Winning the Hardware Software Game Winning the Hardware-Software Game - 2nd Edition

Using Game Theory to Optimize the Pace of New Technology Adoption
  • How do you encourage speedier adoption of your product or service?
  • How do you increase the value your product or service creates for your customers?
  • How do you extract more of the value created by your product or service for yourself?

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Electric scooters (“e-scooters”) are one of the latest hot new tech toys on the scene. Several start-ups have unloaded thousands of rentable e-scooters onto the streets of major cities in the US. The scooters offer users a cheap and convenient way to travel short distances across town. These scooters are dockless: users leave them on the anywhere on the street -- no need to find a docking station at a predetermined location. Quite the convenience for users. But quite the hazard and eyesore for local residents, who are finding scooters indiscriminately strewn about the sidewalks.

I started to map out the Electric Scooter Game. That involves identifying the players who interact with e-scooter users. However, as I started identifying the players, the game quickly expanded from e-scooters on sidewalks or in bike lanes to all users of roadways.

I realized that two trends have quickly engulfed our cities. First, capitalism has provided ever more modes of transportation – types of vehicles – to move us from one place to another. And second, city and suburban roadways have become much more congested. Together, these two trends are creating a fantastic game between people using different modes of transportation to get to where they want to go, as quickly, conveniently, and cheaply as possible.

This analysis will first review the electric scooter market – who the major companies are, how electric scooter rentals work, and regulatory actions that have recently been taken by cities against scooter companies.

The analysis will then move on to examine the broader Public Roadways Game. This game examines the dynamics among all the different users of public roadways, together with other interest groups whose actions affect the use of public roadways.

Electric Scooters

Company Information

Figure 1 provides some basic information on the major e-scooter start-up companies. Bird and LimeBike look to be the most popular at the moment. Meanwhile, seeing independent e-scooter companies as both a threat, as well as a potential business opportunity, Uber recently acquired Jump.

Figure 1

1 e scooter companies

How Scooter Rentals Work

The following excerpts describe how the e-scooter rental process works.

From Eliot Brown, “Adults Are Terrorizing San Francisco On Tiny Electric Scooters”:

Scooters, located and paid for with apps on phones, cost 15 cents a minute. There aren’t any designated drop-off points; riders just leave them when they’re done. The scooters have GPS, so at night, someone drives around, picks them up and recharges them for the next day.

From Tala Salem, “Scoot Over Bikes, There’s a New Ride in Town”:

… scooters, with a maximum speed of 15 miles per hour and the ability to ride pretty much anywhere bikes are allowed, are cheaper, faster and easier to use than other transportation methods like Metro and ride-sharing apps.



"Dockless" refers to the fact that the bikes and scooters have self-locking mechanisms, which makes it easier to park them near the user's destination. No docking is necessary, unlike earlier versions of municipal bike-share programs that required riders to pick up and drop off the bikes at designated stations, where they could be released with a code purchased at an accompanying kiosk.

Scooter startups, including Waybots, Bird, Spin and LimeBike, function pretty much the same way: A customer downloads an app that is later used to unlock a scooter for a flat rate, after which the rider is charged per minute during the ride. The scooters can travel about 20 miles on a charge, and their power levels are remotely monitored by the company that operates them. They are equipped with alarms that activate if the devices are moved other than by an authorized rider, and they can also be remotely disabled, cutting down on theft.

Maintenance of Scooters

The e-scooter companies employ “Juicers” to recharge the scooter. A Juicer is anyone who offers to collect, charge, and redeploy scooters in exchange for a fee paid by the e-scooter company. Here’s how Lime’s Juicer program works:

1. Collect low-battery Lime-S scooters

Bring them back to your charging spot using your own vehicle. We love pickups, vans, SUVs, and full-sized sedans!

2. Charge them overnight

Use our Lime-S power supplies with any standard electrical outlet in your home.

3. Deploy fully charged Lime-S scooters in the morning

We'll tell you where the dropoff will be for your Lime-S, bright and early for the commuting crowd!

The scooter companies pay Juicer’s $5 per scooter to recharge them. An online conversation suggested that it takes a couple of hours to recharge them, where the cost of electricity is “maybe only 15-20 cents per full charge.”

