When Ken Lewis came to New York City for graduate school in 1992, he did as many immigrants do and found work driving a taxi cab. Some 90 percent of NYC taxi drivers today are foreign born.
It’s not necessarily because of low barriers to entry. In fact, over the past decade the barriers became unbelievably high, as policymakers and predatory lenders spent years artificially inflating the price of a taxi cab medallion — the city permit required to own a yellow cab — pushing many taxi drivers into spiraling debts that have led to multiple taxi drivers committing suicide.
But despite all that, the barriers are even more prohibitive in many other sectors, pushing immigrants into situations where they become vulnerable to all manner of exploitation, be it taxi medallion debt to ride hailing platform companies taking 25-30 percent of their revenues.
“What sort of struck me was the very predatory nature, across the sector, be it dollar cabs, be it yellow cabs. In many ways drivers had to try to organize, whether it be sharing a cab or buying a vehicle together to make it in the industry, there was always a sense of drivers trying to share,” says Lewis, who still drives for both Uber and Lyft today.
But Lewis is now also a co-founder of The Drivers Cooperative, a new driver-owned ride-hailing platform that hopes to launch to the general public in New York City later this year, with aspirations of operating in cities across the country. And it’s not just about building one driver-owned ridesharing platform that avoids the exploitative practices of this industry. The Drivers Cooperative is out to prove that drivers can build a company that is also better for consumers.
It reminds Lewis of growing up in his native Grenada. Revolutionary leader Maurice Bishop came to power in 1979, and created programs to re-orient the Caribbean island nation’s economy around cooperative practices rooted in the existing practices of its people.
“In a lot of poor countries you live in a cooperative society, in a sense,” says Lewis. “We had lands when I was a kid, other community members would come when it was reaping time and sowing time. It was community work because the work was too big for one person.”
It wouldn’t be the first time drivers have built a transportation company they own and control, which works out better for themselves as well as for customers. Union Cab Cooperative in Madison, Wisconsin, has been doing it since 1979.
But The Drivers Cooperative co-founder Erik Forman admits he once had doubts about whether drivers, or really any group of exploited workers, could start and run their own businesses. He’s been active in the labor movement for around 15 years, including five years working in fast food and organizing fast-food workers.
“Workers would always say what they really want is their own restaurant,” Forman says. “And as organizers, we would often dismiss that because isn’t the reason you’re working here because of the lack of access to capital?”
But Forman would come to an epiphany over the past few years, working at the Independent Drivers Guild, which represents 85,000 for-hire vehicle drivers (including Uber and Lyft drivers) across New York City (and is partially funded by Uber). “From the first day on that job drivers would come up to me and say why don’t we create our own app,” says Forman.
Meanwhile, worker-owned cooperatives have had a resurgence among Black, Latino, Asian and other communities in New York City — fueled in part by the city’s Worker Cooperative Business Development Initiative, an annual grantmaking program to fund the development of worker cooperatives that started in 2015. As a result of that program, the number of worker cooperatives in the city went from 24 in January 2014 to around 200 by the end of 2020.
In 2019, the Independent Drivers Guild won a 2019 Co-Op Innovation grant from Capital Impact Partners, a national community development lender. The idea for the grant was to launch a purchasing cooperative that would reduce expenses for drivers, including fuel, car washes, oil changes, dash cameras, meals-on-the-go, and car repair — and to eventually “purchase” the services of app developers to build a driver-owned ride hailing platform.
“Half of every dollar drivers make gets eaten up by vehicle costs,” says Forman. “In most industries you get paid for going to work, but in this industry you pay when you go to work.”
After winning that grant, Forman put out an email to Independent Drivers Guild members to recruit a drivers’ council to shape the new cooperative. Forman says out of a thousand initial responses, three hundred drivers expressed interest, and Forman organized an election that resulted in a council of 18 drivers. Lewis was one of them.
“I submitted my best resume and we got together and we said we could do this,” says Lewis.
There was still a lot they didn’t know about the inner workings of a modern ride hailing platform company, especially how to manage its growth. Onboard too many drivers too quickly and they’ll cannibalize each other’s opportunities; too slowly and riders will complain about long wait times and switch to competitors’ apps with nothing but a few thumb taps. For that knowledge, they found Alissa Orlando, who joined as another co-founder last summer after years of working in corporate offices for conventional ride hailing platform companies and building on-demand delivery platforms outside the U.S.
