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The biggest and most common "loophole" being "we don't need all the physical infrastructure" Amazon: we don't need to own retail stores or inventory Airbnb: w

by throwaway201103 6y ago

The biggest and most common "loophole" being "we don't need all the physical infrastructure" Amazon: we don't need to own retail stores or inventory Airbnb: we don't need to own hotel properties and employ managers and housekeepers Uber: we don't need to own cars and employ drivers Are there any examples of tech disruptors that are really displacing classic competitors only on the basis of tax loopholes?

rob74 6y ago
Can't think of any, but it's still fair to say that tax loopholes (and lack of other regulations that the established competitors are subject to, e.g. Taxi licenses) provide an additional advantage...
TheOtherHobbes 6y ago
Amazon: We don't need to pay sales tax or look after our warehouse employees AirBnB: We don't need to pay sales tax or look after our hosts Uber: We don't need to pay sales tax or look after our drivers The sales tax problem is only a loophole in some territories. The "look after" part is a problem in all of them.
buran77 6y ago
I never said (or meant only) "tax loopholes", Uber may even end up paying more tax than taxi companies. But taxi companies have a far, far higher bar in the eyes of the law. In most countries you can't just decide to climb in your private car and provide commercial transportation service. You have to spend a lot of time and money to get there, authorizations, commercial insurance, driver certifications, etc. Uber bypassed it by saying "we're a tech company" and left it to the drivers, making the enforcement of the law a lot harder. Hotels also have higher requirements than an AirBnB host but the company says "we're just the tech platform". Just look at conflict resolution and what kind of leverage and protections a client has when dealing with a hotel vs. dealing with a private renter to see the massive gap that comes attached to that "disruption". Because that's the thing, you could have short-term renting in the past but that wasn't an alternative to hotels. AirBnB made it a hotel alternative so that's the benchmark. Same with Uber, you could (legally) hitchhike in the past but Uber made the service a taxi alternative. Imagine Google "disrupting" the state/national/federal identity registry, as in become the equivalent of the passport or identity card issuer while offering Google-style support and SLAs. Some services are important enough to be regulated, this is what today's disruptors are bypassing. The solution to an industry being crap isn't to allow someone to bypass existing regulation, it's to create a set of effective regulations that can be applied equally to everyone.
- kd5bjo 6y ago
  > Uber bypassed it by saying "we're a tech company" and left it to the drivers, making the enforcement of the law a lot harder. The original loophole that Uber used was San Francisco’s different regulations between taxis and limo companies: The latter are less regulated but are allowed to accept prebooking, and not street hails. Uber realized that ordering a ride via a phone app is more convenient than trying to hail a passing taxi in many cases and can be served by a limo company instead.
  - emteycz 6y ago
    What's the difference from calling by phone, also served by many limo companies?
  - buran77 6y ago
    Not very familiar with the situation across the pond but in much of Europe the expectation from companies providing commercial transportation services are far higher than just booking method: - Drivers need a different, more expensive license or attestation that needs to be renewed periodically; - Car needs a more expensive commercial insurance that covers all passengers and cargo, to a much higher payout, not just the driver like most Uber drivers have; - Car needs to be inspected far more often to ensure it's roadworthy and can stand that driving regime for the future; - Prices are regulated because the taxi service is seen as closer to public transport than to personal one. So you don't see price fluctuations more than you'd see for the bus; - They need an authorization to serve an area (meaning they were checked according to local regulation); - The company is responsible for its employees in many ways; - And more. A restaurant's kitchen has higher requirements than your private one which makes owning and operating a commercial kitchen far more resource intensive than a private one. There's no "kitchen sharing" where you can sell food straight from your private kitchen, "infirmary sharing" where you can pretend you're a doctor or a hospital room, or "legal office sharing" where you can pretend to be a lawyer without meeting all the requirements imposed on those sectors. This is the loophole Uber exploited. Replace "car" with "house/room" and you get AirBnB. When they had enough of a head start they started complying with some regulation, while still acting like they're a different kind of service for what other regulation is concerned. They want to live on the border and pick and choose what applies to them, something no other commercial service is allowed to do. Except all the other disruptors who raise enough money to afford some fines while they still operate in a grey area. Cost of doing business.
mellavora 6y ago
uber: we don't need to demand/provide commercial insurance even though the vehicles are used commercially, private insurance can pick up the risk.
qwerty456127 6y ago
Nevertheless, all these are legitimate things if viewed from a different perspective. As a driver I like to have a platform to list my own services an independent way at instead of applying for a job at a transportation company. And as a passenger I like to be able to hire an individual driver. I don't want a taxi company nor the Uber company, just a private individual + a convenience website where I can find one. As a traveler I don't want a fancy hotel, let alone a shitty one - I prefer a decent room or a bed in an ordinary private home. If only Uber and AirBnB were just doing their job connecting individuals rather than trying to conquer the markets for themselves I would certainly be on their side.
- ghaff 6y ago
  >As a traveler I don't want a fancy hotel, let alone a shitty one - I prefer a decent room or a bed in an ordinary private home. I think that's a generally minority position though. For the most part, people prefer their own room, bathroom, and possibly kitchenette/sitting space. Along with flexibility about checking in and out. Not always of course. Sometimes you need to adapt if you're off the beaten path. But I'm pretty sure that if you surveyed most people, especially business travelers, they're not really looking for a speare room or bed in a private home.
  - qwerty456127 6y ago
    Obviously. But I believe there is enough no-hotel people to consider this an option worth existing. Same thing with transportation: a significant portion (if not the majority) of people would prefer to be serviced/employed by a serious company yet many drivers prefer to freelance and many customers prefer real people over corporations. In fact I myself mostly use classic taxis and hotels but I understand the value of being able to choose the other model.
miohtama 6y ago
> Airbnb: we don't need to own hotel properties and employ managers and housekeepers This is correct for AirBnb, but incorrect for the value chain. Someone must have the flat on their balance sheet. Someone must have a cleaner lady on a payroll. Is Airbnb value chain more effective that hotel value chain? Maybe. Maybe not. But for AirBnb host having a tax advantage of not being charged as a tourism business while in fact being one was clearly an advantage. Similar laws have been passed all over the world, including the US where it goes by a city or a state, Las Vegas being notable.
jasode 6y ago
>Airbnb: we don't need to own hotel properties and employ managers and housekeepers Fyi because this is a common misunderstanding: Hotel chains like Marriott, Hilton, Four Seasons, etc also do not own most of their physical properties[1]. They are primarily management companies instead of owning a portfolio of real estate. If you see a Hilton logo on the side of a building, it doesn't mean that Hilton actually owns it. The logo is there because they have a long-term contract to manage the hotel for the real owners of that property. >Amazon: we don't need to own retail stores or inventory Amazon isn't a totally "virtual" company. Amazon owns (or leases) physical distribution centers instead of retail stores. They've always paid sales taxes based on nexus of those DCs. What's recently changed (circa 2017?) was collecting sales taxes on behalf of 3rd-party marketplace sellers. [1] https://www.quora.com/Do-hotel-chains-like-Hilton-Mandarin-or-Marriott-own-their-real-estates-and-buildings https://www.quora.com/Do-hotel-chains-like-Hilton-Mandarin-o...
jonny_eh 6y ago
Opendoor is disrupting real estate agents by buying real estate and selling directly. Seems fair to me.