In “Electric scooters draw hordes of investors and users — but a number of critics as well,” Deborah Findling provides more information on how start-ups manage their e-scooters:

The company employs people it calls "juicers," who help charge LimeBike's fleet of scooters, and has brand ambassadors to coordinate charging and bike deployment. LimeBike also has partnerships with coffee shops and stores to drive traffic to their shops, and is mulling other ways to incentivize e-scooter adoption.

Finally, in, “Here’s why owning a bike-share service makes sense for Uber,” Johana Bhuiyan noted that e-scooter companies also have to maintain the scooters.

While Uber does not have to pay for the costs of expensive docks, the company has to now own and maintain these electric bikes and either hire or contract people to move the bikes around and charge them.

Regulation of Scooters

The backlash against e-scooters by residents who claim the scooters are an eyesore and a hazard has led certain cities to either ban or regulate e-scooters.

Electric scooters were recently banned by the City of Austin, Texas, until regulations can be established. According to Ben Wear and Brandon Mulder in “Motorized scooters pulled from Austin after City Council crackdown”:

Both companies [LimeBike and Bird Rides] were expected to take the scooters off the street to comply with the emergency ordinance adopted Friday, which would have allowed city workers to impound any of the scooters left on city rights-of-way if their owners did not have a permit.

A licensing process through the city’s transportation department will take effect May 1.

San Francisco is considering a permitting plan for e-scooters. Megan Rose Dickey describes the proposed program in “Here’s how SF wants to regulate electric scooters”:

The SFMTA’s proposal lays out a 24-month pilot program, which would grant up to five permits and 500 scooters per permit. As part of the program, electric scooter companies would need to provide user education and insurance, share its detailed trip data with the city, have a privacy policy that protects user data, offer a low-income plan and operate in a to-be-approved service area.

That means the city would allow no more than 2,500 electric scooters on the streets at any one time. In order to receive a permit, each company would need to first pay an application fee of $5,000 and show how they would ensure safe use and proper storage of scooters.



As of earlier this week, the San Francisco Department of Public Works had impounded 319 scooters, resulting in impoundment fees of $5,774 for Bird, Lime and Spin. As part of the proposed permitting process, companies would need to pay $10,000 for a “public property repair and maintenance endowment” in the event the city incurs additional costs due to the damaging of public property or needing to store improperly parked scooters.

Finally, Ford GoBikes is a company that provides on-demand, docked bicycles. Ford specifically worked with the city of San Francisco to negotiate terms that would benefit all residents, users and non-users alike. Joe Eskenazi makes this point in “Scooters are the mess that San Francisco made for itself”:

There’s a reason that the hard bargain the city drove with the Ford GoBikes people resulted in riders’ movements not being tracked as they navigate the city (provided you sign up on the GoBike site and not the Ford Pass site). That could have been a problem if, say, Immigration and Customs Enforcement demanded the data. It would also have been problematic if data revealed a rider’s destination was, say, Planned Parenthood. Or, more benignly, Old Navy — and then the rider was bombarded with ads on his or her desktop computer.

The GoBike docking stations, while ungainly, also prevent bikes from piling up in the trendy parts of town while being absent from poorer places a for-profit operation would gladly skip. The city mandated that bike stations be in underserved neighborhoods and be restocked regularly — and that indigent people can get a year’s membership for $5 cash. These are the sorts of concessions that come out of working with the city instead of acting imperiously and then hiring former city officials and PR mavens to marshal useful idiots to lobby the government on your behalf.

 

The Public Roadways Game

Players in the Public Roadways Game

Figure 2 provides a layout of the Public Roadways Game.

Figure 2

2 public roadways3

Players in the Public Roadways Game include:

  • Sidewalk Users
  • Curb Users
    • Parked Vehicles
    • Electric Charging Vehicles
    • Vehicles parked while drivers make deliveries
    • Vehicles engaging in pick-up and drop-off of passengers
    • People about to cross the street
  • Bike Lane Users
    • Bicyclists
    • E-Scooter Users
  • Car Lane Users
    • Private Vehicles
    • Rideshare Vehicles
    • Commercial Vehicles
    • Public Transport Vehicles
    • Autonomous Vehicles (Coming Soon)
  • City Residents, who care about local access, congestion, pollution, and hazards or clutter on the roadways
  • Local Governments, who care about managing congestion and providing quality of life for local residents and visitors
  • Environmentalists, who care about minimizing pollution

Users in each roadway segment (sidewalks, curbs, bike lanes, car lanes) compete with each other for access and ease of movement. When a particular roadway becomes congested, users of that roadway tend to spillover and impinge upon users in neighboring groups.

