How The Heavy Hand Of Government Stifles The On Demand Economy
from the not-helping dept
This century has produced a new lexicon that didn’t exist a generation ago: Broadband. Apps. Connectivity. Streaming video. Social networks. The on-demand economy.
The new millennium has also produced a startling number of successful American companies with worldwide reach: Airbnb, Amazon, Facebook, Google, Lyft, Netflix, Pandora, Snapchat, Twitter, Uber, Yahoo, Yelp.
With so many American innovators leading and improving the global economy, it would seem natural for American policymakers to do everything possible to allow these companies to flourish. Instead, we see far too many examples of our politicians actively discouraging or burdening new services from the country’s leading American companies. With good intentions, but flawed logic, politicians are jumping in to regulate these new companies, slowing the pace of innovation.
In July, Democratic New York Mayor Bill de Blasio was forced to table a plan to limit the growth of ride hailing companies like Uber and Lyft in New York after riders launched a public campaign to stop the proposal. Ride hailing services give New Yorkers and visitors access to quick, clean and affordable transportation options and help expand the city’s economic growth by creating more job opportunities. So why are city regulators trying to slow their expansion and limit consumer choice?
Ride hailing companies continue to face pressure from courts and politicians who say drivers should be treated as employees rather than independent contractors. Labor unions are pushing this view, while ignoring that many ride hailing drivers are drawn to the flexibility of being independent contractors. (Meanwhile, taxicab drivers in many cities are also considered independent contractors, a fact that is rarely mentioned in these debates.)
On-demand economy services like Airbnb that link homeowners with those looking for places to stay are also under attack, as hotel unions join with the lodging industry to regulate, and in some cases ban, these services. The city of San Francisco is considering a measure that would cap Airbnb stays at 75 days, a move that Airbnb says will cost the city $58 million in tax revenue over the next 10 years. Why would city leaders seemingly ignore the potential good that immense amount of revenue could do?
Our nation was built on a foundation of freedom — freedom to contract with each other for goods and services, freedom to innovate and create new products, freedom to start a new business and maybe even fail at it. The government should only impose itself on industry if there’s a compelling public interest.
Rather than force new services to fit the framework of old rules, innovative startups offer regulators a chance to revise outdated rules to reflect a new reality. Ride hailing services naturally weed out bad drivers and poor service, especially when compared with the legacy cab drivers who aren’t rated on or accountable for the quality of their service. Government can and should require driver screening and insurance, but it’s the dynamic feedback nature of the wireless service that safeguards the public and benefits drivers.
Home-sharing services like Airbnb give users more options when they travel and provide extra income for homeowners. Government can and should collect hospitality taxes after some threshold of rentals, but cities benefit from the influx of tourism whether visitors stay in hotels or not. Recently, my family took a holiday in New York City, where Manhattan has few hotel options for families with children. Thanks to Airbnb, we rented an apartment for a third of the comparable hotel price.
Meanwhile, millions of Americans enjoy new services and experiences thanks to the ever evolving tech economy — whether it’s making a living from eBay or Etsy, figuring out where to eat or stay from Trip Advisor or Yelp, or enjoying new music from Pandora. Politicians need to get out of the way, let these businesses thrive and intervene only when there’s a demonstrated, compelling need — and even then, do so as narrowly as possible. The public is voting with their apps and their finger taps. Politicians would be wise to listen to the sounds of the page clicks. It’s what their constituents want.
Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA), the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times best-selling books, Ninja Innovation: The Ten Killer Strategies of the World’s Most Successful Businesses and The Comeback: How Innovation Will Restore the American Dream. His views are his own. Connect with him on Twitter: @GaryShapiro
Filed Under: innovation, on demand economy, on-demand, regulations, ride hailing, sharing
Companies: airbnb, lyft, uber
Comments on “How The Heavy Hand Of Government Stifles The On Demand Economy”
On Demand infrastructure?
The problem is when the ‘on demand’ service is in reality a required infrastructure for a modern society.
Comparing taxi service in NYC (or any modern city) to ebay and Etsy is just ridiculous.
