Regulators,
who are still attempting to respond to the creation of the Internet, will never
catch up to America’s entrepreneurs.
By
Jared Meyer
July
17, 2016
The following is
an adapted excerpt from the author’s new monograph “Uber-Positive:
Why Americans Love the Sharing Economy.”
Despite the
results of a new Pew Research Center poll showing that Americans overwhelmingly
reject the application of outdated regulations to the growing sharing
economy, government regulators have missed the message. Places as diverse as Austin,
Texas, and Montreal,
Quebec, have recently taken steps to suppress the sharing
economy—specifically ridesharing—by treating the Uber as a taxi company.
Regulators’ attitudes towards innovative new services can be summed up in one
phrase: “Regulators gonna regulate.”
But when
crafting regulation, policymakers need to keep in mind that the relationship
between consumers and service providers has been transformed
for the better in the sharing economy. Rather than keeping consumers safe,
regulators are now threatening the growth of the new economy—growth that has proven
to be a promising way to increase consumer choice, work opportunities, and
economic growth.
For example, at
every stage in ridesharing’s growth, established interests in the taxi industry
have used claims
about its dangers to scare politicians into acting. Each time, the claims
have been shown to be overstated
or blatantly
false. Undeterred, the industry continues to use any political means
available to maintain its monopoly. Rather than focusing on competing on Main
Street, Big Taxi turns its attention to city halls and state capitols.
It is difficult
for regulators to embrace the changing economy. Politicians on the campaign
trail often
talk about the need for regulatory reform, but their rhetoric alone will
not be enough to change policy. However, despite the continued attacks on
innovation, one major shift has happened in recent years—the rise of the
sharing economy. Workers finally have a way to satisfy their desires to work on
their own terms. It is now up to policymakers to facilitate workers’ calls for freedom, flexibility, and mobility, rather
than standing in the way.
We Like Creative
Business Models
Not only do many
workers prefer to take part in the sharing economy, but in the current period
of low economic growth it is an essential way to increase Americans’ earnings.
More than half of those people who provide services through the sharing economy
say they became better off financially over the past year. This is above the 32 percent level of
other workers who make the same statement.
Partially
because of the sharing economy’s success, and the subsequent hostile response
of some politicians, only 18 percent
of millennials believe regulators have the public’s interest primarily in mind.
Young people realize that many regulations do little to keep the public safe.
They want companies to be held liable for harming consumers, but they do not
support regulations that keep out new competition or dictate how entrepreneurs
must meet their customers’ needs. It is difficult, if not impossible, to find a
millennial who wants an outright ban on Uber and Airbnb.
Uber’s business
model is to start operating first and work with regulators later. This embrace
of permissionless
innovation flies in the face of the antiquated command-and-control model of
regulation. But it should not be the norm for American businesses to have to
ask for government permission to innovate. While innovators tirelessly work to
drive the economy forward, regulators now function as annoying backseat drivers
or roadblocks.
Rather than
applying outdated regulations on the sharing economy in the form of limits on
its growth or business models, policymakers need to allow legacy companies to
update their business models to better compete. In other words, taxi companies
need to be allowed to become more like Uber—not the other way around.
Resistance Is
Futile
By the time
policymakers catch up to a new service such as ridesharing, a new
innovation will already be gaining popularity. A regulatory framework for the
future must embrace flexibility if it is to allow for the next transformational
product or service to reach the market. One way to do this is to regulate by
specifying explicit ends (in terms of consumer safety) but leaving the means to
reach those benchmarks open to innovation.
Regulations
specifying rigid means that only work for current business models will be
outdated in a few years, when the next new technology arises. In short,
regulators, who are still attempting to respond to the creation of the
Internet, will never catch up to America’s entrepreneurs.
Uber’s strategy
of innovating around regulations might be compared with the effect e-mail has
had on the U.S. Postal Service. USPS still has a monopoly on delivering
letters—just as yellow taxis still have a monopoly on Manhattan street hails.
But the technological advancement of e-mail and forward thinking by FedEx and
UPS have rendered the postal service obsolete for companies and nothing more
than the butt of jokes about government inefficiency.
New technology
cannot simply be wished away. Rather, established firms face a choice: they can
either embrace innovation or they can follow the taxi companies’ lead and dig
in their heels as they are pulled toward irrelevance or bankruptcy.
Innovation
arises through individuals taking risks—trial and error, success and failure.
People must be free to experiment and put their unique knowledge to use. Every
time politicians and regulators call an Uber or plan a vacation with Airbnb, it
should remind them how the economy actually grows.
http://thefederalist.com/2016/07/17/why-americans-love-the-sharing-economy/?utm_source=The+Federalist+List&utm_campaign=40ee646292-RSS_The_Federalist_Daily_Updates_w_Transom&utm_medium=email&utm_term=0_cfcb868ceb-40ee646292-83795033