An Up-Lyft-ing Christmas Tale

Reputation protects better than regulation.

This Christmas Eve, if you see a fat man in a sleigh distributing presents, tell him he is in violation of several government regulations. The Federal Aviation Administration is upset about his secret flight path, and his gift bag violates charity tax rules.

In real life, government barely lets people give each other rides in cars. But now the Internet has given birth to exciting businesses that challenge the rules.

Lyft and Uber offer a phone app that allows people who need a ride to connect to a driver nearby who'd like to make a few extra bucks. It's an instant taxi business—which is why existing taxi businesses don't like it.

Uber in particular is denounced by the loud voices of the left: unions that are threatened and safety zealots who say Uber can't prove its drivers are trustworthy (despite their customer-approval ratings and the fact that plenty of bureaucratically licensed cab drivers are untrustworthy). Leftists also don't like the cavalier, capitalist attitude of these new companies.

I once worked as a Lyft driver. To do that, I had to pass a criminal background check. Once approved, I pressed a button on my phone saying I was "available." I quickly got a message from someone nearby who wanted a ride. When I dropped him off, no cash changed hands. Lyft processes the fare through credit cards based on time and distance.

My passenger or I might have been reckless or obnoxious, but if we were, it would appear on our Lyft "rating." He'd have trouble getting another ride, and I wouldn't get new customers.

My next passenger was a woman. She felt safe getting into a stranger's car because the rating system protects her. Lyft sent my picture to her phone.

In the end, I made money, and my passengers saved money. Win-win. But taxi companies aren't happy about losing business to people like me, driving my own car. One told our cameraman, "We have to pay big money for licenses, get fingerprinted, have commercial insurance. [Lyft] has nothing!"

But it's not "nothing." I had to have a drivers' license, a state-inspected car, and that background check. Even more useful are the ratings. That instant feedback gives drivers and customers more reliable information than piles of licensing paperwork. Reputation protects better than regulation.

Will government crush innovations like ride-sharing or room-sharing businesses? Politicians keep banning them. Every week it seems The New York Times runs a hostile story along the lines of: "Councilman Jones says these new services don't follow the regulations!"

But of course they don't. The regulations make it impossible to make improvements. Regulators call themselves "consumer protectors," but often their main role is to ban better options.

A few Uber executives did say creepy and despicable things, but I still love their business model: Keep operating in defiance of regulations. By the time the lazy dinosaur that is government objects, thousands of happy customers will tell local politicians, "Don't take away a better service!"

Luckily, technology allows capitalist innovation to move fast enough that these new businesses may stay ahead of the politicians' instinct to destroy things they think of as weird or dangerous.

This year my favorite Christmas gift to myself is the Internet app Waze (Spotify is my second favorite). GPS systems make it harder to get lost when driving. GPS was a great improvement, but Waze is even better. It tells me exactly which route to take, and almost exactly when I'll arrive.

Waze computers filter real-time information from thousands of other drivers to figure out which route is fastest. I no longer obsess about whether I should get off the highway and take Third Avenue or stay on the highway or … who knows? Now I relax, knowing that tiny person inside my phone will find the best route. I love it. I'd buy Waze for my friends this Christmas except—Waze is free. Isn't the Internet grand?

May the holidays bring you exciting new toys. Let's work together to keep government from crushing them.