Airbnb v NYS: Can innovation coexist with regulation?

Rules are meant to be broken.  It’s not a bad aphorism inasmuch as it contains the spirit of innovation that leads to things like democratic republics in favor of monarchies, cures for horrendous diseases, brilliant works of art, and…yes…iPods.  Of course, as the better English teachers used to say about grammar, it’s okay and even necessary to the task of creative writing to break the rules as long as you know you’re breaking them.  In another context, regarding the rules pertaining to many of the social systems we erect, I would argue that it’s okay to break certain rules as long as we don’t forget why we wrote them in the first place.  There’s no question that government regulation, for instance, can be inefficient, unreasonable, costly, and even corrupt; and for a state government that has exhibited all of these vices many times since the nation was new, one need look no further than Albany, NY.  Nevertheless, as state Attorney General Eric Shneiderman squares off this week with chief executive Brian Chesky of Airbnb, the question of whether or not regulation plays a role in the so-called “sharing economy” is as much a cultural matter as it is a practical one.

Airbnb is the biggest online facilitator of short-term rentals.  Through services like these,  home-owners with anything from a room to a whole house available can connect with renters looking for short-term alternatives to hotels and traditional B&Bs. Airbnb collects modest service fees for hosting the connections and facilitating transactions, and today the company is worth an estimated $10 billion.  Of course, in New York State, as you might expect, a very large portion of rental properties are offered and sought in New York City, and there happens to be a law in the city against renting a whole apartment for less than one month.  This is to prevent landlords from operating unlicensed hotels.  According to this story by David Streitfeld in The New York Times, AG Schneiderman is claiming that 60 percent of Airbnb rentals in the state are illegal due to the large number of city offerings that are breaking the law.  Chesky is fighting back with a familiar refrain we hear in so many contexts these days — that current regulation doesn’t apply to his company’s stable of hosts he calls “micro-entrepreneurs.”  And, indeed, Airbnb can be a very lucrative, even home-saving opportunity for people seeking new ways to survive the pressures of the current economy.

I personally think Airbnb and businesses like it are pretty cool, and we should proceed with caution when it comes to regulating new sources of income for individuals in an economy that continues to pummel the middle class from all sides.  I stayed in a woman’s home on Long Island a couple years ago; and it was clear that the income she earned by renting out her kid’s room from time to time factored considerably into making ends meet for her family. On the other hand, if an unregulated, data-driven system enables the multi-property, commercial owner in a place like New York City to circumvent laws originally designed to protect consumers, that doesn’t ultimately help Mrs. Room-to-Rent or anyone else in the long run. It seems to me that if a system like Airbnb exacerbates the already lopsided real-estate market in that city, the family with one room to rent is only going to bear more financial pressure over time in macro-economic terms until their micro-entrepreneurism won’t help.

And according to the Times article, the AG’s office claims that nearly one third of the city rental offerings at the time it began its investigation were owned by just 12 percent of the hosts on Airbnb.  Even as the fight was brewing in Albany, Airbnb was scrubbing certain landlords from its site who were controlling an estimated 2,000 rooms in the city.

David Streitfeld rightly invokes the Silicon Valley ethos ingrained in its VC-fueled, fail-fast, start-up culture that “It’s better to ask forgiveness than permission.” This mantra is often repeated with regard to copyright infringements privacy invasions and violations of any number of statutes, and what it really translates into is get rich faster than you can be sued or indicted, and then you can negotiate or even pay a settlement after the fact.   In fact, the Times article quotes a Mr. Kevin Laws of AngelList thus:  “the approach almost all start-ups take is to see if they can be successful fast enough to they can have enough money to work with regulators.”   It’s an effective strategy, and there is something undeniably American spirit about it, too; but it seems to me we should adapt regulations to accommodate the changing market without necessarily abandoning their initial intent.  The current cultural trend that seems to want to tear down all systems originally designed to serve the public has a tendency to result  in the kind of market that existed at the turn of the last century when people were  literally ground under the wheels of innovation.

I think this tension between New York State and Airbnb makes an interesting test case — one that it ought to be a relatively solvable — exemplary of the larger challenge as to how and when to regulate in the digital age.  Can we balance legitimate innovation that really does meet a viable market demand and creates opportunities for people while also maintain rational grounds for public oversight where necessary?  While temptations abound to forego the very notion of traditional regulation in favor of some sort of algorithmically optimized democracy, I suspect this isn’t a choice we’d make were we able consciously to consider it.  As such, cases like this one are intriguing in that they force us to ask some of the right questions.

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Google’s Tangled Web

 “You won’t know who to trust . . .”