rob74 6y ago

Can't think of any, but it's still fair to say that tax loopholes (and lack of other regulations that the established competitors are subject to, e.g. Taxi licenses) provide an additional advantage...

TheOtherHobbes 6y ago

Amazon: We don't need to pay sales tax or look after our warehouse employees AirBnB: We don't need to pay sales tax or look after our hosts Uber: We don't need to pay sales tax or look after our drivers The sales tax problem is only a loophole in some territories. The "look after" part is a problem in all of them.

buran77 6y ago

I never said (or meant only) "tax loopholes", Uber may even end up paying more tax than taxi companies. But taxi companies have a far, far higher bar in the eyes of the law. In most countries you can't just decide to climb in your private car and provide commercial transportation service. You have to spend a lot of time and money to get there, authorizations, commercial insurance, driver certifications, etc. Uber bypassed it by saying "we're a tech company" and left it to the drivers, making the enforcement of the law a lot harder. Hotels also have higher requirements than an AirBnB host but the company says "we're just the tech platform". Just look at conflict resolution and what kind of leverage and protections a client has when dealing with a hotel vs. dealing with a private renter to see the massive gap that comes attached to that "disruption". Because that's the thing, you could have short-term renting in the past but that wasn't an alternative to hotels. AirBnB made it a hotel alternative so that's the benchmark. Same with Uber, you could (legally) hitchhike in the past but Uber made the service a taxi alternative. Imagine Google "disrupting" the state/national/federal identity registry, as in become the equivalent of the passport or identity card issuer while offering Google-style support and SLAs. Some services are important enough to be regulated, this is what today's disruptors are bypassing. The solution to an industry being crap isn't to allow someone to bypass existing regulation, it's to create a set of effective regulations that can be applied equally to everyone.

