John Zimmer: Pink Mustaches, Rideshare Wars, and the Legacy of Lyft

0:00We built a prototype in two weeks and had a board meeting, explained what we were going to do. People in the board meeting said, do you think anyone is going to do this? I remember Logan's face just was like, I don't have any question about whether people will use this. The pink mustache gave people an excuse to talk about it. It was weird. It was shocking. It didn't make sense. There was a cultural moment. That's John Zimmer, co-founder of Lyft, and someone who sparked a movement to revolutionize transportation. The road to Lyft was paved with existential hurdles. Zimmer and his co-founder, Logan Green, had to outmaneuver and trench taxi monopolies and rewrite the rules of urban mobility on the fly, all while scaling a business model that many experts insisted was a logistical impossibility.

0:51And he had to deal with some of the most extraordinary competitive pressure in the history of startups. This is Mike Maples Jr. of Floodgate, and it's Go Time with John Zimmer.

1:05This is Mike Maples, Jr., and welcome to the Pattern Breakers podcast, where we explore why some founders radically change the future and how they stand apart. Together, we'll learn about the counterintuitive mindsets and actions behind their remarkable success. Brace yourself for a world where chaos is welcome, naysayers are often a positive signal, and movements galvanize misfits who transform the impossible to the inevitable.

1:42There's so much to learn from Lyft's journey. The boldness to pivot after five years from Zimride. The ability to leverage a technology inflection. And the pink mustache as a reason for early riders to accept the call to a new, strange adventure. But one of my favorite reasons for the initial breakthrough came from John and Logan's ability to spot anomalies. they noticed something that simply didn't make sense. Cars sat idle 96 % of the time, taking up space in cities. And then when you actually need a ride in San Francisco, good luck finding a taxi. The mismatch was glaring to them. By starting from this contradiction, it helped them see what others missed.

2:25This wasn't just about convenient rides. It was about reframing what the future of transportation could look like in America. Let's talk to them.

2:42John Zimmer, welcome to the podcast. Thank you for having me. Been through some things together for a while, so I've been looking forward to putting this episode together. So, you know, obviously ride sharing is not a new thing to you. The whole field of hospitality is not that new to you. So how did you get started on the topic of ride sharing in the first place? You know, what led you to that as an interesting area? And then what led you to partnering with Logan to get Zimride started initially? Yeah, so in 2006, I was a senior at Cornell. I was in the hotel school there. So I studied hospitality, didn't have a technical background.

3:24And I took a city planning class. I had an amazing professor. His first lecture was the history of the world. And then he had a lecture on transportation. And it was this zoomed out look at U.S. transportation infrastructure from canals to railroads to highways. And I started thinking, what would be that next big infrastructure change? That's what led me to think about if we have all these cars, we have all these empty seats, all these cars that are sitting idle 96 % of the time. And so what if that next infrastructure is more digital and less physical? And that's what sparked the interest. I started running a business plan in my senior year.

4:05I grew up in Greenwich, Connecticut, and I couldn't shake this kind of finance mindset that I was into. And so I worked at Lehman Brothers. One of those low risk jobs. Yeah, exactly. He, Logan, who I did not know, posts on a mutual friend's Facebook page. Check out this website I'm building, zimride.com. My last name is Zimmer. Very strange. He had been to Zimbabwe and it was inspired by seeing people sharing rides in Zimbabwe. And both him and I thought of this idea of long distance carpooling from college campuses. And so because I saw that on Mutual Friends Facebook page, I reached out to the mutual friend.

4:41He connected Logan and I. I decided to leave Lehman Brothers. I was told by a friend's mom who worked in the building, how could you leave a shore thing like Lehman to do a silly carpool startup? Three months later, Lehman is bankrupt. and I had moved to California to do this full time. And that's kind of when, close to when we met. So, you know, you said something initially about assumptions that you saw about transportation that didn't add up. Can you elaborate on that a little bit? Because I think that's important for a couple of reasons I'm going to ask you about. Yeah, so, I mean, the average American household today, you know, spending over$10 ,000 a year owning and operating a car that they use 4 % of the time.

