How old businesses fight innovators Uber, Airbnb
They count on good old politicians
On Twitter the other day, someone tweeted a quote from Will Spencer: “When life gives you lemons, apply for a business license, a food service license, and a sales tax license and make lemonade.”
This drew a reply from Tennessee Sen. Frank Niceley: “Then hire a lobbyist to make lemonade consumption mandatory and subsidize it.” Another cynic responded: “You then also need to require government approval to open new lemonade stands.” And the final word in this little colloquy was: “Then lobby again for regulations you can handle, but will bury your competition.”
Cynical or not, these statements accurately describe why economic progress is so much harder today than it once was. But why? And why are so many politicians coming out against innovative new services such as Uber or Airbnb?
The answer is simple: Those new services offer insufficient opportunities for graft. The old services they compete with — taxi or hotel companies — offer politicians a better deal, even if the deal they offer consumers often isn’t as good. And politicians back the companies because politicians don’t care about you; they care about using their positions to accumulate money and power.
Just imagine that you’re a bigcity mayor. If taxi medallions — granting the right to run a taxi to a limited number of people — sell for six figures, the people who own them are heavily invested. They’ll offer lots in the way of money, political support and votes to a politician who will protect their investment from competition. Thus, though services like Uber (which requires no medallions) are cheaper and offer service in poor neighborhoods where taxis won’t go, for a politician, it’s a no-brainer: Support your supporters.
The result is a host of regulations and taxes designed to protect old businesses from new competition.
Uber has been good at generating a large base of mobile customers, then using them to pressure politicians: When New York City Mayor Bill de Blasio went after Uber, Uber used its app to let its users pressure de Blasio. Happy Uber customer Kate Upton weighed in, producing more pushback than de Blasio could withstand — especially when it turned out he had gotten more than $550,000 in political donations from taxicab interests.
Other services aren’t so lucky, and the ability to do an end run around regulators isn’t universal.
One of the reasons that America enjoyed such tremendous growth over the past century was that technology outran regulators’ ability to keep up. Will that remain true over the coming decades? Let’s hope so.
We can’t make it in the 21st century with a 1950s economic model, however appealing that approach might be to politicians.