Lyft’s CEO on the economics of robotaxis, how to end surge pricing, and reviving his company

Lyft has long had a reputation on Wall Street for living under the shadow of Uber, its larger and more profitable competitor. 

But if you ask CEO David Risher, the company is in the middle of a major turnaround, even if it’s taking the Street a while to get up to speed. The ride-share company recently reported its third consecutive profitable quarter after years of losses and is dipping into new markets. 

“People have this mindset of somehow if you’re smaller than the other guy in the market, you must be losing,” Risher said, wearing a bright-colored polo printed with tigers and water lilies. “But we’re not. We’re growing very fast.”

Risher — arguably one of the most avuncular executives in Silicon Valley, known for his loud shirts and Citi Bike commutes — became Lyft’s CEO in 2023 after joining the board two years earlier. Under his leadership, Lyft expanded outside of North America for the first time this year with the acquisition of FreeNow and has struck deals with automated vehicle companies to begin offering driverless rides in certain cities domestically and internationally. 

But can he convince Wall Street that Lyft hasn’t lost too much ground to Uber? I sat down with Risher at Lyft’s Midtown Manhattan offices to talk about what he’s done with the company since joining in 2023 and where he sees Lyft going in the future. 

This interview has been edited for clarity and length.

Sherwood News: You recently reported financials that showed revenue, bookings, and earnings per share all up — but it wasn’t well received by the Street. What do you think they’re missing? 

David Risher: I think the biggest thing I want them to know is we are right in the middle of a big ol’ turnaround. Two and a half years ago we were losing money, consuming cash, not growing particularly fast, not really improving service metrics. It was a story of a company with so much promise that had done so many things well but it got a little bit off track. 

Now, two and a half years later, we’re seeing more active riders than ever, more drivers than ever, drivers prefer us versus the other guys, and we’re printing cash. 

Sherwood: Lyft has been net income positive for three quarters in a row now, after more than a decade in business. Tell me a bit about that turnaround. What was the company you walked into in 2023 versus the one you lead now?

Risher: I think the single biggest difference is we live with a purpose now, and that purpose drives our customer obsession and our operational excellence. I want to get riders and drivers out in the world, connecting in the real world, doing it every single day.

One is relentless focus on service, which is not what I found a couple of years ago. The second thing we have now is ambition. A couple of years ago, we were thinking of ourselves as a sort of second-place, domestic-only, only a business-to-consumer company. Now, we’re a much more global company, we’re a much more customer-obsessed company, and a much more well-rounded company. 

Sherwood: Earlier this month, Lyft’s cofounders left the board and converted their shares to give them regular voting rights. How often are you in touch with them these days? What do they think about the direction the company is going? 

Risher: They feel super good about where the company is going and that’s what allowed them to step down.

Sometimes when founders, especially founder-CEOs, leave the company, they still maintain an office and come by maybe once a week. I had this conversation early with them; I told them, “I don’t think you want to be the high school quarterback who comes back and hangs out after he’s graduated and tries to relive the glory days.” And they agreed. So they never took an office. I would meet with one and the other typically once a month, always separately, so I get two different perspectives, and then I’d see them at board meetings. 

Maybe four or five months ago, they started to look at how the company’s been profitable. We’re free cash-flow positive, we’re on our financial goals, and I think they just said: “We have less and less to add and it’s more and more likely that we’ll be anchors, thinking in old ways instead of helping you guys move forward.” It was about as seamless a transition as you could imagine. 

Sherwood: Lyft stayed domestic for longer than your peers and has more recently expanded internationally. You just completed an acquisition of Freenow in Europe and got into Puerto Rico, which is technically still domestic, but still a new market. Why now?  

Risher: You can’t do things before you’re ready. You can try, but you’ll fail. We just weren’t ready. We were not doing well enough domestically to even consider going outside the United States in any significant way. 

So then we got ready. Then you have to have ambition. We had to sort of rethink ourselves as a company that does have the capacity to go global. It was really those two things lining up. 

Then, of course, it was nice to have a supportive board that said, “Yeah, you guys really are ready.” They would say stuff like, “A year ago if you had brought this up, I would’ve laughed in your face, David. But now, absolutely.” 

