Here’s the solution to the Uber and Airbnb problems — and no one will like it

It has been a fascinating week to see the war between Uber along with the De Blasio government play out.

This is just another very early round in what’s going to be a long and difficult war — not only between Uber and NYC, or Uber along with other towns, but between every high-growth startup innovating in a controlled sector and each regulator and lawmaker overseeing these industries.

Watching the huge battles that have played out so far — specifically around Uber and Airbnb — we have seen the exact same pattern many times over: fresh startup delivers a creative and beautiful new service that breaks the previous rules, ignoring those rules until they have critical mass of happy clients; regulators and incumbents respond by attempting to shut down the new invention; startups and their joyful customers rain hellfire on the regulators; questions arise about the true effect of the new innovation; a very small number of information is shared to settle the dispute.

I’m not sure there is a near term alternative for this process — new methods of doing things won’t ever see the light of day if step 1 is always”ask permission”. The solution will almost always be no, and fresh ideas will not have an opportunity to prove themselves.

It’s how these new platforms are regulating themselves. My colleague Brad has said that web platforms are like authorities , and that is becoming clearer by the day (just look at Reddit to the most recent chapter).

The principal innovation that contemporary web platforms have created is, basically, how to modulate, adaptively, at scale. Using tons and tons of real time data as their main tool, they have inverted the regulatory model. Instead of seek onerous up-front consent to onboard, users onboard easily, but are subsequently held to strict accountability throughout the information about their activities:

Contrast this with the traditional regulatory model — the 1 government uses to control the private sector, and it is the opposite — regulations concentrate on upfront permission as the primary instrument:

The cause of this makes a great deal of sense: when the current regulations were created (largely at the start of the progressive era in the early 20th century), we did not have access to real time data.

We’ve got data, plenty of it. In the case of the connection between internet platforms (companies) and their customers, we’re leveraging that data to present a regulatory regime of data-driven accountability. Just ask any Uber driver what their main complaint is, and you will probably hear that they can get booted off the stage for poor performance, very quickly.

The question is: how do we alter our public regulations to embrace this sort of model? Here is the part that Nobody will like:

1) Regulators will need to take a new version where they concentrate less on making it difficult for people to start. That means things relaxing licensing requirements (as an instance, all of the countries working on Bitcoin licensing right now) and raise the freedom to run . This is vital for innovation and experimentation.

2) In exchange for this freedom to operate, business need to share information with regulators — un-massaged, and in real time, just like their customers do together. AND, will have to accept that data may lead to forms of accountability. By way of instance, we ought to give ourselves the chance to enjoy the obvious advantages of this Ubers and Airbnbs of this planet, but also recognize that Uber could be making NYC traffic worse, and Airbnb could be making SF home affordability worse.

In other words, grant companies the freedoms they provide their customers, but also bring the Exact data-driven accountability:

That’s going to be a difficult pill to swallow, on either side, so I am not certain how we get there. But I feel that if we are honest with ourselves, we’ll recognize the approach to regulation which internet platforms have brought to their customers is an innovation in its own right, and is one which we should aim to apply to the public layer.

In her article now , she rightly points out that”Those choices are demanding if no one trusts each other” — platforms (rightly) do not trust regulators not to clamp down on new innovations, and authorities do not expect platforms to EITHER play with the present rules OR provide in-depth data for the sake of accountability.

In the meantime, we will get to see more battles as the war wages on.

10 comments

  1. Very interesting but not summarize the inevitable: firms will be pressured to or will choose to run on open information, peer reviewed networks. In five years from today, Uber is probably top be contested by a decentralized program run by a decentralized company which won’t even be integrated.

