Sep 2012
(Based on a talk at Student Entrepreneurs Club)
“Growth for the sake of growth is the ideology of the cancer cell.”
– Edward Abbey
“How can a society that exists on instant mashed potatoes, packaged cake mixes, frozen dinners, and instant cameras teach patience to its young?”
– Paul Sweeney
Normally I didn’t want to do any media stuff for Tramsurance since most of that was left to Tom since he’s better at it.
But someone asked me recently, what it’s like to have built an app experiencing hyper growth. More specifically what it’s like while it’s going through hyper growth. It struck me that most people haven’t actually experienced hyper growth first hand. And most probably never will, a weird realisation. But before then, neither had I and it’s quite a unique experience.
Hyper growth isn’t really like regular growth. Regular growth is linear whereas hyper growth is asymptotic. That doesn’t sound very different but it’s the difference between riding a bike along a footpath or down a steep hill.
First, I think it’s worth mentioning the resources we had available. The answer to that is none. We didn’t have any money. No real media connections to speak off. And we weren’t even in Melbourne while It was exploding… We were in Darwin. We did however have a $100 Rackspace hosting voucher.
Second, it’s worth mentioning just how large it got and how quickly. We built it over a Startup Weekend Melbourne and launched officially on a Wednesday. Wednesday night it explodes. Thursday morning it is front page of every major newspaper in the country and talked about on most breakfast radio stations. Thursday afternoon it’s talked about on nearly every radio station and hits the billboard on the The Age building showing the most talked about story in the country.
Thursday night it ends up on nearly every TV station and starts trending in Asia-Pacific. Friday morning we get international coverage and it starts making big international magazines, cease & desist letters and lawsuits start arriving as well as job offers and government ministers start talking about it on air.
It grows solidly for 3 weeks with a huge userbase and huge turnovers. Before serious legal threats arrive. Saturday 3 weeks later we shut it down under the weight of a multimillion dollar lawsuit and refund all customers. All of that Saturday every media outlet does a followup story and it starts trending again. So really it was mentioned everywhere twice.
But the interesting part is it didn’t become a bid deal on social aggregator sites first like Hacker News or Reddit. In fact most didn’t even pick up on it. It sort of transcended them and went straight into mainstream media. I thought that was really interesting.
The way Tramsurance works is pretty fascinating and falls into a kind of legal gray area.
The average tram expenditure is $140 per month. That’s around $1,700 per year just to get to work. Or around $1,100 for students just to get to school when you count concessions. That’s a lot especially for low income earners.
This is so expensive largely due to the Victorian government having to recover costs for spending $1.5 billion dollars rolling out the Myki ticketing system. It was estimated that amount could operate free public transport in Victoria for 5 years.
So the theory goes, instead you purchase Tramsurance for $20 per month and if you’re fined, the fines will be covered.
The math behind it is either very simple or extremely complicated depending on how precise you want to get. Roughly for every 8 users we could accommodate an extra tram fine per month.
The service relied on that for every sample size of 8 users not more than 1 is fined in a given month which is pretty reliable. But it turns out a lot less than 1 in 8 fare evaders is caught, much less, only 1 in 400 people are fined, or close to 40 million dollars per year less. Discounting for the fact that typically friends travel together and you had a reasonable business and quite a significant political statement.
The political statement is that – “we feel so outraged by the misalloccation of government funds that is Myki, we are going to start a project that allows people to fare evade with few repercussions as a sign of protest” – which was exactly how a lot of people felt.
Plus some generic information how to avoid being fined. Tram inspectors optimize their routes to catch as many people as possible so avoiding routes with high concentrations of fines helps.
For example you’re much more likely to get fined on the 19 tram after 6 pm or on weekends since that is the College Circuit. Or any tram going down Chapel St on a Friday night. Or Swanston St trams on a Saturday night. Or any trams leaving Southern Cross station at a similar time to the bus arriving from the airport since that’s how they get tourists.
The reason it exists is because Public Transport Victoria have yet to realise the glaringly obvious that they would experience a net increase in revenue if there were one inspector on every tram instead of wandering in intimidating packs and that commuters don’t like being beaten up.
Why did it take off? If I’m completely honest. I have no idea. Basically we flew into a thermal and executed as best we could.
Some key market factors that had just happened.
