Approaching Policy After Uber’s Scorched Earth

The blowback to Uber reached a new level of intensity this week with massive and occasionally violent street protests in France. Our very own Romain Dillet walked around Paris snapping photos of the protests, which included overturned cars, smashed windows, and tires set on fire. Even for a nation with a storied past of truculent protest politics, the anti-Uber mobs were notable.

It should come as little surprise then that the company has spent millions of dollars in lobbying across the United States (with plenty more, I am sure, around the world). That translates into hundreds of lobbyists, more than Wal-Mart itself according to a Bloomberg analysis of available data.

It’s already incredibly hard enough to build a startup and manage customer growth, but now startups are increasingly confronting legacy policies of the government on their way to success. These battles are fundamentally unfair, because they can pit companies with a handful of people against the entrenched interests of thousands of dedicated protesters.

This difference in resources is even more clear when we place it in the context of this week’s news. Who would have thought that of universal health care, same-sex marriage, and taxi regulations, that it would be the latter issue that would be toughest to settle?

Is Uber The Right Vehicle For Policy Change?

Uber, of course, is no longer a startup by almost any definition of the word. Now worth $40 billion (and potentially $50 billion if its most recent fundraising efforts are successful), it is the 800-lb gorilla in the urban transportation market. Indeed, Uber has far more extensive resources than the taxi industry in all but local political relationships. Even there, Uber is buying up lobbyists and contacts to close the gap.

I always have an allergy to companies getting too big, not because I dislike scale, but simply because hugeness stifles economic creativity and innovation. Creative destruction needs to be our top priority, because there are so many improvements we can still unlock in our society, and size is often the barrier to realizing those changes.

Monopolies may be good for the companies that hold them, but they are almost never good for new entrants into a market. I love these companies dearly as they fight for success as startups, but we must ensure that their size never starts to stifle the innovation so key for startup success.

Today, Uber is on the cusp of gaining a monopoly position, even with Lyft admittedly offering some level of competition in the U.S. My allergy against size should have already kicked in, yet in this case, I don’t see Uber as a barrier to innovation, at least not yet. Rather, I see them as one of the only companies in the world right now with the size and approach that can actually open up government regulations for startups.

In many ways, I abhor Uber’s aggressive approach toward policy, but I am also resigned to the fact that there is probably no other way for the company to proceed. What exactly do you do when your opponents are willing to flip over cars to stop any technological progress? The idea that these two sides can sit at a table and find an agreement that is good for everyone is simply a fiction.

How To Seek Better Regulations

The longer-term challenge is that this incredible policy resistance to economic progress also represents a steep barrier to any other startup interested in reshaping regulated industries. Uber has managed to handle that situation by using customer growth as a means to influence policy, and vice versa, finding a formula for its success. There is no guarantee that the next startup, say in health or finance, is going to have access to a similar model.

While we may never get consensus around Uber, we should work toward building a consensus around the power of innovation to improve our lives and the need for regulations to foster it. We do need to bring people around the table, and educate politicians and voters on how to create rules that favor innovation over stasis.

That’s a tall order of course, given that it is the incumbent industries of the past that lobby for laws and not the growth of the future. Nonetheless, it doesn’t have to be an impossible mission.

The key is to think in a more decentralized way about the implementation of policy. This doesn’t have to mean moving to a libertarian utopia of complete anarchy without government rules. Rather, it is about separating the objectives from the actual means by which we accomplish them.

We see this with the taxi laws and Uber. Governments should care about ensuring adequate transportation coverage, access for the disabled, safety and security of passengers, as well as insurance for drivers. Those are the higher-level principles that we have decided are important in this market, and they should be enforced.

The problem is that cities went far beyond developing reasonable principles to prescribing very specific operational details, such as the fare structures used, the number of cars allowed, the means of hailing, and the distinctions between classes of service. That’s where the innovation gets stifled.

These laws are not unique to taxis or even the United States. Koreans still almost exclusively use Internet Explorer because the government mandates the use of a specific ActiveX control to handle logging in and encrypted transactions. All browser innovation locally has essentially ceased. It’s not hard to imagine a less specific law that would have improved the safety of ecommerce while ensuring that innovation can still flourish.

It can be easy to side one way or the other on a specific issue like Uber. However, we all have a stake in ensuring that rules are written with economic and operational flexibility in mind. Ensuring that the innovation we have seen in so many different areas of our lives can enter regulated industries like health and finance is perhaps the greatest political challenge of our time. If Uber is the vehicle for that change, I hail them.