If taxi’s are removed in favor of Uber, how do you guarantee you’ll have sufficient service available? That’s called regulation and is required for infrastructure…else you get jacked rates as demand increases for a scarce good. Good economic theory but bad macro planning for a functioning society.
Uber’s response is surge pricing…which prices people out of the market and pricing people out of basic infrastructure isn’t generally a good idea for said functioning society.
Re: On Demand infrastructure?
Wait, where did you get ‘remove taxi’ from? I’m sure taxis could still compete with Uber if they wanted to.
Re: Re: On Demand infrastructure?
Because if you allow a business to cherry pick the profitable markets, the existing regulated infrastructure service will become unprofitable quite quickly.
Then you’re left with just Uber/Lyft and surge pricing.
Re: Re: Re: On Demand infrastructure?
Are you suggesting that current taxi companies in new York apply 100% equal and totally seamless service to all neighborhoods and regions? Taxi drivers are not currently cherry-picking profitable markets?
Re: On Demand infrastructure?
The previous AC is right that Uber doesn’t have to replace taxis. Competition is a good thing. Some people will still prefer a taxi, even if it’s more expensive.
But beyond that, if the taxis did go away and there was a larger demand for Uber, then it creates a job opportunity for new Uber drivers (or contractors of competing services). And since it’s a lot less expensive to start up as an Uber driver than it is to purchase or rent a taxi medallion, the barrier to entry is lower.
And if there gets to be too many drivers, the prices go down and some of the drivers get out of the market.
Re: Re: On Demand infrastructure?
A job created from the ashes of another job is “creating job opportunities”
Re: Re: Re: On Demand infrastructure?
Not
…is NOT “creating …
Re: Re: Re: On Demand infrastructure?
If it were a one-to-one ratio of jobs destroyed to jobs created, but the jobs aren’t necessarily equal and the numbers wouldn’t necessarily be equal either. If the barrier to entry for the market is lower for Uber drivers than for taxi drivers, then more Uber drivers could get into the market than taxi drivers.
Re: On Demand infrastructure?
“Comparing taxi service in NYC (or any modern city) to ebay and Etsy is just ridiculous.”
Maybe it’s ridiculous in New York, but not in any of the major cities I’ve been to. In all of those, cabs are not even close to being essential infrastructure.
“how do you guarantee you’ll have sufficient service available?”
The existing cab regulations don’t do a very good job of this (probably because that’s not the goal of the regulations). Every time I’ve used a cab, it’s been a crapshoot as to whether one will show up, and nearly always it takes about an hour for one to show up.
Re: Re: On Demand infrastructure?
The paradox of regulation: too much regulation makes things worse.
It’s reasonable to get mad when you’re forced to follow crippling regulations while your competition isn’t.
Re: Re: On Demand infrastructure?
As an example in DC, a single cab company is given the contract for Dulles airport – but this also requires them to provide a set level of service with x number of cabs available at the airport even during very slow late night hours.
Uber would just surge price you to $100 or more during those late night hours and still not guarantee anyone would be there providing service.
There’s no doubt existing cab service can be lousy, but scrapping it without providing the same level of service ‘all the time’ is something the Uber/On Demand simply hasn’t been able to articulate yet – except for ‘surge pricing’ with no guarantees.
Re: Re: Re: On Demand infrastructure?
Uber would just surge price you to $100 or more during those late night hours and still not guarantee anyone would be there providing service.
That’s not how surge pricing works. It happens when there’s too much demand, not too little.
Re: Re: Re:2 On Demand infrastructure?
Isn’t surge pricing based on when demand outpaces supply? Uber uses surge pricing to encourage more drivers. In the middle of the night, demand may be low but supply could be even lower. This could create a situation where travelers coming in may still need to pay higher rates to encourage enough supply at off-peak times.
Re: Re: Re: On Demand infrastructure?
As someone who has hitchhiked from Dulles airport at midnight, I agree with your comment. But I believe the problem is the monopoly the airport gives to one company caused this problem. Give me competition any day- and if the cost of Uber is surge pricing- then I can make my decision!
