Uber, Airbnb, … good or evil for cities?

During the last years we had a lot of controversy around the sharing economy, particularly its most successful companies: Über and Airbnb were and are in the spot.

The list of examples is quite long, some of them even violent and dramatic such as über cars being burned, airbnb promoting highly successful citizen campaigns in NYC to prevent being banned or even top executives of über imprisoned in Paris.

Many of these conflicts originate with the existing incumbents: taxi companies, hotel chains, … trying to maintain their privileges against technological and/or business model innovation. This is not new, exactly the same thing happened when cars were taking the place of carriages or taxis (a quite recent invention in historical terms) began to establish in cities.

However, these are not the only source of conflicts, others arise from a lack of clarity on the objectives of a city, the type of society that they envision and the way to make it real. Many times, trying not to loose votes, politicians are ambivalent and say one thing, the opposite and the contrary at the same time and of course, this generates conflicts.

If we try to bring clarity to the discussion around the city that we envision, pretty soon we will find ourselves talking about regulations. This is so because they determine to a great extend the type of society that we live in. Do you think regulations are neutral ? or always in favor of the City overall ? Of course they are not ! they shape in many ways our society.

One good example of all this is to analyze the factors that contribute to the success of cities in terms of attracting visitors. Elements such as the brand of the city, its image displaying a vibrant life full of exciting proposals greatly contribute to make the city more attractive and become a magnet for visitors. All this is not created mostly by the government but by local actors.

How is the food there? Are restaurants offering new proposals? How is night life? Do they have interesting live music? How is accommodation there? Overpriced and completely boring hotels or exciting and full of variation coming from a variety of proposals? Is transport a chaos with angry taxi drivers that treat you badly or do you have a multitude of options where to choose? Can you do something else than visiting museums? Do you have theaters, day and night proposals for everybody? …

All these are questions that shape the attractiveness of a city for visitors are aspects where policies play a huge role. For example, live music was pretty common in the Barcelona of the 70’s, however after that period a new regulation was enacted protecting the interests of neighbors and nowadays only in very few places you can find live music, and when you find it, it is mostly illegal. Is this a good thing for the city? I guess we all can agree that it is not ! Enacting norms that effectively ban live music is the only way to protect the interests of a few citizens?

We can find many more examples of norms that backfire when they try to protect the interests of a few against the common interest of the majority.

Will it happen too if we restrict / ban airbnb or über ?

Why is this so important ?

Probably answering this question was easier years ago than now. What is the big change? Well, now cities compete and the winners and losers of this competition determine in many ways growth.

We are all pretty aware of how market competition moved towards innovation. Now the best way to compete in the market in many areas is not doing the same things better or cheaper, but doing a different thing. Apple, Whatsapp, Google, Facebook, … are prime examples of the renewed importance of radical, disruptive innovation as a form of competition.

Cities are not neutral in this change. Not only regarding their own competition for visitors, conferences, exhibitions, … which by the way, became global and of great importance to cities for its impact on branding. But also because of the rising importance of attracting “the creative class”, the group of professionals that move this new economy increasingly focused on the capacity to create and grow startups and high-profile disruptive ventures.

The new economy depends on connections, venture capital, mentors, … which are all global. This is why any city that wants to grow needs to be able to attract the kind of people that represent it and brand itself as such, as a global entrepreneurial city.

Traditionally the way that cities promoted growth was trying to interest and get the attention of large corporations, tax breaks was the usual thing, and grow this attention to setting factories in the surroundings. This is not over, but not only the action is not there but also the kind of work and culture that top cities envision is no longer to one represented by large factories but the one existing in places like SOMA in San Francisco or Midtown Manhattan: an ecosystem of startups, co-working spaces, new ventures, … what we commonly call the new economy. 

Well, you got it ! Failing to attract the creative class is not decoration, it impacts the bottom line of real growth and therefore has important consequences for our future.

But, why is this related to Über and Airbnb ?

The first thing that we have to realize when we talk about the sharing economy is that it is about everything but sharing. Providing a service in exchange of a monetary compensation is not “sharing”, is normal business.

The “sharing” economy however, signals the starting point of a new type of organizations where freelancing will be more common. Leaner organizations where full-time employees will be replaced by freelances that nevertheless will benefit from their brand, from their platform infrastructure and procedures but will not be tied by long-term contracts. Of course, this demands a new regulation, but this aspect belongs to another post.

Therefore, organizations such as Über or Airbnb are not good or evil,  it is about dealing with the past or building the future.

Airbnb, Über and the rest provide the obvious benefits of bringing a diversity, innovative set of options to residents and visitors. With Airbnb you can book from a boat to a luxury apartment to a chic one or a cheap one if you choose so. With Über you have easy access to high-end limousines, convenient transportation in places where no other transportation exist or just a convenient service all over.

Therefore you have more, diverse and possibly better options. Is that bad for the City?

This is in line with introducing innovation in cities, making them more livable and more attractive. It is not the only way, e.g. Google & NYC just announced 5.000 self-driving cabs replacing an equivalent number of New York taxis, wouldn’t we like to have a ride in one of those? Of course, we will !!! What better promotion can you find for a City? Is there a better way to put the City in the front page? To spur innovation and make it clear that innovation is priority #1 there? Maybe not !

Where is the conflict then? Well part of the conflict and part of the problem are policies. City policies were not designed to transform cities in Living Laboratories full of experimentation but to ensure security and equal access to services.

A conclusion, many times missed, of the emergence of these new organizations is that we have to rethink policy. Now we need policies that preserve the common good of course, but at the same time we need policies that can also foster innovation and creativity in cities.

Cities establish policy in many ways, but in terms of services one of the main ways is to grant licenses, normally direct licenses given by the City Hall itself.

This ensures a tight control but at the same time limits tremendously variety and experimentation. Just imagine that you want to establish a capsule hotel, it won’t probably fit any existing standard, neither comply with the ones that the license was thought for (Aribnb or Über are typical examples of this category). This is exactly the first thing that you want to avoid when dealing with innovation. In innovation you want freedom.

There are many ways to transform the actual system, while retaining some form of control, some examples are:

• Opening them. You can open categories for accommodation without linking them to a specific form of accommodation.
• Using public agencies with the participation of social groups to grant licenses instead of directly the City Hall.
• Providing temporary licenses easily that can be revoked after 3,6 moths or one year.
• Granting tax benefits for engaging the conditioning works necessary for activities such as live music or in general any activity that favors the city.
• Many questions are open, but one is right now pretty clear, how do we foster innovation in our cities, how do we manage to transform our cities in Living Laboratories for experimentation is becoming a priority if we want to succeed in this new economy.
• ….

Banning and avoiding conflicts with existing incumbents, is probably the worst thing we can do not only to our cities but to our present and future citizens !