Companies Built on Sharing Balk When It Comes to Regulators
nytimes.com
nytimes.com
My lesson, as a former engineer in a regulated industry who later did a stint at a federal agency: you'd be shocked by how many people, not lobbyists but real people, have priorities other than maximizing the rate of new technology deployment. Most people see "disruption" as a bad thing. This is a fact that serves the interests of incumbent industries, but it's a fact that exists on its own apart from those interests.
It's undeniable that incumbent industries have figured out how to use those regulations to protect themselves. And it's great to see start-ups that are willing to fight these fights and enter regulated industries. But I think "rules don't apply to us" bravado like Mr. Chesky's comments are counter-productive. It's rare that a regulation is wholly a sop to some politically-favored industry. There are legitimate interests in play, and dismissing those interests out of hand and needlessly antagonizing those that have different priorities is a sure way to turn the process into a very expensive legal battle.
In this case, I think it's a miscalculation to think it's merely a fight against the hotel industry. It's not. It's a fight against condo and co-op owners. In New York City, the land of $15 million 3-bedroom units, that's a class of people you don't want to needlessly antagonize.
And, yes, political special interests are rarely a main reason for regulatory capture. However, business interests are much more influential.
I am at loss why would you use inflammatory language like "bravado", "tropes", "hilarious" and simultaneously criticize Cheskys comments for being counter-productive.
As a member of the community at stake, I applaud Albany for pursuing AirBNB's customer lists. I want to see heightened enforcement, not compromise. So far, I'm very pleased with my elected officials on this one.
It's typical American exploitative extortion tactics, especially of foreign tourists. Nowhere is it clearly indicated how much the taxes and fees are when you see prices, nowhere is it even indicated what the percentage rate is. We live in a country and society of fraud, deception, and scam and the hotel industry and it's beneficiaries are no exception. We live in a society that does not regulate with the interests of citizens or the protection of the vulnerable and minority from the tyranny of the majority and powerful like our Constitution demands. We regulate as favors and advantages to certain industries or in the most extreme violations of all things good and just and then only with much labor and strife.
The burden of a sales tax is shared between the business and the customer in a proportion that depends on the elasticity of supply and demand, independently of who is (legally) charged the tax. In general, it's not good for a business when a sales tax makes their product more expensive, because that decreases demand.
They're not the only people who might reasonably want regulations on short-term rentals. Many long-term renters have a legitimate interest in the quality of their buildings and their neighborhoods, even though they don't own a piece of either.
As a long-term renter, you may quite fairly be concerned about the negative consequences of short-term rentals. Those consequences could conceivably include noise, property damage, and crime. Not necessarily, but conceivably.
Is there a difference in impact between a) one apartment dweller renting on AirBnB, and b) a 100-unit motel that charges by the hour? Of course there is. Perhaps the laws will evolve to reflect that. But for now, it's reasonable for long-term residents to be concerned about the latter situation developing if AirBnB is subject to no regulation at all.
The problem is scale. 1 apartment getting rented on AirBnB probably isn't a problem for anyone at all. But if it's 1%? That's a significant reduction in available housing. Given that NYC already has a gigantic housing and real estate problem, anything that can conceivably compound the issue will get attention.
Except, perhaps, for the landlord or condo association. Either one could have legitimate concerns about that. Especially if the lease or condo rules prohibit subletting or renting without permission. Even if they don't, the landlord or association may be worried about the guests' lack of accountability, or the landlord or association's absence from the screening process.
> Given that NYC already has a gigantic housing and real estate problem, anything that can conceivably compound the issue will get attention.
Good point.
The actions of UberX and Lyft in Seattle over the "ridesharing" debate have been demonstrative. I'll say upfront that the Seattle City Council's idea to cap Transportation Network Company (TNC) drivers to 150 per TNC seems shortsighted, but I can understand why[1]. When Lyft and UberX didn't get exactly what they wanted, they filed and paid for signature gathering to put the ordinance to a referendum; their right to do so under law. However, that referendum suspends the ordinance that makes their business model legal. Instead of ceasing, both companies doubled-down. Why do they get to break the law in the name of "disruption" when most of the rest of us don't?
0 - For-hire drivers have to meet certain requirements that Lyft and UberX drivers don't meet. Further, both companies actively solicit for people to violate the terms of their auto insurance. Being canceled "for cause" by an auto insurer is an almost guaranteed way to see a person's rates double with the next company.
