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October 1, 2015

Congress Has Discovered the Sharing Economy

4 reasons why that should keep you up at night

It’s official: the House of Representatives has discovered the sharing economy. And the verdict from Capitol Hill? Sharing is good (mostly.) But that won’t stop policymakers of all stripes from continuing to look for ways to handcuff and hamstring entrepreneurs seeking to create new business models.

As these things go, it was a pretty good hearing of the House Energy and Commerce Committee, which was entitled, “The Disrupter Series: How the Sharing Economy Creates Jobs, Benefits Consumers, and Raises Policy Questions.” The hearing included witnesses from Uber, Intuit, the Internet Association, Thumbtack, and other organizations involved in the sharing economy. Aside from the cognitive dissonance of Congress talking about disruption (remember the famous “series of tubes”), the hearing touched on many of the most salient issues.

Lawmakers from both parties discussed the sharing economy. Republicans discussed its rapid growth and job creation. Democrats also were generally positive, but questioned whether Uber drivers were actually employees, whether drivers should receive minimum wage, and also raised privacy issues about its terms of service.

This was an information-only hearing; no specific legislation was being considered. So no harm, no foul. Right? Wrong.

Here are 4 reasons why this hearing should keep you up at night.

  1. Legislators legislate and regulators regulate. Just as serial entrepreneurs always have an idea they’re working on, so too do policymakers. It’s just what they do. So as legitimate concerns about aspects of the sharing economy emerge, enterprising policymakers will propose legislation that could have a major impact on business models and platforms alike. So if you’re a start-up disruptor, ignore Washington or Sacramento or Austin at your own peril. If you don’t educate them on your product or service, someone else will. And you many not like the outcome.
  2. Most policymakers aren’t yet comfortable with the gig economy, the idea of matching workers with a job in an on-demand, as needed basis. Most policymakers came of age when there were employers with responsibilities and employees with rights. The idea of working for 3 or 4 or 5 “employers” at the same time, sounds much different in Washington than it does in Silicon Valley. Policymakers worry about exploitation and a host of other issues. So the burden for demonstrating the value of this model will always be on companies, not Congress or state legislatures.
  3. Disruption creates destruction. For the tech industry, disruption is all good. It is the process whereby new business models and technologies are created, and old ones fall by the wayside. But for Washington, disruption leaves a wake of destruction in its path – some creative, some not so much. Disruption leaves workers with pinkslips, destroys long-standing ways of providing salaries, services, and healthcare, and creates entirely new issues to grapple with. So it’s critically important to think about policymakers as an important audience from the get-go, just as you think about investors, media, employees, and analysts.
  4. The policy challenges are only going to get more difficult. Today, ride-sharing companies run up against local taxi and airport commissions, and those are tough audiences indeed. Soon, as the next wave of start-ups mature, especially in the FinTech and HealthTech spaces, the regulators will be federal and state – think the FDA, the OCC, the CFPB. Startups will need to have well thought out strategies for introducing themselves and their products, telling their stories, and building allies who support them. If they don’t, they will be locked in policy battles for months and years, rather than doing the hard work of building a business.

The good news from Tuesday’s hearing is that Congress sees the value of the sharing economy. Long term, however, I’d watch out when policymakers “discover” new industries and business models. Usually, it means that a raft of policy proposals isn’t too far behind.

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