5:26It's the second highest household expense after the house. People understand it has a big impact, but I don't, you know, think people understand the degree to which it has a big impact. And then the utilization is, you know, horrible. The amount of money we spend and the amount we get for it felt very out of whack. So I'd be curious about your response to something then. And so over time, I've sort of developed this opinion, and it's informed by people like David Deutsch and Karl Popper, who are kind of in the realm of physics and philosophy. And these guys tell me that breakthrough new ideas come first by spotting anomalies.

6:06And so, for example, when Einstein came up with the general theory of relativity, he was reacting to the fact that when you treated gravity as a force, some experiments just didn't add up. Newton's mechanics didn't explain what you'd expect the experiment to reveal. So it's like something's up with that, like something doesn't add up about this. And so what the theory of relativity is, is a better explanation of reality than Newton physics. Why is that important? Well, a lot of times I find that startup problems are defined as just problems. You know, I want more of this than I want, or I want less of this than I don't want.

6:45And what I started to realize is that when you define a problem that way, you're still operating within the current frame of the rules. You're operating by the world's explanation reality as it is. So any type of problem that doesn't require you to change your explanation to solve is not going to be a breakthrough new answer, right? Because you're solving a problem by today's rules and today's frame. And so what I always found interesting about Zimride and later Lyft was it was an example of where in some ways the problem emerged from the anomaly. The anomaly was sort of like, well, you know, cities are designed around cars and not people.

7:25And there's enough parking lot space to cover the state of Connecticut and people aren't in their cars that often. There's a whole bunch of things that when you really think about it, it kind of doesn't make sense. It doesn't add up. I think that more startups should start with an anomaly that leads to a problem. The problem emerges from the anomaly. If you have a deliberate problem definition, you solve current pain in today's world. But if you find an anomaly, you have to solve it by coming up with an explanation that the world hasn't come up with yet, which is the first step to a breakthrough.

7:59Right. And so so like Lyft to me is a really good example of, you know, recognizing something about the world that just kind of didn't add up. What's up with that? Right. And then you kind of pull on the thread and see where it goes. Yeah. And it reminds me of something that one of our other early investors, Sean Argyle, if you remember him, said he's like, I figured it out. He's like, don't take this the wrong way. But a naive entrepreneur could mean that they they they have a breakthrough. And so he's like, the fact that you and Logan are a bit naive about whether it's transportation or the law surrounding, you know, providing rides to other people in your community.

8:42We weren't that naive. We looked at all the laws. Yeah. Coming into something from a different perspective is incredibly powerful. Yeah, and it's interesting. A lot of the other breakthrough startups the last 20 years, similar thing, right? Like Brian Chesky puts up a WordPress site, and lo and behold, people are like wanting to stay in his apartment. He didn't know anything about hotels or any of that stuff, but it was more like, huh, I've become increasingly a believer that the way to find the breakthrough ideas is to look for the things that don't add up. Moneyball is a great example. I remember reading that book from a business perspective.

9:22As a kid, I collected baseball cards, and I always cared about batting average. And it just so happens that every Major League Baseball manager also cared about batting average, but what about on-base percentage? That's actually way more important. But literally, everyone was looking at the wrong thing. it. That's right. And it's funny because when everyone's looking at the wrong thing, when there's something about the world that doesn't add up, the corollary is not only is there a better explanation, but there's an arbitrage opportunity, right? That's what Moneyball showed, right? Like if everybody's explanation of what makes a good baseball player is not as accurate as on-base percentage, then you can arbitrage that insight.

10:05You can, you know, you can bias your spending on players who have high on base percentage and you can even trade away the players that are overvalued right because you can you can take advantage of that yeah so then back to zimride so you start zimride you're working with um you're working with logan it wasn't doing too bad you know you raised some money founders fund got into it uh uh mayfield got into it good funds uh you know getting some good revenue growth why change why why pivot to an illegal service with a mustache on the car that could threaten to put you in jail somehow. It was all about frequency and kind of stickiness of the product.

10:44And kind of, we looked at ourselves and said, the impact wasn't big enough. People would use Zimride twice a year. What about a product you could use twice a day? You know, and when we started Zimride, the iPhone was not, either was just coming out or was not a thing. And when we started Lyft, it was obviously, it's one of the things that enabled that. So it just was around frequency and stickiness and impact. And was there a moment where you realized, oh, now we could do this peer-to-peer thing? Was it, you know, the iPhone 4S had a GPS chip or is that a story we tell ourselves after the fact?

