Ford Acquires Chariot (YC W15)

Not only a drag, or not even a drag.

It's been a long while since I read The Innovator's Dilemma, but the ground-breaking thesis in that book as I remember is that established companies are disrupted because it's 100% rational for them to continuing pursuing and maximizing profit in their established market, even while obsolescence is knocking on their door.

The dilemma is that they have to choose between maximizing profits in their current market and returning unused capital to stockholders, or burning money on speculative investments in a bid to remain relevant in the future.

Were labor and capital markets frictionless, it wouldn't even be a dilemma. The answer would be obvious--choose the former. Any investments you divert from maximizing your current advantage is always a net loss. Excess capital is best given back to shareholders because "the market" will do better at choosing the next disruptive technology than any single person or business would be. That you're doomed to obsolescence and will eventually have to wrap up the business doesn't matter; what matters is maximizing profits.

But because labor and capital markets aren't frictionless, it's not optimal to let an existing business entity disappear. Think fixed costs like HR; or brain trusts. Finding the balance between maximizing your current market position and speculating on disruptive technologies is therefore arguably something worth pursuing.

But as labor and capital markets become more free and liquid, there's less of a dilemma.

Anyhow, long story short, companies aren't disrupted because they're dinosaurs and antiquated. They're slow to respond because it's often perfectly rational (i.e. more profitable) for them to ignore new technologies and to continue pressing their advantage until the very end. And that incentive aligns well with maximizing global profits and capital investments. The intuitive sense that companies are doing something wrong by not preparing for disruption is irrational as a general matter. You prepare for disruption by making as much money as you can and jumping ship at the very last moment; doing anything else is leaving money on the table.

Not surprising at all based on the responses I got to emails sent to him. I used to be a customer but the drivers I had (or observed) were absolute menaces on the road.

Here's one example:

Hi Ali et al.,

Wanted to bring your attention to an incident that happened this morning on my drive to work (though I'm a monthly customer, I drive probably 3x/week).

I was driving in my lane headed towards the Embarcadero when all of a sudden the driver of Chariot van #49, realizing she was in a left-hand turn only lane, swerved violently in front of me. Had I not immediately slammed on my brakes, I would have crashed right into her at a relatively decent rate of speed.

Somewhat shaken, I immediately grabbed my phone to document the incident and submit just a "heads up" to you to instruct this driver to be more careful. While taking pictures (included below), I notice the woman lean over towards the passenger seat and watch me taking pictures in the side-view mirror. She did not appear to be pleased with my actions and gave me a dirty look through the mirror.

Thinking no more of it, the light turns green -- we're in bumper-to-bumper traffic at this point -- and she begins accelerating. Then, out of nowhere, she slams on the brakes (a "brake check" if I didn't know any better), causing me to slam on mine, and bumping into her at about 2 mph. My immediate thought was that she was trying to induce an accident, or at the very least give me a scare. Either way, not at all a professional move by someone entrusted with the safety of your passengers.

As soon as this happens, the woman gets out of the car and I roll down my window to try to talk to her. I attempt to get her to exchange information, but she simply ignored me, took pictures, and drove away without a single word. Finally, at the spot I was previously* cut-off by one of your drivers (i.e., where they make a left-hand turn into that parking area), I was able to catch up to her to take my own pictures (these are below as well).

Given what happened today, and what I've observed before (see below), I'm inclined to bring this matter to the attention of the San Francisco County Transportation Authority. Before doing so, however, I wanted to hear you out and understand what sort of driver training your company has instituted -- and what actual re-training this driver might be required to take. While I'm a big fan of the service and convenience you provide, I can't help but think you're suffering from a serious driver quality issue. I've lived in this city for 10 years and have not had a single incident on the road outside of with Chariot vans.

Here are the pictures I took immediately after van #49 swerved into my lane:

1. Showing her stopped in my lane after cutting me off (when she realized she was in the wrong lane) [PIC]

2. The view from my car after I slammed on the brakes and swerved to the right to avoid the accident as she plowed into my lane [PIC#2]

3. How close we came to a decently high-speed accident [PIC #3]

And here is the picture that I took after I manage to catch up to her on Embarcadero:

1. Note that small scratch on the right side of the bumper (my car has somewhat more damage, including my license plate). This happened when she slammed on her brakes after immediately starting to go through the light -- inducing, I believe, me to bump into her:

* This is not the first time I've been aggressively cut off by one of your drivers. A month or so ago I submitted a report through the app. It should show up under support requests for my email address: prdonahue@gmail.com.

Please let me know if you need any more information.

Thank you, Patrick

To which the CEO replied: Hi Patrick,

Thanks for bringing this to my attention. We've logged tens of thousands of miles at this point and I will stand by our company's safety and compliance procedures and record of success firmly. Accidents happen, and regretfully you were involved; that's not an indictment of our driver's professionalism.

I have cc'd our manager Josh and team to investigate this matter immediately per our SOP.

You should expect to hear from them soon.

I got a boilerplate response indicating someone would look into it—but then radio silence.

Congrats to Ali. Been very impressed with Chariot's mastery of nitty gritty business & logistics fundamentals. That sounds like it should be obvious, but Leap and other competitors couldn't so much as file the right permits, let alone start what amounted to their own public transit network and get regular ridership. This is a hard, low margin, business to get right in a crowded space, and Ali managed to scale it to 40k+ riders per month and that's awesome. Well deserved!

They blamed their shut down on regulatory issues, but how did chariot get around them?

YC validates that a company might be worth a lot one day. Employees factor this into their decisions both to join a company and in salary negotiation. Everyone knows this and anything less then full acknowledgement of the fact is complete chickenshit.

To then turn around on a YC forum and say "It is completely fair that employees come out of a $MM acquisition with the skin on their backs" is equally chickenshit.

Until startups stop banking on the marketing of equity to employees I'm always going to advocate for said employees.