 

The Nature of the Public Roadways Game

There Is a Public Goods Problem

The problem cities face regarding traffic is this:

How do we best manage traffic, emissions, and use of public roadways on increasingly congested and polluted roadways to optimize the overall well-being of the community as a whole?

The problem is confounded by certain realities of city life:

  • Users care primarily about their own costs and convenience, and they don’t mind imposing costs on others in the process.

E-scooters, for example, offer tremendous convenience for users at an extremely affordable price. However e-scooter Users impose costs on pedestrians and residents when they zoom down sidewalks and discard used scooters haphazardly. Surely many e-scooter Users know they’re imposing costs on others, yet they continue to do it, because it’s convenient for them.

“[T]he most common mode of transportation to work within the US is ‘driving alone in a private vehicle.’” According to Clean Technica, as of 2014, 76.4% of commuters in the US drive alone in a private vehicle. And despite massive efforts by governments and special interest groups to get people to use more sustainable methods of transportation, this number has actually been increasing over time, from 64.4% in 1980.

It can be extremely time-consuming for delivery drivers to find parking spots. It’s much more convenient for them to simply double-park while they run in and make their deliveries. So they double-park. However, double-parking creates congestion for other drivers on the streets, especially when roads are already congested.

  • Cities don't have the resources to enforce transportation rules as much as they must so as to motivate people to better comply with the laws. Most cities simply have more pressing matters to deal with than keeping e-scooters off the sidewalks. Unfortunately, however, as the relatively small problems pile up, cumulatively, they have an oversized impact on citizens’ quality of life.
  • The Law simply cannot keep up with the pace of technological change. And it doesn’t help that the attitude of many technologists is “to move fast and break things,” that is, they would rather seek forgiveness than ask permission.

There Is a Coase Problem

From Wikipedia (emphasis mine):

In law and economics, the Coase theorem describes the economic efficiency of an economic allocation or outcome in the presence of externalities. The theorem states that if trade in an externality is possible and there are sufficiently low transaction costs, bargaining will lead to a Pareto efficient outcome regardless of the initial allocation of property. In practice, obstacles to bargaining or poorly defined property rights can prevent Coasian bargaining.

Laws have been passed, at least in some areas, to manage many, but not all, of the vehicles currently found on city streets and sidewalks. In California, the Department of Motor Vehicles has determined that electric scooters must be operated in bicycle lanes, and they are not allowed on sidewalks. As Brock Kelling reports in “Everything you need to know about the great electric-scooter takeover of San Francisco”:

Per the California Department of Motor Vehicles, “A motorized scooter may be operated on a bicycle path, trail or bikeway, but not on a sidewalk. On the roadway, it must be operated in the bicycle lane, if there is one. On roads without bicycle lanes, motorized scooters may operate where the speed limit is 25 mph or less, and shall be ridden as close to the right hand curb as possible, except to pass or turn left.”

It should be noted that non-motorized user-propelled vehicles (NUV), which are classified as different than electric scooters, may ride upon any business sidewalk within the city or any sidewalk “between the period commencing one-half hour after sunset and one-half hour before sunrise,” per transportation code 7.2.13. And electric personal assistive mobility devices (e.g., wheelchairs) are, of course, legal on all sidewalks.

Are e-scooter Users riding scooters on sidewalks? “With impunity! Fury-inducing,” according to Brock Kelling, Note that the User Agreements for all e-scooter companies require Users to obey the rules of the road. For example, Bird’s User Agreement says:

1.7 Rider Must Follow Laws Regarding Use and/or Operation of Vehicle. Rider agrees to follow all laws pertaining to the use, riding, parking, charging and/or operation of the Vehicle, including all state and local laws and the rules and regulations pertaining to Vehicles in the area where You are operating the Vehicle, including any helmet laws.