11:20No, I think that's the thing, you know, being able to accurately say I'm here and for a driver to be accurately able to communicate back to you visually that they're there and to connect those dots before that, that, that would have been, you know, much more difficult. So then the iPhone 4S comes out and you're thinking, okay, we could do this peer to peer thing. How do you, how do you decide whether that's a good idea? Right. I know you did some clever things to experiment to see if people would actually want to do this, but like, how did you, how did you set up a test to see if people, or, or were you just pretty much convinced that people We went, so the hardest thing was to say, we're going to turn the page from Zimride.

12:04This is something we worked on from 2007 to 2012 for five years. You know, like, you know, we loved the product, cared about the customers, the team, and it was working to a small degree. It was very hard. I had a headache for a very long time. I like ended up having appendicitis, I think after we, I think it's related. I don't know. But like my appendix almost burst like right after we made the decision. So I was like taking on physically. It was hard for me to turn the page. So that was hard. But then once we did that, we built a prototype in two weeks and had a board meeting, explained what we were going to do.

12:44People in the board meeting said, do you think anyone is going to do this? I remember Logan's face like just was like, I don't have any question about whether people will use this. At the time, Uber did exist, but they were only doing black car limos. Obviously, taxis existed, but no one had really done anything with personal vehicles where we had criminal background checks, driving record checks. And so we were convinced there were legal questions, as you said. But a lot of the big things come out of finding that, call it arbitrage, call it gray area. Once we turned the page, we were all in and put the app out in two weeks, did friends and family.

13:31And we almost immediately had a waiting list and there was like pull on the product from customers. And that was not something we experienced with Zimrad. Yeah, it's funny. I remember when Anne was describing this to me, she said, well, they're going to launch this thing. They're going to call it Lyft or put these pink mustaches on cars. originally they thought it was going to be targeted towards females so that they'd feel more comfortable sharing these rides and i was like oh that's interesting it'd be interesting to see what happens like literally two weeks later uh one of our associates at the time tommy leap comes into our team meeting and goes we are going to make a fortune on this lift deal and and uh and i remember ann and i are looking at each other like well before that happens we got to not get sued every day and right now we're having these rides away we're going to run out of money.

14:19So I hope you're right. But like, there's a couple of steps between now and then. But it just instantly blew up, right? I remember people would be telling me, oh my gosh, it's everywhere. All my friends, especially like millennials, right? Like millennials were like, oh my gosh, like once you get in a lift, you can't unsee it. It's just amazing. It was like, just became a craze just almost immediately. Yeah, we hit, there was a cultural moment. The pink mustache gave people an excuse to talk about it. It was weird. It was shocking. It didn't make sense it also made the car a lift and not a uh personal you know someone's a personal vehicle someone's honda cord and and the talk about like physical real world virality of like seeing it pointing to it talking to the person next to you asking what that is it just had an instant conversation conan o 'brien took a lift and that i don't know if you remember that i remember that with uh um kevin harr and ice cube that that still has like one of the most watched youtube videos So it just hit a cultural nerve pretty quickly.

15:20It's awesome. Yeah. And the mustache itself, whose idea was that? And what was the premise of why the mustache was going to be a good idea? That was me. We always, in the transportation world, we thought Zipcar had something really nice that when someone used a Zipcar, you had that decal on the side with the Zipcar logo, and it created that conversation. I remember the first time I saw it, someone pulled into my, when I was a kid, pulled into my driveway. And I was like, what the heck is that? And so we wanted that. Your parents told you never get in the car with a stranger. We needed to shake people out of that mentality.

15:59We obviously had to do the right things on background checks, driving record checks, insurance. But we also needed to present this not as you're getting into a stranger's car. You're getting into a Lyft, which has those safety checks. It's also why up front, we asked people to sit in the front seat. Who wants to get chauffeured? Back then, it was super weird to get chauffeured in someone's Honda Accord or whatever. And so we called it your friend with a car was our tagline at the time. And then as it got more normalized, obviously, the mustache went away and people did tend to sit more in the back seat.

16:35But we thought about the whole physical experience. I remember this maybe was some of my hospitality background. Me and one of the team members at the time, we just sat in the car, pretended to be driver and rider, switched roles. And what felt awkward, we kind of like, you know, mocked it out in reality. And the front seat felt less awkward for that new mode of transportation. So, John, I'm curious, at the time that you guys did the mustache, had you had any background in storytelling and like the storytelling primitive? No. Because like one thing I find fascinating about it, you know, with startups, it's tricky because sometimes you can misremember how things really happened and you think you knew stuff at the time you didn't really know in hindsight and things like that.