- Tram fines were going up that same week from $180 to $207 which had most of the public agitated and everybody felt a bit sorry for themselves.
- Cases were starting to emerge of violence and intimidation from tram inspectors who act like bullies.
- The Victorian government were rolling out Myki a $1.5 billion dollar ticketing system using tax payer dollars.
- General fare discrimination. Sometimes kids or elderly people who’d forgotten their Myki cards were fined without sympathy. Many elderly folk and overseas students aren’t able to get concession Myki cards. Tourists or travelers often don’t even know what Myki is and still get fined.
- There is no way to recharge a Myki card while on public transport. So if the card runs out there is nothing you can do and places to recharge it aren’t available in the suburbs etc.
- Slightly under the radar but an engineer at Google had broken the Myki encryption with his Android. That is to say an engineer at Google had broken an encryption on a $1.5 billion dollar ticketing system.
It put a lot of people in situations where they almost had to fare evade. So when we launched, it totally hit a nerve and they fell in love immediately.
We actually launched the same day as the Higgs-Boson discovery so we had some serious competition for the news that week. Suffice to say I think we won.
Tramsurance was front page. Higgs-Boson page 3. That made me extremely depressed. More depressed than I’d been in a long time. The scientist in me had his heart broken that day, since a tram controversy out-newsed one of the greatest scientific discoveries in history. Still, you live, you learn.
So why did we build Tramsurance? Really, credit where it’s due, it was all Tom. I’ve known Tom since we were like 5 in preschool.
One day he comes to me with a giant excel spreadsheet with a crazy idea for applying an insurance algorithm to public transport. He’s really bitter since he’s been fined twice in the last week and says he has a way of fixing tram fares. I don’t really believe him but since he’s not a developer and doesn’t know how to build it, he asks me too.
I actually didn’t think it would work, but Tom assures me it will and I figure Startup Weekend Melbourne is just around the corner so it seems like the perfect time. Man, was I wrong. Not only did it work, it worked a little bit too well.
It’s probably worth mentioning Tom didn’t actually want to do the Startup Weekend. He saw it as a waste of $100 which were the price of the tickets. It was only after a ton of harassing and arguing that he finally caved. Even then the only reason was because there was prize money for the top 3. We figured if we could make the top 3 it would cover our expenses and we would be “profitable.”
Technically, it was just a WordPress site, a pretty theme with accounts and a payment gateway, hosted on a Rackspace cloud instance with a rudimentary viral stack in the form of some PHP written over the top.
The viral stack was hyper chill, where if you referred 3 people you got a month of “free Tramsurance” so we ended up having users refer like 300 people and get “10 years of free Tramsurance.” I think that’s what happens when a viral stack goes wrong and when we realised it was going to implode spectacularly.
We built it over the weekend and Tom pitched it to the crowd at the SW to massive applause. The crowd loved it and he ended up winning 3rd place which was a Samsung Tablet. First prize was $5,000 and the team that won was Corner Storage, AirBnB for storage space, which I’m pretty sure is dead now.
The night of the Startup Weekend is an interesting story actually. Nobody knows this but I was invited to a party that night by this girl Emily. I’d had a huge crush on Emily for most of that year so this was a big deal for me. That week I told her how much I liked her. When I get there Emily starts kissing me. After a while we all go out to a club.
Now I’d promised Tom I would only be at the party for a couple of hours and would get back to finish building Tramsurance. But this was also the night Emily and I got together. As it happens she takes me to a club on King St, the same street as York Butter Factory, the office space the Startup Weekend is being held at.
When we get to the club there is this horrible crossroads decision. It might not seem like it but this is a very significant moment. One of those moments where you feel like your life would have turned out differently depending on the choice you make.
I could have gone into the club with Emily or go back to Tom. Remember at this point I don’t think Tramsurance is going to go anywhere since it’s not even finished yet. Emily is looking at me expectantly to come in. I’m thinking of how annoyed Tom will be if I don’t come back. My phone is dead so I can’t contact anybody. I think espirit de corps got the better of me.
I look at her, put my ID back in my wallet and walk back to YBF where I pull up a text editor and finish building Tramsurance while listening to sad music.
