The Emperor’s New, New Clothes

The Emperor’s New, New Clothes

The establishment of any new Industrial Age always brings with it the loss of jobs, or a shifting of them, at the very least, and technology is no exception. But the tech sector did come up with an ingenious solution for certain people who found themselves somewhat disenfranchised or in need of some quick cash: the sharing economy, which gave us the Taskrabbits, Airbnbs and Ubers of the world. Task-related solutions are one thing, but when it comes to a platform like an Airbnb, which enables one to rent out one’s abode for short term stays and a bit of dosh and which has blossomed into quite a cottage industry (pun unavoidable), it can become somewhat of a more thorny issue, and it’s not only due to regulations in certain cities around the world (Airbnb’s plan to compromise with cities as regulatory challenges pile up).

Tech has always had a bit of an ‘us versus them’ brashness to it, and again, Airbnb is the perfect example, disrupting the hospitality industry – and rental market – in ways that the founders, who started by renting out an air mattress and hence the name, had not foreseen. But given technology’s (and its investors’) insatiable appetite for more, more, more, at this stage in the game, as technology and platforms outgrow the startup phase and become seven- and eight-figure businesses, buyer – or renter – beware: it’s only ever really a matter of time before our so-called fellow conspirators become ‘them.’

According to Quartz, Airbnb is no longer the nice guy of the sharing economy. “For almost a decade, Airbnb has stuck carefully by that message, while maturing from a scrappy startup into the world’s fourth-most valuable private tech company. On paper, Airbnb is worth $30 billion, as much as Marriott International, the world’s largest hotel chain. At the same time, the company brands itself to hosts, guests, and investors as a champion of the middle class.”

In New York, Governor Andrew Cuomo signed a law in October that called for “fines of as much as $7,500 for illegally listing a property on a rental platform such as Airbnb,” according to the New York Times.

“The company had said the large fines could have deterred hosts and impaired its revenue in New York City. Hosts in the city generated about $1 billion in revenue last year, and the company took a cut of that in fees. But Airbnb on Friday agreed that it would drop the suit as long as New York City enforces the new law only against hosts and does not fine Airbnb. The settlement takes effect on Monday.”

In other words, the company threw its hosts under the bus, and in some cases, created a new criminal class: better pay those fines! Then again, in the more, more, more scenario, Airbnb has plans to expand into full travel service, and to go public. Big dreams and plans often blind one to the plight of the little guy, who become collateral damage.

“Airbnb is moving away from, or at least beyond, its founding promise of being a platform for the middle class. It’s becoming more professional, more like the very hotel chains it seeks to upend. For the most part, that transition makes sense: Airbnb is no longer a new player. It has 2.5 million listings across 191 countries and 1 million guests staying in them on any given night. Like many a successful startup before it, Airbnb now has far more stakeholders to answer to. But the company still rests its appeal on bettering the lives of everyday people, and that mantra feels increasingly outdated amid a host of corporate imperatives,” says Quartz.

The question is: did Airbnb truly innovate – or merely take a different route in order to compete more quickly with seemingly insurmountable competitors? (And thanks should go, in no small part, to the tech press and all of the adulation and ink they provided.) Are they innovators, or predators cloaked in the guise of tech? We also wonder how closely Uber is following this same path, especially in light of the fact that, according to the Financial Times, “for the year ending September 2015, Uber had GAAP losses of $2 billion on revenue of $1.4 billion, a negative 143% profit margin. Thus Uber’s current operations depend on $2 billion in subsidies, funded out of the $13 billion in cash its investors have provided. Uber passengers were paying only 41% of the actual cost of their trips; Uber was using these massive subsidies to undercut the fares and provide more capacity than the competitors who had to cover 100% of their costs out of passenger fares.” In the meantime, they are driving the traditional players out of business – or at least making it a lot harder for them to compete.

So, is Silicon Valley/tech truly innovating, or even disrupting or disintermediating, or as we’ve suggested, merely taking a different route to launch what is tantamount to more of the same? When the early Web 1.0 companies were launching and failing to turn profits, investors still believed in and threw money at them, and pundits often cited it as being a case of the emperor’s new clothes. Seeing it repeat itself in some fashion, in the case of Uber and perhaps encompassing even more companies – Amazon comes to mind, disrupting brick-and-mortars, and now building their own chain of brick-and-mortars -, we wonder if those pundits missed the bigger picture, as these disruptors/disintermediators put more and more wealth into the hands of the few. Is it really a case of the emperor’s new clothes, or rather good old-fashioned naked greed, pure and simple? Onward and forward.

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