If cities are to thrive, they cannot — and must not — hold back the rising tide of innovation, but when you consider that cities are also tasked with protecting their citizens from harm, finding the balance between protection and innovation is not easily achieved.
For Airbnb and Uber, their respective disruptions of the status quo were widely embraced by the public — just as their problems have been widely criticized. Both companies are part of the Sharing Economy, which came on the scene around the turn of the century and encompasses a wide variety of companies based on peer-to-peer sharing of access to goods and services.
By embracing the unique approach of the Sharing Economy, both companies enjoyed a meteoric rise to global adoption, but both companies have also been plagued with lawsuits and resistance from governments concerned over the lack of protection for citizens and the inability to regulate or collect conventional taxes from these innovative startups which often operate outside of current regulatory structures.
When Brian Chesky and Joe Gebbia came up with the crazy idea of using a few air mattresses on the floor of their apartment to sell sleeping spaces to attendees of a sold-out tradeshow, both were unemployed and just looking to make a few bucks to pay their rent. Their impromptu “Air Bed and Breakfast”, complete with un-toasted Pop-Tarts, landed three paying guests — and the short-term rental platform, Airbnb, was born.
Despite early skepticism that people would not want to spend the night with complete strangers, Airbnb grew in popularity by building an online platform which, among other things, removed the barriers so that anyone with an extra room could easily earn extra income. In addition, the platform focused on delivering a unique experience by enabling travelers to live like locals and enjoy the conveniences of home at a fraction of the cost of staying in a hotel.
While a majority of visitors have had positive experiences using the platform’s services, an increase in reported mishaps, injuries and crimeshave lawmakers concerned. In fact, many cities are not making it easy to operate an Airbnb rental, including global tourist destinations like Paris, Amsterdam, London, San Francisco and New York City.
Taking it a step further, some city and state governments are pursuing legal action, with one New York City apartment owner now facing a $300,000 lawsuitfiled by the owners of her building in response to a city administrative law judge fining the landlord for their tenant’s “bad acts”.
And, of course, the short-lived Airbnb listing for a $200/night igloo which was hastily constructed after a blizzard in New York City, while humorous, highlights the inability of the company to fully control the quality or honesty of the listings on its platform.
Airbnb is making some effort to address mounting concerns by offering a compromise of sorts at the U.S. Conference of Mayors, promising the mayors in attendance that in exchange for their support, Airbnb would begin collecting upwards of $200 Million in new taxes within 50 of the largest cities in the U.S.
In addition, the company’s pledge of transparency and release of New York City data was lauded by many as a step in the right direction. But others, like Mark Headd, a longtime advocate for open data and government, pointed out that the release of data is only one small step in the right direction, especially since the data was never published in a digital format. In fact, anyone wanting to view the highly redacted data had to do so in person at Airbnb’s New York office.
Uber: Destined to Repeat the Past?
In 2013, four people filed a lawsuit against Uber claiming the company should classify drivers as employees instead of contractors and asking for reimbursement of such expenses as gas, insurance and car maintenance.
Today, that lawsuit has attained class-action status and mushroomed to encompass 160,000 individuals worldwide. It is but one of many lawsuits and complaints lodged against ride-hailing startups which are disrupting the taxi industry.
Eric Posner points out in his 2015 essay that something quite similar happened to the taxi industry in the 1920’s with the introduction of the mass-produced automobile. In New York City, riders hoping to avoid the higher cab fares would hail part-time drivers who were using their own personal vehicles.
As more independent drivers took advantage of this opportunity, the glut of unregulated drivers negatively impacted taxis to the extent that the government stepped in and began issuing medallions to registered taxis in an attempt to stabilize the industry and protect consumers.
Today’s taxi drivers often spend years paying off loans to afford their medallion, which until recently cost over $1 Million — and it is the cost of those medallions which many attribute as the catalyst for the success of today’s new ride-sharing companies like Uber.
And just to bring things full circle, in late 2015 cab drivers filed a lawsuit against New York City, claiming that the city misled cab drivers about the value of the required medallions and that the city has allowed companies like Uber to usurp the property rights of cab drivers through disparate regulation.
Disrupting the Cycle of Civic Innovation
It would be easy to blame the dysfunction within the cycle of civic innovation on the failure of lawmakers and regulations to keep pace with innovation, but, in a chicken-and-egg sort of quandary, the more difficult question is whether it is this perceived dysfunction, this lack of regulation, that makes it possible for innovation to even happen.
Neither Uber nor Airbnb were overnight successes; it took years of testing and pivots to achieve market adoption. By innovating outside of the system, the companies were able to disrupt established industries and deliver new options to consumers. And while the hour of reckoning with heavier government regulation appears to be nigh, innovation resulted from freedom of inventing outside of those regulations.
In today’s rapid pace of technology changes, cities have discovered they cannot innovate fast enough to keep pace with the constantly changing smart city and civic tech inventions which are already beginning to deliver more efficiency and easier access to city services and information.
Many government agencies are partnering with this new breed of tech startups despite the barriers of outdated 20th Century regulations by implementing new procedures to experiment or implement pilot programs. As more cities disrupt their own established procurement processes, the question is whether cities will become tomorrow’s disruptive innovators.
If cities can collaborate with private enterprise to keep pace with new technologies while simultaneously addressing needed changes to regulations — we might be witnessing the best disruptive innovation yet.