The same weekend we built it, that night we caught buses and flew back to Darwin for the uni holidays. I thought it would grow really slowly and organically. Tom thought it would become a big deal. I ended up being wrong and for about 3 days we didn’t even really know what was happening until we started seeing links to Tramsurance on Twitter.
That’s kind of when we knew something interesting was about to happen and we tidy the site up a little bit, added a contact email address to the front page, relaunched and waited. In retrospect adding the email was the best decision since that’s the address the media started contacting us on.
The waiting was really interesting. There was a kind of tension in the air. We almost felt like soldiers waiting in a trench for a storm to start brewing. All the while refreshing the sign up page backend and doing some brief research on all the email addresses that signed up.
We start seeing names we recognise. At first it’s just tech people from the Startup Weekend. Then friends from Melb signing up. Then a reporter from the Age. Then a reporter from the Herald Sun. Then Yarra Trams signs ups. Then the public transport minister signs up. Then a couple of police officers. Then groups of students.
You start to imagine how it’s spreading in real life. Like the conversations people are having about it in the real world. So and so, telling so and so who tells so and so.
It’s night time now and we’re still waiting. We have dinner and we’re still waiting. Then I figure we should do something else and we decide to go clubbing.
While clubbing I realise something horrible. I configured the email server incorrectly. They were stored in the default Horde client in CPanel instead of being forwarded to Gmail. So we race back home and check the account.
There are 6 emails waiting for us.
It’s a student wondering why he can’t pay for the service. At this point the payment gateway is switched off still. Another email asking how Tramsurance works. So we publish a blog post explaining.
Then the big email arrives. It’s a reporter from The Age who wants to run a story on it. Then another email comes from a reporter from the Herald Sun who wants to run a story on it.
Tom and I at this point realise something is about to happen, not quite sure what yet but something. We agree on who handles what, rotations, split up and I go home. Since it was Toms idea we agreed that he’d be the media face of it.
Apparently both the Herald Sun and the Age neswspapers wanted to run a story around page 7. But thanks to some amazing negotiating on Toms part, it ended up being front page of both. He basically played them off each other, so both kept offering us a better position to outdo the other so as not to miss the story and to try and be the first to break it. I don’t fully know how he did it but it was brilliant.
That night around midnight the story goes live on the Age and Herald Sun online. I get a call from Tom saying we’re about to be front page news the next day and that he’s going to sleep.
My turn. So now I have till morning to create as much havoc as possible knowing soon everyone is going to know about it. For the rest of that night, quite literally every few minutes or so I send a new email to everyone I want to watch this thing.
To investors, to VC firms, to TV stations, to radio stations, to random famous people in the US. Everyone I can find. The goal here is to take this thing that is exploding, to make it go as big as possible and leverage it into connections for our next project.
Like if you are a VC firm and you get an email from some random kids saying they’re about to be the biggest deal in the country. The next day when they do exactly what they said they would, you’re pretty impressed.
So I don’t sleep that night and come day break, buy a handful of iced coffees and go back to Toms house. I force him awake, pour us both iced coffees and then things start to go crazy.
It’s a little bit like a tidal wave hits and everything just starts to go wrong while you’re scrambling to keep up. You’re just making stuff up as you go along trying to fix things that start breaking.
Victoria is waking up and front page news is this tram thing. Suddenly we get a surge of sign ups, like every time we refresh there are dozens of new ones. And our phones start going off. I don’t fully know how journalists got our phone numbers but somehow they did and every breakfast radio station wants to interview Tom.
It starts trending. Every media outlet that missed out on the story doesn’t want to feel left behind and runs a story on it. Some guy on twitter who has like 11 million followers tweets about it.
I go on defence and start fielding all the phone calls so they are coherent and queuing them for Tom to do interviews so he doesn’t get overwhelmed. I felt like a serious hollywood agent that day.
“Interview with Sydney Morning Herald? Please call back in 10 minutes, Toms on the other line with the Age. Sure thing, Tom you’ve got Triple J, 104.1 and ABC Radio, sorry Nova, can we get back to you in 20. Sunrise? Sorry we can’t do Sunrise, Toms already booked for CBS Breakfast and TodayTonight.”
It was outrageous. The phone just kept ringing. And our facebooks start getting private messages from journalists asking to do interviews. One of the radio stations wanted to do a live on air debate with the Minister for Public Transport vs Tom while the whole of Melbourne listening. When the TV stations started getting involved it just gets crazier.