“In-between signing my contract and joining, Uber cut prices 35 percent, and they were going to ask me to cut prices an additional 20 percent after we just encouraged drivers to take out three-year fixed payment car loans,” Orlando says. “And we were still encouraging drivers to take out vehicle loans for $15,000 at 15-20 percent interest from a partner bank, even though you could get a car that met all the requirements for half the cost. I was like this is completely unethical.”
Orlando eventually moved back to the U.S. to get her MBA, landing in Silicon Valley, where she got to see up close the venture capital ecosystem that spawned companies like Uber. But that’s also where she also first encountered the cooperative model as an alternative.
“There’s no inherent morality in a technology platform, it’s really in the structure of the business and the capital you bring into that business,” Orlando says. “That’s why I’m really excited about what we’re building at The Drivers Cooperative because it’s a dramatically more equitable model of a service that people have really come to love.”
As part of its purchasing cooperative model, The Drivers Cooperative arranged a partnership with Lower East Side People’s Federal Credit Union, which has a focus on serving low-income communities across New York City. The partnership allows cooperative members to join the credit union — which like all credit unions is also a cooperative — and refinance their 15-25 percent interest vehicle loans from other lenders to 3-4 percent interest.
“We have one member who went from paying $750 a month for his vehicle financing to $450 a month after refinancing with the credit union,” says Forman. “Most of these drivers are one missed payment away from economic disaster.”
Another barrier that ride sharing or other for-hire vehicle drivers face in NYC is every March they have to renew their special insurance as for-hire vehicle drivers on top of regular car insurance, as required by the city. This insurance typically requires an annual 20 percent lump sum down payment, usually in the hundreds of dollars. The credit union can also provide financing to cover that down payment and spread out the payments in smaller amounts over a number of months.
“We focused on developing specific loan products with the credit union for the inevitable costs of being one of these drivers,” Orlando says. “The costs are fixed on an annual basis, especially the biggest expenses, which are insurance and vehicle financing, but your revenue is completely variable from day to day. So people have to predict what’s going to happen over the next several years and bear all the risk of making that large fixed investment up front.”
Other costs like auto maintenance and repair or weekly car washes might be smaller and more or less predictable, but as a cooperative the drivers are also trying to be intentional about how they spend those dollars.
“We’re always looking for these other synergies with other solidarity economy projects,” says Forman. “For example we’re talking with an association of small auto repair shops about discounts for our members, which can also help them out as an industry dominated by immigrant workers. We’re also talking with union-organized car washing workers in New York City to see if we can direct business to unionized car washes. 50,000 for-hire vehicles getting at least one car wash a week is a lot of car washes. If we can steer some of that purchasing towards the higher-road employers it can aid labor organizing in that sector.”
Forman also says they are working on a policy platform that includes a requirement that for-hire vehicle drivers in the city use electric vehicles, arguing that it would further reduce ongoing costs for drivers. They’re calling it a “Green New Deal for For-Hire Vehicles.”
“As a co-op we’re not only a business but a worker organization,” says Forman.
The Drivers Cooperative is also running a small pilot operation to test out its app with drivers and potential customers — providing a limited number of rides for members of Cooperative Home Care Associates, a Bronx-based home health aide company that happens to be the largest worker-owned cooperative in the country, with more than 1,000 worker-owners and more than 2,200 employees overall on its payroll.
Lewis says drivers so far have been very much a part of conversations with the cooperative’s app developers, at least one of whom he says has had experience as a for-hire vehicle driver in the city. “There were many things we missed initially, and when we showed it to the drivers they were very clear [about changes that needed to be made]” says Lewis.
Lewis is very guarded about the exact details about the app, knowing how fierce the competition is. The Drivers Cooperative needs every edge it can get against competitors who, despite never reporting a profitable year yet, still have access to billions of dollars in investor capital.
In addition to grant funding, The Drivers Cooperative has one investor so far — it got a working capital loan from Shared Capital Cooperative, a loan fund that is itself a cooperative that lends exclusively to cooperative businesses and housing cooperatives across the country.
“It’s very difficult to get capitalists to give you capital to start a business owned by workers,” says Forman. “The reason the world looks the way it looks today with extreme inequality in wealth is because of extreme inequality in ownership.”
Editor’s note: We’ve corrected the number of drivers on the Drivers Cooperative council, and clarified that Forman was working in fast food while organizing workers.
This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter. The Bottom Line is made possible with support from Citi.
Oscar is Next City's senior economics correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha, and Fast Company.