9 ms·

It's interesting how Uber, Airbnb and Draftkings blatantly broke laws and won. They set the precedent that if you're growing fast enough, the laws will change t

It's interesting how Uber, Airbnb and Draftkings blatantly broke laws and won. They set the precedent that if you're growing fast enough, the laws will change to fit you. Didn't work out that way for Zenefits. They seemingly lost.

paulsutter 11y ago
Not to defend breaking the law/rules in any case, but there's a big distinction here. Uber broke rules in individual cities, facing the choice of (a) not entering a city, or (b) entering the city by breaking rules. Stretching local rules didn't threaten the survival of Uber the company, it just meant they might be shut down in a single city or area. Zenefits apparently broke rules in such a way that it did threaten the existence of the company. If the news coverage is accurate, insurers could decide or be forced to cut them off as a broker, they could lose their licenses, or have a pile of lawsuits.
Pxtl 11y ago
They voluntarily admitted to it. Considering the macro just prevented auto-logout, would that even have ruined them? Im betting they could have quietly stopped using the macro once it was identified as a problem and gotten away with it. I wonder if this is really just the result of infighting more than regulation.
- jessaustin 11y ago
  Yeah the hack was just a pretext. The explanation for why everybody hates the former CEO isn't difficult to find in TFA: People were given low salaries with the promise of increases when funding came through, but Zenefits didn’t make good on those promises when it raised new investments.
___ab___ 11y ago
I think the reason that {Uber, AirBNB, DraftKings} succeeded in flouting the law is that they operated in industries that are consumer-facing, and where the cost of regulation is obvious to consumers. Many people understand that taxi regulations (for the most part) negatively affect them, and in many cases are extremely frustrated with them: see Washington, DC. Most people aren't familiar with and don't care about the company that manages their health insurance, and as a result there's little public support.
- pron 11y ago
  Exactly, but I'd phrase it a bit differently: when it comes to taxis and apartments, regulations are bad for you, the consumer, and good for the people in your community (taxi drivers, neighbors), while in insurance, regulations directly protect the consumer. Because people (especially in the US) couldn't care less about other people, regulation that annoys consumers is "bad", and the consumers then defend the companies breaking those particular laws. Those companies exploit the fact that in every industry, consumers always outnumber providers (or conversely, every person consumes from many more industries than those where they provide), and so the disregard for this kind of regulation will always work. Every new company will get consumers to gang up on the far fewer incumbent providers until they break the regulation that protects them, and so on, industry by industry. It's a little like the robber barons, who used every new wave of immigrants to beat up the previous generation of immigrants who tried to unionize, and then hired the new ones in their place... that is, until the next wave of immigrants. Except the new way of doing this is far more effective, because it's always easy to obtain a majority that supports you and feel like they're doing the right thing at the same time.
  - yummyfajitas 11y ago
    Similarly, Jim Crow regulations were bad for the consumer, but they were good for the people in your community who were protected from economic competition by Negroes. Of course, taxi regulations and Jim Crow laws are very bad for the people who are not lucky enough to get into the favored class...
    - deleted 11y ago
      [deleted]
    - gclaramunt 11y ago
      I hope you're just trolling :/
      - GFK_of_xmaspast 11y ago
        Check his post history.
leftnode 11y ago
I don't think Uber and Airbnb have won at all. There is still tremendous push back against them, neither are public companies, and Uber specifically is burning cash at a tremendous rate. Hey night last slightly longer than Zenefits, but I would expect to see major changes in how they operate. I don't know enough about Draftkings to say one way or another other than it appears they have greased the right palms to continue to operate for the time being.
wahsd 11y ago
Yeah. Zenefits took on a whole different weight-class of entrenched interests.
- zander312 11y ago
  yes this is very interesting!
nommm-nommm 11y ago
I dont think that Draftkings blatantly broke laws. The Unlawful Internet Gambling Enforcement Act of 2006 specifically excluded fantasy sports in the definition of gambling. The issue is people allege that daily fantasy sports is more akin to the illegal type of gambling because it doesn't require enough skill whereas the law was intended to cover the traditional type of fantasy sports which require more than 1 day commitment and smaller sums of money.
- ritchiea 11y ago
  Indeed, DratKings and Fanduel realized you could create a new type of fantasy sports competition that was still explicitly legal but also allowed for regular, compulsive gambling. It was actually quite clever. The fantasy sports gambling exemption was conceived for year long fantasy sports contests where typical participants bet small sums annually rather than casino like contests that allowed people to bet repetitively.
  - nommm-nommm 11y ago
    Perhaps you can say "exploited a [probably, maybe, unintended] legal loophole."
    - ritchiea 11y ago
      It's almost certain the Draftkings use case was unforeseen.
- deleted 11y ago
  [deleted]
timrpeterson 11y ago
I wouldn't say any of those companies have won. Irrespective of the legal challenges, none have a moat, essentially selling a commodity.
davidu 11y ago
This is the wrong takeaway. The regulatory pushback that Uber and AirBnB have demonstrated has been in the public face. The fraud that Zenefits is being accused of was not expected by the consumer. They offered themselves as an insurance broker where the agents were licensed insurance brokers. It turns out that isn't the case. That's probably considered fraud.
erod86 11y ago
Draftskings did not win and UBER is facing a ruling in California that can destroy its business model... You can only get away with it for so long...
arihant 11y ago
There is massive difference between aggressively renovating an outdated industry and committing fraud. If the customers of Zenefits knew they aren't brokers, and if it was publicly clear and accepted, then maybe there is a slight chance of justification. "Public do not want regulation" they could say. Airbnb never said they were a hotel. Uber went out of their way to prove they aren't a taxi company. They did not disguise as one.
deleted 11y ago
[deleted]
matchagaucho 11y ago
Apples and Oranges. Uber consumers are demanding the service. Zenefits customers are not demanding their health insurance be sold to them by non-compliant, unlicensed agents. Nobody wins in the Zenefits case.
nemild 11y ago
You might enjoy this post from Stratechery that discusses how strategy related to startups and regulations might be different for a Zenefits compared to an Uber: https://stratechery.com/2016/zenefits-and-regulation/ https://stratechery.com/2016/zenefits-and-regulation/
gist 11y ago
> They set the precedent that if you're growing fast enough, the laws will change to fit you. Essentially, if you are growing fast enough you have plenty of money to be able to hire good lawyers and advisers and clean up and manage any mess that you create.
pbreit 11y ago
I'd keep Zenefits in the winner column. In fact, after they clean things up, which will be relatively easy (compared to achieving hypergrowth), they will be in better legal shape than the others.
astral303 11y ago
I think this reading is relevant to this situation and your comment: "The Myth of the Rule of Law." http://faculty.msb.edu/hasnasj/GTWebSite/MythWeb.htm http://faculty.msb.edu/hasnasj/GTWebSite/MythWeb.htm
dodders 11y ago
I don't think Draftkings or Airbnb have 'won' - they are both facing significant legal challenges in various states (and in the case of Airbnb, globally) - it's not clear that either of them will emerge with a viable business. Zenefits is an example of the exact opposite of your point - financial and state regulators have little tolerance for companies that break regulatory laws, regardless of how fast they are growing. See also Sand Hill Exchange [1]. [1] http://www.bloombergview.com/articles/2015-06-19/bitcoin-bucket-shop-kicks-bucket http://www.bloombergview.com/articles/2015-06-19/bitcoin-buc...

