The drawing shows a family gathered around a Chanukah menorah. The caption: “The Internet startup had only enough cash for one more day. But miraculously, the money lasted for eight days, until more venture capital could be raised.”
Internet startup culture has permeated American life so far that the New Yorker can joke about it and compare it to the miracle of the Chanukah oil that lasted for eight days. And, not to take anything away from Chanukah, there is something that seems miraculous about it. The technological revolution may have a deeper and more positive effect on America than anything President Obama accomplishes during his presidency, and it is in its own way more significant than anything the president uttered in his Air Force One interview with Remnick, not withstanding all the New Yorker editor’s formidable journalistic astuteness.
The fecundity of the startup culture is on display at a new Web site (where else?) called Product Hunt, which lists dozens of new mobile Apps and Web sites each week. One recurring theme in successful startups is the ability to get around the regulations created by politicians like Obama. Companies are using technology to create a free market.
The foremost example of this is Uber, with its UberX service that turns ordinary drivers in their own cars into taxi drivers. Sidecar and Lyft operate on a similar model. A Boston lawyer who represented existing taxi services challenging the new entrants, Sam Perkins, told the Boston Globe, “SideCar and UberX have targeted Boston to make the guy next door and his Prius into an unlicensed taxi driver with an uninspected taxis and no safety equipment…Their goal is to eliminate the existing taxi system and its consumer protections.”
The government-imposed licenses, medallions, inspections, minimum wages, regulated fares, and “consumer protections” turn out to be replaceable, more or less, by an Amazon-style star-rating system and the incentives of independent drivers and ride-provider networks that want repeat business.
And it’s not just taxis. Airbnb is doing the same thing to hotels. If you stay in an apartment or house you rent via the Airbnb marketplace, you may not have a clearly marked fire exit map, or a statement of the maximum room rate, on the inside of your room door. Consumers, it turns out, don’t mind. Many of us would rather pay less money, avoiding exorbitant hotel taxes and the wages of unionized bellhops and chambermaids.
Eat With and Feastly may yet provide similar disruption in the heavily regulated restaurant industry. These services, recently highlighted by NPR, offer guests the opportunity to enjoy home-cooked meals in private homes. The hosts avoid health department inspections, liquor license requirements, and the need for workmen’s compensation, payroll tax, or disability insurance for waiters, dishwashers, or line cooks.
President Obama’s approach to countering inequality is top-down and government-centered: raise taxes, increase the minimum wage, spend more on subsidies for education, food, and health care. But there’s an alternative, technology-led model that lets the UberX driver, the Airbnb host, or the Eat With cook use the skills and assets they have to connect with paying customers and earn a rating without a lot of government red tape. The opportunities are not small: Uber, which launched to the public in 2010, was valued last year at a reported $3.5 billion. Airbnb, founded in 2008, raised a round of capital in 2012 at a reported $2.5 billion valuation.
The tech world is not perfect. The e-commerce boom of the late 1990s ended in a burst Nasdaq bubble (though one that arguably laid important foundations for the current boom). Silicon Valley at its worst can have a herd mentality, an insularity, and mercenary qualities that outweigh loyalty. But which one offers more hope and change right now, West Coast tech start-up culture or Washington political culture? The question answers itself.