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To Protect Legitimate Interests, Seattle Should Cap All Forms of Innovation
- Guvante 13y agoDoesn't this metaphor break down when you consider that taxi drivers are capped already? Also AirBNB and Uber and similar things are in a weird spot since they are in heavily regulated industries.
- Tobu 13y agoUber is innovating in bookkeeping and creative interpretation of regulations, which is not the kind of innovation that benefits the world at large; they're employing marketers and lawyers, not drivers. They just built cute ways to work around the employment, road tax and health insurance costs their competitors pay, turning those costs into their margin. Good point, their competitors had to obey a cap and they didn't, raising the taxi cap by 30% to address demand made a lot of sense. Some of the excuses are right out of the pimp playbook and deserve ridicule: our drivers are freelancers! no one is paying for a ride, these are voluntary donations! we don't encourage anyone to operate unlicensed taxis, we merely collect a referral fee!
- trhway 13y agocouldn't they just tax the Uber, Lyft, etc... drivers' revenue? The same with AirBnb - whenever someone charges the money for their condo/apt/house, be it aunt/uncle, friends or unrelated tourists - pay the share of revenue thus leveling playing field with established players.
- fennecfoxen 13y agoWhy do Seattle's residents need the playing field levelled in the direction of services that they wouldn't choose in the absence of legislation?
- trhway 13y ago>services that they wouldn't choose in the absence of legislation 1.are you saying that taxicabs can be abolished as nobody would use them? 2. any business activity (ie. activity generating revenue stream) would rely on some government services, like, for example, road maintenance in this case. You drive more and thus cause more wear and tear on the roads, and this increase in your driving brings you additional revenue - seems to fair to tax such a revenue. Driving more you increase congestion which government [suppose to] spend money to solve. Being involved in frequent business transactions you'd probably have higher probability for the need for other government services - police, courts.
- fennecfoxen 13y ago1. No, I'm not claiming no one would use taxicabs or would ever choose taxicabs over Uber; I refer to a series of hypothetical transactions in which an individual would choose Uber over taxicabs in the absence of the government pressuring the system one way or another. 2. The business activity's externalities (e.g. contributing to congestion) could hypothetically be involved in an answer to my question!! While rhetorical, the question does have good answers from time to time. However, in this case, I don't believe the proposed cap is going to be very effective at mitigating those externalities, and the general concept of a "level playing field" is orthogonal to externality mitigation.
- trhway 13y ago>the general concept of a "level playing field" is orthogonal to externality mitigation. no. If one operator is paying for externality mitigation, it is only natural to level playing field by making other operators in the same business space to pay for the same externality mitigation.
- zaroth 13y agoDid anyone else have to reload multiple times before the text actually showed up? (Using Chrome v33)
- johnrob 13y agoI understand why everyone gets upset at this - there are rarely enough cabs, especially when I need one now. But the law is and has been very clear about paid transportation. Why don't we focus more on updating the law instead of asking politicians to break it?
- MartinCron 13y agoI don't like excessive regulation any more than the next guy, but creating a new business in a regulated industry and then calling all payments "donations" just to get around the law feels like a practice that is... dangerous at best. The regulations were crafted by elected representatives of the people, if they aren't good, we can change them. This is Washington State, we passed both marriage equality and legalized marijuana at the ballet box. Surely we can legalize cars with ridiculous pink moustaches.
- aetherson 13y agoThe Seattle city council was updating the law. It was entirely within their power to update the law in such a way that it removed restrictions on cab and for-hire companies and kept TNCs lightly or not-at-all regulated. This may go to a deeper level than you intended, but law -- especially business regulation law like this -- is SO detailed and complex that I think that most citizens despair of being able to easily comment on changing it in any way that is not entirely generalities (such as: "I don't think that we should cap Uber's car-count"). I was listening to the Seattle city council meeting, and one of the councillors asked -- someone, staff or maybe the bill author -- "Why did we strike the section that lists the innumerable things that we don't want professional drivers to do (like, 'transport a prostitute' and such)?" The bill author responded, "Oh, well, we're reclassifying the TNCs as for-hire companies, so we already have law explaining all the things they can't do." (I'm paraphrasing, of course). This struck me as both ridiculous -- I'm fairly sure that we don't need separate business regulation making it... more?... illegal for cab drivers to aid and abet separate crimes -- and also a cause for despair. The city councillors who have been focusing considerable attention on this particular subject for weeks now are unable to keep the bill straight in their heads. How impenetrable will it be to everyone else?