kd5bjo 6y ago
> Uber bypassed it by saying "we're a tech company" and left it to the drivers, making the enforcement of the law a lot harder. The original loophole that Uber used was San Francisco’s different regulations between taxis and limo companies: The latter are less regulated but are allowed to accept prebooking, and not street hails. Uber realized that ordering a ride via a phone app is more convenient than trying to hail a passing taxi in many cases and can be served by a limo company instead.
- emteycz 6y ago
  What's the difference from calling by phone, also served by many limo companies?
- buran77 6y ago
  Not very familiar with the situation across the pond but in much of Europe the expectation from companies providing commercial transportation services are far higher than just booking method: - Drivers need a different, more expensive license or attestation that needs to be renewed periodically; - Car needs a more expensive commercial insurance that covers all passengers and cargo, to a much higher payout, not just the driver like most Uber drivers have; - Car needs to be inspected far more often to ensure it's roadworthy and can stand that driving regime for the future; - Prices are regulated because the taxi service is seen as closer to public transport than to personal one. So you don't see price fluctuations more than you'd see for the bus; - They need an authorization to serve an area (meaning they were checked according to local regulation); - The company is responsible for its employees in many ways; - And more. A restaurant's kitchen has higher requirements than your private one which makes owning and operating a commercial kitchen far more resource intensive than a private one. There's no "kitchen sharing" where you can sell food straight from your private kitchen, "infirmary sharing" where you can pretend you're a doctor or a hospital room, or "legal office sharing" where you can pretend to be a lawyer without meeting all the requirements imposed on those sectors. This is the loophole Uber exploited. Replace "car" with "house/room" and you get AirBnB. When they had enough of a head start they started complying with some regulation, while still acting like they're a different kind of service for what other regulation is concerned. They want to live on the border and pick and choose what applies to them, something no other commercial service is allowed to do. Except all the other disruptors who raise enough money to afford some fines while they still operate in a grey area. Cost of doing business.

mellavora 6y ago

uber: we don't need to demand/provide commercial insurance even though the vehicles are used commercially, private insurance can pick up the risk.

qwerty456127 6y ago

Nevertheless, all these are legitimate things if viewed from a different perspective. As a driver I like to have a platform to list my own services an independent way at instead of applying for a job at a transportation company. And as a passenger I like to be able to hire an individual driver. I don't want a taxi company nor the Uber company, just a private individual + a convenience website where I can find one. As a traveler I don't want a fancy hotel, let alone a shitty one - I prefer a decent room or a bed in an ordinary private home. If only Uber and AirBnB were just doing their job connecting individuals rather than trying to conquer the markets for themselves I would certainly be on their side.

ghaff 6y ago
>As a traveler I don't want a fancy hotel, let alone a shitty one - I prefer a decent room or a bed in an ordinary private home. I think that's a generally minority position though. For the most part, people prefer their own room, bathroom, and possibly kitchenette/sitting space. Along with flexibility about checking in and out. Not always of course. Sometimes you need to adapt if you're off the beaten path. But I'm pretty sure that if you surveyed most people, especially business travelers, they're not really looking for a speare room or bed in a private home.
- qwerty456127 6y ago
  Obviously. But I believe there is enough no-hotel people to consider this an option worth existing. Same thing with transportation: a significant portion (if not the majority) of people would prefer to be serviced/employed by a serious company yet many drivers prefer to freelance and many customers prefer real people over corporations. In fact I myself mostly use classic taxis and hotels but I understand the value of being able to choose the other model.

miohtama 6y ago

> Airbnb: we don't need to own hotel properties and employ managers and housekeepers This is correct for AirBnb, but incorrect for the value chain. Someone must have the flat on their balance sheet. Someone must have a cleaner lady on a payroll. Is Airbnb value chain more effective that hotel value chain? Maybe. Maybe not. But for AirBnb host having a tax advantage of not being charged as a tourism business while in fact being one was clearly an advantage. Similar laws have been passed all over the world, including the US where it goes by a city or a state, Las Vegas being notable.

jasode 6y ago

>Airbnb: we don't need to own hotel properties and employ managers and housekeepers Fyi because this is a common misunderstanding: Hotel chains like Marriott, Hilton, Four Seasons, etc also do not own most of their physical properties[1]. They are primarily management companies instead of owning a portfolio of real estate. If you see a Hilton logo on the side of a building, it doesn't mean that Hilton actually owns it. The logo is there because they have a long-term contract to manage the hotel for the real owners of that property. >Amazon: we don't need to own retail stores or inventory Amazon isn't a totally "virtual" company. Amazon owns (or leases) physical distribution centers instead of retail stores. They've always paid sales taxes based on nexus of those DCs. What's recently changed (circa 2017?) was collecting sales taxes on behalf of 3rd-party marketplace sellers. [1] https://www.quora.com/Do-hotel-chains-like-Hilton-Mandarin-or-Marriott-own-their-real-estates-and-buildings https://www.quora.com/Do-hotel-chains-like-Hilton-Mandarin-o...

jonny_eh 6y ago

Opendoor is disrupting real estate agents by buying real estate and selling directly. Seems fair to me.