Re: Re: On Demand infrastructure?
London taxi drivers have long been famous for refusing to drive south of the river, and that cliche has been around much longer than I have. If it’s still true, I’d bet there’s plenty of Uber-style drivers who wouldn’t mind the journey
Re: On Demand infrastructure?
You may be right, if you’re referring to trains and buses.
I hope that by “infrastructure” you don’t mean the existing taxi system. There is no “regulation or requirement” for taxis to work on any given day, either. And many of us have found ourselves in times and places where one could not be hailed or called.
By “jacked rates” do you mean the way cities add an “Airport pickup tax” to some taxi pickups, for no fair reason? Or the way they add “occupancy taxes” to my hotel bill that wasn’t part of the quoted rate nor part of AirBnB?
I’m not entirely anti-regulation or anti-tax, but with taxis, we’ve definitely got a case of the current system not working well, and the innovation working much better.
Re: On Demand infrastructure?
If taxi’s are removed in favor of Uber, how do you guarantee you’ll have sufficient service available?
Hmm. I’ve always found Uber MUCH MORE accessible nearly everywhere I’ve used it. Uber is available in places taxis never go.
else you get jacked rates as demand increases for a scarce good
Again, my experience with Uber is that it’s generally cheaper and easier than a cab. So not sure where you get that from.
Uber’s response is surge pricing…which prices people out of the market and pricing people out of basic infrastructure isn’t generally a good idea for said functioning society.
Surge pricing, which actually gets more drivers out on the road. It’s called basic economics and is generally a good thing.
Yeah, unregulated lodging is great, right up until someone gets sexually and AirBNB does nothing when it’s brought to their attention, instead telling them to just call the police. Or when someone gets bit by a Rottweiler (when the listing didn’t mention any dogs) and AirBNB replies that “per our terms of service” they have no liability, but they really value the victim as a customer and hope he recovers soon. Or when your unregulated gypsy cab driver turns out to be a violent felon, but victims can’t get any recompense because Uber’s corporate structure is deliberately set up with shell companies that shield it from liability.
But no, let’s not “stifle” any of this with government regulation. If we try to actually respect people’s rights, it might get in the way of making money. Oh, the horror!
Re: Re:
How is this different from regular hotels and taxi services?
Here in Winnipeg there’s been two rapes by “regulated” taxi drivers in recent months. Cases of women suddenly being afraid for their lives as taxi drivers heading off in the wrong direction and refusing to stop, turn around or listen, happen again and again. They too have shell companies. Assaults in regular hotels aren’t unknown either.
Re: Re:
With Uber and Lyft, you know the registration of the car coming to pick you up, and can get a photo of the driver, along with reviews of that driver, and have an option to select from several drivers. Also you use of the taxi is tracked by a third party.
Book a regular taxi, or hail a taxi on the street, and the only thing you have to go on is that the vehicle that picks you up looks like a taxi. Therefore users of Uber or Lyft usually have more information to go on than users of regular taxis. This includes the ability of single people to avoid being the first passengers for a new driver, and go with a driver that other people have rated.
Regulation of companies and individual offering personal services, like taxis and hotels etc. made sense where and when it was almost impossible for customers to post and receive reviews of the service provided. With the new service, a service provider is only as good as their last review, which can be a warning to other people posted by their last customer.
Re: Re:
All of those situations appear to be handled better by these new services than old services. And, honestly, how do you think gov’t regulation solves any of those situations that you describe?
Re: Re: Re:
I’m sorry… what?!?
Did you even bother reading the linked articles? The only thing that their responses could possibly be “better” than would be officers of the company literally showing up in person and assisting the perpetrators in victimizing their customers!
Re: Re: Re: Re:
Did you even bother reading the linked articles? The only thing that their responses could possibly be “better” than would be officers of the company literally showing up in person and assisting the perpetrators in victimizing their customers!
