San Francisco is leading the way on Scooters, but there are lessons for the rest of the tech giants.
We need to be ready to reign in companies with regulation when they abuse their power or when their profit-driven interests do not align with our community interests. City regulators are starting to do that with scooter regulation, but with antiquated methods. We need a smarter approach that uses technology to regulate technology to encourage innovation and markets rather than create monopolies.
Uncontrolled scooter growth ran afoul of pedestrians and bicyclists in San Francisco and Santa Monica. Both cities took action. San Francisco refused to award licenses to Uber and Lyft because of past violations in ridesharing. Santa Monica almost did the same thing to their home-town scooter company, Bird, but relented in the end and gave them a permit along with Lime, Uber, and Lyft. While San Francisco took a positive step forward and acted in the best interests of the community, Santa Monica gave in to the same old aggressive tactics we’ve seen from Uber and Lyft in the past. It is likely more cities will follow San Francisco’s lead than Santa Monica.
Scooters are a small thing compared to what is happening in the rest of technology. Ridesharing is taking over car ownership as it morphs into the “Triple Revolution” by combining with autonomous technology and electrification, creating less congestion and fewer emissions while increasing access to cheap transit. Facebook and social media is locking in the future of our media. Apple and Google are controlling our smartphone experience and Amazon our shopping experience. And most of the tech giants are racing to control the emerging platforms of voice-activation, VR, and AR.
How we deal with scooters can teach us something about how to deal with the impact of the tech giants on our daily lives.
First, we need to recognize that network effects result in monopoly. As investors, we already get this. We want companies that can leverage network effects to become monopolies or oligopolies. That is why companies like Uber have raised over $20B and is worth $72B. Investors are willing to sustain losses for a long time in order to secure a fat margin, rapid growth market in the future.
As citizens, we need to recognize that network effect-based monopolies aren’t good for us. There are the usual reasons: yes, they reduce choice and innovation; yes, they tend to raise prices. But they also result in a no-holds barred culture that doesn’t flinch to break ethical and legal boundaries. Uber is exhibit A with it’s history of go-go bro culture. Bird, Lime, and Spin see that as the model of how to behave. All of this is enabled and encouraged by an investor culture that puts up with crap behavior because of the promise of a fat exit rainbow on the other end.
The lessons apply more broadly than scooters. Our current antitrust ideology was formed in the 1980s and organized around pricing rather than market power. It wasn’t always so. At the turn of the 19th century, Theodore Vail, the CEO of AT&T, used the logic of network effect to build one of the first tech monopolies and the resulting abuses alerted us to the need for antitrust regulation. Today, we need to re-think antitrust laws to incorporate network effect to help reign in the power of the large tech companies.
Second, regulators need to be smart and leverage technology to get to better outcomes. The current methods are stuck with the tools of the 20th century. Regulations for scooters and some ridesharing rely on limits to the number of vehicles. That made sense when the only way to regulate was issue a paper permit. The result of that sort of limits is a system of government-sanctioned monopoly or oligopoly.
We could have a much smarter system that encourages innovation, startups, and new markets. It would leverage the fact that hardware is cheap and location-aware, with data connections, cheap accelerometers, and software that can be inspected.
What would a smart system of regulation look like? For transportation some simple basic licensing will be required to make sure there is insurance and basic safety. Beyond that, however, regulators should not be deciding who can operate in a geography. Bad behavior can be policed by monitoring data from sensors. Cities can use demand pricing, which is already used to control congestion and parking in some cities, and apply it to scooters, ridesharing and new mobility solutions like the triple revolution. When and where there is over-supply of cars or scooters, fees should go up. In transportation deserts prices should be low or zero.
The compliance software should be open-sourced to make sure it is easy for new companies to enter the market and to shine a light on these crucial portions of code. The VW emissions fraud debacle would not have happened, for example, if that software was open-source.
All of these lessons also apply to regulating the other tech giants. We need to be ready to take antitrust action based on a theory of network effects. We need to demand an open-source compliance with rules for their behavior.
San Francisco’s decision is promising in the battle to regulate against companies’ bad behavior. We need more cities to take similar stands to check the winner-takes-all mentality rampant in tech, but do it with regulations that encourage innovation rather than award monopolies. Otherwise, we risk creating more monopolies with bad behavior — more Ubers, Facebooks and Amazons.