Thursday, July 30, 2015

Corporate Nullification

In a recent piece on the gig economy, Siva Vaidhyanathan and I explored the idea of corporate nullification--when businesses decide that they are simply going to flout the law. While we focused on tech firms like Uber, we could have easily extended our perspective to large banks or other multinational firms. But tech firms are in a class by themselves in terms of PR. You won't find bankers bragging about the LIBOR scandal, for instance. Yet rechristen defiance as "permissionless innovation," and all of a sudden you're a DC sweetheart.

Some commentators have taken us to task for failing to adequately appreciate the regulatory capture perpetrated by, say, local taxi monopolies. But few of them have grappled with the full range of consumer, traffic, and environmental concerns raised by transport and logistics. Olivier Blanchard is particularly smart on this:
If, like me, you really want to see who comes out on top of a fair market competition between an Uber and an incumbent taxi company, then you have to level the playing field: “Ride sharing” services need to pay the same fees as the cabbies. They have to apply for the same licenses and permits. They have to submit to the same requirements in regards to driver qualifications, vehicle inspections, insurance coverage. They have to pay the same fees. If and when they start to do that, you’ll have a level playing field, and may the best business model win. Until that happens, good luck convincing authorities and the public that they aren’t running illegal taxi services and engaging in fare piracy.
[Incumbent drivers have] played by the rules and obeyed laws which are there to protect them AND consumers. Laws that took decades to come up with by the community in which they apply, whose intent was to established the most ideal balance possible between cab fares and consumer protections. Shattering all that work isn’t the kind of “disruption” anyone who understands the checks and balances of that market actually wants. What’s the impact on urban planning? What’s the impact on traffic congestion? What’s the impact on people’s quality of life?
Tip: If you really want to be a rebel, make your idea so great that people will want to rewrite the rules. That’s the difference between a change agent and a cheater, and it’s time we started making that distinction.
We should also note that there are some places where "gig economy" firms are more intent on suppressing the rebellious than enabling them. See, for instance, Uber's success in China:
As protests by taxi drivers erupted in multiple cities across China, Uber recently acknowledged its commitment to “maintain social order” by using its GPS data to track drivers and their locations near protests and canceling their Uber contracts if they were near such protests – a strong signal to the government that its cache of data could be used for the “social order maintaining” objectives of the state.
In other words, when it comes to Uber, it's not as if we're dealing with some scrappy incumbent. Rather, the firm is yet another multinational behemoth, more than capable of lobbying in its own interests. When it chooses to disobey the law, it is no better than the TBTF banks paying billions in fines on a semi-annual basis for an endless litany of malfeasance. The real upstarts will be the platform cooperatives that may arise in the future. But no one should assume they are major players now, or an inevitable response to Silicon Valley's already well-trodden path toward monopolization.