I’m confused as to why you’re blaming the companies for these issues. As others pointed out to you, there are crazy cab drivers too (and in those cases you often don’t even know who it is and there’s no reputation associated with the drivers). Same thing with most bed and breakfast situations.
Why not blame the people actually responsible?
Re: Re: Re: Re:
Uh huh. I’ll bet that similar claims were made about motorized taxis when they replaced horse-drawn carriages. Similarly pretending that any problems started with the new service and didn’t also occur with the old one.
Like any tool, government can be misused
While I agree with the sentiment of this piece, I think the blame is misplaced – it presents government, at all levels, as this thing apart from us. Local, state, and the federal government generally only react in response to pressure – and in most of the cases above, the pressure is coming from established business interests afraid that their legacy business models are in danger. And they’re right of course, a business model that fails to account for change isn’t a model that will last long. The better question would be why is government doing more to protect dinosaur business models than to help its citizens. You can’t blame unions or governments without also being willing to blame the corporate interests that, with their political contributions, call the shots.
The other part of it is that governments have become beholden to the revenue from existing tax/licensing structures. This isn’t necessarily the fault of governments but of the people who bristle at any attempt to honestly address funding of government services. Don’t like how a city government is jumping to the defense of traditional taxi services? Perhaps if they weren’t so dependent on every cent from those hack licenses, they would be so worried.
And don’t let off these on-demand services either. Every Uber driver is putting a more-than-normal demand on a city’s infrastructure – in the traditional taxi models, taxi surcharges and hack licenses were intended to help defray those costs, yet Uber drivers don’t have the same requirement to pay for the services they’re using from the city.
In short, and to put it in the classic libertarian terms: TANSTAFL. On-demand services are using infrastructure paid for by other people and not contributing to the maintenance or improvement of that infrastructure at a level commensurate with their usage. Don’t ask me to cry tears for them, when their entire business model is essentially a hack of the existing system. Sure it’s clever and all, but that doesn’t mean it contributes to the overall greater good.
Re: Like any tool, government can be misused
Agreed. It’s libertarian nonsense. And the video below, which is by an admitted Libertarian, Bill Maher, shows that the schtick is wearing thin.
Zap
https://www.youtube.com/watch?v=-ygeC-oeIO4
Re: Re:
Bill Maher makes less and less sense the older he gets. “They forgot to build an app for sharing the profits.” Uh, yes, they did actually. That’s why people offer their homes on up on AirBnB or drive for Uber or Lyft — because they’re MAKING MONEY doing so. That’s even more insanely stupid that Maher’s standard idiocy.
As it should be
“The new millennium has also produced a startling number of successful American companies with worldwide reach: Airbnb, Amazon, Facebook, Google, Lyft, Netflix, Pandora, Snapchat, Twitter, Uber, Yahoo, Yelp.
With so many American innovators leading and improving the global economy, it would seem natural for American policymakers to do everything possible to allow these companies to flourish.”
In the contrary, I think that companies that have got as large as quick as these ones have need to be held in check.
Freedom doesn't include the freedom to exploit people.
It’s a mixed bag, this twenty-first century economy. Sure there are successes like NetFlix, Google, and Amazon. I’m not sure I would include Pandora, Snapchat or Twitter. While they may be household names, have any of them actually made a profit?
Unfortunately you have included some arguably bad actors in your list; Lyft, Uber. I would have added Homejoy, but they’re shutting/shut down.
The ‘on demand economy’ isn’t a license to exploit workers.
They should, they are. FedEx is facing similar issues for many of the same reasons.
More like many drivers are trying to make a living wage in an economy that offers a multitude of low wage, part time, benefitless, overly flexible [for the employer] job opportunities.
There is, the protection of working Americans. The same compelling public interest that gave us, the minimum wage, the 40 hour work week, overtime, safer workplaces, social security, workman compensation, and protection from discrimination and exploitation. Unless you think that those are things that shouldn’t apply to the demand economy.
Employers are free to try to utilize the new economy to find inventive and imaginative ways to make money. You have listed some that have succeeded (Google, Facebook, Amazon) and some that are giving it a good try (Twitter, Pandora, and I would add Spotify). Protectionist laws and regulations should be challenged and changed.
