
Companies Built on Sharing Balk When It Comes to Regulators - petethomas
http://www.nytimes.com/2014/04/22/business/companies-built-on-sharing-balk-when-it-comes-to-regulators.html
======
rayiner
> Many start-ups define “working with” regulators as simply accusing them of
> holding back innovation. But Mr. Laws said regulators were trying to balance
> many competing interests. “This assumption that they’re always bad in my
> experience has been almost 100 percent wrong,” he said.

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.

~~~
vdaniuk
I disagree. Your statement that regulators give a due weight to important
priorities of a democratic society in theory is definitely true. However,
regulatory capture is very real and I would hypothesize that majority of
regulators are serving special interests, not community interests.

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.

~~~
hapless
It's not impossible for it to be both. Special-interest hotel owners AND
average citizens both have excellent reasons to see illegal hotels stamped
out.

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.

------
techsupporter
This is the same problem that I have with UberX, Lyft, and Sidecar. As a
customer, I love the services. As a citizen of where I live, I'm upset at them
breaking the law--or, more specifically, condoning and aiding breaking the
law[0]--and not only expecting not to have any consequences for that but going
so far as to be furious when there are consequences.

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.

~~~
Zak
_breaking the law[0]--and not only expecting not to have any consequences for
that but going so far as to be furious when there are consequences._

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.

~~~
rexf
Correct, the article says the same:

 _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.”_

~~~
Zak
Having money isn't quite the same as having passionate users and therefore
public support. Both are important for getting regulations changed.

------
Silhouette
It's hard to sympathise with Airbnb if the facts as presented in the article
are accurate.

 _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.”_

~~~
GVIrish
Yes it's hard to feel sympathy for Airbnb when they openly flout the law then
ridicule regulators whose job it is to uphold the law. These guys are ignoring
the law because it is profitable to them, not because of a fundamental belief
that the laws are unjust and they're doing the "right thing" by breaking them.
Why are they any different than any other business that ignores the law for
profit?

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.

------
numbsafari
I have a hard time with the word "sharing" when it comes to AirBnB.

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.

~~~
orky56
The sharing economy is based on selling the period you are not directly
utilizing the products/services you have paid for. The main issue is that
these startups have not paid for full use of these products/services under any
circumstances. In the case of AirBNB, majority of these places are rentals
with existing rental agreements that set up contracts that deal with
landlord/tenant.

------
chollida1
> “There are laws for people and there are laws for business, but you are a
> new category, a third category, people as businesses,” Brian Chesky,
> Airbnb’s chief executive, told an audience last fall. “As hosts, you are
> microentrepreneurs, and there are no laws written for microentrepreneurs.”

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.

~~~
CookWithMe
When I read it, I immediately had to think of the classic joke: There are only
10 types of people: Those who understand binary and those who don't.

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.

~~~
Zak
_Obviously, a micro-entrepreneur, like any other entrepreneur, runs a
business, and the laws for businesses apply._

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?

~~~
hapless
Item #1 isn't a problem at all. Every day, courts have no trouble
differentiating a business from what you do with your friends. Courts aren't
stupid.

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.

~~~
Zak
_not every hair has to be split up-front_

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.

------
orky56
We have a new model forming in regulation and special interests. With
traditional companies, we have paid lobbyists representing industries and
sectors when speaking with lawmakers directly.

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.

------
oracuk
The subject of start-ups and regulators has come up a few times recently and
there tends to be a view espoused that regulators are intent on legislating
away innovation.

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.

------
zby
I don't like how they use 'sharing' when it is about paying for something.

------
billmalarky
From what I've gathered, NYC doesn't like illegal hotels for a number of
reasons. An important one being that NYC's relatively high hotel tax forces
travelers to help foot the bill for the outrageous maintenance costs the city
has. Since airbnb "hotels" don't pay this tax, they really are stealing from
the city, not to mention undercutting legitimate hotels.

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).

~~~
atom-morgan
Your comment seems to be a popular one on this issue since most people
immediately compare Airbnb to hotels. Once they realize Airbnb doesn't have to
do something hotels do, like pay hotel taxes, they come to the conclusion that
Airbnb should play by the same rules and regulation as everyone else in the
hotel industry.

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?"

~~~
cantankerous
> 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.

~~~
billmalarky
It's not like the city is just being greedy either. City maintenance is
outrageous in NYC and tourists benefit from the city infrastructure while they
are here.

------
hapless
They're accused “of being bad neighbors and bad citizens.” “They’ll call us
slumlords and tax cheats."

If the shoe fits, wear it.

------
fsk
That's because Uber and Airbnb are doing regulatory arbitrage more than
anything else. If they were taxed and regulated to the same extent as their
existing competition, their business model wouldn't be viable.

------
Joeboy
I'm not in the US and don't know a lot about those companies, but it would
seem to me that they're more "built on unregulated commerce" than "built on
sharing".

So it's not altogether surprising that they have awkward relations with
regulators.

~~~
metaphorm
the issue is that, actually, the commerce IS regulated but these companies
have decided to try and operate without abiding by those regulations.

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.

------
ben1040
Lyft launched in St Louis this past Friday. It took 90 minutes from the launch
party for the first driver to get pulled over and cited. Yesterday afternoon a
judge issued an injunction telling them to shut down the service.

[http://www.stltoday.com/news/local/govt-and-politics/nick-
pi...](http://www.stltoday.com/news/local/govt-and-politics/nick-pistor/st-
louis-judge-orders-lyft-app-to-be-disabled-
in/article_39b51215-7f75-545f-b763-f2b61a142cb8.html)