- timr 13y agoI personally think the Seattle uberlyft rules are stupid, but it's worth remembering something that gets lost in the noise of "futurism" that clonks around the silicon valley echo chamber: it's not inherently wrong to have laws that protect established businesses. I don't like cab companies, but I do want to know that my hired driver is insured. I'm indifferent to hotels, but I don't want my neighbor running an SRO out of his apartment. I don't enjoy high medical bills, but I like the ability to know that my prescription medications aren't radium-based elixirs. And so on. To the extent that stability of certain kinds of businesses is essential to the stability of our society, it's actually a very good thing that governments are somewhat conservative about protecting the establishment. Moreover, there's no law of the universe that says that "disruption" is a good thing, and there certainly isn't any clean way to weigh the interests of one big established industry with those of a large, successful, wealthy competitor industry. Anyway, I have a hard time getting worked up over the regulatory disputes of corporations -- we have bigger problems, not the least of which is the question of why those big, successful companies get so much influence over the laws in the first place.
- baddox 13y ago> it's not inherently wrong to have laws that protect established businesses. I don't like cab companies, but I do want to know that my hired driver is insured. I'm indifferent to hotels, but I don't want my neighbor running an SRO out of his apartment. I don't enjoy high medical bills, but I like the ability to know that my prescription medications aren't radium-based elixirs. And so on. For each of those arguments to work, you would need to demonstrate that laws protecting established businesses are necessary for each result.
- deleted 13y ago[deleted]
- stdbrouw 13y agoNope. You would just need to show that they're an effective and convenient means of avoiding certain consumer- and citizen-unfriendly situations, and that the benefit outweighs any negative side effects. Whether or not there are theoretically better methods to protect consumers is irrelevant unless they're practicable.
- ulysses 13y agoAlternately, to protect the public and support innovation, Seattle passed legislation to license and legalize taxi alternatives such as Uber. Also, Microsoft is not a Seattle-based company.
- adventured 13y agoI think you're being disingenuous. The author never said Microsoft was a Seattle based company. He said they're a "local employer" - which they are. He referred to Microsoft having seattle-based employees. Microsoft is obviously a Seattle area employer. When you have 42,940 employees in Puget Sound, you're a Seattle employer. It's a perfectly valid reference.
- wpietri 13y agoReading what the city councilmembers say, this sounds pretty reasonable to me: "But the six other councilmembers voted that idea down. Bruce Harrell, who voted last month in favor of the 150-cap, said that the city’s vision in the coming years is to remove caps and let consumer choice “dictate what’s out there.” But for now, the approved legislation lets TNCs operate legally in Seattle with oversight." That's hardly the "stop all innovation" position that this VC is lampooning them as having.
- dmix 13y agoDid you read the article? The vote that you're referring to, found farther down in the article, was the one to remove all caps from taxis. They council voted against it. If you read the beginning of the article, the one placing the caps on alternative taxis passed: "the Seattle City Council voted 9-0 Monday afternoon to enforce new legislation that will regulate app-based transportation companies like UberX, Lyft and Sidecar."
- Tobu 13y agoYou misunderstand; one of the councilmembers who voted for the caps was considering dropping the caps later. The council let Uber &co operate for one year before updating the law and are prepared to wait, see and update it again.