1 - I can think of two reasons. First, it's because taxis are capped and, while that system is badly broken, it can't just be yanked out from under the existing taxi system. That leads to the second reason, which is the Council not wanting to have hundreds or thousands of cars trying to cruise the same areas while looking for passengers.
I don't think UberX and airbnb are operating under any illusions that there won't be consequences. I think that they're hoping members of the public will grow to like their services faster than regulators can stamp them out, and that public fury over attempts to stamp out the services will prompt changes in the law.
I see this as objectionable if the companies mislead their users who provide services about the legal risks they may incur, but not otherwise. People who feel strongly about a moral duty to obey the law may disagree on this point.
Kevin Laws of AngelList, a site that unites start-ups and investors, explained that “the approach almost all start-ups take is to see if they can be successful fast enough so they can have enough money to work with the regulators.”
Re 1 - Market supply and demand fixes the problem of hundreds or thousands of cars trying to cruise the same areas.
[1] http://pando.com/2014/03/31/half-of-ubers-insurance-arrangem...
In theory, regulation should make cabbies better, but that just doesn't happen. I dread using cabs - more than half the time I feel like I have to take part in the driving if I want to get anywhere.
It depends what you mean by 'better.' The regulation of nuclear plants isn't intended to make them more efficient.
It is against the law in New York City to rent out an apartment for less than a month, a 2010 measure meant to curb unregulated hotels. [NY Attorney General] Mr. Schneiderman says 60 percent of Airbnb rentals in New York are illegal.
If that is the case, then it seems entirely reasonable for the legal authorities to seek the identity of those offering those rentals and prosecute them. These people aren't "regular New Yorkers", as Airbnb claim, if they're regularly and systematically breaking the law.
It might not be a good law in some people's opinion, but the correct solution for those people is to make a case for better laws, not to break the existing ones and just hope they'll get away with it.
Then, a few years ago, Silicon Valley had a collective insight: Better to ask forgiveness than permission.
Maybe not so much, as it turns out that laughable arguments about being a new category of "microentrepreneur" operator that is neither person nor business and is therefore somehow outside the law are treated with the contempt they deserve by the legal authorities.
In a blog post, Airbnb said the regulators’ plan was to accuse Airbnb hosts in court “of being bad neighbors and bad citizens.” It added: “They’ll call us slumlords and tax cheats. They might even say we all faked the moon landing.”
Indeed, it's hard to imagine why people who say things like that don't get taken entirely seriously.
I'm all for disruption, and I sympathise with the little guy start-up trying to compete against big guy established players, but that's the game. You don't get to win by just ignoring the rules. This summed up the whole situation for me:
Micah Lasher, Mr. Schneiderman’s chief of staff, fired back that “being innovative is not a defense to breaking the law.”
Seems a bit like Youtube's playbook back in the day where they turned a blind eye to rampant copyright infringement so they could secure a big exit. Or even Uber right now that has been skirting taxi laws. The 'grow fast, law be damned attitude' might be good for getting rich quick, but can also permanently damage some nascent business models.
If you want to share your space, then why are you charging me?
There's a huge difference between couch surfing and AirBnB.
The fact that Silicon Valley is trying to convince us that subletting your apartment constitutes "sharing" says a lot about their values.
It is still the USA after all, the land of scam, fraud, and deception, and manipulation. But I have to say, a lot of these companies, AirBnB included, are a LOT more transparent and honest than most of the industries and sectors that tech companies are trying to disrupt, uproot, and supplant. Maybe they are simply being drawn into the American status quo of having to be manipulative and deceptive and lying in order to get anything done.
I'm not sure if this is genius or plain foolishness.
One one hand I agree with him about laws needing to change with the time. On the other hand I just can see how he can think he can wave his hands and say that they don't fall under the existing laws and therefore aren't accountable to them.
Obviously, a micro-entrepreneur, like any other entrepreneur, runs a business, and the laws for businesses apply.
As an airbnb customer, I'd be more happy if they'd properly work on improving the legal situation than playing this silly PR game.
I see two difficulties here.
1. Much of the time, it's difficult to draw a clear line between an individual doing normal, unregulated things for which they happen to receive a bit of money and a person acting as a business. If some government official tried to punish me for running an unlicensed taxi service when I give a friend a ride in my car and ask for gas money, the case would be laughed out of court. Is it different if it's someone I just met, say at the airport instead of a friend? Is it different if it's a stranger and the arrangement was made online? Is it different if a third-party intentionally facilitated the transaction?
