To Protect Legitimate Interests, Seattle Should Cap All Forms of Innovation
starkravingvc.com
starkravingvc.com
To the extent that stability of certain kinds of businesses is essential to the stability of our society, it's actually a very good thing that governments are somewhat conservative about protecting the establishment. Moreover, there's no law of the universe that says that "disruption" is a good thing, and there certainly isn't any clean way to weigh the interests of one big established industry with those of a large, successful, wealthy competitor industry.
Anyway, I have a hard time getting worked up over the regulatory disputes of corporations -- we have bigger problems, not the least of which is the question of why those big, successful companies get so much influence over the laws in the first place.
I'd add that since government is the mess-cleaner-upper of last resort, it's reasonable for them to limit the velocity of change. If Uber, etc, are really the future, then phasing in gradually larger quotas isn't going to stop the future from coming. But if instead there are unintended consequences, gradual introduction will let us find and fix those problems when they're small.
As an entrepreneur, that's great by me. If society gets burned on a big scale by some experiment, it may taint attitudes for years or decades. For example, the crash of 2008 has to made a lot of people extremely skeptical about financial innovation. In contrast, look at the very gradual expansion of drug liberalization in the US: people are slowing getting used to the idea that when people can buy weed in stores, nothing particularly bad happens.
There's something fairly close to a law which says that disruption is a good thing. Industries can only be disrupted by entrants that provide products that consumers prefer, so we have almost-a-law: disruption is a preferable-to-consumers thing. There a few cases where that's not socially desirable (I suppose crack replacing cocaine would be an example) but those are exceptional enough that I think we ought to regard disruption as presumed good unless shown otherwise.
Similarly, a decent heuristic for choosing whose interests to consider out of an established industry and a competitor is to let consumers choose which one is better. Of course this can be difficult for those in the established industry, but we're in a society-wide Prisoner's Dilemma over this, and a useful function of government would be making sure we all cooperate. Letting consumers choose the best companies is cooperation; protecting your own industry is defection. I'd be better off if my job and income were guaranteed, but I'd be worse off if everyone else got the same deal.
Many industries create negative externalities and government regulations force them to internalize some of those costs. Hotels are full of loud, annoying people; we stick them in certain parts of town only.
Or many industries are a form of cost pooling. The US decided that we want to have reliable mail delivery. The post office (which does an amazing job as compared to the vast majority of countries) uses the profits from short routes and urban centers to subsidize expensive and/or remote routes. Of course a business would love to come in a cherry pick the profitable routes. We -- rightly -- don't permit that, because we wish to have universal mail delivery and this is how we've chosen to pay for it. Reliable city-wide taxi service is probably similar; I don't know if uber et al are just cherry picking the best / most profitable routes, but I wouldn't be surprised. (And don't get me wrong, I love uber -- at least in sf, it's a taxi that actually comes. Amazing! But still, service guarantees are important, as are flat fares to/from airports, in part to avoid screwing tourists.)
And this doesn't even mention tax revenues; I know HN tends towards the glibertarian but the simple fact is if we, as a society, want nice things someone has to pay for them. A (big?) piece of many of these controversial startups' innovation seems to be thinly disguised tax avoidance (amazon, airbnb).
I actually think disruption tends to be neutral at best. Cities, especially dense urban living, are a large set of compromises amongst many people, and valley companies often have little respect for that.
hmm.
There are tons of examples where that's not socially desirable. Piracy is one easy example -- people don't want to pay for stuff, and will love a product to death if it enables piracy.
Said another way: what consumers like is orthogonal to what makes society better.
That's blatantly false at worst and misleading at best. People will love a product to death if it allows them to consume media on fair terms in an easy way.
Netflix reduced movie piracy and iTunes reduced music piracy. Because they're not priced in an insulting way, and because they're friction-free to use.
The concern that many people have is that technological disruption is replacing old industries that employed more people with new industries that -- while preferable to the consumer -- employ less... and that those jobs will not be replaced since the same thing is happening all across the economy.
Who then will be the consumer to whom these new industries are preferable?
Now maybe you think this time it's different, either because people won't be able to move up the "ladder" (like our grandparents learned to operate those machines) or that society won't be able to generate enough demand (which seems crazy to me, but okay). You could make that argument, but you aren't. Just pointing at innovations as job killers is like pointing at the sail and complaining about all the oarsmen who will be laid off.
Another lens to look at all of this through is the Star Trek future. In, like, three hundred years, what do you want society to look like? Like it does now, where people toil away at current productivity levels, or is everyone is vastly richer? Assuming you want that future to be awesome, how do you draw a line from here to there? Because the "we can't have technological disruption" attitude just can't really be on that line, right?