- yajoe 13y agoFor those who don't know, Greg is one of the common faces of the Seattle VC scene. He is a staple at nearly every startup event -- Startup Weekend, Geekwire events, TechStars, VC panels, etc. I don't have a dog in the fight, but I did spend some time reading the actual bill since these blog articles felt like more political campaigns than informative pieces. The last time this came up I posted https://news.ycombinator.com/item?id=7303232 https://news.ycombinator.com/item?id=7303232 The Seattle city council passed a law that made so-called "ride sharing" services legal after intentionally withholding prosecution for over a year. The law isn't perfect, but it does feel like it strives to balance protecting existing investments with new services. The most salient changes about the bill: 1. Seattle defines uberX, Lyft, etc as Transportation Network Companies (TNC) and declares all drivers as "for-hire" drivers, which is a legal distinction that means Seattle can regulate them. 2. TNCs are taxed at $50k for first year. Second year is the greater of $50k or .35% of gross revenue. 3. No more than 150 drivers may be associated with each TNC at a time, and each driver can work only 12 hours per 24 hour period. Previously the law would have limited 300 drivers per TNC per quarter regardless of who was active, and this was "the cap." For comparison, there are 1100 taxicabs in the city. 4. Drivers can't double dip: They can't both drive for-hire cars and also do uberX on the side. They also can't work for both uberX and Lyft. 5. Rates may either be flat-rate between preset zones OR subject to RCW Chapter 19.94. RCW Chapter 19.94 defines appropriate measurement devices that may be used with commerce, which I think precludes most cell phones... uberX would need to install meters it seems and precludes surge pricing. 6. The insurance requirements are stricter than what uberX or Lyft provide today and are mostly in line with existing taxicabs. 7. There was a 30% increase in the cap on cabs at the same time. 8. TNCs have to report their activities to the city, which will be available to the public for inspection.
- HelloMcFly 13y agoRegarding #3, isn't 150 active drivers at one time, rather than 150 per TNC?
- benatkin 13y agoNo, it's 150 per TNC. Were it 150 total, they'd effectively have a medallion program.
- jsnk 13y agoA French economist and statesman, Frédéric Bastiat ridiculed government protected industries in the same manner as OP in 1800s. source: http://en.wikipedia.org/wiki/Fr%C3%A9d%C3%A9ric_Bastiat#Economic_Sophisms_and_the_.22Candlemakers.27_Petition.22 http://en.wikipedia.org/wiki/Fr%C3%A9d%C3%A9ric_Bastiat#Econ...
- MartinCron 13y agoI doubt anyone would mistake the OP for being original or even clever. Anyone can stretch something until it sounds preposterous.
- Locke1689 13y agoOpinion follows: This article is bullshit. It's quite obvious to me that Seattle roads are a classic tragedy of the commons. There is a point where Seattle streets are saturated such that adding cars increases traffic and congestion without reducing cab time from point A to B. There is also a point where the supply of taxis meets the demand exactly. Currently, we have little data to say where these points lie on the number line of "taxis" in Seattle. If the first point is less than the second, the city should place a limit at that point. If the second point is equal to or less than the first point, then the city can set the limit at an arbitrary value equal to or greater than the second point and let the market sort it out. Either way, by regulating the quantity of taxis, the city can slowly increase the limit to find the optimal solution.
- otterley 13y agoUnless they do the same thing with private automobiles, which exist in far greater number than common carriers, this is hypocritical at worst and useless at best.
- icebraining 13y agoEven if we take street congestion to be a tragedy of the commons, it's not obvious that more cabs imply more congestion, since as part of a network of public transportation, they may help reduce personal car usage. But even if we take it for granted, I still think your approach is pernicious. The issue with your - and the city's - method is that while the claimed problem is congestion, the solution is to limit the number of registered cars per service. But the error in that reasoning is that it presumes that they are perfectly correlated, and so it prevents market players from coming up with better solutions that reduce congestion without reducing the number of cars. For example, services like Uber which rely completely on calls via the Internet have the potential to cause much lower congestion compared to a service that relies on having idle drivers drive around looking for people waving their arms. If one wants to reduce congestion, then the only good solution is to tax cars driving in congested areas.
- mscarborough 13y agoGreat blog! No content, no menu, but Disqus comments. This dude is the perfect person to be evaluating growth/scale of companies as a Stark Raving VC, but who for all his money can't hire an intern to make a static blog work. If it was something that wasn't important to the author, like the last episode of some TV show, OK, but this whole taxi thing seems like a big deal. Treat the medium with respect if you care that much.
- runn1ng 13y agoI hate to be that guy, but.... the website doesn't work on Chrome on Android. I see just empty page and some pictures.
