Arcade City, the much-hyped ride-sharing app which promises to be the “Uber-killer” and the new face of the industry, is a company born out of conflict with authorities. Rising from the remains of the Free Uber campaign, Arcade City’s CEO Christopher David set to work spreading the company’s “regulations-be-damned” presence across the globe. This resulted in the police in Austin, Texas coming for him for ostensibly operating an illegal ride-sharing company. Now, the city of Portsmouth has a warrant out for his arrest for a no-show to a court date hailing back to the Free Uber days, when David recorded a taxi-friendly bouncer who was being hostile towards Uber drivers.
I interviewed Christopher David on the usefulness of civil disobedience’s nexus with business, as well as the long-term viability of an “outlaw ride-sharing” company.
The Desert Lynx: Arcade City seems to have come out of the Free Uber campaign. What’s the connection between fighting the system and building an enterprise?
Christopher David: The transportation industry is highly regulated. Regulations are often written by and for the established industry players, which stifles innovation. When Uber and Lyft began, they chafed against regulations written with taxis in mind. They had to organize, lobby, and struggle over a period of years to get the laws updated to reflect their newer business model. They’ve largely succeeded, but only in getting their particular model of a “transportation network company” encoded into law. They are now the established industry players in need of disruption. Our model of decentralized ridesharing is not reflected in the current laws, so we will fight just as Uber and Lyft did until the laws again catch up with the new reality.
Uber and Lyft have pulled out of areas in the face of government regulations. Is Arcade City immune to this possibility?
CD: Uber and Lyft are transportation service providers subject to local regulations. Arcade City is a decentralized marketplace for peer-to-peer transactions. Transportation service providers can use the Arcade City tools, brand, and community to market their services in their local areas. Because Arcade City is one step removed from the actual services provided, we are not subject to the same regulations as Uber and Lyft. This allows us to rapidly enter markets anywhere in world, taking advantage of Uber and Lyft needing to withdraw due to their less flexible model. Our decentralized model allows local entrepreneurs to handle the relevant legalities and compliance considerations themselves, using Arcade City to support their own businesses. We’ve seen a huge level of interest in this entrepreneurial aspect, including from rideshare drivers as well as legacy transportation providers and even other service providers like delivery drivers. Arcade City as a platform for entrepreneurs allows us tremendous flexibility and, soon, a large global presence with minimal capital.
How does that make any money?
CD: Arcade City the company will provide various tools and services to this marketplace, some free and some paid. When service providers use our mobile app to handle payments, we’ll charge a small processing fee on each transaction similar to Uber and Lyft, but at far more competitive rates. Uber and Lyft also aggregate their driver demand to secure bulk discounts on useful services like gas cards and vehicle repairs, creating new revenue streams with each business partnership. Arcade City the company has a similarly privileged position atop the marketplace we create, allowing for many various monetization options. The difference is that we are creating an open marketplace where we’ll invite other service providers to the table as well. We’re not the only ones to approach monetization of decentralized marketplaces this way. The OpenBazaar project similarly has a venture-backed corporation OB1 that provides services to an open marketplace, using the Bitcoin blockchain and peer-to-peer transactions to disrupt eBay just as we aim to disrupt Uber.
Seems like you got off to a good start this February with a workable app. Why take it down while working on the latest and greatest iteration? I’m not sure I’ve even seen that strategy before.
CD: With our proof-of-concept app live, our network grew too fast for our internal processes to keep up. We had to pivot. Back then we were approving drivers centrally, managing driver onboarding with one team of volunteers for the entire network. At that time we were planning to get into the ‘transportation network company’ game ourselves, structuring similarly to Uber and Lyft and obtaining ridesharing insurance to extend to a fleet of drivers we managed centrally. We took the app down to get on solid footing with insurance, compliance, financing, and our internal processes, much in the same way you wouldn’t disassemble and reassemble an airplane while it’s in the air. Thankfully our network was able to capitalize on the huge opportunity of the Austin situation even without a live app. That situation gave us a huge proof of concept: the idea that liberated, self-organizing drivers can not only provide rideshare services peer-to-peer, but can even meaningfully compete with well-funded ridesharing apps on a shoestring budget despite little to no technical infrastructure. Observing our Austin network, we identified certain community-driven social dynamics that would solve our previous issues relating to driver onboarding. Basically we figured out how to decentralize even quality control to the level of each individual community of drivers, letting the network self-govern. That revelation removed a key bottleneck from our model, giving us confidence that we’ve finally developed a system that can sustainably scale around the world. Those ideas are reflected in our new mobile app, launching September 1st for Android and iOS.
To some, traveling around the world starting government-resisting movements looks a lot more like activism than starting a viable business. What would you tell a wary investor who loves the idea of Arcade City, but thinks all the annoying local authorities thing is counterproductive?
CD: We hope to partner with governments to help them embrace newer, innovative business models. When technology outpaces government regulations, there will inevitably be some tension. There is no need for any of it to be adversarial. Outdated regulations that stifle innovation need to be modernized in a smart way, and we are happy to help advise on that process. In the case of Austin, our multiple requests to engage with the city went unanswered and they chose enforcement instead of communication. That situation has since been smoothed over, but we will inevitably face other difficulties as we advance this newer model. It comes with the territory. We hope to be a better corporate citizen than Uber has been, yet there is still a place for standing firmly on the side of consumer choice in the face of outdated regulations. You can debate Uber’s hardball tactics but can’t ignore their effectiveness, as Uber is now the most valuable privately-held corporation in the world. Their “friendlier” competitor Lyft is just a fraction of Uber’s size. For our part, we do think it’s possible to balance aggressive growth and constructive relations with all stakeholders. It may get messy in parts, but that’s the birthing process for you. It’s not for everyone. A common refrain among tech investors is that they wished they invested in Uber early on. Some passed on the chance to invest in Uber for the exact same reasons some will pass over Arcade City now. We don’t mind. There are enough visionaries out there with an appetite for risk and revolutionary change that we’ll do just fine.
Is civil disobedience good or bad for entrepreneurship? Why?
CD: It worked for Uber and Lyft. That’s if you define civil disobedience as refusing to adhere to existing laws until they change to your benefit. Uber has flagrantly continued operations in areas where they were declared illegal, and Lyft initially structured their donation model specifically to circumvent transportation regulations. Theirs were self-interested stands, not principled stands, as evidenced by their willingness to enshrine arbitrary rules into law (like ’no cash rides’) to defend their newly privileged position in the market. Now let’s see how they react to Arcade City using their same playbook against them.