The cities and municipalities that are trying to contain the likes of growth-hungry startups like Airbnb have a major disadvantage: Their adversaries have fought this fight multiple times before.
Startups and tech companies such as Uber, Airbnb, Gojek, Bird, and Compass operate in many cities and often multiple countries, and they typically have a repeatable playbook for each time they arrive in a new place.
What Gojek, the food delivery and rides startup in Southeast Asia, learns about optimal pay for couriers in Jakarta can translate, at least in part, to Ho Chi Minh City. Airbnb’s experience in navigating local bureaucracies has been honed from its experience in hundreds of cities around the world.
That’s not necessarily true for the people, industries, and policy makers with whom these companies work. The Gojek courier in Ho Chi Minh City doesn’t necessarily know how to avoid the pitfalls his counterparts in Jakarta already encountered. A city planner in New York may not have the luxury of learning from a counterpart in Paris what taxes or guardrails were effective for Airbnb rentals in that city.
The companies are armed with centralized knowledge and act consistently based on those experiences. On the other side, there is often highly fragmented knowledge and action by the contract drivers, homeowners, mom-and-pop restaurants, local real estate agents, trucking companies, and governments that deal with startups trying to shake up how the real world functions.
This imbalance is what I think about when I read articles like this one about hotel operators, delivery couriers, and others who feel they got the short end of the stick from startups backed by SoftBank Group Corp. or its Vision Fund. Bloomberg News has also covered the continuing city-by-city or state-by-state efforts to tax or put limits on on-demand companies such as Airbnb and Uber. (Disclosure: A family member works for a labor organization that has advocated for legislation of short-term home rentals, such as those provided by Airbnb.)
There are exceptions. Chain restaurants that deal with delivery startups have the advantage of identifying patterns in their dealings with the tech disruptors, as do multi-city adversaries such as hotel industry trade groups. U.S. cities that were caught off guard by on-demand ride services a few years ago learned to move more quickly when scooter-rental companies came to town. It helped that cities could force companies to comply by impounding scooters, said Brooks Rainwater, director of the Center for City Solutions at the National League of Cities.
Coordinated knowledge and action isn’t easy, though. In recently published research on regulating ridehail services, the New York University Rudin Center for Transportation found that local policy makers were so overwhelmed that it was difficult for cities to learn best practices from one another. Rainwater said that some cities were coordinating a few years ago on effective policies for on-demand ride companies. Then the companies and some lawmakers pushed to take action out of city planners’ hands in favor of statewide rules.
Meera Joshi, an NYU visiting scholar and one of the authors of the Rudin Center’s report, said some cities are coordinating directly or have been inspired by others. Mexico City is taking steps that may lead to sliding, per-kilometer fees for on-demand rides similar to those of Sao Paulo, which imposed the surcharges to mitigate traffic congestion. New York and Chicago, she said, gained confidence from talking to each other about compelling ride companies to provide data that can help cities with transportation planning and other goals.
The superior knowledge and power of sprawling companies isn’t unique to on-demand startups, of course. When General Motors builds a factory, Walmart opens a distribution center and Amazon pushes for a local tax break, the lawmakers, workers, and business partners with whom they’re dealing probably don’t have the same experience as a company that has gone through this process many times before.
The scale of the startups, however, is on a whole other level. Uber had 3.9 million contract drivers and couriers working on its system at the end of 2018, and it operates in more than 700 cities. There are more than 100,000 cities with Airbnb listings and more than 7 million listings globally. There are not 100,000 cities with a Walmart.
The bigger the startups get, the more the parties they deal with will become fragmented. That is a lot of people potentially learning from scratch how to work a system the companies have mastered.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
©2019 Bloomberg L.P.
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Photo Credit: An Airbnb guide to San Francisco. Effie Yang / Flickr
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