Peer-to-Peer Hucksterism: An Open Letter to Tim Wu

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Dear Tim Wu,

Has something happened to your brain? Can your short article in the New York TimesApps to Regulate Apps, be the product of the same grey matter that produced the excellent "Who Controls the Internet?" and the admirable "The Master Switch"? What's going on? I hope it was a momentary lapse and I hope you will change your mind about this sloppy and potentially damaging piece.

You were writing, as you know, about AirBnB and Uber: two new "peer-to-peer" companies building big businesses around apps that let you "book a car ride or rent someone's apartment using your smartphone or computer", and apparently breaking a few laws along the way. You write that "no one can deny that these apps are responding to real demands and helping cities become easier to live in and visit", and you place them on the side of Progress, and the Future; in contrast, the reactions of cities who have banned these apps "recall Ned Ludd's response to the automated loom".

While you do acknowledge that there are complaints about the companies, you decide that "many of the complaints are anecdotal". But complaints are always anecdotal unless someone tallies them, and tallying them is, of course, one of the points of regulation: AirBnB and Uber are not tallying them, that's for sure. They may even try to sweep them under the rug in case it damages their valuation: exactly the kind of conflict of interest that make regulations necessary in the first place.

But let's step back a bit. I'm no Valley Visionary, so if I were setting up a business based on offering unlicensed hospitality or cab rides, I might ask myself a few questions first. And I may ask myself: why is it that every town and city I've ever been to has licensing requirements for people offering taxi services or overnight accommodations? Is there a global taxi cartel or a multinational bed-and-breakfast conglomerate enforcing its will on municipalities from Aberystwyth to Yellowknife? And if there isn't — and of course there isn't, because taxi and B&B operations are usually local and small-scale operations — I may ask myself: what's behind all these rules?

And if I stopped for more than two minutes before seeking seed funding for my enterprise, I may tell myself about property zoning, about landlord-tenant agreements, about the risks run by customers who step into a taxi or a hotel in a strange city, about liability in the event of accidents, about the importance of equitable access, about complaints investigation, about safety checks, and more. Not, of course, that licensing is unproblematic in all cities – far from it – but these would at least be things I would wonder before proclaiming that those who stand in the way of my right to make a buck are simply Luddites. And if I were to advocate changing zoning regulations in cities throughout the world, and changing taxicab licensing rules too, with all the expense that comes with those changes, I'd have put a little thought into it. Especially because, as you say in your final sentence, "It is, in short, a time to think carefully". Unfortunately, all the evidence is that AirBnB and Uber have not stopped to think, so the idea that they should set the agenda for civic licensing discussions, placing new stresses on the already-stretched finances of municipalities around the world, despite displaying such solipsistic lack of attention, is presumptuous at least and offensive at worst.

Unfortunately your two suggestions – that cities should require the companies to provide applications which could be used by landlords and co-op boards with a check on their tenants' use of AirBnB, or that cities could "simply" require Uber to disclose information about its prices and traffic – do not even scratch the surface of the issues that need to be sorted out before AirBnB or Uber can be taken seriously as forward-thinking, sustainable partners in civic development. And I hope that, if you reflect, you'll agree that the new peer-to-peer companies are a blight on the landscape of egalitarian thinking. Yes, according to CNN, CEO Brian Chesky "thinks of Airbnb as more than a company – to him it is a movement. His site invites users to return to a time when hitchhiking wasn't dangerous – when it was just fine to share anything with strangers because no one was all that strange." But Brian Chesky has not tried to start a movement, he's started a company: and he hasn't actually done anything much to make hitchhiking less dangerous. He wants his customers to think of it as a movement while he owns the business. While they invoke the communitarian traditions of the informal economy, these new peer-to-peer companies are more likely to erode that economy than enhance it.