So, as we see, even where laws have been established, Users don’t always abide by them. Rights of way need to be clearly defined and the rules enforced.

There Is an Externalities Problem

An externality occurs when one person takes an action that imposes costs on another person. Delivery drivers create externalities – impose costs on other drivers – when they double-park. As roadways become more congested, players are more likely to take “short-cuts” in an attempt to save time. Many short-cuts involve breaking tacit rules of the road, if not actual laws; that is, short-cuts tend to impose costs on others. It becomes crucial for the city to enforce the laws, particularly when roads are congested and users are likely to attempt to take short-cuts, thereby inflaming already short tempers of other drivers. Externalities are discussed in more detail below.

The Game Is Zero-Sum

Congestion has become a serious problem in many urban and suburban parts of the country. There are simply not enough roads to accommodate increasing populations. The total amount of space is generally limited. So any additional space allocated to one group must necessarily come at the expense of another group: The Public Roadways Game is a zero-sum game. As I see it, there are three possible solutions:

  (i) Decrease the number of people moving about or

 (ii) Increase the incidence of ride-sharing or

(iii) Shift people from bulkier vehicles (e.g. cars) to more compact vehicles (e.g., bikes).

 

Evolution of the Public Roadways Game: Actual vs. Ideal

Actual Evolution of the Game

New modes of transport are added incrementally, in an ad hoc manner.

While some innovators work specifically with city governments to coordinate actions, most operate independently from city governments, as well as from one another. The result is that innovators introduce new technologies into the marketplace in a completely ad-hoc and unsystematic way. In addition to being haphazard, the technologies also generally impose costs on others, which the technologists themselves don’t have to bear. Add to the fact that some of the most egregious cost-imposers are start-ups funded by VCs, then the mentality of the innovators becomes, “nothing to lose and everything to gain.” Sounds a lot like the bankers who caused the Financial Crisis but came out of the mess wealthy as sin.

Many people, especially those living in tech hubs, have become quite jaded to technology innovators and their new solutions. In “The Uberization of e-scooters,” Stefana Simonetto notes, “Shoot first, apologize never. It’s a story we’ve seen before, especially in California. And one that legislators and regulators are getting tired of.”

Julia Carrie Wong adds some interesting insights in “Who ruined San Francisco? How its scooter wars sparked blame game”:

“Sometimes a thing like a scooter or a bus becomes a symbol of something that people feel, and the feeling right now in the Bay Area is that it’s becoming a playground for wealthy tech companies at the expense of the majority of us,” said the local activist Max Alper. “The problem is when we have a system that is built for the enjoyment of the few while public transportation and public good is being cut.”



A co-founder of the first women’s hackerspace in San Francisco, [Liz] Henry also was understanding of the mindset that leads tech entrepreneurs to behave in the way they do, which she described as a “mentality of approaching social problems as well as technical problems by just trying things out, seeing the possibilities, rapidly trying and discarding solutions”.

In “Scooters are the mess that San Francisco made for itself," Joe Eskenazi emphasizes that innovators ought to work with city governments to do what’s best for the city, rather than creating a “Malthusian,” Wild West society:

Whether scooters represent an unmet need or an unrealized want remains to be seen. But we can argue that the scooters could serve a useful purpose and also concede that VCs operating unregulated, for-profit businesses on city streets — and engaging in malthusian competition with one another — is not the way to an urbanist’s nirvana. It’s in any city’s interest to oversee how companies are using its public goods for profit. And it’s also in this city’s interests to oversee what those organizations do with residents’ information.

Eliot Brown describes how “Adults Are Terrorizing San Francisco On Tiny Electric Scooters”:

Scooters sprawled in the middle of sidewalks have drawn ire among the aesthetically concerned…city officials have impounded scores of illegally parked scooters blocking the use of sidewalks.



Riders weave in between pedestrians on sidewalks and stopped cars on streets during rush hour, and zip next to bikes in bike lanes—sometimes to the ire of bikers.

And Tala Salem continues Eliot Brown’s depiction with, “Scoot Over Bikes, There’s a New Ride in Town”:

Among the city's objections: Motorized scooters are unlawful, a public nuisance and a danger to public health and safety.