I agree, but only if we can solve our energy and resource problems. If we can't do that, supply constraints will keep that scenario from happening again. There won't be any growth. No growth + automation = massive unemployment.
Can't industries also be disrupted by evil government bureaucrats taking them over, by ordering in jack-booted stormtroopers to drive out all competitors, for the benefit of the all-powerful state?
Or does that not count as disruption because it's not a scrappy underdog?
So enact laws that force drivers who offer rides professionally to have insurance.
"I don't want my neighbor running an SRO out of his apartment"
Why not? The noise? We have existing nuisance laws for that.
"I like the ability to know that my prescription medications aren't radium-based elixirs."
We have consumer protection laws for that.
Protecting consumers from fraud is a good thing, as it promotes good service and (indirectly through increased trust) grows the economy, and makes people/customers/voters happier.
Protecting companies from their competitors is a bad thing, as it promotes bad service from being outcompeted, and (by allowing inefficiencies to stay unchecked) hampers economic growth, and prevents people/customers/voters from choosing what they want.
Those laws exist. They are called taxi regulations. Uber is flouting them.
Look, Uber can comply with all of the rules that taxicab companies have to. Uber chooses not to because it is more profitable to ignore the laws.
No sympathy for Uber. They could have played within the rules and still been disruptive--they chose to ignore the laws and now are getting bashed for it.
He's not saying that the regulations that the Seattle City Council chose to impose were the right ones to impose. He's saying that the inverse argument--that there should not be any regulations at all--isn't correct either.
For each of those arguments to work, you would need to demonstrate that laws protecting established businesses are necessary for each result.
Whether or not there are theoretically better methods to protect consumers is irrelevant unless they're practicable.
You make it sound like it's a scientific process. Once you hand it over to a political system, that goes out the window. See: New Jersey / Tesla for a nice recent demonstration.
Exactly. That's what I meant.
Yes, I am, at least in NYC. They are there to provide some consumer protection.
I will be speaking of New York.
First of all, a medallion isn't strictly required to operate a taxi-like car (for hire vehicles). It only affords them the permission to pick up passengers who flag a cab off the street. You are allowed to operate what is called a "car services" or "livery cab" too, they are allowed to only pick up and service people who call ahead to arrange the ride. Since the summer of 2012 livery cabs may pick up people who hail a cab outside the borough of Manhattan to serve undeserved populations (excluding the airports). Having a medallion means you are required to pick up any passenger who hails a cab, the first one you see, no matter if they are drunk, homeless, disabled, black, going to an undesired destination or otherwise "undesirable" passengers. Having a medallion also strictly regulates fares no matter what kind of car your medallion taxi is, including flat fees to get to the major airports. Taxis are regulated to look a certain way so you know you're getting into a licensed taxi and not a serial killer van. There are also very regular inspections of the vehicle to make sure it is up to safety standards. The authorities conduct undercover operations that ensure taxis are following the rules. The license plates bear a variation of the medallion number so that police can easily identify violators. It can be said or argued the limits of number of medallions is because there is limited space on the streets and you might not want them to be mostly taxis at the expense of other vehicles, before the medallion system there were at one time more taxis than taxi passengers. You also don't desire taxi drivers working very long hours to make a profit with excessive competition, because they might become fatigued and fall asleep at the wheel. Also the cost can facilitate the funding to enforce the regulations.
Is this the best system? I don't know, but it is there for a reason.
That's not protecting established businesses. All those laws are arguably meant to protect consumers. I can't see any justification for "caps". This is just the needless contrarianism that appears in the top comment of every HN post. This is undefendable though.
The problem of industries resisting change through the legal system is far worse than whatever small problems might be caused by disruption. In general humans are heavily biased against change. We need less resistance to change, not more.
If a certain kind of business is essential to the stability of our society then it should not be a business, it should be part of the government. "Essential" is a pretty strong word. A business should never be too big to fail. Free market competition should ensure that existing businesses will be quickly replaced by competitors if there is sufficient demand for their product or service.
we have bigger problems, not the least of which is the question of why those big, successful companies get so much influence over the laws in the first place
These are not even different problems, they are one and the same. The big, successful companies get so much influence over the laws because their friends in government shield them from competition, allowing them to grow into monopolies that are wealthy and powerful enough to exert influence over the laws.
This is done through industry regulations passed under the pretense of protecting consumers from the dangers of untrusted companies offering products of unknown quality, a concern that you expressed above. But when you look at who is actually lobbying for the tighter regulations and licensing requirements, it's always the established businesses looking to raise the barrier to new market entrants. That's their ulterior motive.