We all know the informal economy. I used to hitchhike to university, my neighbours have yard sales, friends help each other move house. None of this activity is regulated because it's at most minimally commercial. But there is a line, of course: if I started having a yard sale every weekend then my neighbours might think I'm stretching a point and complain to the by-law people. If I rented my house to strangers week in and week out – for money — they might ask if I'm running a rooming house. And that's assuming that the people renting my house aren't running a brothel. So there is a trade-off here: informal activity for little or no money is OK. Commercial activity plays by different rules; a level of accountability is needed.

So now here comes AirBnB (to take one example), who want to keep the idea that it's about the noncommercial and "sharing" informal economy, and scale it up. They talk about their hosts in a non-commercial sense: earning "additional income", or "extra money" (link) — rolling out, I could not help but notice, the very phrases used years ago to justify not giving women's jobs the same protections and benefits as men's jobs. It's not the real economy, it's just a bit of pocket money: we don't need all those expensive rules and regulations. But they want to build a billion dollar business on the back of it. And while eBay famously did this for knick-knacks, the nature of the activities makes the two companies completely different. There are information asymmetries with serious consequences here. The model is that AirBnB take 10% of the booking fees and take 0% of the responsibility for what happens when you book, or hire, a room. Now many exchanges do go well, partly because the early stages of an activity like this do draw from a community of people who are committed to the non-commercial side of the action, but the success attracts others, and for personal safety in such cases (rare incidence but severe consequences) recommender systems are simply not the right tool. It's not like Wikipedia (or eBay or Yelp) because you can't just Undo an apartment-trashing, and the fact that AirBnB had not thought about what happens when an apartment is trashed shows, as Farhad Manjoo writes, that is simply wasn't thinking. It didn't care. And if Brian Chesky really thought about AirBnB as a movement, he'd care.

The questions are heightened by the contrast between the community-friendly rhetoric of the company and the apparent character of its founders. One has a reported history as a spam-merchant (that and more from Ryan Tate), and the financing has raised ethical questions about the way in which early investors can take large amounts of money out of the business without diluting their control. The long and short of it is that the company runs as a scheme to make large amounts of money for a small number of people by appealing to large numbers of egalitarian-minded young people. Investment (and presumably board-level presence) from Andreessen-Horowitz, Yuri Milner, and now maybe Peter Thiel, all with well-known neo-liberal attitudes, makes this clear.

Your other company, Uber Taxi, has a similar litany of complaints: taking a 50% cut of tip money (illegal in many places), and more. The "surge pricing" following Hurricane Sandy is a clear example of the eat-your-cake-and-have-it approach that characterizes these peer-to-peer businesses: the company adopts hard-nosed Economics 101 pricing models (which we can argue about) while employing a rhetoric of community and sharing. You can have at most one or the other, but not both. Unsurprisingly it is run, as Seth Finkelstein pointed out on my previous post, by an admirer of Ayn Rand.

The contrast with real efforts to break down barriers to access and to make more accessible, non-commercial travel a reality is dramatic. None of the peer-to-peer companies "start from an entrenched social problem and work backwards from there" as Catherine Bracy writes. For real inspirarion, look back to efforts like the Ramblers Association's 1932 mass trespass of Kinder Scout, the services provided over the years by the Youth Hostel Association and Hostelling International, all characterized by a broad base, by people who thought about what they were doing, and who had an actual commitment to their goals. And guess what? Remarkably enough, none of these has billionaire venture capitalists – or even the profit motive – behind them.

So, Tim. Back to the beginning. The Randian, simplistic free-market thoughtlessness behind the wave of "peer-to-peer" companies, and especially those who are trying to uproot regulations that protect consumers, is far from the wave of the future: it's hucksterism masquerading as progress, hubris as vision, callous selfishness as community-mindedness, and it's a disaster waiting to happen. I don't think it's something you want to associate yourself with. Will you retract your support for AirBnB and Uber?


Tom Slee

Written in Org version 7.8.10 with Emacs version 23

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  1. Being compared to Ned Ludd is no slur, though it was doubtless meant as such. The historical Luddites were not opposed to technology, just to the benefits of it going one-sidedly to mill owners. A form of proto-socialism, if you will.
    The British government responded barbarically, including laws that made breaking a loom a capital offense.
    Any similarities with modern conditions are if anything too close for comfort.