 It’s a familiar refrain in any number of thrillers in which protagonists find themselves entangled in webs of overlapping conspiracies.  You think you have a position, an ideology, and allies; and it turns out you’re being played by a powerful manipulator pulling strings on both sides of the battle.  The lines between good and evil blur…

It wasn’t that long ago that Google enjoyed substantial credibility among progressives, who like to think of themselves as unfailingly opposed to corporate influence in public policy; and it was just this week that Washington Post reporters Tom Hamburger and Matea Gold published this in-depth article revealing just how rapidly Google has learned to use its considerable resources to amplify its voice in Washington.  It’s well worth a read, particularly, I feel, to understand some of the more subtle means by which a company like Google can evangelize its agenda in public debate outside the Beltway. Lobbying is a reality, and every industry is going to participate; but it isn’t very subtle, and it isn’t all that difficult to learn how much a particular corporation or industry spends on K Street.  Far more insidious, I believe, is when a corporation or industry can strategically sponsor the outcome of public discourse in the guise of academic fora, research, and policy-influencing organizations that the public believes to be citizen advocates.

Imagine a corporation that has enough money to fund or sponsor a vast network of policy-affecting organizations that appeal to the broad spectrum of ideologies but ultimately lead public sentiment to the same conclusions.  Imagine further that this same corporation actually controls most of the technology used to disseminate these messages and, moreover, that the public believes itself to be liberated by the wealth of “information” made freely available by those technologies.

Consider, for example, that Google funds both the progressive-styled Public Knowledge and the decidedly conservative American Legislative Exchange Council (ALEC).  The former organization promotes messages of openness, individual expression, and access to knowledge delivered in the tone of a professor at a liberal arts college.  The latter organization is specifically designed to facilitate corporate, pay-to-play influence on public policy while pumping out conservative messages promoting small government and free markets.  And thanks to social media platforms like Facebook, where so much short-attention-span politicking takes place, we the people are now neatly organized into ideological echo chambers. If you and your friends are generally left-leaning, you’re likely to see items in your news feed from an organization like Public Knowledge; if you and your friends are right-leaning, your’e likely to see items from an organization like ALEC.  But here’s the genius part for a company like Google, in this case:  once you strip away the veneer of liberal or conservative, these apparently divergent organizations are both promoting the same bottom-line message —  leave Google alone.

A corporation funding both political camps doesn’t care if its unfettered existence is sustained in the name of liberal free speech or conservative small government, just so long as it remains unfettered.  And Google is certainly not the only corporation playing this game, but it would be hard to point to a single company today that is more capable of having its fingerprints on more messages in the vast mosaic of communication that exist between the cloisters of Washington and the coffee shops of the blogosphere. And one unique feature of the politics of internet companies is the manner in which they can align the idea of protecting the internet itself as synonymous with protecting its design to date; and that translates into a kind of “too big to fail” status for the largest players.   And in this context, it’s worth mentioning that Google is a company that could use a bit of fettering from time to time.  Despite a history of investigations and/or penalties for anti-trust violations, copyright infringements, privacy invasions, and profiting from illegal drug trafficking, there remains a distinctly world-domination theme to this information juggernaut with the cute logo and adorably nerdy appearance.  I offer this quote from a February article in The Guardian written by Carole Cadwalladr about genius technologist Ray Kurzweil, who presently serves as Google’s Director of Engineering:

Google will know the answer to your question before you have asked it,  he [Kurzweil] says. It will have read every email you’ve ever written, every document, every idle thought you’ve ever tapped into a search-engine box. It will know you better than your intimate partner does. Better, perhaps, than even yourself.

Assuming Kurzweil is right (and he has a habit of being right about a lot of things), the question is whether or not the future projected in that stated ambition is a future we actually want.  Of greater, immediate concern, however, is to what extent we are engaged in that discussion at all.  What should be clear at this moment, I believe, is that those goals Kurzweil describes can best be accomplished in a society that has either abandoned or radically reshaped its attitudes about privacy and about ownership of intellectual property.  This coincides with my own instincts that so much of the “debate” about copyrights and patents are often little proxy wars whose purpose is propaganda meant to foster a generation of Americans who will voluntarily forego the notion of intellectual property on the grounds that it is an antiquated right.  Ditto privacy, with the exception that it turns out all one needs to do get people to give up that right is invent Facebook and Twitter.

So, while the bloom may fade from Google’s progressive rose as it cozies up to groups like The Heritage Foundation and donates to the campaign of Ted Cruz, that’s not necessarily the big story.  I think the big story is going to be how effectively one corporation, or one industry, can convince people of even opposing ideologies to give up certain rights in the name of what that industry defines as “progress?”

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A Conversation – TV Writer Gene Grillo Part I

Since 1996, Gene Grillo has been a staff writer and series editor for a variety of hit, animated TV series, including Johnny Bravo, Jimmy Neutron, and Back at the Barnyard, and Kung Fu Panda.  Like many comedy writers, Grillo began as an actor working with Second City in Chicago — a sketch comedy/improv group where performers are also writers.  Presently, Grillo is working on the new show Breadwinners for Nickelodeon.

I spoke to Gene via Skype at his home in Pasadena, CA.

