1 year, 11 months ago

Regulating Platforms

On Friday, Transport for London (TfL) declared that Uber was not fit and proper to hold a private hire operator licence. Uber’s current licence expires next week. However, Uber can continue to operate in London until any appeal processes have been exhausted. (TFL Press Release, 22 September 2017)

By Saturday afternoon, a petition in Uber’s favour had raised half a million signatures. Uber seems to put more energy into campaigning against evil regulators than into operating within the regulations, and was evidently already prepared for this fight. (You don’t send out messages to millions of customers at the drop of a hat without a bit of forward planning.) As Emine Saner writes,

“Calling for better legislation certainly is not as exciting as a glossy app, or whipped-up social media reaction, but it may make your trip home safer – and would be a better use of online petitions.”

The protests follow a number of well-worn arguments

  • Many users of the Uber service (especially young women) have become dependent on a cheap, convenient and supposedly safer alternative to public transport and expensive taxis.
  • Many drivers have borrowed heavily to invest in the Uber business model, and fear being thrown into penury.
  • This is an anti-competitive and technologically backward move, prompted by entrenched interests. And as TfL is itself a transport operator, it is not appropriate that TfL should regulate its competitors.

None of these arguments can be taken completely at face value.

  • It is true that many women believe the Uber model is safer than the alternatives; however, some women have been raped, and other women have had extremely scary experiences. Uber is accused of failing to carry out proper checks, and failing to report serious incidents.
  • Uber service is cheap not only because it cuts costs and exploits its drivers, but also because it is subsidized by Uber investors. This looks suspiciously like predatory pricing rather than fair competition. Analysts such as Izabella Kaminska argue that Uber will only become profitable when it has driven its competitors out of business, at which point it will be able to increase its prices. Like much of Silicon Valley, it appears to operate according to the Peter Thiel anti-competition playbook. Even Steve Bannon has been heard arguing for closer regulation of what are effectively monopoly platforms.
  • Technology companies such as Uber sometimes describe themselves as “disruptive”. While it is true that disruptions sometimes yield socioeconomic benefits, the belief that disruption is always good for competition is based on ideology rather than evidence. Regulation is generally opposed to disruption.
  • And as Stephen Bush points out, it’s not as a digital start-up company that Uber has fallen foul of regulations, but as an old fashioned minicab operator. (As John Bull explains, Uber London is just a minicab company; the app is operated by Uber BV in the Netherlands. This corporate separation helps Uber to finesse both regulation and tax.) Persuading politicians and economists to see Uber as a shining example of technological progress is just “a very, very clever marketing trick”.

I’m quoting Steve Bannon because I’m just amazed to find something I agree with him about.  Regulating platforms is not the same as regulating regular companies, and the general art of regulation needs a kick up the proverbial. However, that is no reason to diss the current regulations or regulators, who are doing the best they can with insufficient regulatory mechanisms and resources. Experience from other cities shows that if Uber can’t get its act together, there are plenty others that can.

John Bull, Understanding Uber: It’s Not About The App (Reconnections 25 September 2017)

Stephen Bush, The right are defending Uber, because they don’t really understand it (New Statesman 22 September 2017)

Martin Farrer, Nadia Khomami et al, More than 500,000 sign petition to save Uber as firm fights London ban (Guardian 23 September 2017)

Ryan Grim, Steve Bannon Wants Facebook and Google Regulated Like Utilities (The Intercept, 27 July 2017)

Hubert Horan, Will the Growth of Uber Increase Economic Welfare? (September 14, 2017)

Izabella Kaminska. For references see earlier post Uber Mathematics 2 (December 2016)

Sam Levine,‘There is life after Uber’: what happens when cities ban the service? (Guardian 23 September 2017)

Jason Murugesu, Night bus or black cab – what will save stranded Londoners post-Uber? (New Statesman 22 September 2017)

Andrew Orlowski, Why Uber isn’t the poster child for capitalism you wanted (The Register, 26 September 2017)

Emine Saner, Will the end of Uber in London make women more or less safe? (Guardian, 25 September 2017)

Related posts (with further references): Platform, Regulation, Uber

2 years, 6 months ago

Regulating Software Development

  Another weekend, another too good to pass up Twitter conversation during my “unplugged” time. This weekend, Grady Booch hooked me by retweeting Mike Potts tweet: Mike’s tweet was a reply to Grady’s comment on the latest news out of Uber: It’s an understandable question. It’s a reasonable question. It’s one that came up back […]