Just like with patents, you shouldn’t be able to take an otherwise unpatentable idea and get a patent by adding: …on the internet.
Some of these companies (the Uber and HomeJoys) are trying to take an exploitative and illegal business plan and think they all they need to make it legal is to add
…on the internet.
Your article does us all a disservice by conflating the two.
Re: Freedom doesn't include the freedom to exploit people.
“Freedom doesn’t include the freedom to exploit people.”
What you’re saying is that true liberty is not compatible with corporate capitalism. I agree.
Realists can't compete with gushy forecast of joy and luxury forever. But least knowledge of history proves you both wrong and insane.
To start: You leave out the Microsoft monopoly. People have only one choice for operating system: Windows with around ninety percent of the market. Of course you’ll raise the usual corporatist sophistries that it’s a “natural” monopoly, or just “desktop” and now being replaced by mobile, rather than admit the simple fact that Microsoft has been for two decades a harmful monopoly keeping us in the 1980s, that it stampedes and coerces people into expensive cosmetic “upgrades” having trivially new functions but engineered incompatibility with all prior, and its most recent version makes major grab for everyone’s privacy.
Apple and Google OSs are exactly like Microsoft in unprecedented and unnecessary spying. The real basis of the “new economy” you rave about is spying — not material production: none of those you list actually make anything. Globalist corporations are now carving out mercantile territories like mobsters do.
We are well toward a corporatized surveillance state with no real distinction between multi-national corporations and the remains of governments: high-tech fascism. Since they’ve learned from prior fascist states and now have gadgets to spy full time on everyone, it may well last forever.
You’re just simply presenting one side. To admit a few facts wrecks your equation of more freedom for persons from less regulation of corporations. You kids have never lived in any time but after corporations were limited by anti-trust, or anywhere but with decent working / living conditions fairly assured, and you foolishly think will be even better if do away with what prior generations found necessary.
Regulations exist because corporations are legal licenses to avoid moral responsibility while still getting money. Regulation is civilizing amoral entities. If let do whatever they want, they’ll steal the liberties of “natural” persons even more effectively than governments.
Freedom for the many can only exist if the rich and their corporations are limited.
As for Techdirt: Yesterday we got a little criticism of Google over “net neutrality” that doesn’t matter, today it’s back to gushing advocacy of globalist corporations.
This is number inflation
“Airbnb says will cost the city $58 million in tax revenue over the next 10 years.”
This is number inflation to make the number sound bigger than it is.
$5.8m / year isn’t nothing, but it’s definitely NOT “an immense amount of revenue” in the context of a municipal budget that likely runs into the $100m or $1b range.
If the city thinks they can get $5.8m of value by outlawing long-term AirBNB rentals, power to them. I don’t know their motivation for regulating >75 day stays, but I can think of plenty of reasons why they would want to make sure that long-term guests are treated (and taxed) as residents rather than tourists. I would imagine that $5.8m / year probably covers the expense of one or two legal disputes that could otherwise be avoided under existing regulations.
Re: This is number inflation
If $5.8m/year off of a $100m budget is “nothing”, how would you feel about taking a 5.8% pay cut?
Taxis, Uber, & Lyft
Lately in my area there’s been a rash of advertising for Uber & Lyft drivers. Sounds good until you read farther in: the driver must provide their own vehicle, and it must be no older than 5 years. That matches the local laws for taxi service: cabs cannot be any older than 5 years; once they reach 5 years of age the cab co. must retire it or move it to an area that doesn’t have such restriction. And I’ve seen airport bids that have the same specification.
It wouldn’t be so bad if Uber & Lyft had their own vehicles, or at least some vehicles so that people who were interested but whose cars are older than 5 years could still participate. Taxi companies own (or lease) their vehicles; they don’t make their drivers provide them.
