People in particular industries are framing the argument between new entrants vs established players as a very personal issue of what societies want. Well, they are right. It is a very personal issue of what a new generation values. And they are wrong. It is not going to resolved by name-calling at newbies like Airbnb, Uber, Grow (Fintech) or others as “cheats.” Below are a few cases in point which should help illustrate my point:
When Solar City got into the game of energy, many utilities didn’t care. To them, this was an upstart company with barely a fraction of the history and capitalization as the mammoth utilities. Turn forwards a few years later, Elon’s cousins are proving them wrong and utilities are leading the charge to making solar practically impossible to place on a residential roof, because they simply have no way to monetize it, in the context of having thought they could amortize their transmission lines for decades to come. Here in Quebec, we have a virtual monopoly in Hydro Quebec who insists that centralized power is the only future (whether hydro or wind) and that there can be little room for distributed power in the mix. While they used to openly dismiss distributed generation and storage, the market has moved on them, and their costs have actually increased to where solar+battery will soon provide a compelling financial argument as well. Because of the political importance of this “national jewel,” even the slightest peep of disrupting their monopoly is met with flags raised through the argument that there is a “societal pact” between HQ, the dams they build decades ago, and the population of our province. Nowhere in that argument is there any room for understanding that our closing our minds to new sources of energy has only led us to be far behind other states and countries who have helped small and medium sized companies to sprout up and be counted globally for their new energy technologies. When you don’t provide a home market for energy products, the knowledge base doesn’t grow, universities don’t create curriculum around it, vendors don’t relocate to be near business clients, and you fall behind.
In the case of mobility, we have a number of new models which have sprouted up in the past few years challenging our traditional thinking of how to get from Point A to Point B. Whether its car-sharing (opened up by car makers or otherwise) or improved public transit, people (and things) are able to move today by the shared-use of assets, which leads to cost-defrayal and added income for those with spare time.
Car makers are being tremendously affected by the car-sharing and direct sales. They used to sell cars, then lease cars, and now they themselves are investing in car sharing (GM in Lyft and BMW in their own service). While some position themselves from the argument of a societal perspective in order to protect legacy investments and political power bases, the reality of the millennial generation is that they want assets to be better used. Taxi drivers need to be re-trained. My car is already driver-less on the highway. Apparently within two years it will be so quite safely within my city. Its coming sooner than anyone thinks.
Some argue that the car sharing services of Uber and Lyft are nothing more than masked taxi services. I’d disagree. Thats like saying Costco isn’t a club. Some would want them to withhold taxes on “salaries”, yet the fact is that the drivers own their own assets, determine their own hours and decide on their own cars. This is not quite an employment situation. My consultancy clients do not withhold salary taxes on my fees to them, that’s my job to report. It shouldn’t either be the car sharing services responsibility either.
Electrification of transport is another booming area that provides governments with a big dilemma. Even electric car taxi services are guilty of not contributing towards the repair of roads, taxes which originate in the fuel taxes paid by gas guzzling consumers. So how will the government recoup those lost revenues?
A number of upstarts have been providing online lending in recent years, thereby bypassing many of the regulators and controls that banks are having to deal with. They are serving as “matchmakers” between desirous lenders of various risk profiles with borrowers (usually corporate). As another “match-making service”, they are simply providing a platform between two entities to agree on a financial arrangement. Obviously the banks are up in arms. Yet why is that different from my cousin lending me money, or the reverse? Why should a transaction between two willing entities be controlled by state regulators?
Bitcoins is one of those disrupting entities that has been placed on the “watchlist” by currency regulators worldwide. How do banks make money when transfers are immediate? Apple Pay has made Apple a financial company to reckon with…and it only has $200Billion in its vault to play with.
We see a number of sprouting hospitality services (AirBNB, VRBO) which do not require a hotel reservation process, don’t give you room service, yet provide an opportunity for owners of homes to share their costs with guests. Again, the platform isn’t to blame if hotels are losing customers, yet many feel that these platforms should be treated as would any other local “hotel” entity, and charge the taxes accordingly. In some jurisdictions, reasonable agreements have been reached, yet for the most part, it remains a “wild west” scenario.
Decades ago, you need a brick and mortar store to sell goods. Now anyone can sell online. The progress of the platforms have enabled people to sell their junk. Again, should it be Paypal’s responsibility to report sales to the IRS? Apple collects 30% of online line revenues from games or other apps that are housed in its Apple Store. Does it share a dime with my city, province or country? Nope…and nor should it. Its’ service is provided from wherever it resides, and so long they have legally set it up, then it’s called “avoidance”, not evasion. If you want the laws about taxation to change, please reserve for me a ring-side seat when you take on Apple, Google, Facebook and the rest. As many municipalities have proven, there are reasonable compromises that can be had on all fronts when new platforms come in to disrupt, but whining about the new entrants isn’t one of the winning strategies.
Photo credit: Benjamin Child