  2. Nick, your”Legislation 2.0″ writings are all intriguing, timely and thought provoking. As a public policy advocate for technology businesses, I think components of the version you suggest are crucial in the long term. However,…While the advantages of a data-driven regulatory model are so numerous, the present challenges impeding this kind of strategy are important. As an instance, it isn’t only how many automobiles Uber has about the roads of New York or the number of chambers Airbnb rents in San Francisco (quantifiable and objective factors ). It’s also about the politics stemming from disturbance of strong incumbents, possible reduction of tax dollars, information privacy and security issues, environmental and economic impacts, public security problems and several other largely political factors (subjective and unpredictable factors ). Regrettably, data lacks the capability to overcome political barriers in the present atmosphere. To be prosperous, innovators in controlled businesses need to understand, address and conquer regulatory and political hurdles. This procedure will sometimes (frequently?) Be cluttered. Then again, purposeful disruption and change are rarely simple, especially given the parties and dynamics involved. Nevertheless, it is definitely worth the effort.Thank you for your gifts.

  3. 1) How can any new policy have passed when both parties together with tools and inertia categorically oppose it?2) it is quite interesting how the new technologies enables the shifting of regulation by simply breaking it. Before cellular, no corporation might have gotten sufficient users by flouting legislation punctually to effectively lobby to alter them.

  4. There are two Basic issues with the Assumption of the story:1) Uber was closely complying with regulations new york’s for hire transport industTy. These principles have been installed long before uber came and we probably comply with these principles better than every other participant in the transport sector in New York.2) Uber already supplies data for each and every trip we perform in New York, per regulations.Awarded Uber complies with existing regulations in New York, also already supplies New York City information on each and every excursion per these rules, it creates much more sense to conclude that the proposed cap on automobiles was easy cab protectionism.

  5. They aren’t innovations, it is just fresh, mostly illegal methods to perform something from your house or car rather than a licensed, insured, inspected, tax paying, car/facility. All types of things will probably soon be coming down the pike from restaurants daily auto, not one of that is actually original, it is only a different centre for the exact same old service AND it is prohibited.

  6. De Blasio should not be acquainted with Uber’s tech. He would have easily parried Uber’s assert that capping new drivers had been damaging underserved minority areas. He’s stated Uber will keep adding new drivers when it did not allow the brand new ones pick up passengers in Manhattan below 96th Street. Uber has the capacity to do this easily (the exact same way they maintain Uber NJ drivers by picking up in NY).

  7. I’m comfortable with #1. Not sure I’m familiar with #2 unless it is totally anonymous. Government bureaucrats are not angels. They’re human. Imagine if my rival pays a govt bureaucrat for information they should not have?

  8. I am OK with #2 when the information enter the public domain. If information are for use by the town, but nevertheless treated as proprietary, then I’d observe that as worse than the status quo.

  9. In the world of the “built environment” and development regulation -where STRs reside – much of this does not apply. There is a lot more than data to consider with the residential/business STR model, in fact most urban planners would probably tell you it is one of the most complex issues they have confronted in their careers. And the author starts from the premise that “…new ways of doing things will never see the light of day if step 1 is always “ask permission”. The answer will nearly always be no” and “regulators and incumbents respond by trying to shut down the new innovation;” This just isn’t true. What is true is that we have a “baseline” of current laws/ordinances/regulations that is constantly being amended to resolve changes in society, business models, housing preferences, higher-level laws,etc. It is naturally a slow process because changing the laws requires deliberative processes intended to allow the public to understand the proposed changes before they are made, and the speed of life and business has increased exponentially with hand-held computers/telecom devices, changing society’s expectations for regulators. So please consider that nobody has come up with the “right answers” for any community yet, because no matter how this turns out there are likely to be a significant portion of the community that is not satisfied with the outcome.

  10. However, the information that uber / airbnb accumulate isn’t holistic. It has short term grin ratings between clients and employees. These internet platform companies take the most lucrative elements of a town’s ecosystem, extract earnings by the local surroundings, prevent paying for societal infrastructure and possibly cripple public support options. They have to be controlled difficult and should not be permitted to construct an internet monopoly. The internet wasn’t devised to encourage monopolies and it ought to be controlled to make sure it does not. Investors and innovators who attempt to own entire markets will need to expect low yields.

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