2. These kinds of regulations seem unlikely to change unless people are actually doing things that arguably violate them. The strategy of getting a large number of individuals to use and/or provide services that don't play nicely with existing regulations is likely the only way a startup has any hope of getting the regulations changed to allow its new business model.
As an airbnb customer, I'd be more happy if they'd properly work on improving the legal situation than playing this silly PR game.
What does this mean? PR is generally how one changes the laws, especially in a representative democracy. I suppose hiring lobbyists and bribing politicians might also work; do you think that's better? By what method would you suggest airbnb work on improving the legal situation?
I think that one is quite straightforward.
If you're providing something in return for payment with the goal of making a profit, you are running a business.
When your friend gives you gas money, they're just paying their fair share of expenses you already incurred on behalf of the group. You're not making a profit and not running a business.
Additionally, laws are not executable code, not every hair has to be split up-front. Each of your scenarios would be addressed individually in a court of law.
As for #2, AirBNB could operate 100% entirely within the law tomorrow, if they wished: assiduously ban rentals that aren't owner-occupied.
This is exactly what I expect them to do.
Obey the damn law. Comply with investigators completely reasonable requests. Stop trying to "improve the legal situation" by shielding lawbreakers and issuing nonsense press releases.
This can make it difficult to know whether what you're doing is legal before incurring liability. It becomes a problem if a new official has a different interpretation of the law than the last one and decides to pursue enforcement aggressively. People can lose their livelihoods this way.
Comply with investigators completely reasonable requests.
You mean turn over private information about their customers to government officials who intend to take actions against those customers when they haven't been legally compelled to do so? If a company did that to me, I'd probably never do business with them again, and I would do my best to notify others.
Re PR: I didn't suggest they should not be using PR, I said they should not play this silly PR game. It is not the method I'm after, it is the content.
Instead of pointing fingers and calling names, airbnb could lead a constructive dialog. I think they actually do have a valid story to tell on how their service is a net-benefit for society as a whole, how it's different from running a hotel and why their micro-entrepreneurs should therefore be taxed differently (!= not at all) from running a hotel.
With startups, the model is a bit backward. VCs are the ones providing the funds to artificially fund a broken business model that creates market share before profitability. This acquired market share is the argument these startups are using to fight regulators. "Look we have public support."
Whether or not regulations are outdated or backward, they are still the law. Operating outside the law to garner support is not a legal or ethical way to change laws. It's just as bad or even worse than money getting closer to the lawmakers. Entrenched interests are a reality and something that should be fought on a level playing field.
My experience of working alongside or for regulators is that they overwhelmingly do not want to write new law unless they absolutely have to. Law is hard to write, hard to schedule and politically difficult to agree.
Generally regulators prefer industry associations or similar creating 'best practices' that the regulators can then rely on for evidence of recklessness or negligence compared to peers in the industry.
This can lead to established players in a market controlling the regulatory framework for innovation but this is solved through either new players engaging with the industry associations or a truly valuable innovative approach forcing legislators hands.
By not engaging with regulators and industry associations to address best practices the only route left is to be valuable and disruptive enough to require new law which is resisted by all those involved until the last moment possible.
It is always worth remembering that no matter how good your relationship with the regulator is their goals are not yours, they would like you as an industry to be successful but they exist to protect society as a whole and when placed in a position between your success and the perception of harm to society they will enforce regulations strongly.
I would prefer they just legitimize the business instead of playing all the shadow games. Honestly, I bet all the big airbnb "hosts" that run mini-hotel chains would rather the business be legitimized as well. It would certainly remove a lot of risk from their business (which in NYC is pretty high).
However, I would argue that the better approach is to question the mere existence of the hotel tax.
The question today seems to be, "Why doesn't Airbnb have to pay a tax all hotels in NYC have to pay?" The better question is, "Should hotel taxes exist in the first place?"
That question has already been put to the local electorate, and they seem to be happy enough with the status quo. Taxing hotels is a way for a locale to generate revenue from tourism. In this case, New York has something visitors want, and it wants to charge them for it. I don't see anything wrong with this. If you don't want to pay New York's Hotel taxes, don't go there.
If the shoe fits, wear it.
So it's not altogether surprising that they have awkward relations with regulators.
they argue that small tweaks to the business model (e.g. running a web service for taxis, rather than owning taxi vehicles) make them exempt from regulation. its a big stretch. not many cities are willing to give them a pass on this and there has recently been an incredible amount of friction with local regulatory authorities.
the relations with regulators is more than just awkward. its a farce.
http://www.stltoday.com/news/local/govt-and-politics/nick-pi...