Mind, I’m still emailing people constantly, replying to all the facebook messages and answering all the phone calls while Tom is on the phone with the interviews.
We start getting random emails and messages on facebook from people who said they’d been attacked or manhandled by tram inspectors. Others sent us sad stories how they didn’t have any money but had tram fines to pay asking for help. A tourist told us he didn’t even know what Myki was and still got fined. Countless stories from people who’d gotten into arguments or had bad experiences. We thought of creating a montage but felt it was probably a bad idea.
The side effect is that we completely lost control. The first Rackspace instance goes down and I get an email from Rackspace telling me I should load another instance. I load three more to balance the traffic. When they go down, I load six more. Constantly worried they’re going to go down as well.
Then our first cease and desist letter arrives. I’ve never received one before. Getting a cease and desist letter is terrifying. It comes on an official letterhead with a note saying how horrible you are and ends with an official signature from a lawyer.
I quickly organise to meet with a lawyer friend of mine. Interestingly when we meet him, he’d already heard about it. We even talk to a QC who’s friends with my mum so agrees to see us for free, even he’d already heard about it. We visit them in the middle of the storm to see whether it’s even legal. All of the lawyers give us an emphatic, “I don’t know.” Usually followed by, “if it’s not illegal now, it soon will be.”
One of the lawyers tells us the way that works is they’ll take you to court, legislate to change the law, then retroactively hit you with legislature they just passed. The way that actually works is, it doesn’t. But we couldn’t afford to fight a legal battle and it wasn’t really worth it anyway. Especially since they’re the government.
Then they go after damages which is “compensation and denial for loss of revenue.” The way you measure this is dubious because you first have to prove how much revenue you would have lost. Since it was front page of a lot of newspapers that number can get scary large. The lawyer even talked about it being measured in millions dollars. We even consider incorporating to avoid the liability.
We don’t find this out till later but we weren’t actually breaking any laws. The only law we might have been breaking is *incitement to commit fair evasion*. Which wasn’t really the case, we weren’t encouraging people to fare evade but we created an economic situation where it was cheaper to fare evade. In fact, we would openly say, don’t fare evade.
Like a lot of people genuinely forget their wallets or Mykii cards at home and get fined by accident and it’s unfair. So we were providing insurance for that. So there’s all this precedence been set and is totally legal.
But what it accidentally does is provide incentive to just not travel with a Myki card. Now if there is a situation where it is both legal and cheaper to fare evade, doesn’t that prove how wrong the current pricing system for trams is?
The two ways to break the algorithm are to lower tram fares or to increase tram fines. Increasing tram fines is wrong since it goes against everything the Ministers were saying about how public transport is for the good of everyone and not trying to raise revenues to compensate for the expenditure on Myki.
And the reason trams are priced so expensively is because the Vic government had just spent $1.5 billion dollars so need this pricing structure just to pay for itself. So we actually accidentally proved the $1.5 billion spent on Myki was too expensive since the numbers didn’t add up. That’s the kind of thing someone could lose an election over.
So after speaking to the lawyers we rush home since there are all these film crews coming who want to run a story for the evening news. Every hour or so I call the lawyer dude again panicking.
There are film crews all around the house. Luckily the head of the film crews is an old friend of mine so he’s on our side and warns us which media are going to run negative stories so we could prepare for them.
It’s worth mentioning that the media attention was incredibly mixed. Some media outlets are decidedly negative. Some are positive. One paints Tom as the villain. The other says he’s a hero. One says he’s this spoilt private school kid, we went to a public school by the way and another says it’s about time the youth of our nation did something. Another says we’re hooligans. I think one called us cyber terrorists, I’m not sure who reads that magazine.
Still others were saying how impressive it was and the Unis and Colleges loved it. Other magazines turned the story into political cartoons which is of course, the height of fame. Random people start writing blog posts about it with armchair deconstructions. My favourite was this tiny magazine that ran a front page story that just said “Kids Fuck With Trams!”
Famous people start reaching out to us randomly. A popular band offers to do a charity concert to raise money for a legal battle if we get taken to court. A reasonably popular author offers to write letters to the editor every day for a month. It’s just crazy.