But you do need to ensure the reliability of your chosen mechanism. You can't just unleash the market on it, and hope for a good result. Unconstrained capitalism doesn't last, as demonstrated by its numerous crises, most notably in 1929.
Most of the time, the government will just heavily manipulate the market into doing what it wants to do. American farms are heavily subsided, for instance. Doesn't work too poorly, and lasts quite long.
Even if you strongly believe in free market and cut-throat competition, you need to ensure the market stays free somehow. You don't want any challenger to actually win.
http://en.wikipedia.org/wiki/Agricultural_subsidy
The restrictions at issue are protectionism run amok, but you do nobody any favors by making easily-debunked non-arguments.
I detest monopolies that are propped up and protected by government subsidies and regulations. The people who run such businesses are enriching themselves through rent-seeking behavior at the public's expense, and then taking bailouts when they can't make a profit, all under false pretenses like "stability," quality control, and regulatory compliance, which are really just protectionism. They enjoy this privilege because they have well-placed friends in the government, thanks to lobbying and campaign contributions. It is a form of corruption.
If a business is too big or too essential to fail, it should be a function of the government, so that there is public oversight/accountability and no rent-seeking at consumers' expense. Otherwise, it needs to be allowed to fail and be replaced by competitors, if it is not financially viable. If such a business is allowed to fail and is not replaced by a competitor, it was probably not that "essential" after all.
> we have bigger problems, not the least of which is the question of why those big, successful companies get so much influence over the laws in the first place.
If those big, successful companies can have so much influence, how exactly are you safe? This doesn't exactly support the gist of your first paragraph.
I don't have a dog in the fight, but I did spend some time reading the actual bill since these blog articles felt like more political campaigns than informative pieces. The last time this came up I posted https://news.ycombinator.com/item?id=7303232
The Seattle city council passed a law that made so-called "ride sharing" services legal after intentionally withholding prosecution for over a year. The law isn't perfect, but it does feel like it strives to balance protecting existing investments with new services. The most salient changes about the bill:
1. Seattle defines uberX, Lyft, etc as Transportation Network Companies (TNC) and declares all drivers as "for-hire" drivers, which is a legal distinction that means Seattle can regulate them.
2. TNCs are taxed at $50k for first year. Second year is the greater of $50k or .35% of gross revenue.
3. No more than 150 drivers may be associated with each TNC at a time, and each driver can work only 12 hours per 24 hour period. Previously the law would have limited 300 drivers per TNC per quarter regardless of who was active, and this was "the cap." For comparison, there are 1100 taxicabs in the city.
4. Drivers can't double dip: They can't both drive for-hire cars and also do uberX on the side. They also can't work for both uberX and Lyft.
5. Rates may either be flat-rate between preset zones OR subject to RCW Chapter 19.94. RCW Chapter 19.94 defines appropriate measurement devices that may be used with commerce, which I think precludes most cell phones... uberX would need to install meters it seems and precludes surge pricing.
6. The insurance requirements are stricter than what uberX or Lyft provide today and are mostly in line with existing taxicabs.
7. There was a 30% increase in the cap on cabs at the same time.
8. TNCs have to report their activities to the city, which will be available to the public for inspection.
Reading through the law, it seems largely sensible. The council lays out its logic for which pieces of the operations of a service like Uber need to be regulated, and specifies appropriate regulatory action on each item. We're talking about aspects like "transparency of rates", "certificates of safety" from mechanics, allowances for handicapped people, and insurance.
In fact, the council lays out a pilot program to assess whether such regulatory action is actually effective, "so that regulation provides a safety net that the public can rely on for its protection while new businesses innovate and use technology to better the lives of Washingtonians." The balance between "innovative" interests and those of consumers is clearly being weighed, and the council will assess "any negative unintended consequences of the pilot program" by next year.
Attacking the caps ignores the fact that they are associated primarily with the pilot program and initial regulation. You can think of it as a form of risk management for a trial, not dissimilar from that exercised in a medical drug trial.
[1] http://clerk.seattle.gov/~scripts/nph-brs.exe?s1=&s3=118036&...
Here in Baltimore, there are tons of illegal 'hack' cabs operated by 'private citizens,' mostly not white people, sometimes in their spare time, sometimes on the regular. They are illegal. But they do it anyway. And probably seldom get caught (they do not put weird devices advertising their existence on their front grill). Okay, such is the black/grey market, it happens.