Sherwood: Uber is your biggest competitor in the States, and there are smaller private competitors as well. Now Alphabet’s Waymo is an emerging competitor. What edge does Lyft have in this market? 

Risher: Let’s start with the bigger picture. Just in North America, there are 161 billion rides that people take every year in their private cars. Between the two of us, and even if you include Waymo, we’re talking about 3 billion at most. 

My main focus isn’t what do I have that they don’t; it’s how do I keep innovating for riders and drivers, such that we can get a lot more on the platform. 

What we do have, however, is our customer obsession, which is not just starting to translate into profitable growth, but it’s translating into innovation that is actually useful. Two examples: we now guarantee that drivers will get 70% of what riders pay them after fees. If you have a driver who feels fairly treated, that translates to better service. 

The second thing I would say is that I don’t meet a lot of people who love our competitor. In fact, I can’t think of any. On the other hand, I drive for Lyft, and people say, “I want you to succeed. I like you as an underdog, I like your values, I like Chase Sapphire Reserve points.” 

Sherwood: What you’re saying reminds me of a term you used in your annual shareholder letter: “enshittification,” which I understand to mean the process of hurting the customer experience in an effort to grow profits. What are some specific ways Lyft has avoided this? What ideas have you turned down?

Risher: I feel lucky that people at this point don’t tend to propose a lot of ideas that are not customer-obsessed. So I don’t end up having to say no to ideas because they’re not customer-obsessed. It’s more usually the case that a person will propose something and someone else will shoot it down because it seems very complicated. And I’m like, “Hold on, no — there’s something really important for customers there that we really have to develop and figure out how to do it, as opposed to all the reasons not to do it.” 

Maybe the most salient example is working to end surge pricing. It’s an economist’s dream; it’s supply/demand management. In the world of econometrics, it’s perfect. In the real world, people hate it with a fiery passion. But it’s hard to get rid of it. You have to be better at predicting where there is going to be demand. It’s really hard. There’s almost an incentive not to get good at it, because when you lower your surge pricing, you’re lowering your bookings. So you’re doing exactly the opposite thing from what Wall Street wants, which is growth, growth, growth. It’s almost like you get addicted to the crack cocaine of the top line and then it’s hard to change it. 

We had to wean ourselves off this drug because riders don’t like it and it’s bad for business long-term, even if it suppressed growth a little bit in the short term.

Sherwood: Lyft partnered with some companies to offer driverless rides in the US and in Europe. Did you go out looking for partners or did they come to you? 

Risher: It’s usually kind of mutual. There aren’t that many players, so everyone talks to everyone. The breakthrough is usually when both parties really understand what they bring to the table.

Let’s use Mobileye as an example. They’ve got to figure out what car manufacturer is going to work with them, and they want their technology to get better, which means they have to get data. In order for that to happen, they need distribution — they need customers.

They don’t have end-users, customer support, fleet management. And they have what we need, which is self-driving tech. It turns out to be a pretty clear division of labor. 

Nobody really knows what the world is going to look like a couple years from now. In Waymo’s case, you can see they’re seeing if they should do it on their own or partner. There’s a little bit of playing the field, because it’s the early days. 

There are certain costs to these relationships. They are kind of up-front and a little expensive. Sometimes people want a big investment. Sometimes a car manufacturer wants nonrecurring engineering expenses to be covered. These things tend to slow conversations down, but we’ll get there eventually. 

Sherwood: You seem to have a bit of a focus on the driver experience in particular. I mean, you drive on the platform every few weeks as well. But with autonomous vehicles (AVs), on its face, it sounds like that involves replacing them. What would be your response to drivers who are concerned about that?

Risher: Every driver today who wants to continue to drive for the next 5 or 10 years is going to have a driving job. There aren’t enough self-driving cars and there’s too much demand, and the demand is growing.

The second thing is, don’t stop thinking of yourself as an entrepreneur. Just think of yourself as the driver who will buy the car and put it on the platform. There’s still going to be a need for someone to maintain it. The opportunities will still be there, and the driver can go and do something else while their car is making money for them. 