Then the next cease and desist letter arrives and the media attention levels up even more. I think this has something to do with the time difference but suddenly we start getting phone calls from Big International magazines. And the users just explode.
We get a Reuters reporter calling. A reporter from the UK’s The Scotsman. A French reporter. A big US TV station. A Forbes reporter calls. I think her name was Leticia or Mary or something. Something strange starts happening, we start getting sign ups from countries outside Australia. People from Taiwan signup. And France and Germany and the US and the UK and Poland. Trams don’t even run in half these places.
And we start getting fan mail. Lots of fan mail. We started getting job offers. Lots of them. Randomly recruiters start sending us messages asking if we’re willing to be hired by XYZ high profile company for huge salaries. Places like Google, Apple, Facebook.
Passionate users end up being everyone from ethnic students who felt victimised by racially profiling tram inspectors to people who wanted the tram system stopped and for us all to ride horses to work to just everyday Joe’s who felt like it was just way too expensive and were angry that average taxpayers were forced to pay for the $2 billion dollar mistake that was the Myki ticketing system. The most common user was just average commuters who felt mistreaten by a governments poor spending of public funds on infrastructure.
We suddenly hit the radar of some of the old school Silicon Valley elite. Legendary investors whose names I recognise are sending us emails offering to mentor us and invest in our companies. It’s the first time I’ve ever gotten emails from massive people like VC firms.
The iced coffees run out at this point and I go buy another round. The film crews leave, things start to die down a bit, the phone isn’t ringing as much and we have some quiet time to think about what had just happened. Tom and I are just looking at each other constantly not sure what’s about to happen.
It feels a bit like we were in the eye of the storm and the quiet is just trying to get us to put our guard down. The phone rings again. It’s our parents asking if we’re alright and if we need them for anything. Apparently everyone at my mums work is talking about it.
I still haven’t slept at this point and am absolutely exhausted. I go crash on a couch. Our user numbers are still growing. Our revenues are growing. But we decide to relax a bit. Most of the media attention has dies down now. And we’re just focusing on actually keeping the service alive and running the business.
The next 2 weeks are more of the same thing. But only about 70% as hard. Totally exhausting, but less like we’re in a movie and more like we’re just in a really really stressful job. And the amazing part. Is the thing is working. We ignored the cease and desists. The site is up and engines are steaming. Everything is growing. The business looks like it’ll succeed and do amazingly and we’re going to get minted.
Then like Icarus flying too close to the sun. Everything turns to shit.
The Government become very serious at this point and they issue a statement that if the site isn’t shut down by 5pm that Friday night then we’re going to be taken to court and be hit with a lawsuit. They’re using the exact same media we used, against us now. At this point, the story has well and truly made its way into mainstream conscious.
There’s a service Klout. Which measures offline influence. Basically how much people are talking about something offline. We have the highest Klout score in all of Asia / Pacific for 2 weeks. Which is another way of saying it’s the most talked about thing in the country for weeks.
The lawsuit will apparently also be from Yarra Trams, Mykis parent company, Public Transport Victoria and the Victoria Government. I can’t really talk about the exact terms of the lawsuit. But it was hella scary. We’re about to be sued by 3 multi billion dollar organisations. And they’re threatening criminal charges.
I bet they’re experiencing a serious drop in revenues while we’re the most popular thing in the entire country. If I had to guess, it’d be like 20 million dollars. They basically have to shut us down because otherwise we’re about to totally eat their lunch. And they do it in a very clever way.
It wants us to do a few things. 1) Shut down the site and refund all customers. 2) Agree to an NDA and not do something like this again and kill the algorithm powering it all. 3) Come work for them redesigning the public transport network algorithmically. They offered us jobs. Because clearly we discovered the big loophole. And just like that all claims and charges would be dropped.
It was brilliant. Good cop and bad cop in one move. We’re going to totally destroy you and take you for everything you’re worth, or here’s a get out of jail free card where you help us make the same thing you made better, but you won’t benefit at all from it. Only society at large will.
There is now like a Western shootout-esque stalemate between us and the Government and a large number of people are watching, waiting to see what’s going to happen. The users are still growing. People are asking if they can buy T-Shirts.