  2. There are mass protests in India over the rape (and now death) of a young woman. Part of the outrage is the fact that the victim boarded a bus (driven by the rapists) which was not registered and could not have legally taken passengers, and yet was freely driving around the city without any oversight by the police.
    Ignoring the clear lack of policing, this is exactly the kind of model that Airbnb and Ubertaxi push for, as you say. I had an eyebrow raising moment when I read that Airbnb is available in Australia.
    Yelp (IIRC) was also notorious for faked reviews, and for ignoring said problem for many years, until they realised that it was affecting their value as a company. Airbnb has similarly tried to “minimise” coverage of trashed houses via the use of their service. As you say, it is in the interests of these companies to pretend that everything is rosy. Here’s hoping governments get on top of this.

  3. Sunny: I had not even thought of that connection. That needs some thinking about. Thanks.

  4. Appreciate the points being made here – but (esp in relation to the Delhi tragedy) would just also like to say that years ago, my sister was attacked by a licensed, registered taxi driver. The police were called, and spoke to my sister. Of course its just your word against his, and even though we had his cab number and reported him to the company that employed him, my sister declined to take matters further, as we were told life is made hell in the courts for women who report this kind of thing and a conviction was unlikely. So he’s still out there, driving…
    The quality of taxi drivers has also declined markedly where I live in recent years – they often don’t know where to go, bad service etc:
    So all the concerns and fears that people have about peer-to-peer systems *still exist in the status quo*. At least with the reputation/trust systems that underpin the sharing economy, the host/driver and guest/passenger’s conduct is out there for ALL to see, completely transparent.
    For interest, here is an ex-cabbie’s take on the situation:
    And right now, my house is under siege from doof-doof music of idiots in the street, friends of neighbours. Nought to do with Airbnb…inconsiderate behaviour happens everywhere. So does considerate, thoughtful behaviour. If I was to be an Airbnb host, I would not want anyone in my place that would trash my property, or bring me into disrepute with my neighbours. Again, the feedback ratings help to sort the wheat from the chaff – the latter will not stay in the game long, as the immune system of the sharing economy will expunge them!
    The issue here is less the kind of system being used, than the ethics of those participating in the system (whichever one it is), and how mindful they are of their impacts on others, which is in turn, part of a much wider societal concern.

  5. Sharon: commiserations on your sister’s experience. Yes, bad or criminal behaviour happens with or without peer-to-peer systems and I’m not surprised that there are many cities with problematic licensing.
    Reputation systems owned by companies who make money off the volume of trade have some built-in conflicts of interest of their own. And I think that they are much better suited to cases of minor but correctable problems than rare but serious violations. Giving a driver a one-star rating doesn’t seem much of a feedback system for assaults such as the one your sister faced.
    So I agree that there is a wider societal concern over ethical behaviour, but I still don’t agree that peer-to-peer will help it.

  6. Fascinating read.
    I agree that we should regulate the peer-to-peer economy but let’s make sure that it remains the wave of the future. Why? because the most important benefit of peer-to-peer is not measurable with $$$.
    It is the strengthening of social link within communities, and that I believe is what every city wishes for.
    I also believe that online ratings have a definite value, when reliable of course.

  7. Uber drivers are licensed black car drivers. You seem to think it’s a service anyone can provide. Uber has simply made it easier to summon a black car, essentially. And the controversy comes from taxi drivers and their captured regulators not liking that, despite that lack of any consumer harm.
    I have found Uber to be more reliable, more pleasant and cost-competitive with taxis in DC.
    If regulation gives us bad results with taxis, but a less regulated (but still regulated) Uber gives us better results–I’m going to go with the good results. There’s still a role for safety regulation. But the pricing regulation of taxis in DC has done nothing but bring poor service, and none of the common carriage rules get enforced to begin with.