Sherwood: Help me understand the economics of AVs. In the future, when AVs are a bigger part of your fleet, what do the margins look like in that world versus what they are today?

Risher: There are some things we know and some things we don’t. What we do know is that the two biggest expenses for ride-sharing are driver pay and insurance. Both of those in the self-driving world will decline, no question. 

What is harder to predict is what will happen with pricing, because now you have a different dynamic. Right now drivers need to be paid for every single ride at a certain level guaranteed, where self-driving cars don’t necessarily need to get paid at the same level for every ride.

I think the margin conversation becomes a little bit complex on a per-unit basis. What I also know is that more people will be taking ride-shares in the future than they are now. So the total volume of dollars moving through might actually be higher for all I know, because there’ll be so much demand. 

Sherwood: Do you use AI in your day-to-day?

Risher: I’ve begun to use it as a brainstorming buddy. Say, take a look at this piece of mail or document and critique it from the perspective of a skeptical investor, for example. Or look at this new product feature — what are the weak areas?

That’s probably the most consistent CEO-level stuff I do with it. And then across the company, we’re asking it to go through all of our code and remove lines of code that haven’t been touched in a while. We’re using it in customer care. 

Sherwood: What’s something another company, public or private, is doing that you think is really interesting? 

Risher: Here are three: small, medium, and large. Small is these guys here. [Points at Oura Ring.]

They have nailed the customer experience. There’s a sort of virality to it, but it’s a positive virality. It gives me enough information, and it doesn’t feel naggy. The technology is super slick and easy. They started with a clear idea, they’ve not tried to add 20 different things, and it’s a really good example of a focused and customer-obsessed product.

Medium: Starbucks. It’s very hard to be so consistent across so many geographies, and simultaneously, try to be ahead with things like the app, their loyalty program, and even drive-thrus back in the day. Then their beverages change. They go through their cycles, of course, but I think they’ve done a very good job.

And for the extra large, I would say Microsoft. I think Microsoft went through a period of stasis and a little bit of confusion. I think Satya Nadella has done such a good job of both being a purpose-driven leader but also showing that he can make incredibly tough, very strategic business decisions that make your company one of the most valuable in the world.

Sherwood: You’re actually an alum of Microsoft, as well as Amazon. What did you bring from there that you think you’re using now?

Risher: I was at Microsoft in the ’90s. Then, it was a fierce competitor. It was laser-focused on increasing market share of its products, and you can understand why. Not only was Bill Gates a ferociously competitive guy, but the dynamic of that sort of network affects marketplaces; once you got to 60% of people using Microsoft Word in a company, it would go to 90%. I didn’t so much take that market share focus, but just really understanding what your competitors are good at and really understanding how you can do better. 

From Jeff Bezos, it was customer obsession. I mean, he was quite a visionary about this. On the internet, everyone’s a click away from everyone else, so you have to provide a better service. I think this is one of the reasons why I like our position now. I look at our primary competitor and what I see is a company that, when we do Women+Connect, then they do it. We do Price Lock, and then they do it. We do Lyft Silver, and they do it. It doesn’t bother me to be copied. I don’t mind being a leader in the space and having other people copy me. That’s fine. Because I think if you look at the companies that give up their leadership to the other guys, then you’re roaming through the graveyard of companies.

More in our Final Boss series of exec interviews:

• Grindr built a wildly successful dating app. Will its push into AI finally get Wall Street’s attention?

• How CEO Jason Wilk took Dave Inc. from near disaster to one of 2024’s top performers

• A talk with Duolingo’s Luis von Ahn

• Frank Holmes, executive chairman of HIVE Digital Technologies, on the overlap between bitcoin and AI

• D-Wave Quantum’s CEO on what Jensen Huang gets “dead wrong,” the march to 1 million qubits, and “technological hocus-pocus”

• Upstart Holdings CEO Dave Girouard on the rise of the AI lender

• A talk with Charlie Youakim, CEO of the stock market’s favorite buy now, pay later company, Sezzle
  

This article has been updated to clarify the number of private car rides Risher says are being taken in the US.