Final point: Uber & Lyft are intended as part-time jobs, not as a career. Too many people have overlooked this. And as far as employee/contractor goes: so long as Uber & Lyft do NOT specify how many hours to work or when to work the contractor relationship stands. The minute they start telling people how many hours to work or when to work the contractor relationship terminates and one becomes an employee. That’s what the issue is with FedEx.
Re: Taxis, Uber, & Lyft
It wouldn’t be so bad if Uber & Lyft had their own vehicles, or at least some vehicles so that people who were interested but whose cars are older than 5 years could still participate. Taxi companies own (or lease) their vehicles; they don’t make their drivers provide them.
If the company owned its own vehicles, then it would be a taxi service. But it’s not. It’s a software platform for connecting willing drivers with willing riders. That’s it.
Re: Taxis, Uber, & Lyft
“Taxi companies own (or lease) their vehicles; they don’t make their drivers provide them”
…which is one of the reasons why they’re a “taxi service” and Uber are not.
What would be your preferred standard for cars used by Uber drivers? Slightly or vastly inferior (and therefore more dangerous / less reliable than taxis)?
Re: Taxis, Uber, & Lyft
“Taxi companies own (or lease) their vehicles; they don’t make their drivers provide them.”
No. They do something even worse. They own them, and control the medallions which are priced out of reach of the drivers. Then they RENT the taxi cabs to the drivers in 12 hour chunks for about $100 to $110 per day.
http://www.forbes.com/sites/marcwebertobias/2011/11/18/how-taxi-companies-rip-off-their-drivers/
http://www.nytimes.com/2012/05/23/nyregion/new-york-taxi-drivers-unsure-they-will-see-benefits-of-a-fare-hike.html
Don’t forget that (if they were not prohibited) taxi drivers could just use their own car, or rent a car from Alamo for less, or lease a car for way less.
The drivers are economically forced to work 12 hour shifts, in order to earn back enough fares to pay off the high fixed cost of that cab rental. Any cabbie who works just 6 hours will earn just enough to pay the cab rental fee, and keep NOTHING!
So, your claim of “they don’t make their drivers provide [cars]” should have been phrased as “they force their drivers to rent cars their cars at inflated rates.”
FTFY.
Here’s another conjob from the assholes of Silicon Valley:
http://www.cnbc.com/2015/08/25/hampton-creeks-just-mayo-isnt-mayo-regulators.html
Thank god the government stepped in.
Re: Re:
Here’s another conjob from the assholes of Silicon Valley:
Just because there are some assholish companies, as we all agree their are, how does that make it that all Silicon Valley companies are jackasses. Would you accept that if I pointed to a jackass musician that it means all musicians are jackasses? Or if I point to one example of a label ripping off musicians that all labels rip of musicians?
Thank god the government stepped in.
Or what? People might have eaten a product that is actually healthier for them, and which has all of its ingredients clearly listed on the label? Oooooooooh. The horror.
those in power are corrupt they pass laws to stay in power and gather wealth to themselves at the expense of the sole reason they were put in power. Which was to better things for everyone not just the select few
Ride hailing services naturally weed out bad drivers and poor service, especially when compared with the legacy cab drivers who aren’t rated on or accountable for the quality of their service.
Most systems are able to be gamed. See in particular the title text on this one: http://explainxkcd.com/325/
Of course, YMMV. I’ve found TripAdvisor ratings to be an accurate indicator for hotels in most cities I’ve used it in (with more likelihood of accuracy outside USA than inside, possibly based on my very limited sampling within USA)
free markets
Free markets work best if everyone can participate, as consumer AND as producer.
Airbnb is exactly doing that. And I can’t see why this should be a tax problem, as the income made with renting out your apartment is subject to normal income tax. Why would you have another tax on it?
Of course, incumbents don’t like free markets…
Glad to see that a good number of posters don’t buy into this ‘sharing economy’ screed. I can only add that Michael Masnick’s attack at the top of the comments strikes me as more insanely stupid than what Bill Maher said.
Re: Re:
The usual contrarians are not a great metric for “a good number of posters”
always ends up facing off with one or two-
Free Market
Glad to see that a good number of posters don’t buy into this ‘sharing economy’ screed.