Saturday, December 9, 2017

HBR: "We Don’t Need a Whole New Regulatory Regime for Platforms Like Uber and Airbnb"

From the Harvard Business Review, April 2016:
Many online platform businesses, such as Uber and Airbnb, have so far had a pretty easy ride when it comes to regulation. Your Airbnb host probably doesn’t have to worry about city fire-code inspections, for example, and it’s up to you, informed only by the driver review on the app, to decide whether you think the Uber vehicle you are about to step into is safe and road-worthy.

So far, the theory behind this laissez-fair regulatory approach — which many in Silicon Valley are happy to endorse — is that platform companies define new markets for which regulators were not prepared, and as such can’t be regulated in the same way as legacy companies. We believe, however, that these businesses have not redefined industries in a fundamental way; instead they are “old wines in new bottles.” They have more similarities than differences with traditional businesses, and should be regulated accordingly.

First, we should agree on a definition of a new market: in our view, it is commerce that brings together products and services with customers in a transaction that did not previously exist. A historical example of this is the introduction of cell phones, which created a fundamentally new market because consumers could connect with each other in ways that were just impossible with land lines. As a result, regulations influenced mainstream cell phone use differently depending on the country. In the UK, handsets and service plans were sold separately, giving rise to a whole new market of retailers and encouraging open competition among handset manufacturers. In contrast, in the U.S., regulators linked handsets to service plans, resulting in a telco-owned market and largely absent of any handset competition for years (until a certain smart phone came along).

Although today’s online platform businesses have the potential to expand demand through easier access and lower pricing, they don’t actually create new markets; they serve existing ones. While they do leverage nontraditional assets (e.g., shared capital, shared workforce) to efficiently deliver on the same customer promise, many equivalent approaches have appeared before within those same industries, and it is the successful disruption of the status quo — not any fundamental “newness” — that has incumbents worried....MORE
HT: 13D Research

Related, one of the quotes from last week's "The Neurochemistry of Smartphone Addiction":
 ...Or, from The Automatic Earth's "Tax Them Until They Bleed" post:
Industries that are not productive, but instead only extract money from society, need to be taxed so heavily they have trouble surviving. If that doesn’t happen, your economy will never thrive, or even survive. The whole service economy fata morgana must be thrown as far away as we can throw it. Economies must produce real, tangible things, or they die.