It has been a fascinating week to see the war between Uber along with the De Blasio government play out.
This is just another very early round in what’s going to be a long and difficult war — not only between Uber and NYC, or Uber along with other towns, but between every high-growth startup innovating in a controlled sector and each regulator and lawmaker overseeing these industries.
Watching the huge battles that have played out so far — specifically around Uber and Airbnb — we have seen the exact same pattern many times over: fresh startup delivers a creative and beautiful new service that breaks the previous rules, ignoring those rules until they have critical mass of happy clients; regulators and incumbents respond by attempting to shut down the new invention; startups and their joyful customers rain hellfire on the regulators; questions arise about the true effect of the new innovation; a very small number of information is shared to settle the dispute.
I’m not sure there is a near term alternative for this process — new methods of doing things won’t ever see the light of day if step 1 is always”ask permission”. The solution will almost always be no, and fresh ideas will not have an opportunity to prove themselves.
It’s how these new platforms are regulating themselves. My colleague Brad has said that web platforms are like authorities , and that is becoming clearer by the day (just look at Reddit to the most recent chapter).
The principal innovation that contemporary web platforms have created is, basically, how to modulate, adaptively, at scale. Using tons and tons of real time data as their main tool, they have inverted the regulatory model. Instead of seek onerous up-front consent to onboard, users onboard easily, but are subsequently held to strict accountability throughout the information about their activities:
Contrast this with the traditional regulatory model — the 1 government uses to control the private sector, and it is the opposite — regulations concentrate on upfront permission as the primary instrument:
The cause of this makes a great deal of sense: when the current regulations were created (largely at the start of the progressive era in the early 20th century), we did not have access to real time data.
We’ve got data, plenty of it. In the case of the connection between internet platforms (companies) and their customers, we’re leveraging that data to present a regulatory regime of data-driven accountability. Just ask any Uber driver what their main complaint is, and you will probably hear that they can get booted off the stage for poor performance, very quickly.
The question is: how do we alter our public regulations to embrace this sort of model? Here is the part that Nobody will like:
1) Regulators will need to take a new version where they concentrate less on making it difficult for people to start. That means things relaxing licensing requirements (as an instance, all of the countries working on Bitcoin licensing right now) and raise the freedom to run . This is vital for innovation and experimentation.
2) In exchange for this freedom to operate, business need to share information with regulators — un-massaged, and in real time, just like their customers do together. AND, will have to accept that data may lead to forms of accountability. By way of instance, we ought to give ourselves the chance to enjoy the obvious advantages of this Ubers and Airbnbs of this planet, but also recognize that Uber could be making NYC traffic worse, and Airbnb could be making SF home affordability worse.
In other words, grant companies the freedoms they provide their customers, but also bring the Exact data-driven accountability:
That’s going to be a difficult pill to swallow, on either side, so I am not certain how we get there. But I feel that if we are honest with ourselves, we’ll recognize the approach to regulation which internet platforms have brought to their customers is an innovation in its own right, and is one which we should aim to apply to the public layer.
In her article now , she rightly points out that”Those choices are demanding if no one trusts each other” — platforms (rightly) do not trust regulators not to clamp down on new innovations, and authorities do not expect platforms to EITHER play with the present rules OR provide in-depth data for the sake of accountability.
In the meantime, we will get to see more battles as the war wages on.