  8. John: the only reason that I am bundling AirBnB and Uber together here is because they are bundled together elsewhere as part of the “sharing economy”/”peer-to-peer economy” hype. I do get what you are saying – that Uber is not really peer-to-peer, but if there is confusion I think it starts with those I’m debating, not with me.
    Although you say “Uber drivers are licensed black car drivers” and although that is Uber’s take on the matter, it’s not clear to me how much they verify. In Toronto, for example, at least one unlicensed driver using Uber’s app has been charged.
    I don’t claim to be an expert on the ins and outs of taxi licensing, which seems to vary from city to city and country to country. But the attitude of Uber seems different to that of other players in the space. In Toronto again, for example, Hailo applied for a dispatch license, but Uber refuses to. Krista Caldwell’s article seemed convincing to me.
    You’re in DC? I came across this quotation, which is from a Washington Post article from January 1933, which led to the licensing of taxis in the city. Quoted in an article by Luke Brock about cab licensing in Vancouver.

    Cut-throat competition in business of this kind always produces chaos. Drivers are working as long as sixteen hours a day, in their desperate effort to eke out a living. Cabs are allowed to go unrepaired… Together with the rise in the accident rate, there has been a sharp and concomitant decline in the financial responsibility of taxicab operators. Too frequently the victims of taxicab accidents must bear the loss because the operator has no resources of his own and no liability insurance. There is no excuse for a city exposing its people to such dangers.

  9. The comment thread under the Krista Caldwell article is great, by the way. Some people are fairly angry, but it does highlight the tremendous variance of experience from city to city and fleet to fleet, and give a glimpse into the taxi world.

  10. Businesses can sometimes deliver higher quality products and services. My personal experience is that in the case of taxi transport in Boston or San Francisco uber seems like a superior (but more expensive) alternative. I have also rented flats through airbnb, which saved me money and allowed me to stay in places I preferred over anonymous hotels. And I rent out a flat in Cape Town, which has been fun, but not very lucrative.
    However, I don’t agree with many of the proponents of these services that business is inherently better than governments at meeting citizens’ needs, or that this suggests we should get rid of regulation. In many European cities high quality public transport and well regulated taxi systems that operate as profitable businesses exist. In Germany, an uber clone cuts out the expensive radio taxi middlemen, connecting customers directly to licensed taxis, without circumventing any of the existing regulation for passenger transport. Such hybrid models can provide much of the innovation that the Internet enables and make sure the needs of all citizens are met in responsible ways.

  11. what’s Ayn Rand and liberalism got to do with that?

  12. Damn you Tom Slee now that Bogost has written something I’m thinking you can use this argument with everything!
    The goal of your baker is not to make delicious bread but to maximise profits, therefore they have a conflict of interest in providing you with the actual bread which costs money to produce. That means the bread must be dodgy so you shouldn’t buy bread from your baker.
    But that’s not true(ish)! There’s enough trust in society that you think the Baker is happy enough doing the baking every day and charging you a nominal amount so they can continue with the baking. They don’t spend all day thinking “MAXIMISE PROFIT!” they’re thinking “something something BREAD.”
    I think what you’re actually doing is shuffling “burden-of-proof” for trust. You say that a startup darling needs to prove that it is in fact trustworthy, whereas others simply assume that it is. For a society to function properly, the a-priori assumption is in fact kind of essential. In fact, both Uber and Airbnb have done things that erode this trust, and it is true that just because you a-priori assume that Airbnb and Uber are “good companies” doesn’t mean that you can’t change that trust (which is, again, something that is kind of essential for society to work). However, it is also not true that you shouldn’t a-priori trust your baker (or Uber or Airbnb).

  13. The 1933 WP article prefigures the South African experience:
    To Kalsi’s point – the P2P profiteers depend on an established trust which is possible only in a well-regulated society. It seems reasonable they should have to pay the costs of regulation before skimming the profits; we can only hope it might happen.

