How Next-Gen Car Sharing Will Transform Transportation

Robin Chase, Former CEO of Zipcar and current CEO of Buzzcar

Back in 2000, Robin Chase, an entrepreneur trained at the MIT Sloan School of Management, joined with a friend, Antje Danielson, to found Zipcar, a car-sharing network. The idea was to transform transportation, encouraging more people to use fewer cars. Zipcar has been a big success: It went public in 2010, had $242 million in revenues in 2011 with operations in 17 major metropolitan areas and in January 2013, Avis announced it was acquiring the company for roughly $500 million.

Chase, who was CEO of Zipcar until 2003, has received numerous awards including designation as one of Time magazine’s Most Influential People of 2009.

And now Chase is back with a new business. It’s a variation on the Zipcar theme, called Buzzcar.

Buzzcar is another car-sharing business. But this time, instead of sharing cars from a company-owned fleet, people share their neighbors’ cars. The company calls this peer-to-peer car rental, and has taglines that include “Borrow the car next door” and “fewer cars, more options & the money stays in the ‘hood.”

The company is in beta testing in France. In a conversation with MIT Sloan Management Review’s David Kiron, Chase, the CEO of Buzzcar, explains why car sharing is a win across the board, how transportation decisions help drive other decisions and how a tour of the Paris sewers solidified the whole idea in her head.

Why Buzzcar? Why now?

The interesting thing about peer-to-peer car sharing is that it’s an idea that’s been around forever. When I was CEO at Zipcar, there was one guy who would send me two-page emails that just went on and on and on, saying, “Why are you using that crazy model? You should be using all the excess capacity that’s all around. So many people have cars sitting in their driveways; why would you ever do it this way?”

When I was doing Zipcar and in the years in which I have not been doing it, I have been incessantly met with, “Why isn’t there a Zipcar downstairs, in my neighborhood, in my city? Why didn’t you put one in this place or that place?” And the obvious answer to any business person is, “well, we need to be assured of a return on investment.” But Buzzcar completely transforms the economics. I don’t have to place a car there. It’s already there.

This is a way to make car sharing happen everywhere, not just in dense urban areas and university towns. Zipcar established that people are willing to share cars. We now have established ways to trust other people through social networks, ratings and commentaries — all things that are key pieces of this business.

Car sharing is a win/win/win/win situation. There’s no stakeholder for whom it’s not a better situation, except for perhaps car manufacturers and car rental companies. I used to have a nightmare, a whole Godfather scenario — where I’m sleeping and the car rental companies are coming in with Uzis, and wake me up, pointing their guns at me.

What about the car companies? They are a huge employer in this country and elsewhere.

My last two years in France gave me the most delightful answer to that question. I took a tour of the Paris sewers. Paris is well known for being one of the first European cities to drain sewage off of city streets. Before the sewers were built, there were 20,000 water carriers in the city. It was a significant piece of employment: carrying water in and gray water out.

As I was on the tour, I was thinking, are we honestly going to say that we wish that sewers and plumbing had never been invented, to maintain those 20,000 jobs? No. And that’s what I think about car manufacturing.

When Obama bailed out the three giant auto manufacturers, my feeling was: are you kidding? It would have been better to provide great health coverage for people who wanted to quit and try new things: change jobs or become entrepreneurs and innovators. In 20 years, are the big three going to be the size and scale as they are now? No. They will be smaller, every one of them, unless they figure out how to make money in ways that are not just car sales.

I love the Paris example. So how do you see Zipcar and Buzzcar transforming the transportation sector?

A well-used shared car, by which I mean a shared car that is actually being driven most of the day, will be shared by 30 to 50 people. Imagine what happens when 40% of those people avoid owning a car altogether, or end up selling their own personal cars, because of Buzzcar’s existence. As we move into the future, people won’t be avoiding because they will never have bought one to begin with.

Today, each shared car replaces 15 to 20 cars because 40% of the members decide to sell or avoid buying a car. In dense urban areas, every car that exists requires three parking spaces: you need one for work, one for home and one for retail. Every car you take off the road, you’re taking away the need for three parking spaces.

Zipcar had 10,000 cars and probably 730,000 members last year, so that would have meant about 150,000 cars not bought or avoided being purchased. And that — I checked with someone from GM — is half a percent of the cars sold in the US that year. That’s a significant percentage.

In terms of parking spaces, that’s 450,000 parking spaces that did not need to be set aside in these urban areas. It equals 1.1 million metric tons of CO₂ not put in the atmosphere, because people are not driving. And that is one week of New York City’s CO₂ output. One week that did not get put into the atmosphere because of Zipcar. So I’m proud of that.

Talk a little about the demographic trends that are helping make this idea a success, and the implications of these changes.

If we think about urbanization, 50% of the people live today in dense urban areas. In 2050, that’s going to be 75%.

Most people, when they wake up in the morning and go outside, will be choosing the way they go for each individual trip at each individual moment in real time.