Media people ask us to respond. Tom does so, with sheer cajones, by sending an invitation code to the Minister for Health and Public Transport giving him a month of free Tramsurance. He then gives a quote from Batman: The Dark Knight as our official response. “We’re not the hero Melbourne deserves, but we’re the one it needs right now.” People love it. It gets read out on national news as our official response.
That night if you were watching the news on any tv channel you would have seen Tramsurance. It starts trending again. Everyone who knows Tom or I are sending us messages congratulating us, for what, I’m not entirely sure.
We call the lawyer friend again and decide to go out for dinner. It’s been a long day and while we’re sitting in the restaurant eating pasta, people are arguing about it all over the internet. It’s still trending. It’s still growing. But that night, if we don’t shut it down, we’re going to turn into a courtroom drama. Less Social Network. More The Practice.
We can hear a family sitting at another table in the restaurant talking about Tramsurance. Tom and I look at each other amazed, and smile. We then go to a tiny coffee shop. The waitresses kind of recognise Tom. I think that’s how you know you’ve created something amazing. When you’re not even in the same state and walking into a random place, people are talking about it.
We talk to the lawyer and ask what we should do. Secretly, we’re exhausted. Tom and I are talking a lot about why we’re even doing this. And if we have the energy to run this business full time as well as fighting a lawsuit, as well as doing university. I’m supposed to be starting university in 3 weeks.
The lawyer offers to represent us for free. But advises us to take the offer and shut down the site. That we’re a small outfit without a ton of resources. If you’re going to get sued by the government, it’ll be a long public drawn out affair and they’re going to win, because they’re the government and they make the rules.
We talk some more. And we decide to shut down the site. We sign. And I pull out my laptop and turn off the servers and repoint the DNS to a Launchrock. The refunds were a bit harder, but we figure that out too. Just like that, the business is dead. Tom and I go from thinking we had something worth zillions to losing it all again.
We’re a bit sad.
Then we go for a walk home. When we get home there are like 15 missed calls since the site isn’t down but the government had already issued the statement, asking us what we’re going to do next. Pretty much all the media people start doing followups and our inbox gets flooded. The phone starts going off again and Toms parents are sitting in the corner amazed. They’re not really sure what to think. Probably a weird mixture of pride and confusion. My dad put it nicely when he said, “all this attention just over a website? Must be a great website…” Thanks dad.
They would have seen us on the phone constantly for hours late into the night. The phone would ring, we’d answer then there would be a 20 minute break then it would ring again pretty much all night which was better than near constantly during the day. I’m still completely exhausted but struggle to keep responding to emails and sounding confident on the phone. We have this weird feeling like we’d built a house of sand and the moment we stopped the whole house would come crumbling down.
It isn’t till about 6 am in the morning when the phone completely stops. Toms mum offers to cook us pancakes. We just look at each other and collapse. I’ve been awake for nearly 3 days at this point. Tom for 2. I’m pretty sure if we’d fallen asleep beforehand the whole thing would have collapsed.
I drive home, I probably shouldn’t have but I live just around the corner. When I get home my parents ask, “so how was it?” I answer something like, “it was pretty good.” Storms over. And I go to sleep. I don’t wake up till midday. First thing waking up, I call Tom to see what’s happening.
That’s kind of where I leave, there wasn’t enough work left for me to help with anymore and Tom tells me the next day a bunch of people contact him but nowhere near the sheer quantity.
Mostly it’s just emails. We shut down the site. I was the engineer. There isn’t anything left to do. Few people even realise it’s been shut down. We get the occasional email asking how to use it and we just apologize. All the media do follow up stories that weekend and it starts trending again.
I get emails from people I’d emailed while it was exploding at all times over the next month. For a few weeks it becomes a meme. People on public transport when asked for their tickets saying, “Sorry sir, but I have Tramsurance.”
For the briefest of moments we were the talk of the entire country. Things started to die down over the next few weeks. We added a new line to our resumes. Updated Linkedin.
What did we achieve with Tramsurance? Apart from some notoriety and proof that we could execute on something, nothing really. So really it was just a big spectacular failure. But one hell of an experience.
It was tiring and puts growth in a whole new perspective. You feel aged having gone through it like you suddenly became a few years older. We went from 0 to 50 and could barely keep up. You develop a whole new appreciation for companies like Instagram who acquired 10 million users in 10 days. Or companies where explosive user growth is their primary creator of value.