But we're going to legalize some _other_ kind of illegal taxi service because it's run by white venture-funded capitalists instead? (Apparently we have, because I see the Uber cars here, I don't know the situation). Do the illegal hack cabs just have to accept internet-baed reservations, and they're suddenly legal too?
This article is bullshit. It's quite obvious to me that Seattle roads are a classic tragedy of the commons. There is a point where Seattle streets are saturated such that adding cars increases traffic and congestion without reducing cab time from point A to B. There is also a point where the supply of taxis meets the demand exactly.
Currently, we have little data to say where these points lie on the number line of "taxis" in Seattle. If the first point is less than the second, the city should place a limit at that point. If the second point is equal to or less than the first point, then the city can set the limit at an arbitrary value equal to or greater than the second point and let the market sort it out.
Either way, by regulating the quantity of taxis, the city can slowly increase the limit to find the optimal solution.
But even if we take it for granted, I still think your approach is pernicious. The issue with your - and the city's - method is that while the claimed problem is congestion, the solution is to limit the number of registered cars per service. But the error in that reasoning is that it presumes that they are perfectly correlated, and so it prevents market players from coming up with better solutions that reduce congestion without reducing the number of cars.
For example, services like Uber which rely completely on calls via the Internet have the potential to cause much lower congestion compared to a service that relies on having idle drivers drive around looking for people waving their arms.
If one wants to reduce congestion, then the only good solution is to tax cars driving in congested areas.
"But the six other councilmembers voted that idea down. Bruce Harrell, who voted last month in favor of the 150-cap, said that the city’s vision in the coming years is to remove caps and let consumer choice “dictate what’s out there.” But for now, the approved legislation lets TNCs operate legally in Seattle with oversight."
That's hardly the "stop all innovation" position that this VC is lampooning them as having.
If you read the beginning of the article, the one placing the caps on alternative taxis passed: "the Seattle City Council voted 9-0 Monday afternoon to enforce new legislation that will regulate app-based transportation companies like UberX, Lyft and Sidecar."
I think that it should probably be decided by the market, and I would love to be wrong about this. I just don't think that I am. Maybe if I were 10 years younger and didn't have kids, but at my current place in life, I'm calling a cab to take me to a hotel, and I don't have house guests that aren't really or like family to me.
The regulations were crafted by elected representatives of the people, if they aren't good, we can change them. This is Washington State, we passed both marriage equality and legalized marijuana at the ballet box. Surely we can legalize cars with ridiculous pink moustaches.
This may go to a deeper level than you intended, but law -- especially business regulation law like this -- is SO detailed and complex that I think that most citizens despair of being able to easily comment on changing it in any way that is not entirely generalities (such as: "I don't think that we should cap Uber's car-count").
I was listening to the Seattle city council meeting, and one of the councillors asked -- someone, staff or maybe the bill author -- "Why did we strike the section that lists the innumerable things that we don't want professional drivers to do (like, 'transport a prostitute' and such)?" The bill author responded, "Oh, well, we're reclassifying the TNCs as for-hire companies, so we already have law explaining all the things they can't do." (I'm paraphrasing, of course).
This struck me as both ridiculous -- I'm fairly sure that we don't need separate business regulation making it... more?... illegal for cab drivers to aid and abet separate crimes -- and also a cause for despair. The city councillors who have been focusing considerable attention on this particular subject for weeks now are unable to keep the bill straight in their heads. How impenetrable will it be to everyone else?
So they make up something to charge the pimp with.
If it was something that wasn't important to the author, like the last episode of some TV show, OK, but this whole taxi thing seems like a big deal. Treat the medium with respect if you care that much.
Why didn't we tell the DRM people where to stick it? The business of selling recorded performances is teeny tiny compared to the 1.5 billion programmable devices per year, the routers, the fiber, the software, etc. of the tech industry. And yet we are led by the nose.
If we figure out what makes taxi companies powerful, maybe we can rip the DRM out of our devices.
The rest of the seeming conundrum is, I think, evolved institutional codependence, bureaucratic inertia, and people's fundamental conservatism. That is:
1. Taxi companies and taxi regulators have grown up together. It's not that taxi companies are exactly lean, mean lobbying machines, and it's not that taxi regulators are exactly corrupt. It's that they know each other and are comfortable with each other and even when they're quarreling, they understand the limits of their relationship.
2. Hand-in-hand with that, people just don't like to make radical changes to regulatory systems. Even if the existing regulatory system is kind of crazy. There is a fairly large class of people who will assume that any system that's present must have some virtue, by mere testament of its presence.
