It's interesting how Uber, Airbnb and Draftkings blatantly broke laws and won. They set the precedent that if you're growing fast enough, the laws will change to fit you.
Didn't work out that way for Zenefits. They seemingly lost.
Didn't work out that way for Zenefits. They seemingly lost.
Many people understand that taxi regulations (for the most part) negatively affect them, and in many cases are extremely frustrated with them: see Washington, DC. Most people aren't familiar with and don't care about the company that manages their health insurance, and as a result there's little public support.
Because people (especially in the US) couldn't care less about other people, regulation that annoys consumers is "bad", and the consumers then defend the companies breaking those particular laws. Those companies exploit the fact that in every industry, consumers always outnumber providers (or conversely, every person consumes from many more industries than those where they provide), and so the disregard for this kind of regulation will always work. Every new company will get consumers to gang up on the far fewer incumbent providers until they break the regulation that protects them, and so on, industry by industry.
It's a little like the robber barons, who used every new wave of immigrants to beat up the previous generation of immigrants who tried to unionize, and then hired the new ones in their place... that is, until the next wave of immigrants. Except the new way of doing this is far more effective, because it's always easy to obtain a majority that supports you and feel like they're doing the right thing at the same time.
Most of the AirBnB and Uber horror stories you hear are things that don't happen, or happen far less relative to the overall volume, in a world of licensed taxis and professional hotels/B&Bs.
Does the good of current regulations outweigh the bad? Likely not, in many cases. But there are reasons (at least some of) these regulations exist outside of capitalism being terrible and the successful trying (and succeeding) at pushing out competition.
Landlords often are annoyed about regulations (and some tenants unfortunately abuse them) but many came about because of the abusive practices of the slumlords.
Our society deems having a safe place to live pretty essential so landlords have a massive amount of power over their tenants if unchecked.
FTFY
If you've seen the HBO series Deadwood (a masterpiece, BTW), I'd say we're replacing an Al Swearengen with a George Hearst. Both may be villains, but the scale makes all the difference...
There is a lot more transparency with Uber, however if they achieve a near total monopoly on transportation such as Google did for search, the end result from a consumer experience standpoint may end up the same, with different trade offs.
The alternate issue, the employees/drivers, won't matter in the long run because there won't be drivers whether it was Uber or medallion holders.
You mean those in society with disposable income to invest (or a 401K). That's not quite the same as "society".
> The medallion owners largely were individuals who had the access to credit and leveraged in as the values rose.
Sure, they were small-business entrepreneurs. As I said, they are Swearengen to Uber's Hearst, but their immigrant employees certainly benefit from the regulation, too.
> The alternate issue, the employees/drivers, won't matter in the long run because there won't be drivers whether it was Uber or medallion holders.
Perhaps, but there will be other similar issues.
thats a ludicrous reductionism as to what "publicly traded" company actually means and it discredits the rest of otherwise reasonable argument to say this.
No, if Uber is ever nationalized, then the owner will be society.
If Uber merely goes public, then the owners will still be the stockholders, its just that it will be easier to trade in the stock.
It's unreal that people would attempt to defend this.
When people are asking politicians why Joe Doe was able to operate his "taxi" company that wouldn't stop his car outside of the ghetto without a $50 "oops, I got lost fee", it seems obvious why regulation is put in place.
That isn't to say that said regulation remains entirely useful, just that your argument isn't really bore out by the history.
The reason why zenefits is having issues is that the laws they broke are still entirely relevant to everyone involved.
The so-called "sharing economy" could as well be called "fuck you economy".
Go back and you find people wanted to cut the number of Taxii on the roads. I would much rather you use a bus than a Taxi. The problem was regulatory capture constricted past this point.
ex: We don't want a lot of them on the road making traffic worse. Drive to B -> C you add X congestion, call a cab they drive from A -> B to pick you up, then B->C that's X + Y congestion, pollution, risk for accidents etc.
PS: The real issue is after regulation people tend to forget why it was added. "Let's deregulate Banks!"
The explicit reason given, at least in the case of NYC, was the desire to make driving taxis more profitable. During the Great Depression there were more drivers than passengers and it couldn't pay the bills. How do we solve this? Limit the supply of drivers, therefore raising the price and reducing competition. From a consumer standpoint this is terrible.
We would have ended up with an explicit monopoly for a specific company if it weren't for some folks getting convicted of corruption (taxi company bribes) scuttling that deal.
> I would much rather you use a bus than a Taxi. The problem was regulatory capture constricted past this point. >ex: We don't want a lot of them on the road making traffic worse. Drive to B -> C you add X congestion, call a cab they drive from A -> B to pick you up, then B->C that's X + Y congestion, pollution, risk for accidents etc.
Why limit it to taxis? There is a great way to promote public transit, reduce air congestion and pay for roads: tolls and congestion pricing. This would affect all drivers, not just certain drivers.
>PS: The real issue is after regulation people tend to forget why it was added. "Let's deregulate Banks!"
The irony is it appears you've forgotten why these regulations were created in the first place.
https://books.google.com/books?id=VXpyNs5EaHEC&pg=PA119&lpg=...
It confirms the story that I have heard previously that taxi medallions were introduced to protect consumers. This doesn't mean that profit was not a reason but I'd like to see something that shows the "explicit" reason you state.
