New York City Mayor Bill DeBlasio’s proposal to control Uber’s growth this summer was met with fierce opposition from all angles. Tweets, Facebook posts, emails, and even a call to action from Ashton Kutcher (early Uber investor) poured in against DeBlasio. Uber challenged the mayor to a public debate. Uber even implemented a slight iteration in their app for users in the NYC region.
Complaints against the mayor and mockery of him and his proposal poured in from all across the globe.
In short: people were peeved. Peeved over a transportation regulation.
And this isn’t the first time that Uber has riled up the citizenry. The ride-sharing company is well-known for sending out emails to users in states and cities threatening to regulate it out of existence.
Cities, counties, and states — lobbied heavily by taxi companies looking to lose a lot with the rise of Uber, Lyft, and Sidecar — are wont to regulate the ride-sharing services. Whether it be with explicit bans on the service or with tiresome licensing regulations, local governments have gone up against the tech startups time and time again.
And they continue to lose.
How can this be? Free market think tanks and policy groups have been working for decades to deregulate the taxi industry. It has been shown by economists and policy-wonks alike that taxi and transportation regulations do more harm than good, hurt the people they are supposed to help, and are ultimately the devices of taxi companies looking to stamp out competition.
The answer is simple: people are rationally ignorant.
While taxi and transportation regulations often hurt the consumers they are paraded around to protect, most people don’t see the costs of the regulations in traditional markets. Regulations may cost them a few dollars more, but taking the time to become well-read on the matter and reaching out to city hall likely costs them more. Meanwhile, the taxi companies have millions to gain from successful lobbying efforts.
It makes sense for most people not to pay a lot of attention to transportation regulations. Even with hours of convincing and remonstration, they can only imagine a better option than the taxi cartels. The cartels, on the other hand, have a very concrete alternative for which they lobby.
The sharing economy changes all of this.
From Rational Ignorance to Rational Indignation
Startups like Uber present people with real alternatives. They don’t present people with white papers showing how economically inefficient protectionism is. They don’t try to show how the money is flowing from taxi companies to corrupt politicians. They don’t even have to hire lobbyists to go up against the status quo.
Instead, they change people’s experiences.
New users of services like Uber and Airbnb almost always are shocked by how easy they are to use. For Uber, you just press a button and a car shows up. You tell the driver where you are going and get out. No money ever has to change hands, you don’t have to worry about getting lost thanks to a GPS built into the app, and you aren’t berated to bring cash rather than a credit card.
Now consumers have a real alternative against which they can compare the status quo.
When regulators and politicians, like DeBlasio, come along and try to crack down on these plucky upstarts, now consumers have a personal reason to put pressure on city hall and get angry. When before it was only that “hey, some alternatives might hypothetically be hurt in the future,” now it is, “hey, they are trying to take this away from you!”
Uber’s request that drivers keep working in areas where the service is illegal is a sign that they know people want the service. The fact that people keep using the service while it is illegal shows that entrepreneurship outpaces politics. While they are technically engaged in civil disobedience, users likely neither care nor know the legal status of the services.
Airbnb hosts rent out their apartments against the terms of their leases. They probably violate some hospitality regulations in their cities. They don’t really care. The experience is so positive that both hosts and users win.
What makes this entrepreneurship new is that the barrier to entry is so low for somebody to engage in the exchange. When before somebody would have to apply for a job or go directly to consume a service, one becomes a user and an employee at the press of the button. The ease at which experiences can be created and benefits can flow is magnitudes greater than under older models of business.
Create Better Experiences — Politics Will Follow
Politics follows innovation at a snail’s pace. Mired in entrenched interests and working on fixed schedules, politicians will follow consumers only when the pressure to do so outweighs the pressure to stymy their options.
Trying to change people’s beliefs and getting them to put pressure on politicians is hard enough for major issues like foreign policy and social issues. Trying to change their beliefs on seemingly minor issues like business regulations and taxes can be nearly impossible — unless something puts their skin in the game.
The new era of entrepreneurship does this. Sharing economy users and hosts (i.e., those who are providing the services) both have much to lose at the hands of overzealous regulators lobbied by entrenched interests.
Everybody wins — except for the status quo.