#regulation

In the last two weeks, there’s been two frontpage stories coming out of the “sharing economy” space. First up, news broke that Seattle passed new regulation to limit the number of drivers that Uber or Lyft can have on the road at any time, effectively hamstringing both services. Then, over the weekend a story started circulating about an Airbnb stay gone awry involving an orgy, Twitter, and of course the cops. While the stories are wildly different, they both sit at the intersection of the new “sharing economy” and the role of government regulation. Because of this, both stories sparked an intense debate everywhere from The Wall Street Journal to Hacker News. The attitudes and viewpoints of the discourse were interesting and revealing about people’s attitudes towards regulation in the taxi and hospitality space.

The opinion towards the new regulations in Seattle were overwhelmingly negative, ranging from claims of stifling innovation to accusations of outright corruption. Empirically, it seems that most people, even outside of early adopters, have generally positive feelings about Uber and Lyft. It might be because of the horrible experiences people have had in normal cabs or because of the perception of hackney companies as entrenched monopolies but I think it’s primarily due to people’s perception of risk surrounding Uber or Lyft. As a non-user, the perception of how “risky” it is to have Uber drivers operating in your city is probably near zero. Given how small a percentage of total drivers they’ll make up and that “licensed cab drivers” typically already operate in the area, I don’t think many people feel threatened by having additional drivers potentially ferrying people around their city. Because of this, it’s been easier for people to take hold of the “sharing economy” narrative where Lyft or Uber who were empowered to make a living are suddenly shut out by corrupt, entrenched interests.

Contrast this with the reactions from the same people to the Airbnb story, which ranged from disgust that someone would rent out their condo to strangers through feelings that Airbnb should be held liable for the actions of an independent third party. There’s no argument that the Airbnb story is significantly more disturbing, but it isn’t the first time something like this has happened and it certainly won’t be the last. So why such a different, visceral reaction? It’s perceived risk. As a non-user, the perceived risk to having Airbnb operate in your area is undeniably significant. Take a typical condo apartment building where every occupant is either a member of a condo association or a vetted rental tenant. Introducing the possibility of short term, “random occupants” certainly sounds risky and unnerving to anyone living in the building. Anyone considering the situation immediately evaluates worst case scenarios, “what if they’re criminals?” or “drug dealers?” and so on. Compared to driving, where interactions with strangers is a given, introducing “random interactions” into a scenario where it’s unexpected seems to push people towards favoring legislation.

As a whole, the emergence of the new “sharing economy” is probably a net positive. Despite that, companies are certainly thumbing their nose at government regulation and entrenched players which is going to cause ruffled feathers along the way. To win the hearts and minds, companies will definitely need to manage the perception of how risky their services are both to users and non-users alike.

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