The App Is Not the Special Thing

Here’s an interesting fact about Lyft as it goes public today. According to its IPO filing, the service now boasts 1.9 million drivers. Once it goes public, its two co-founders, who by then will own only 5% of the company, will still control 49% of the vote, thanks to the controversial dual-class share structure many tech Unicorns employ.

What percentage ownership do the drivers who take most of the risk and do all of the work for its core business get? Zero. What about a vote in the projects future? Also zero. The shared economy, as it turns out, is not that shared.

This is an odd situation for a company that, like its peers Uber and AirBnB, and even user content driven social media platforms like Twitter and Facebook, talks a big game about empowering drivers to be their own bosses. The drivers that I encounter seldom seem all that empowered, especially now that they see the company going public with nary a profit or input from them.

A critic might argue that this is true for every employee of a big company that is doing well, and has been since the dawn of the industrial era. But there is a difference. In the industrial model, the corporate entity is the special thing. In the P2P shared-economy model, the network is the special thing. The flaw with Lyft and every other company like it is that the value generated by that network is increasingly captured by those who built the app. But the app is not the special thing. Not anymore.

In the beginning, the app was the special thing, and therefore, those who built it — the founders of these companies — were taking a substantial risk. For that they deserve to be rewarded spectacularly. But now that the app has matured into a network, it’s the drivers, homeowners and content creators who shoulder almost all of the risk. For that, they should get more upside and more of a vote. The longer the network persists, and the more the network effect grows, the greater their share should become.

Lyft and companies like it offer the exact opposite. Which is why in the years to come, they will be disintermediated by blockchain-based communities that — like Bitcoin has done for P2P payments, or Ethereum has done for P2P computing — do reward the original founders, but as time rolls on, reward them increasingly less.

When Ethereum was launched, the founders and initial investors had all the say and captured all the upside. But as time has rolled on, the miners that maintain the network have taken increasing ownership, as have the dapp builders who are increasing its network effect. Vitalik and Joe Lubin have gotten rich off their creation, and deservedly so, but their share of the upside, and their say in important decisions, declines with every new block.

Which model strikes you as more sustainable?