Uber and Airbnb

I’m extremely uneasy about startups like Uber and Airbnb whose business models are grounded in sidestepping regulations that were originally intended as consumer- and labor-protection measures. People—both the service providers and their customers—love Uber and Airbnb because they offer greater flexibility and efficiency than traditional taxi and hotel services. Some of that flexibility is afforded by new communications technologies that offer a more direct connection between the service provider and the consumer. But a lot of that flexibility stems from the fact that these services are unregulated. Uber and Airbnb get closer to consumers not only by using information technology to ditch the middleman of the dispatcher (in Uber’s case) or travel agent and hotel chain (in Airbnb’s), but also by ditching the middleman of the government.

We can imagine lots of markets that could be streamlined by using information technology to sidestep middlemen to place service providers in more direct communication with consumers. But the middlemen are often the people who comply with government regulations that are intended to protect us from fraud and abuse. Middlemen often create friction and inefficiencies in the system. But sometimes a little friction is good.