3. Finally, regulatory commissions will tend to solve any problem by thinking they should regulate it. Some of it may be cold-blooded, "Well, I want to increase or at least preserve my influence, my power, heck, my job," but honestly I suspect that most of it isn't nearly that calculated. It's just, you've been spending years regulating taxis, when you see something new and taxi-like on the horizon, your response is much more likely to be, "Well, I should regulate that, too," than, "Maybe I should just pack it in and get out of everyone's way."
For whatever reason they aren't rendered immediately. Double hitting the F12 dev bar usually sorts it.
source: http://en.wikipedia.org/wiki/Fr%C3%A9d%C3%A9ric_Bastiat#Econ...
With regard to the first point, before there was email, Lysander Spooner attempted to compete with the (at the time notoriously high priced) US Postal Service. He was profitable, but the US government sued him out of existence.
You could argue the second point already happens "indirectly" through our less than transparent foreign policy.
The third point also kind of already takes place thanks to patents: the US government has given Microsoft a way to profit off of Android despite clearly demonstrating failure in this market.
Also AirBNB and Uber and similar things are in a weird spot since they are in heavily regulated industries.
Some of the excuses are right out of the pimp playbook and deserve ridicule: our drivers are freelancers! no one is paying for a ride, these are voluntary donations! we don't encourage anyone to operate unlicensed taxis, we merely collect a referral fee!
Also, Microsoft is not a Seattle-based company.
You should not need to be wealthy to run or start a taxi service, or have to go through a or complex lengthy paperwork process. Whatever regulation there is, is definitely unfair to lower-income individuals who are otherwise perfectly capable of running a safe taxi service and meeting requirements that don't involve large fees or delays.
You should also not need to be associated with a high-tech startup company in order to start a taxi service. If Uber and the rest are able to somehow bypass or ignore the existing taxi regulation, or have been given a pass, that is incredibly unfair to the numerous individuals and small companies who have been prevented from starting taxis services, or prevented from having _legitimate_ taxi services, by outdated and protection-racket style taxi regulations. And also unfair to the people who went through the whole process and have regular taxi companies.
From what I can tell, most governments operate on a level similar to my high school student government, in terms of fairness and decision making. Basically like racist kids with barely-above average intelligence who give preference to the popular people, are completely inconsistent, manually collect forms and type them into barely-functional spreadsheets, take advantage of their positions, and, the one time they were given the opportunity to set fees, use their "government" as a vehicle to advance their personal wealth.
Within 5-15 years the human race will be completely irrelevant, as super-intelligent artificial general intelligence arrives on the planet and is forced to create zoo-like safety environments surrounding populations in order to prevent humans from destroying eachother and large areas of the planet with ordinary bombs, guns or even nuclear weapons.
- The US postal office has a legal monopoly on mail, and loses money every year.
- Airbnb has faced many legal battles over laws that protect hotels.
- Hospitals often charge arbitrarily high amounts for even small things like a pill or bandage.
- Public schools have an almost complete monopoly on education.
1.are you saying that taxicabs can be abolished as nobody would use them?
2. any business activity (ie. activity generating revenue stream) would rely on some government services, like, for example, road maintenance in this case. You drive more and thus cause more wear and tear on the roads, and this increase in your driving brings you additional revenue - seems to fair to tax such a revenue. Driving more you increase congestion which government [suppose to] spend money to solve. Being involved in frequent business transactions you'd probably have higher probability for the need for other government services - police, courts.
2. The business activity's externalities (e.g. contributing to congestion) could hypothetically be involved in an answer to my question!! While rhetorical, the question does have good answers from time to time. However, in this case, I don't believe the proposed cap is going to be very effective at mitigating those externalities, and the general concept of a "level playing field" is orthogonal to externality mitigation.
no. If one operator is paying for externality mitigation, it is only natural to level playing field by making other operators in the same business space to pay for the same externality mitigation.
But I question the TNCs strategy of approaching this long-term. It appears the strategy was simply to try and go the popular-opinion route. Of course the market has spoken, and it prefers Uber & Lyft by a huge margin over the traditional taxi market. However, in dealing with regulatory matters, political dealings are a necessary cost of doing business.
Instead, the TNCs did a few things wrong: 1) they jumped into the process a bit too late, 2) they took an antagonistic, condescending tone with the powers-that-be, and 2) they under-estimated the power of old-fashioned lobbying by the taxi industry.
Principles of market openness, disgust with the political climate, etc. don't really matter in light of moving ahead. Now, the Seattle market is likely stalled for a lengthy amount of time. And, future markets know they'll be able to extract a pound of flesh as the TNCs look to expand.
I hate the outcome and think the City Council deserves to be revoked, but the TNCs needed to do a much better job in handling this situation.