has been hailed—and particularly by CityLab—as having the potential to change urban mobility.
In my Ph.D. research and as an entrepreneur, I’ve developed algorithms to improve transit operations using real-time information. I believe that software can transform the place of transit in metro regions, and I support anything that helps the public move more efficiently. But microtransit is not living up to its promise these days. In just three years, three of the leading companies have gone out of business. In October, the California Public Utilities Commission forced Chariot, a microtransit company recently purchased by Ford for $65 million, to cease operations for several days, after they found that drivers did not have the proper license to operate.
Unlike the jitney regulations, which were created in reaction to entrepreneurial activity, microtransit regulations already existed when these start-ups began operating. Class B licenses, which Chariot drivers lacked on three consecutive inspections, apply to tractors, trucks, and mini-buses. These regulations are not the product of overreaching government curbing innovation; they are in place to ensure the basic safety of drivers and passengers. If a private transportation company cannot make a profit while providing a safe service, then it should not be in business.