My favorite silly example of how this can play out is, if it’s your own car and you say, “I want to have ice cream,” then you hop in the car and you go drive six miles to get the ice cream and come back. If you are a shared-car member and you say, “I want to have ice cream,” you also think, “Uh, do I really want to spend $8 in the rental fee to go buy that ice cream?” And the answer is, no. And so you go eat old cookies or you buy ice cream on your way home from work tomorrow.

The bottom line is that paying in real-time really, really transforms how you do things. When I have to pay by the hour and by the day, I choose to drive about 80% less — fewer vehicle miles traveled. And this transformation is very natural and effortless. When it is your car sitting downstairs, all the sunk costs are behind you, and you’re only thinking that it’s the variable cost of gas in the car. Now, it is a rental car, and you think carefully about the value of the trip.

The new questions become: am I going to walk, take a bike, go by subway, go by bus, take a taxi, take a shared one-way car, take a round-trip car? If you’re living in the city, I can guarantee, it will never be just one desire: I want to drive. Instead there is this wide range of ways that I want to be traveling, and that will not be a challenge in any way. Just like I wake up in the morning and there are 38 choices of how I’m going to feed myself during the day — am I cooking for myself, is someone cooking for me, am I buying it packaged, am I doing it pre-made? We don’t fret over those choices. You just go along and it’s just easy. And that will be how we move through our day when it comes to our transportation. It will be seamless, easy, obvious. We’ll consider: is it raining, did I break my leg, do I have my four kids with me, am I with my elderly mother? And we’ll make decisions based on those variables.

Some people talk about electric cars as transforming the transportation sector; you’re talking about a different side of it.

I heard this great line yesterday about electric cars: We’ll have clean congestion. So you can wait two hours in traffic and there’ll be nothing coming out of the tailpipe. That’s the way electric cars are going to transform the city.

Electric cars are just such a tiny piece of the pie. That’s why I personally have decided not to become an expert in car types and whether it’s going to be an electric motor or not, because they cannot by themselves answer the issues of today or the issues of tomorrow.

You’ve talked about something called Peers, Incorporated. Could you explain that idea?

Peers, Incorporated is a new organizational model. I go to a lot of policy meetings, where they’re constantly saying, “What’s the private sector going to do and what’s the public sector going to do?” as if there were only two sectors, ever. And I think, well, you know, there’s this third group, and we call them people. And they can actually have a lot to do with things. [See Chase’s TED talk.]

The Industrial Revolution was a response to all those years when people were doing things themselves and creating small-scale one-off businesses. You know what? All the variable quality issues that we find in peer production, industrialization is now going to conquer those and provide a nice consistent product.

And lo and behold, as we did that, we found out there’s this fabulous thing called economies of scale. So for the last 200 years, business has been driving full force to achieve success using economies of scale and delivering a nice, consistent product. And we have really reaped those benefits.

But I feel that we have now reached, maximized and applied that model to more things than is really useful, and that it’s now time for the pendulum to come back a little bit.

Al Gore put on a Solution Summit three years ago, in which, over two days, people gave 20-minute talks. The first day was all on solutions. I was one of the solutions. The next day there were 20-minute talks on successful revolutions over the course of human history and what we can learn from them. It included things like World War II, industrialization, the 60’s, the Apollo Project. What was so striking was that every single one required a huge buy-in from the private sector, as well as job creation.

Peers, Incorporated delivers the best of what industrialization has to offer, and of what individuals — peers — have to offer. It is about giving individuals who are creative and innovative the power of a company. And getting the best out of companies. It’s a partnership between these two groups, where each is providing what it does best. The companies give individuals the advantages of economies of scale, long-term financial investments, standardized contracts and a brand. Individuals deliver what they do best, yet [which] is very expensive for companies [to provide]: diversity of offering, localization, specialization, customization, access to social networks and importantly, innovation. They both have a place, and they both can make lots of money.

Importantly, companies and peers have to share the value if each side is to participate. In the Peers, Incorporated model, the big companies are going to build platforms, in which tens of thousands and millions of individuals — the peers — will then participate. What is the peers’ fair share for what they’re contributing. You have to get that balance right, because otherwise the peers won’t participate.

What is the urgency of addressing climate change?

The journal Science recently published the findings of the National Center on Atmospheric Research. [See Guardian article.] The study looked at the predictive powers of the major climate change scenario models. And they said, “Okay, let’s look at how they would have predicted what we saw in the last ten years.”

Here’s why it’s a serious situation: It turns out the models that predict the highest temperature rise and worst-case scenarios are much more predictive than the other ones. So when the IPCC [Intergovernmental Panel on Climate Change] reports speak about a range, so far the reality has always been at the upper end of the range. By 2100, we’re on target to have an 11 degree Fahrenheit climate change rise! Sadly, most of the land on the planet won’t be habitable to humans at 7.2-degree climate change rise. So is this an issue? Yeah, I’ll say.

The next five years are critical: The types of cities and power plants we build will be locking us in for decades to come.

So how do you walk around with that kind of information? The best I can do is to know that I’m personally trying every day to address the situation. I do that so I can’t look back and say, “I didn’t try hard.” I have tried hard. Every single day I have tried hard.