Is it? If it's not paying the bills, then you're not going to have people doing it. Making sure that the price is at a point where it can sustain itself makes it much more likely that it'll still be there tomorrow.
Yes, but what regulators didn't realize (and still don't) is that economic incidence is tricky. Just because you can charge more, doesn't mean any specific factor in the production chain gets to partake in any of that.
For example, just because Gucci bags surge in popularity doesn't mean the Gucci office janitor can charge more for his labor -- the supply of such services is unaffected and they can find more providers at the same price.
And indeed, the same dynamic applied for taxi medallions: sure, you can charge more to passengers, but the immense supply of qualified drivers -- who only need a small takehome -- means that they'll bid up the price of the medallions (rental price or capitalized) so that the drivers are still poverty level, and almost all the monopoly profits go to medallion holders, not drivers.
It could also be that insurance industry participants are more centralized and organized than taxi and real estate companies, but I'm less sure that this was a driving factor in the regulation.
while it isn't possible to "front run" your insurance deal as your broker, putting you into the wrong insurance has a variety of outside financial consequences that are not insurance related at all.
For example - Zenfits could theoretically "redline" certain kinds of businesses into certain kinds of insurance, even though the employee pools qualify for something better/totally different. By doing so, Zenefits could make more profit per insurance policy sale and renewal, but their is more risk in the lifetime customer that they will explode, since it is the wrong policy. Zenefits see hypergrowth and projections towards even further hypergrowth. However, they also create systemic SMB risk
Since SMBs do not typically get lots of help with these sorts of HR issues, the "wrong" insurance could be the difference between bankrupcy and existence 5 years down the line, even though there is competition among policies. The broker is supposed to act as guidance among many competing insurance policies against that eventuality, hence the regulation.
If Zenefits can't guarantee their employees can actually act not in Zenefits interest as brokers when queried about two policies and the benefit to the customer, despite what Zenefits would make out of the sale, because of behavior within Zenefits, then there are problems for the businesses that brokered with them, and any bank that loaned them money (since part of the premise there is that this stuff is properly managed!)
I'm actually surprised I'm the first one who mentioned it. People are very focused on the Zenefits as startup issue, rather than focusing on "What if it was say one of AIG's largest franchisees (or insert some conglomerate of insurance brokers, especially as famous as AIG) who was doing this." Once framed this way, it becomes much more obvious that the startup issue and how it relates to growth is a different set of issues and framing than "cheating on tests in insurance brokering/lacking proper insurance brokers doing the sales/place of regulation in insurance."
This especially becomes true when if you turn on the tv and hear the occasional pitch about loans against life insurance policies, or question too deeply why AIG was even betting in the subprime mortgage market and became systemic risk if they are an insurer.
It must mean that insurance itself is a kind of financial instrument, or cash flow, or something where you can create exchanges off of it in its own way(1). Which means there is fiduciary duty of some sort when the initial underwriting for the insurance is written.
This is going to be a headache for anyone who bought one of those policies and/or underwrote one.
(1)Technically speaking, options, futures, and forwards all started out as insurance contracts, some dating back as far as before Hammarabuai's code, so insurance contracts today must be some remainder of something special, I suppose.
The regulatory pushback that Uber and AirBnB have demonstrated has been in the public face.
The fraud that Zenefits is being accused of was not expected by the consumer. They offered themselves as an insurance broker where the agents were licensed insurance brokers. It turns out that isn't the case. That's probably considered fraud.
The issue is people allege that daily fantasy sports is more akin to the illegal type of gambling because it doesn't require enough skill whereas the law was intended to cover the traditional type of fantasy sports which require more than 1 day commitment and smaller sums of money.
If the customers of Zenefits knew they aren't brokers, and if it was publicly clear and accepted, then maybe there is a slight chance of justification. "Public do not want regulation" they could say. Airbnb never said they were a hotel. Uber went out of their way to prove they aren't a taxi company. They did not disguise as one.
Hey night last slightly longer than Zenefits, but I would expect to see major changes in how they operate.
I don't know enough about Draftkings to say one way or another other than it appears they have greased the right palms to continue to operate for the time being.
Uber broke rules in individual cities, facing the choice of (a) not entering a city, or (b) entering the city by breaking rules. Stretching local rules didn't threaten the survival of Uber the company, it just meant they might be shut down in a single city or area.
Zenefits apparently broke rules in such a way that it did threaten the existence of the company. If the news coverage is accurate, insurers could decide or be forced to cut them off as a broker, they could lose their licenses, or have a pile of lawsuits.
You can only get away with it for so long...
I wonder if this is really just the result of infighting more than regulation.
People were given low salaries with the promise of increases when funding came through, but Zenefits didn’t make good on those promises when it raised new investments.
Zenefits is an example of the exact opposite of your point - financial and state regulators have little tolerance for companies that break regulatory laws, regardless of how fast they are growing. See also Sand Hill Exchange [1].
[1] http://www.bloombergview.com/articles/2015-06-19/bitcoin-buc...
Zenefits customers are not demanding their health insurance be sold to them by non-compliant, unlicensed agents.
Nobody wins in the Zenefits case.
Essentially, if you are growing fast enough you have plenty of money to be able to hire good lawyers and advisers and clean up and manage any mess that you create.