Listen to Part II here.

Visit Gene Grillo’s IMDB page here.

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Lefsetz Says Losing Value is Progress

From time to time, one encounters an editorial that so deftly weaves the offensive with the inaccurate that it leaves the reader stammering.  I suppose this was the goal of the latest OpEd from digital futurist Bob Lefsetz, which appeared in Variety last week under the title “Film Biz Can Learn a Few Things From the Music Industry When It Comes to Piracy.”  I quote:

Thank God we’re in the music business. We’ve already been through the transition; we’ve already been pushed back to zero. We’re in an era of rebirth so strong that if you think the music business is in trouble, you’re not in it. Blockbuster acts make more money than ever before. Piracy has been eviscerated, killed by YouTube and legal streaming services, and from here on, it’s only up.

If we strip away the tone of Lefsetz’s article, which conjures a notion of fiddling while Rome burns, and just mine it for its didactic elements, he appears to be asserting this:  that the music industry, after being forced finally to understand the digital age, is now on the leading edge of a financial renaissance, embracing and learning to coexist with technological reality that has transformed consumer demand.  Despite the underlying, economic reality that the music industry is worth about fifty percent of what it was fifteen years ago, Lefsetz could not be more sanguine about its future, and he challenges the film industry to learn quickly from music’s example in order to spare itself some pain.

Central to Lefsetz’s ebullience is the continued well being of what he calls the superstars.  He offers the following:

Superstar talent may make less money off recordings than in the past, but the live business far exceeds the money it once made. And then there’s sponsorships/endorsements and privates and sync and so many avenues of remuneration that no one who is a superstar is bitching.

Never mind that what Leftsetz is saying here just ain’t true or even mathematically possible, the elitism inherent in his proclamation is a direct contradiction of those democratizing promises made by his kindred techno-utopians in the first place.  Because what he’s saying is, “If you’re good, you’ll make money,” but by “good,” he means a blockbuster performer like, say, Lady Gaga.  But what if you’re good like Tom Waits or Rufus Wainwright?  Are these musical geniuses, who do not have screaming hordes of teenage fans or, heaven forbid, endorsements from Doritos, not good enough to make it in the brave new world Lefsetz foresees?  And I like Lady Gaga; I think she’s fun, funny, and talented, but I certainly think we need to keep fostering a more diverse library than artists like her are going to produce.  Unfortunately, in Lefsetz’s future the Gagas make a living (and we’ll get to what kind of living in a moment), while the fledgling Wainwrights remain hobbyists.  Not only is that unfortunate for culture, it’s unfortunate for the subsidiary jobs that won’t be supported by that next Wainwright not going pro.  And for all the exuberance, the data are clear that the disruptive technologies we’re talking about are not replacing those jobs.

As for cinema, we’ll set aside the apples-to-oranges flaw predicated on what I assume to be a void in Lefsetz’s knowledge about filmmaking and just stick to the macro view of the market he’s projecting.  If we apply his same “superstar” rationale to the film business, what we conclude is that the Marvel Comics franchise will be fine — and I have nothing against it — because those kind of films can always sell Happy Meals, but the next Wes Anderson, John Sayles, or Marjane Satrapi can expect to see the Spotification of their earning potential as summarized in a recent tweet by Bette Midler stating that 4.1 million plays on Spotify earned a whopping $114.  If you’re an indie filmmaker, try selling that kind of model to a prospective investor.  See, the part where Bob is just flat out lying about the future is that, if you’re good (i.e. make something people want), you will be presented with a choice between being pirated and earning nothing or streamed legally and earning next to nothing.

Finally, Lefsetz says something so inscrutable toward the end of the article, that I can only conclude he actually hates successful creators.  He says the superstars will still make good money, but of course not as much as techies or bankers.  It’s one of those short, stupid statements that act like a fragmentary grenade in the mind because it’s just some arbitrary opinion presuming to set a value on something people actually still demand in large volume.  An uber-wealthy banker is practically synonymous with criminal  to many people these days, so why not say, “Superstar musicians will never make as much as drug kingpins?”  It makes as much sense.  And which “techies” is Lefsetz talking about?  Because unless they’re saving lives, who decided their contributions are worth so damn much?  Okay, the market did, but only sorta.  I mean Zuckerberg is a billionaire, but that’s valuation based on speculation by investors, which more or less sums up the economic roulette game that is Silicon Valley.  Is Lefsetz really saying that Zuck’s real-dollar value is greater than, I don’t know, Bono’s in a consumer-based market?  Let Facebook charge for accounts, and we’ll find out.  No, what Bob is saying is that Bono is a big enough star to comfortably survive the devaluation of music caused by technology, and then he’s arrogantly suggesting that what we’re seeing is a rational market.  The part he’s leaving out is the next Bono you’ve never heard of, and quite possibly never will.

I think the film biz can learn one thing from the music industry with regard to piracy:  kill it as soon as possible.

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