17:24But I also try to understand why certain things worked. And for me, part of the genius of the mustache, and you're kind of already alluding to it, but in many ways, I think that a startup is engaging their early customers on a call to adventure, like in a story. And why would an early customer accept this call to adventure from a company that's 80 % likely to go out of business that I've never heard of before? and so what I find is that the founders need to find some way to make it palatable for early believers to accept the call yeah it's not like ob-wan says to luke hey come with me and let's blow up the death star and rescue the princess yeah there has to be something that causes luke to think he's got a snowball's chance so ob-wan says well I got this thing called the force and I got this thing called a lightsaber and you know it's going to make give you superpowers and so one of the things I noticed in hindsight about the mustache was the mustache gave people a reason to accept the call to adventure you know you're like getting in a stranger's car is kind of scary but if you see a bunch of cars you're in San Francisco you're in a sidewalk cafe see a car zipping by with a pink mustache on it you ask your friend hey what's up with that car oh haven't you heard you know it gives you a ride all over the place it's like if you're on the fence you're now biased to maybe giving it a chance.

18:47Whereas in the past, that seems weird. I don't know about that. I'm passing on it. But it felt to me like the lift mustache was a fantastic example of making it appealing for early believers to accept the call to adventure. And we were not hiding, right? And so that's part of it. Oh, there's a confidence there that like this is this is okay this and so from the legal perspective we had received a few weeks in a cease and desist from the California Public Utilities Commission and you know threatening to to impound the vehicles and cut off our phone lines we didn't have phone lines and they weren't our vehicles but we were worried about the drivers and the drivers vehicles and I remember having these moments of like oh my god the mustache is like literally telling the authority like this Yeah, this is the bullseye.

19:40But I think it also mattered from that perspective. We were hiding. We were there. And speaking of legal challenges, what were the legal parameters that you had to navigate? And what was that experience? What was your day-to-day life like in that window of time? Yeah, it took on most of them, like between fundraising and that. Luckily, Logan and I, you know, complement each other. He led product and engineering. And so I had to focus on, you know, fundraising and government relations. And I was concerned. I was, you know, scared. I was worried for the drivers. We built this movement, really. Going back to the kind of story, we built a movement around the drivers wanting this independence and freedom to earn money on their terms.

20:31And so that was, I would say, even more powerful than I realized when we started, because I was starting it from the perspective of city planning and transportation and hospitality. But I soon realized how powerful this was for people that were single parents and needed to turn on and off work. But I mean, we received several cease and desists. We were for one launch. I was almost held in contempt. I asked my lawyer, which I have to thank you for, because Kristen Svrchek, our general counsel, was previously your outside counsel. And she's fantastic. It was intense. It was very intense. There were a lot of interests.

21:07So taxi medallion holders, taxi owners, and I spoke to many of them because I cared about what was going to happen to their livelihood. And, you know, that got me to any change that has a big impact will have positive and negative consequences. And I had to be confident in myself that the positive consequences far outweighed any of the negative consequences, which I strongly believe. And so then I guess it got interesting as well when Travis Kalanick decided to launch the UberX service not long after Lyft started to succeed. So how did that play out? Like how much time did you get to operate without being contested by Uber?

21:47and then what was their thinking and then what was it like to experience competing against Travis? I mean, it was months, single digit months of like before, but even before they did anything, I mean, they were sending in fake drivers to figure out what our insurance policy was. I don't know if this story is very much told, but I called an incredible woman to help on government relations. uh her name is susan and she uh i called her and i said hey a friend suggested i talk to you you know you you understand the the commission that that's regulating us uh we're trying to do this new thing here's our legal stance here's what they're saying and she was like you wouldn't believe what just happened she was like yesterday i was at this commission and an uber consultant was trying to get the commission to run a sting operation on you and shut down Lyft because they were doing Uber and they weren't doing UberX at the time.