paulsutter 11y ago

Not to defend breaking the law/rules in any case, but there's a big distinction here. Uber broke rules in individual cities, facing the choice of (a) not entering a city, or (b) entering the city by breaking rules. Stretching local rules didn't threaten the survival of Uber the company, it just meant they might be shut down in a single city or area. Zenefits apparently broke rules in such a way that it did threaten the existence of the company. If the news coverage is accurate, insurers could decide or be forced to cut them off as a broker, they could lose their licenses, or have a pile of lawsuits.

Pxtl 11y ago

They voluntarily admitted to it. Considering the macro just prevented auto-logout, would that even have ruined them? Im betting they could have quietly stopped using the macro once it was identified as a problem and gotten away with it. I wonder if this is really just the result of infighting more than regulation.

jessaustin 11y ago
Yeah the hack was just a pretext. The explanation for why everybody hates the former CEO isn't difficult to find in TFA: People were given low salaries with the promise of increases when funding came through, but Zenefits didn’t make good on those promises when it raised new investments.

___ab___ 11y ago

I think the reason that {Uber, AirBNB, DraftKings} succeeded in flouting the law is that they operated in industries that are consumer-facing, and where the cost of regulation is obvious to consumers. Many people understand that taxi regulations (for the most part) negatively affect them, and in many cases are extremely frustrated with them: see Washington, DC. Most people aren't familiar with and don't care about the company that manages their health insurance, and as a result there's little public support.

pron 11y ago
Exactly, but I'd phrase it a bit differently: when it comes to taxis and apartments, regulations are bad for you, the consumer, and good for the people in your community (taxi drivers, neighbors), while in insurance, regulations directly protect the consumer. Because people (especially in the US) couldn't care less about other people, regulation that annoys consumers is "bad", and the consumers then defend the companies breaking those particular laws. Those companies exploit the fact that in every industry, consumers always outnumber providers (or conversely, every person consumes from many more industries than those where they provide), and so the disregard for this kind of regulation will always work. Every new company will get consumers to gang up on the far fewer incumbent providers until they break the regulation that protects them, and so on, industry by industry. It's a little like the robber barons, who used every new wave of immigrants to beat up the previous generation of immigrants who tried to unionize, and then hired the new ones in their place... that is, until the next wave of immigrants. Except the new way of doing this is far more effective, because it's always easy to obtain a majority that supports you and feel like they're doing the right thing at the same time.
- yummyfajitas 11y ago
  Similarly, Jim Crow regulations were bad for the consumer, but they were good for the people in your community who were protected from economic competition by Negroes. Of course, taxi regulations and Jim Crow laws are very bad for the people who are not lucky enough to get into the favored class...
  - deleted 11y ago
    [deleted]
  - gclaramunt 11y ago
    I hope you're just trolling :/
    - GFK_of_xmaspast 11y ago
      Check his post history.

