Coping: Social Pendulum Swing

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.

Computational Egalitarians

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.

I’m sure you’ve heard of NetJets – which is owned by Warren Buffett’s Berkshire Hathaway – but even this upstart is being challenged by newcomers like Nicholas Air.

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,

George@ure.net

Comments

Coping: Social Pendulum Swing — 18 Comments

  1. In a truly free country, anyone who gives cause for anyone to fight for anything is a criminal.

    Fighting for something may make life interesting, but under it is a much deeper, more pernicious reality.

  2. Methinks this is a much bigger issue in ra “rentier economy” which the USA has been for a long time (sharecropping) but with the decline in the production/wealth creation, has gone into hyperdrive. Airbnb also skews real estate values which are based on rental income and the “bigs” loath things that both decrease their ROI AND their asset values.Let the wars begin…

  3. It seems you like the sharing economy model. So do I. I only stay in Airbnb when planning long stays. I regularly use Uber when I don’t want to fight city traffic and parking. The convenience and technology of Uber re-assures me that I will be serviced in minutes.

    But, I have friends that work for Airbnb in New York and San Francisco and both say that Trump will be adding more Federal regulations to reign in the company. Why do you think that Is? Could it be that The Trump Organization has hotels?

    It just sickens me that we have taken a step backwards with this new administration. A business like Airbnb that actually is easy to use, and monetarily benefits the average citizens that are the proprietors, AND is cheaper for the end user will be over regulated and marginalized to protect Trumps own interests. That’s the problem when you”Drain a Swamp”. All you are left with are angry alligators that take over any other bodies of water to survive.

    • ” But, I have friends that work for Airbnb in New York and San Francisco and both say that Trump will be adding more Federal regulations to reign in the company. Why do you think that Is? Could it be that The Trump Organization has hotels? ”

      ———
      get back to us when your “friends” feel real tangible negative impact from Trump.

      Until then, what your worried friends are spreading is just more fake news.

  4. As I tell my Facebook friends, in our culture where everything is monetized, as George so accurately observes, the greatest sin is being poor. And, IMO that is why government NEVER helps people get out of poverty; there is too much money to be made in “helping” them (like the privatized prison industries).

  5. An awful lot of talk about so many problems — but, if you go to the root of it all, the simple problem of limited resources for an unlimited population (OVERPOPULATION) and the continued fight to not admit it, shows me that the future will be horrible. You people who BELIEVE in all the absolute crap that you have been brainwashed into believing since childhood — RELIGION — DEMOCRACY – NATIONALISM – ETC. are soon enough going to see what reality can do to you! Hope you all enjoy the miseries your blind beliefs will be bringing you! All your money won’t protect you, either.

    • Not that horrors have not been endured at the hand of man in the name of any these; but as a species “RELIGION — DEMOCRACY – NATIONALISM – ETC” have actually brought us pretty far from hiding in caves and living to the ripe old age of twenty nine and wondering what that big round thing in the night sky was, to living to a hundred and and taking romps on the moon. Take any one or all of them away and we have no advancement at all.

    • I don’t know. The future here looks pretty good from here.

      Sorry about your outlook. People die every day. That’s pretty much a given. Leading up to death is stuff that might not be fun. But breathing and the other things humans do can be pretty cool.

      All depends on if you are a pessimist or not.

      • Protect us??? From what exactly?

        Life is inherently dangerous. But yeah, pretty cool.

    • Amen, John. Over the years I have found this population issue to be a quick bellwether to determine how deep a person’s ability to think really is.

  6. G –

    I don’t think it is the government trying to suppress anything. Rather, it is the government seeking to do what is does best – insert itself between producer and end-user and leverage a free “piece of the action”.

    You wrote about these “bureaucratic middlemen”, which are the “shadow government” since they aren’t elected. Yet they are the guys making up the oodles of additions to the Federal CFR and state and local laws.

    Again, we peel fancy words away and it is greed and power at the federal, state, county and city levels that gin up new rules and regs to get their cut of our labors.

    I can’t see any way it ever stops, and hasn’t historically. All one can do is choose to live elsewhere (i.e., vote with feet and billfold).

  7. George, I apologize for the off-topic post but have you gone to a 9 point text size? I noticed a few months back that seemingly all the webpage text sizes had been reduced after a round of M$oft updates but your site seems to have been particularly affected by this. Could be my 60 year old eyes but I don’t think they’ve gotten this bad.

    Oh – and Happy New Year to you both!

    • If you have windows,, hold down the control button and roll your mouse wheel in – that should zoom in up more for you
      I will bump the font up a size, too