22:52And so for all the things he said about, you know, government shouldn't get in the way, he tried to use government in the first few months to block us from doing what ultimately became, you know, the largest part of their business. so so they so they were trying to stop you and i suppose that maybe perhaps they were like hey look you know we're trying we're trying to legislate this out of business and we can't and if they're if you know if the government's gonna let them do it we might as well do it too yeah and then and then he said he put out a blog post that basically said hey governments you should you know you should enforce against us and if you don't we will launch you know we'll give it a few months and then we'll launch.

23:30I am not super fond of the person, but as an entrepreneur, incredible, an incredible entrepreneur, like, so to compete against him was an amazing education and mental challenge. I mean, they, they like, when I would go fundraising, they would send NDAs to almost every potential funder of, of either a company saying that if, if you talk to Uber, you can never talk to Lyft. They would somehow call investors days after, or literally the day after I met with an investor, this happened three to four times. They called the next day and said, hey, if you want some discounted Uber shares, as long as you never invest in Lyft.

24:16And the investors would call me and be like, did you tell anyone you were meeting with us? So there was a lot of highly competitive, questionable things happening. But looking back on it, I think it made the industry better. And I think I'm proud of how our team kind of rose to the challenge and it became super inspiring to fight against their approach with ours. Was there ever a time in the experience where you're like, okay, this is going to be gigantic? Yeah, I thought you were going to say the opposite of like, was there ever a time you thought it was going to die? And I'd be like, that was my whole experience.

24:50The first few years, I mean, the chances of it being shut down. Uber raised$3 billion from the Saudi government one day, we had five months of cash in the bank. And they were bigger. And people believed it was a winner take all market. The last one was COVID, where 80 % of the rides went away. And I was like stuck in those early days, fight or flight. So I think I, for too long thought it was going to go to shit when it wasn't. but I also don't have the person like I always wanted it to be and want it to continue to grow be bigger have bigger impact and so I don't remember maybe when we went public it gave me a moment I wasn't expecting going public to be much of a of a kind of meaningful thing to me but I I remember like it allowed me to reflect on what we had built uh and that that was maybe one moment where I felt like, oh, wow, this is big.

25:45Now, one thing I haven't asked you about yet is the financial picture over time. I remember when we invested in the seed round of Zimride, I think Ann told me that you guys had said, we're just going to eat beans until we raise money. so like what was that what were the frugal times like in the early days and like when did you uh when did you realize that you had to shift from frugality i remember i mean even pre-lifted zim ride when we sold one of our the platforms zim ride platforms were sold to universities when we sold one of them uh we would go to ikea and get uh swedish meatballs and that was our celebration uh which was actually it was pretty fantastic that was a delicacy yes i don't know it's it's as that success happened, we were quickly hitting this kind of, you need to raise hundreds and now billions of dollars to survive.

26:45I think our frugality was very helpful that that was kind of ingrained in us. And I don't think we like caught up to overspending or anything because we were by nature, both Logan and I are frugal. And then as the challenger brand, we had to be frugal to survive. There was a memory kind of later stage post public, we were tightening our belt and we had, there were some like organic blueberries in the kitchen and our CFO flipped out and that became the poster child, the organic blueberries of like, we've taken this too far. We've lost our way. And when you look back, you know, so far in the journey, were there any critical decisions along the way that you think had you made the other choice, it wouldn't have worked out or like, you know, that something that we can learn from in terms of decisions that you made that impacted the success in the zero.

27:43Yeah, I would say two main things that just quickly came to mind. I'm sure there are several. But one was when someone says no, that could be a fundraising or that can be the public utilities commission saying you need to shut down or we're going to like you're going to have serious legal problems. I always took those as invitations. And people, you know, people might have gotten the cease and desist and that was it. Yeah. But I said, I want to talk to the person. I, you know, thanks for the letter. Let's, let's talk. And so I would say, I want to understand why this should be shut down. Is it safety or is it because there's like an established, you know, industry that you don't want competition for?

28:21And they always said safety. And I said, okay, great. No problem. Here's what taxis and limos are required to do. and here's what we're doing. So you don't have to take my word for it. Why don't you regulate this category or clarify that you already regulate this category and make sure that I'm doing all the things I say I'm doing, which by the way are more strict than taxis and limos. If you're really just about safety, we've solved that beyond what a taxi or limo is currently doing. And then they didn't say, okay, that sounds great. But it took lots more conversation, but I didn't take the first no, whether it was in fundraising or in the government relations example.