Now whenever Tom or I puts our name anywhere we can say we’ve been in all these big magazines like Forbes, BRW, Reuters, The Scotsman etc. Instant social proof. Which is pretty cool, I guess?
So that’s hyper growth.
Update:
2015 and 2024
One of the ways you can break the algorithm and fix people’s dissatisfaction with public transport is actually by making it free. It was one of the crazy suggestions Tom made to all the government people interviewing us. The way you could achieve it is 2 ways. 1) Lower costs and 2) Increase revenues.
Instead of having a fleet of 600 hundred expensive full time intimidating tram inspectors, you could instead let all of them go and only have 30 full time inspectors, thus lowering your costs dramatically (by a good hundred million dollars) and refactor the tram network to optimise fines.
You could make the popular parts like the whole CBD free and just fine people going in an out of it who are fare evading. That’s the conclusion our database supported and since we had all the fare evaders in our database, we were the only dataset in town from which to really understand how to shard the transporation system as you would a database.
Most people don’t live in the CBD, they come in and out of the CBD. So you can just station inspectors on the entry and exit points of the CBD and fine basically the same number of people and leave the CBD component free, while reducing your staff overhead by 95%.
Melbourne CBD has only 8 entry and exit points, 4 inspectors per point and you can police the same amount of transporation and will achieve the same number of fines with 32 inspectors instead of 600 inspectors. But your staff bill will go down by over $100m dollars. Money you can invest elsewhere, into the overhead involved in making the whole CBD free.
And that’s a more reflective system of peoples behaviours. You end up fining most of the same people anyway but it costs significantly less to do. So you could handle the same volume with significantly less inspectors and pass on the saving to users. In net everyone wins.
You could then increase your fine volumes further and reduce overhead by introducing an on the spot fine. The system of harassing people to pay a $200 fine over weeks was costly. Instead you could give tram inspectors a credit card processor. And charge $75 on the spot the moment you’re fined or $230 to pay later. Almost everyone chooses the $75. And you increase the turnovers of your fines. Because more people are paying them, which increases your revenues.
Those were the crux of the recommendations that we worked on. It was modeled by fancy accounting firms and shown that the math works. And that plan was precisely announced by the Andrews Labor government in 2013 and adopted as one of their flagship policies.
The free tram zone was introduced when they won the state election in 2015. Public satisfaction with the tram network soared and the current state government is one of the most popular ever. Public Transport was one of the tipping points in the election and it helped contribute to exerting so much political pressure that a government changed and the current government is investing huge sums of money, though comparatively much less than they were, into making all public transport in Melbourne CBD free today.
They are spending $156 million dollars per year implementing this plan keeping the entire tram network free in Melbourne CBD, which ironically is still a lot less than what MyKi cost, and they are reaping huge benefits from this expenditure in increased tourism, better public safety, reduced costs for maintenance, reduced costs for staff salaries (you don’t need hundreds of tram inspectors anymore) and has over a 90% public approval. All in all it’s been spectacularly successful.
At the end of 2015 I won an award saying I’m now one of the most influential young people under the age of 30 in the country. And I can go around saying with some amount of truth that I made the free tram zone. Something that makes you basically royalty in Melbourne. So something very good actually did come out of this small app we built once upon a time.
It’s now 2024, 10 years later and the Melbourne CBD Free tram zone is still in effect. That’s about as close to a runaway success story as there is. There was recent modelling done to say the City of Melbourne reaps about $300 million dollars per year in added tourism dollars from the CBD tram zone.
Because most tourists live in the CBD and they love free short trips within the free tram zone. So spending $150 million per year and getting back $300 million in value for a city, is an absolute no brainer. There hasn’t been a person beaten up by a tram inspector in over a decade and the whole city of Melbourne is just safer and better.
For us, we’ve built other very successful businesses and the lesson I take from this experience in business is to build a business that doesn’t grow so fast that it actually implodes in on itself. Build something slower and sustainable that will have longevity. It was super weird to build something that went from nowhere to everywhere in a few months and to go from broke to rich to broke again in only a few months too. Not something I’d like to repeat again even if the epilogue of the whole thing was very good for society at large.
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Things That Are Cheaper Than Myki