3 years, 4 months ago

Volkswagen and the Cost of Culture

Thanks to Volkswagen, we now have an idea of the cost of failing to maintain an ethical culture, roughly $18 billion US (emphasis added in the quoted text below by me): Volkswagen’s financial disclosure on Friday, in a preliminary earnings report, came a day after the company agreed on the outlines of a plan to […]

3 years, 10 months ago

Engineer, Get Over Yourself

Ian Bogost’s “Programmers: Stop Calling Yourselves Engineers” in the Atlantic, claims “The title “engineer” is cheapened by the tech industry.” He goes on to state: When it comes to skyscrapers and bridges and power plants and elevators and the like, engineering has been, and will continue to be, managed partly by professional standards, and partly […]

6 years, 10 months ago

Conflicting Narratives

@queenchristina_ writes an excellent article on Google, Starbucks, and Amazon, arguing that “for these multinationals immorality is now standard practice” (Independent 13 November 2012). See also Martin Hickman, Good Bean Counters (Independent 16 October 2012).

It is much too easy for British politicians, journalists and taxpayers to get a sense of moral outrage when they discover how little UK tax these American companies pay on their UK earnings. There may be nothing illegal about the fact that the coffee beans are purchased from a Starbucks subsidiary in Switzerland, or that the UK subsidiary pays a royalty for the use of the Starbucks brand to another Starbucks subsidiary in the Netherlands. By a strange coincidence, the Netherlands charges a very low tax rate on royalty payments. Of course there are many British companies that use similar devices to reduce their UK tax bill.

The word “account” essentially means “story”. The Starbucks accountants have constructed a story in which Switzerland and the Netherlands are essential links in the Starbucks value chain. British politicians have constructed a different story in which Starbucks is ripping off its British hosts. The moral outrage comes from the clash between these two narratives.

When two narratives clash, it seems natural for us to want to impose our preferred narrative on the Other. Wouldn’t it be grand if Starbucks saw the error of its ways and started to pay a fair rate of UK tax. Or wouldn’t it be equally grand if the UK tax laws were changed to regulate against these tax avoidance schemes? Or from Starbuck’s point of view, wouldn’t it be grand if UK corporate tax rates were reduced, so it could simplify its value chain at no cost to its shareholders? (Obviously words like “grand” and “fair” depend on the narrative.)

Of course, what is more likely is that the politicians will issue some threat of tighter regulation, the companies will make some temporary gesture to alleviate public hostility, and that the media will move onto the next target. In the meantime, politicians and the media can make things uncomfortable for corporate executives in the public eye.

And here’s a slightly older example – the attempts by the US Government to hold BP to account for the oil spill in the Gulf of Mexico. One BP executive complained that “The administration keeps pushing the boundaries on what we are responsible for.” (Wall Street Journal 1 June 2010 via NakedCapitalism)

In any case, there are always going to be conflicting narratives. I was at a workshop in the City this morning discussing how externalities might affect the future of money and the future of commerce. We discussed a range of topics, from mega-cities to carbon trading. 

But what exactly are these externalities? Almost anything that one person thinks to be part of The System and another person thinks to be outside The System. As William P. Fisher, Jr points out, “If we have to articulate and communicate a message that people then have to act on, we remain a part of the problem and not part of the solution.” (Reimagining Capitalism Again, Sept 2011).

Oliver Greenfield identifies the following challenge:

“The externalities created by companies – or, for that matter, nation states – in their pursuit of self-interest can seem rational at the local, country and even regional level.  But at a global level, in a closed system, externalities are costs. What is rational at a company or nation state level is irrational at a global level.” (Green Economy Coalition, April 2012)

Thus we have conflicting narratives, which result from disagreement about system boundaries (including time horizon as a type of boundary). A true systems approach might give us a systematic way of playing contested narratives off against each other.

See also

William P. Fisher, Jr, Question Authority (Oct 2011)

José M. Ramos, Temporalities of the Commons: Toward Narrative Coherence and Strategic Vision (Nov 2012)

Linked-In discussion on Good Bean Counters

and my post on Regulation and Complexity (Oct 2012)

6 years, 11 months ago

Regulation and Complexity

@timharford’s article So Many Numbers, So Little Time yesterday prompted me to think about the causal relationship between regulation and complexity

There are at least three contrasting ideas about this relationship.

1. Red tape directly causes compl…