A word or two about how society goes through mood shifts is in order. As I scanned the news sources today I was struck by several stories that are demonstrating just how much of a reversal there has been over the holidays.
A few examples? Sure…
The Financial Times reports that Airbnb is facing $400 million in lost bookings as officials in London have gone after the small hoteliers with bureaucratic regulations designed to – near as I can figure it – drive up prices in order to protect the “old guard.” Big, rich hotels.
For example, the FT story mentioned a limit of 90 nights per year on hosting properties.
The same has occurred – in dribs and drabs – in some of America’s big towns. Violations of zoning (or hotel) laws have been alleged.
What’s really going on, though, as you zoom in is that small owners of Big Assets are trying to find a way to Monetize them.
As you know, last year Elaine and I rented a wonderful AirBnB property up in Tacoma, Washington for about a month. Compared to commercial properties, the AirBnB place was between a third cheaper to half the price.
Sitting with the third cup of the morning, though, there’s something else going on: Big commercial interests are fighting a (for now) losing battle against artificial scarcity and high prices.
While it’s been said a man’s home is his (or her) castle, that’s actually not how the modern world works.
A “man’s home” is his asset, only so long as he doesn’t threaten the interests of other (bigger) asset owners.
The problem for the large and mainstream business interests is clear: They have made huge investments in equipment and marketing and want “protections.”
Take the airline industry as another example.
Already, there are several “Parts” to the F.A.A. regulations. These involve private aircraft, versus light commercial, versus large carrier regulations.
Notably, just as we see AirBnB using computational horsepower to match up supply and demand – short-circuiting huge investments in planes, equipment, and marketing, so too we have seen a huge increase in computer-matching air travel services.
The air services are interesting because they evolved into the space not from computational horsepower, but from a background in leasing and fractional ownership. Which means we can observe that computer-based business works, but the same thing can be evolved from pure business models like fractional-ownership programs for aircraft where owners are looking for higher utilization (hours flown) in order to spread costs over more hours.
Since I’m taking our old plane up for three take-offs and landings this morning, remember if that’s all I did for the whole year, that hour of flying would cost literally thousands of dollars. But spreading out costs over a hundred hours or more, the cost-per-hour comes down.
Back to point though: We are seeing a Pendulum Swing of Assets.
Here’s another large personal asset that has been monetized (like that basement apartment was with AirBnB): The family car.
I know, you and I think Uber and Lyft are pretty cool – and they are. But there are (again) old guard industries (taxis, limo services, et al) that don’t want competition.
In Connecticut, for example, the state legislature is about to take up state Uber and Lyft regulation.
It’s laughable when you think about it: It turns the art or governance – which should be minimal – into a political bidding war – just the kind of “drain the swamp” problem that led to the Trump victory in November.
Yet, here we are into the New Year and the battles to suppress genuine free enterprise are continuing.
Every jurisdiction has a different angle to it, as well. In Atlanta, it’s reported that Uber and Lyft will simply pay pick-up fees to compete head-on with the big taxi firms.
Speaking of which, it’s been a while since I was up in Vancouver, but when I was the value of a taxicab license was north of $400,000 (USD).
Again, it falls into our “Laughable Government” category when we read headlines like “Metro Vancouver residents want regulations for Uber, poll shows” last year.
The poll was commissioned by the Taxi Association and so what would you expect it to find? Still, to its credit, that poll was only able to gin-up “equal safety requirements” as an issue because the reality is that’s the legitimate concern of government to enforce.
As we roll into 2017, I wanted to point out a few of these “Pendulum Swings” and advise you to keep a weather eye on them for changes ahead. Government errs whenever it tries to play auctioneer between business models.
Yet that’s what we read into the pile of legislation in places as disperse as London, the State of Connecticut, and Atlanta – the most reasonable of the three, as we read it.
At the macro economic level, the change in motion is something like this:
Old-style business models were designed from the ground up with conventional “spans of control” that meant a lot of regulation/management internally.
As computational horsepower has propagated from the desktop to the shirt pocket, the org charts have flattened and things like scheduling (once a human art of the taxi dispatcher, for example) have been reduced to algorithms and heuristics.
Our bottom line to all this is that business models have become loose from their mooring lines. Spans of control have changed. Big players with the old Big Assets want Protection.
Smaller asset owners want Freedom.
Since no one in government is able to articulate the problem, we thought we’d give it a go.
Now you know what to look for – and it promises to be a marvelous year for the informed observers who can sit back and behold the larger context of the only battles that matter.
Write when you get rich,