- stefan_kendall3 13y agoI had my browser window docked to 50% and saw nothing. It's a responsive design that hides content beyond some threshold.
- Zigurd 13y agoThere is an interesting lesson here writ small: How do old-line rent seekers, even where their industries are tiny compared to the technology industry and the investors behind it, continue to give the nerds wedgies? Why didn't we tell the DRM people where to stick it? The business of selling recorded performances is teeny tiny compared to the 1.5 billion programmable devices per year, the routers, the fiber, the software, etc. of the tech industry. And yet we are led by the nose. If we figure out what makes taxi companies powerful, maybe we can rip the DRM out of our devices.
- aetherson 13y agoWell, apples-to-apples, I don't think that people selling fiber generally care very much about DRM or taxi companies. Neither does most of the rest of the tech industry. It's not like the tech industry is some monolithic cabal -- nor should it be. The rest of the seeming conundrum is, I think, evolved institutional codependence, bureaucratic inertia, and people's fundamental conservatism. That is: 1. Taxi companies and taxi regulators have grown up together. It's not that taxi companies are exactly lean, mean lobbying machines, and it's not that taxi regulators are exactly corrupt. It's that they know each other and are comfortable with each other and even when they're quarreling, they understand the limits of their relationship. 2. Hand-in-hand with that, people just don't like to make radical changes to regulatory systems. Even if the existing regulatory system is kind of crazy. There is a fairly large class of people who will assume that any system that's present must have some virtue, by mere testament of its presence. 3. Finally, regulatory commissions will tend to solve any problem by thinking they should regulate it. Some of it may be cold-blooded, "Well, I want to increase or at least preserve my influence, my power, heck, my job," but honestly I suspect that most of it isn't nearly that calculated. It's just, you've been spending years regulating taxis, when you see something new and taxi-like on the horizon, your response is much more likely to be, "Well, I should regulate that, too," than, "Maybe I should just pack it in and get out of everyone's way."
- Zigurd 13y agoYou say "monolithic cabal" like it is a bad thing. How about a coalition of technology companies willing to see the recorded performances business shrink a bit in return for better, less expensive, more secure, and more open devices.
- tolmasky 13y agoAlthough obviously hyperbole, the sad thing is that this is actually not completely outside the realm of possibility: With regard to the first point, before there was email, Lysander Spooner attempted to compete with the (at the time notoriously high priced) US Postal Service. He was profitable, but the US government sued him out of existence. You could argue the second point already happens "indirectly" through our less than transparent foreign policy. The third point also kind of already takes place thanks to patents: the US government has given Microsoft a way to profit off of Android despite clearly demonstrating failure in this market.
- deleted 13y ago[deleted]
- jrochkind1 13y agoI don't understand what's supposed to make internet-based reservation/dispatch such a game-changer that it should make your taxi service immune from existing taxi regulations. Here in Baltimore, there are tons of illegal 'hack' cabs operated by 'private citizens,' mostly not white people, sometimes in their spare time, sometimes on the regular. They are illegal. But they do it anyway. And probably seldom get caught (they do not put weird devices advertising their existence on their front grill). Okay, such is the black/grey market, it happens. But we're going to legalize some _other_ kind of illegal taxi service because it's run by white venture-funded capitalists instead? (Apparently we have, because I see the Uber cars here, I don't know the situation). Do the illegal hack cabs just have to accept internet-baed reservations, and they're suddenly legal too?
- jdonaldson 13y agoWe need to regulate the negative outcomes of a service, not the service itself.
- jroseattle 13y agoGreg makes great arguments here, and he's not the only one who has been making these comments. Indeed, the level of rhetoric in our burgeoning class warfare is escalating rapidly; "technocrats" is my new favorite label. But I question the TNCs strategy of approaching this long-term. It appears the strategy was simply to try and go the popular-opinion route. Of course the market has spoken, and it prefers Uber & Lyft by a huge margin over the traditional taxi market. However, in dealing with regulatory matters, political dealings are a necessary cost of doing business. Instead, the TNCs did a few things wrong: 1) they jumped into the process a bit too late, 2) they took an antagonistic, condescending tone with the powers-that-be, and 2) they under-estimated the power of old-fashioned lobbying by the taxi industry. Principles of market openness, disgust with the political climate, etc. don't really matter in light of moving ahead. Now, the Seattle market is likely stalled for a lengthy amount of time. And, future markets know they'll be able to extract a pound of flesh as the TNCs look to expand. I hate the outcome and think the City Council deserves to be revoked, but the TNCs needed to do a much better job in handling this situation.