"For instance, customers are driving the scooters on the sidewalk, imperiling pedestrians and themselves," Herrera said in the letter. "Customers are also leaving the scooters in the public right of way, creating falling hazards and impeding the safe use of sidewalks, access ramps, and other facilities."

Externalities are unmanaged

The Public Roadways Game involves several different sources of externalities, where certain players impose congestion and pollution costs on others. In particular,

  • Double-parking by delivery people (UPS, FedEx) creates congestion for other drivers.
  • Curb-side pick-ups and drop-offs by rideshare vehicles in undesignated pick-up/drop-off areas create congestion for other drivers.
  • Undocked scooters and bikes parked haphazardly on sidewalks create hazards and eyesores for other sidewalk users.
  • Users of e-scooters and other electric personal vehicles who use sidewalks instead of bike lanes create hazards and congestion for other sidewalk users.
  • Bicyclists who don’t obey traffic laws create hazards for other drivers.

 

Ideal Evolution of the Game

Modes of transport are coordinated to achieve minimal congestion and emissions

When city governments and technology innovators work together to coordinate traffic flows, they have the potential to greatly improve congestion.

In “Scoot Over Bikes, There’s a New Ride in Town,” Tala Salem notes, "Forty percent of all car trips in America are fewer than 2 miles. That's a lot of congestion and traffic." Imagine what could be accomplished if innovators worked with city governments to coordinate activity. Megan Rose Dickey notes in “Here’s how SF wants to regulate electric scooters” that this is precisely what the City of San Francisco would like to achieve:

“The SFMTA supports innovative solutions that have the potential to complement our existing transportation network,” the proposal states. “Powered Scooter Share Programs introduce a new transportation option that may be convenient for users making short trips or as a “last mile” solution when paired with public transit. Furthermore, if Powered Scooter Share users replace trips they would otherwise have taken by automobile, they have the potential to reduce traffic congestion, parking demand, and carbon emissions. SFMTA staff have received numerous emails from Powered Scooter Share Program users expressing their support for these programs.”

Stefana Simonetto indicates in “The Uberization of e-scooters” that coordinated efforts have the possibility of greatly improving the congestion problem, while uncoordinated efforts exacerbate the problem.

The wrong way — which puts the entire industry at risk — ignores clearly applicable laws and basic infrastructure needs. The right way — the path to long-term commercial success and impactful change — actually works with state and local governments to roll out new technology.

Externalities are internalized

By establishing laws and/or permitting systems and enforcing rights of way, players can be forced to pay the costs they impose on others. By internalizing externalities, cities will discourage players from engaging in activities that impose excessive costs on others. In this ideal world,

  • Users of delivery vehicles who double-park are fined to absorb at least some of the costs imposed on other drivers. An alternative is to create more delivery zones where drivers can legally park to make deliveries.
  • Users of e-scooters and other e-vehicles who illegally use sidewalks are fined for doing so. This will increase the costs to these Users of violating public space, thereby decreasing such activity.
  • Users of e-scooters or ridesharing services are fined for not using designated docking or drop-off locations. This will increase the costs to these Users of violating public space, thereby decreasing such activity.
  • Bicyclists are fined for breaking traffic laws.

Yes, it’s expensive to pay city officials to enforce these laws. An alternative would be to crowd-source enforcement. These days, enough people have smartphones. The City could award a small bounty (through an e-payment system) to the first resident who (i) takes a picture of a violator (driver or vehicle) in the act of violating a public space and (ii) sends that picture to a designated analyst. All vehicles are identifiable either by GPS chip or license plate. With a picture that captures the appropriate identifiers (vehicle, location, and date and time of violation), the violators can be fined electronically.

 

Other Subgames within the Larger Public Roadways Game

  • If a person is walking down the sidewalk, enrapt by his smartphone, and he trips over an e-scooter left on the sidewalk, who should be liable?

    • The pedestrian
    • The person who left the scooter in the road
    • The company that owns the scooter
  • Which mode will win out:

(Electric vs. Traditional) x (Docked vs. Dockless ) x (Bicycles vs. Scooters)

  • Which mode will garner more or roadspace:

Personal Vehicles vs. Passenger Vehicles

  • Will more cities use congestion pricing?

Favors wealthier people over poor people

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