Tomorrow, the taxi committee of Seattle’s City Council is voting on proposed new regulations for ridesharing services. You can read the full proposal here, and Todd Bishop from GeekWire has a good summary here (updated here).
The gist of the proposed regulations is to treat rideshare vehicles (such as those dispatched by (USV portfolio company) Sidecar, Lyft in the US, and Carpooling.com and BlaBlaCar in Europe) like taxis — imposing a traditional regime of licensing, inspection, limitations and disclosure. Here are some highlights:
As for the stated goals of the regulations, there are several, but really the main ones are:
In other words: ensure public safety, and protect the existing taxi industry.
Leaving aside the second one, and whether that should be a priority, I just want to focus on how we might go about ensuring safety and building trust. Long time readers will recognize this graphic:
The proposed Seattle regulations are a perfect example of a “1.0” trust regime. Build a high bar for participation, where new actors (TNC companies, drivers) must prove a lot up front and ask permission to operate. This is how we’ve regulated the real world in the industrial era.
This is NOT how things are typically regulated in the internet era. In fact, it’s essentially the opposite. ”2.0” regulatory schemes let anyone get started, and over time they are judged by their actions, driven by peer review and public data. Think Ebay, Airbnb, Uber, even Craigslist, and every other site that has user-generated content and peer-to-peer transactions.
I like to use the example of “what if Ebay had done up-front, centralized vetting of every seller on the platform?” That simply wouldn’t have been possible at web scale, in an environment where many many many smaller actors are entering the market at high speed. Instead, the answer was to create trust, safety and fairness (e.g., “regulate”) in a way that is massively scalable and also allows even the smallest actors to participate with minimal initial overhead.
So it’s entirely unfair to criticize these new businesses as “unregulated” (as they are criticized in the Seattle draft regs). That completely misses the fact that there is actually VERY INTENSE accountability in most of these systems. Uber drivers get kicked off the platform (for better or worse) if their ratings drop below 4.3. They may not be “licensed” the same way as traditional cars, but they sure are held accountable for their actions, which absolutely does incentivize good service.
So, as more and more real-world regulatory regimes bump into internet-based businesses (ridesharing and homesharing have been the two big ones recently but it’s happening in every sector), the question keeps coming up: should we regulate this the real-word / industrial / 1.0 way, or the internet way?
And the most common answer, so far, is to apply 1.0, industrial-style, regulations to these new situations.
A common justification for this is the issue of fairness: all the other taxi drivers need to go through this up-front licensing process, so why not the new guys? We need to make sure there’s a level playing field. And that does make sense.
So here’s a provocative idea:
What if, rather than applying the 1.0 model to these 2.0 businesses, what if we went the other way? What if we were to say: there are two ways you can be compliant with the regulations: EITHER: go through the traditional permit- and inspection-based process OR you operate more freely IN EXCHANGE for massively greater transparency and data-driven accountability.
What if, instead of imposing 1.0 regulations on ridesharing services, we instead applied 2.0 regulations on the existing services?
In other words, what if we started to regulate activity in the real-world the way we regulate activity on the internet, not the other way around?
Imagine if the Seattle regs read, instead, something like this:
WHEREAS: Transportation Network Companies have demonstrated new, more efficient and effective, ways of regulating for-hire transportation through the application of technology and data;
NOW, THEREFORE, BE IT ORDAINED BY THE CITY OF SEATTLE AS FOLLOWS: Anyone offering for-hire vehicle services may opt-out of existing regulations as long as they implement mobile dispatch, e-hailing and e-payments, 360-degree peer-review of drivers and passengers, and provide an API for public auditing of system performance with regards to equity, access, performance, and safety.
That sounds pretty ridiculous, I suppose, but the point I’m trying to make is that these services aren’t “unregulated”, they are just differently regulated. And that form of regulation is actually an innovation, and is actually quite effective.
(Of course, there are still gaps. One of the biggest ones, in the case of ride sharing, is insurance. That’s addressed in the Seattle regs, and it’s also something that Sidecar and Lyft have both addressed recently, adding $1mm supplemental coverage as part of their platforms. And at USV, we’ve seen a number of proposed startups eyeing insurance in the peer-to-peer space.)
So, we will see what happens in Seattle tomorrow. Either way, my guess is that it will be an important precedent as more and more cities take up the ridesharing issue (DC and Chicago right now, among others). Maybe the next one will make a bold move and apply regulation 2.0 the the old as well as the new.
Happy New Year everyone.
I love new years. It always feels to good to turn the page and have a shot at a fresh new year.
And new years in New England is always so so cold — which I think really helps mark the beginning of the real part of winter and the turn of the year. Even when it’s warm right before new years, as it was this year, it always manages to get super freezing when the time comes.
Which brings me to pond hockey.
Today, we went to visit some friends who live near Lake Boon in Stow, Mass, which is about 45 minutes west of Boston. Amazingly, because it was so warm and rainy last week, and then so cold this week, the lake got a natural Zamboni treatment — so all 163 acres of it are not only frozen solid but also smooth as can be. I spoke with a woman who had just finished up hockey with her family — she grew up in the area and said that in her whole life she’d never seen the lake like that.
It’s was unbelievable, really — launching from the town beach and skating as far as you felt like, around the edge of the lake or straight across it. There were tons of people out on the lake — a bunch of pick up hockey games (our friends counted 5 separate DIY rinks marked out around the lake), people just taking a nice tour, and even a guy riding a motorcycle back and forth across the middle (amazingly).
I’ve written before about why casual & natural is so awesome, and today’s experience totally confirmed my view on that. Being able to skate around, wherever you like, however you like, passing around a puck and buzzing around the lake: unbelievably awesome. So so much more awesome than skating at a skating rink — which is also fun, but so much less fluid, with so many more rules, and so much more formality. You’ll notice in the picture that our friends brought their dog out onto the lake. How awesome is that?
I think about this idea of the casual / integrated version of a thing, vs. the formalized version of it. I don’t know why I feel so strongly about this, but I feel so much magic in doing things the casual way. For example, riding your bike to pick up some groceries, vs organizing a bike ride. Or skating to work along the Ottowa canals, vs going to a skating rink. I just love the way fun activities like that feel when they are blended into your daily routine, rather than an event that has to be organized, or done at some special single-purpose facility.
Anyway, it was a great way to start off the new year. I feel refreshed and energized and ready to skate off into 2014. Here’s to an excellent 2014 everyone.