  14. Doug: I think you’ll find everyone depends on an established trust which is possible only in a well-regulated society. Sometimes you have to pay, and sometimes you get a freebie. A restaurant will trust that you will pay for your meal after you eat. In some places this trust is simply not possible. However, restaurants don’t pay over and above their taxes for the kind of law and order which results in them getting paid. I would argue that the price of trust for these companies should simply be obeying the laws of the land and paying taxes. Regulation is part of the political process, and there’s nothing wrong with arguing your case on the regulation front — maybe things have changed, and the regulation needs to move forward. This happens a lot.
    We know these particular companies have a disregard for the law of the land, and do in fact erode trust in a systemic way. However, one cannot in general say that just because a company is for-profit they must be eroding trust or undermining the law, or making a bad product, or, indeed, be part of a new, less centralised paradigm for getting things done. Tom doesn’t tend to mention companies like Etsy (which work around the idea of union labour) or Humble (which works around copyright law), because I guess they’re just doing things in an OK way.

  15. Thanks for this interesting and thought-provoking article. I would add an additional factor for consideration: Uber can help people overcome the racist practices of existing taxi systems. Latoya Peterson at Racialicious has a thoughtful and evenhanded look at the pros and cons:
    An excerpt:
    I had dismissed Uber outright, until a friend convinced me to take a second look. My friend is young and white and, when I asked her why she chose to use the expensive black car service as opposed to any other DC cab, she informed me that her neighborhood isn’t well-liked by cab drivers. As it turns out, while my friend could normally get a cab to stop for her, she suffered the same issues with cabs that black urbanities usually face. Though it is technically illegal for drivers to ask where you are going before allowing you in the cab (New York has clear rules about this; DC has similar rules that are not on any governmental site), it is a common practice. So, my friend noted with a shrug, she’d rather pay the extra five bucks for a fuss-free experience than hail cab after cab, hoping to find a driver to take her to her next destination.

  16. Thank you for these thoughts, I enjoyed reading this thoughtful letter.
    A response is more than I have space for in this column; at some level it gets to how I think the legal system evolves, which depends on some level of law-breaking. The line between hucksterism and challenges to legal regimes is hard to draw.

  17. Actually, I don’t think it’s simplistic Randian marketism, but technocommunism. We disagree about this, but I don’t like the horrors of Randianism any more than technocommunism, but don’t worry.
    The first time I saw these kinds of apps — which take the technocommunism of online “open source” cultism and push them into the real world despite organic law — I said “this is collectivization”.
    Because that *is* indeed what it is.
    Your property is collectivized and your retain only the management of it. Sure, you retain *organic* ownership, but that counts for less and less as you have to sell more and more slices of your organic property to survive in our world. Then the technocommunist companies, like true oligarchs that always emerge under commmunism, take a huge percentage for the service of putting you together with your “market” i.e. the collectivized users using your collectivized property.
    Here’s what I wrote about all this back in July 2011 after I saw getaround demo’d at TechCrunch Disrupt and after the “ransack” case happened at airbnb:
    Since then, these companies have had to try harder to serve customers and put in insurance and such, but they still have a bland disregard for the rule of law and ultimately property that they’re collectivizing. Uber is even worse in their arrogance and I think Paul Carr on Pando Daily got it right (I will hunt for the links) in calling them out.

  18. As for Tim Wu, I’m truly failing to see how the legal system “evolves” with law-breaking. It’s one thing when our system evolves when we move away from “Jim Crow” laws and discriminatory laws and prractices and enforce civil rights and equality, for example. But that doesn’t involve taking away people’s rights or “breaking” the law; it in fact involves applying Constitutinality and notions of equality before the law.
    Tim Wu is talking about revolutionary justice, not law.

  19. Catherine Fitzpatrick

    Here are all the links to Paul Carr’s articles in Pando Daily:
    What was particular awful was Uber’s decision to do a “price surge” (er, a massive gouging) during Hurricane Sandy and the aftermath of the flood in New York City when we had no subway service. See the tweets of people reporting how they were ripped off just because they were desperate.

  20. Off-topic — what is Org ver­sion 7.8.10?

    • It’s what I write the posts in. org-mode is an emacs mode that does outlining, fairly intuitive editing, and a lot of todo things as well. It puts that note in when you export to HTML: I think it’s great software, so I like to leave it in.

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