- alexeisadeski3 13y agoBastiat rides again.
- glesica 13y agoInstead of whining about it, why don't these companies negotiate with cities to find ways that they can raise revenue for the cities and generally help the communities they operate in? They do drive on public roads, etc. Why not propose some kind of fee to offset this? Cities might be slightly less hostile if they weren't staring a big fat hole in their budgets in the face.
- S_A_P 13y agoMaybe I don't get it, and maybe that is why I'm not in the valley at a start up, but I don't really inherently trust that people are good. I don't believe that renting my house to strangers is a smart idea. I don't believe that someone who feels like driving people around should take me 35 miles to the airport. There are bad people out there folks. The formality around hotel and cab businesses and the barriers to entry serve to "protect" the consumer somewhat. Since it's hard to start a profitable hotel, you want to provide good service to customers and keep things bed bug free. If you paid good money for your cab token you probably wouldn't want to rape one of your fares and destroy that investment. Now these are kind of a straw man arguments, but the point I'm making is just because you can do things doesn't mean that you should. I also just think that business models like uber and airbnb can let people into the market that really should not or have no business being there. Of course the odds of something bad happening in a hotel vs airbnb or someone trashing your airbnb are likely very slim. Same goes with über vs cabs. However I would venture to say it's a safe bet that in most cases you are more likely to have a bad experience with the "disrupt" businesses than an established and bureaucratic one. I think that it should probably be decided by the market, and I would love to be wrong about this. I just don't think that I am. Maybe if I were 10 years younger and didn't have kids, but at my current place in life, I'm calling a cab to take me to a hotel, and I don't have house guests that aren't really or like family to me.
- arikrak 13y agoHe picked examples of industries that are protected heavily, and just exaggerated them a bit. So the laws about Uber fit into existing protectionist laws. E.g: - The US postal office has a legal monopoly on mail, and loses money every year. - Airbnb has faced many legal battles over laws that protect hotels. - Hospitals often charge arbitrarily high amounts for even small things like a pill or bandage. - Public schools have an almost complete monopoly on education.
- eplanit 13y agoCities also limit the number of "regular" taxis, too.
- ilaksh 13y agoI get the impression that three things are going on which are all bullshit: 1) people who are invested in some way in existing taxi companies are using politics to suppress competition from high tech startups and 2) somehow the new internet based taxi startups have been exempt from existing taxi laws and 3) the people who are invested in some way in existing taxi companies are using politics to suppress competition from low-tech startups (i.e. Joe with a car who needs money), like they always did. You should not need to be wealthy to run or start a taxi service, or have to go through a or complex lengthy paperwork process. Whatever regulation there is, is definitely unfair to lower-income individuals who are otherwise perfectly capable of running a safe taxi service and meeting requirements that don't involve large fees or delays. You should also not need to be associated with a high-tech startup company in order to start a taxi service. If Uber and the rest are able to somehow bypass or ignore the existing taxi regulation, or have been given a pass, that is incredibly unfair to the numerous individuals and small companies who have been prevented from starting taxis services, or prevented from having _legitimate_ taxi services, by outdated and protection-racket style taxi regulations. And also unfair to the people who went through the whole process and have regular taxi companies. From what I can tell, most governments operate on a level similar to my high school student government, in terms of fairness and decision making. Basically like racist kids with barely-above average intelligence who give preference to the popular people, are completely inconsistent, manually collect forms and type them into barely-functional spreadsheets, take advantage of their positions, and, the one time they were given the opportunity to set fees, use their "government" as a vehicle to advance their personal wealth. Within 5-15 years the human race will be completely irrelevant, as super-intelligent artificial general intelligence arrives on the planet and is forced to create zoo-like safety environments surrounding populations in order to prevent humans from destroying eachother and large areas of the planet with ordinary bombs, guns or even nuclear weapons.