leftnode 11y ago

I don't think Uber and Airbnb have won at all. There is still tremendous push back against them, neither are public companies, and Uber specifically is burning cash at a tremendous rate. Hey night last slightly longer than Zenefits, but I would expect to see major changes in how they operate. I don't know enough about Draftkings to say one way or another other than it appears they have greased the right palms to continue to operate for the time being.

wahsd 11y ago

Yeah. Zenefits took on a whole different weight-class of entrenched interests.

zander312 11y ago
yes this is very interesting!

nommm-nommm 11y ago

I dont think that Draftkings blatantly broke laws. The Unlawful Internet Gambling Enforcement Act of 2006 specifically excluded fantasy sports in the definition of gambling. The issue is people allege that daily fantasy sports is more akin to the illegal type of gambling because it doesn't require enough skill whereas the law was intended to cover the traditional type of fantasy sports which require more than 1 day commitment and smaller sums of money.

ritchiea 11y ago
Indeed, DratKings and Fanduel realized you could create a new type of fantasy sports competition that was still explicitly legal but also allowed for regular, compulsive gambling. It was actually quite clever. The fantasy sports gambling exemption was conceived for year long fantasy sports contests where typical participants bet small sums annually rather than casino like contests that allowed people to bet repetitively.
- nommm-nommm 11y ago
  Perhaps you can say "exploited a [probably, maybe, unintended] legal loophole."
  - ritchiea 11y ago
    It's almost certain the Draftkings use case was unforeseen.
deleted 11y ago
[deleted]

timrpeterson 11y ago

I wouldn't say any of those companies have won. Irrespective of the legal challenges, none have a moat, essentially selling a commodity.

davidu 11y ago

This is the wrong takeaway. The regulatory pushback that Uber and AirBnB have demonstrated has been in the public face. The fraud that Zenefits is being accused of was not expected by the consumer. They offered themselves as an insurance broker where the agents were licensed insurance brokers. It turns out that isn't the case. That's probably considered fraud.

erod86 11y ago

Draftskings did not win and UBER is facing a ruling in California that can destroy its business model... You can only get away with it for so long...

arihant 11y ago

There is massive difference between aggressively renovating an outdated industry and committing fraud. If the customers of Zenefits knew they aren't brokers, and if it was publicly clear and accepted, then maybe there is a slight chance of justification. "Public do not want regulation" they could say. Airbnb never said they were a hotel. Uber went out of their way to prove they aren't a taxi company. They did not disguise as one.

deleted 11y ago

[deleted]

matchagaucho 11y ago

Apples and Oranges. Uber consumers are demanding the service. Zenefits customers are not demanding their health insurance be sold to them by non-compliant, unlicensed agents. Nobody wins in the Zenefits case.

nemild 11y ago

You might enjoy this post from Stratechery that discusses how strategy related to startups and regulations might be different for a Zenefits compared to an Uber: https://stratechery.com/2016/zenefits-and-regulation/ https://stratechery.com/2016/zenefits-and-regulation/

gist 11y ago

> They set the precedent that if you're growing fast enough, the laws will change to fit you. Essentially, if you are growing fast enough you have plenty of money to be able to hire good lawyers and advisers and clean up and manage any mess that you create.

pbreit 11y ago

I'd keep Zenefits in the winner column. In fact, after they clean things up, which will be relatively easy (compared to achieving hypergrowth), they will be in better legal shape than the others.

astral303 11y ago

I think this reading is relevant to this situation and your comment: "The Myth of the Rule of Law." http://faculty.msb.edu/hasnasj/GTWebSite/MythWeb.htm http://faculty.msb.edu/hasnasj/GTWebSite/MythWeb.htm

dodders 11y ago

I don't think Draftkings or Airbnb have 'won' - they are both facing significant legal challenges in various states (and in the case of Airbnb, globally) - it's not clear that either of them will emerge with a viable business. Zenefits is an example of the exact opposite of your point - financial and state regulators have little tolerance for companies that break regulatory laws, regardless of how fast they are growing. See also Sand Hill Exchange [1]. [1] http://www.bloombergview.com/articles/2015-06-19/bitcoin-bucket-shop-kicks-bucket http://www.bloombergview.com/articles/2015-06-19/bitcoin-buc...