[throwaway201103]

The biggest and most common "loophole" being "we don't need all the physical infrastructure"

Amazon: we don't need to own retail stores or inventory

Airbnb: we don't need to own hotel properties and employ managers and housekeepers

Uber: we don't need to own cars and employ drivers

Are there any examples of tech disruptors that are really displacing classic competitors only on the basis of tax loopholes?

[buran77]

I never said (or meant only) "tax loopholes", Uber may even end up paying more tax than taxi companies. But taxi companies have a far, far higher bar in the eyes of the law. In most countries you can't just decide to climb in your private car and provide commercial transportation service. You have to spend a lot of time and money to get there, authorizations, commercial insurance, driver certifications, etc. Uber bypassed it by saying "we're a tech company" and left it to the drivers, making the enforcement of the law a lot harder.

Hotels also have higher requirements than an AirBnB host but the company says "we're just the tech platform". Just look at conflict resolution and what kind of leverage and protections a client has when dealing with a hotel vs. dealing with a private renter to see the massive gap that comes attached to that "disruption".

Because that's the thing, you could have short-term renting in the past but that wasn't an alternative to hotels. AirBnB made it a hotel alternative so that's the benchmark. Same with Uber, you could (legally) hitchhike in the past but Uber made the service a taxi alternative.

Imagine Google "disrupting" the state/national/federal identity registry, as in become the equivalent of the passport or identity card issuer while offering Google-style support and SLAs. Some services are important enough to be regulated, this is what today's disruptors are bypassing.

The solution to an industry being crap isn't to allow someone to bypass existing regulation, it's to create a set of effective regulations that can be applied equally to everyone.

[kd5bjo]

> Uber bypassed it by saying "we're a tech company" and left it to the drivers, making the enforcement of the law a lot harder.

The original loophole that Uber used was San Francisco’s different regulations between taxis and limo companies: The latter are less regulated but are allowed to accept prebooking, and not street hails. Uber realized that ordering a ride via a phone app is more convenient than trying to hail a passing taxi in many cases and can be served by a limo company instead.

[buran77]

Not very familiar with the situation across the pond but in much of Europe the expectation from companies providing commercial transportation services are far higher than just booking method:

- Drivers need a different, more expensive license or attestation that needs to be renewed periodically;

- Car needs a more expensive commercial insurance that covers all passengers and cargo, to a much higher payout, not just the driver like most Uber drivers have;

- Car needs to be inspected far more often to ensure it's roadworthy and can stand that driving regime for the future;

- Prices are regulated because the taxi service is seen as closer to public transport than to personal one. So you don't see price fluctuations more than you'd see for the bus;

- They need an authorization to serve an area (meaning they were checked according to local regulation);

- The company is responsible for its employees in many ways;

- And more.

A restaurant's kitchen has higher requirements than your private one which makes owning and operating a commercial kitchen far more resource intensive than a private one. There's no "kitchen sharing" where you can sell food straight from your private kitchen, "infirmary sharing" where you can pretend you're a doctor or a hospital room, or "legal office sharing" where you can pretend to be a lawyer without meeting all the requirements imposed on those sectors.

This is the loophole Uber exploited. Replace "car" with "house/room" and you get AirBnB. When they had enough of a head start they started complying with some regulation, while still acting like they're a different kind of service for what other regulation is concerned. They want to live on the border and pick and choose what applies to them, something no other commercial service is allowed to do. Except all the other disruptors who raise enough money to afford some fines while they still operate in a grey area. Cost of doing business.

[kd5bjo]

These are per-city rules in much of the US, but the limo companies that Uber was originally subcontracting to had to meet similar requirements in San Francisco as what tou describe. Booking is just the test that was used to determine which set of regulations apply to any given compan. For example, taxi supply was artifically constrained by a medallion system, but there was no such limit on the number of limos allowed to operate.

(Past tense b/c I don’t live there anymore and am not up-to-date with current developments)

They certainly have used the loophole you describe extensively, but that started later, once they were sure there were no repurcussions for the limo dodge.

[darkcha0s]

Uber didn't only become big because of the success in the US. When they scaled their operations, they had enough capital to disregard local laws (Berlin comes to mind), where they simply paid the fines with the capital it had raised, allowing to create a brand and household name. Thats what allowed them to become common everywhere; now that they are regulated, they have quasi no advantage over any ride sharing (even taxi) companies.

[buran77]

This is why fines should increase for repeat offenders to the point where they quickly become unmaintainable as "cost of doing business". They should also always be higher than the estimated profit generated by the offending behavior.

[mabbo]

> There's no "kitchen sharing" where you can sell food straight from your private kitchen, "infirmary sharing" where you can pretend you're a doctor or a hospital room, or "legal office sharing" where you can pretend to be a lawyer without meeting all the requirements imposed on those sectors

I definitely remember someone trying the kitchen one. Forgetting the name of that startup now, but it's been tried.

And given how badly America treats health care and law, I suspect the other two are in stealth mode right now.

[buran77]

I'm sure startups will try anything if they think they can make some money out of it. So do investors. The problem is such an endeavor just has to make more money that you put into it, not necessarily be a sustainable or above board business. They're not disrupting the sector they operate in, they're disrupting the way they can operate outside of the law and be agile enough to not get pinned down by it.

They'll try something, squeeze as much money as they can from wherever they can, see if "the cost of doing business" is low enough that they can even pursue the shady business model as a standard operating procedure, or else at least survive and grow until they can go semi-legit. They will rely on the fact that authorities have inertia so it takes time until someone catches up to their shenanigans, investigates them, comes with a decision, then they can fight for a while, delay the inevitable until they they're cornered, restructure their operations a bit, and the chase starts again. Companies like Uber are still shady businesses that in many countries operated outside the law for more time than they operated within its boundaries. But they gave deep pockets and where there's money, there's a way.

Not that much different from organized crime businesses that start off as being one stop shops for anything regardless of law and regulation, and may eventually be spun out into semi-legitimate businesses with more or less above board practices.

[mtnGoat]

I think it is being tried by the guy that started Uber.

CloudKitchens is the one Kalanick started, there are probably others.

[mabbo]

The one I'm remembering had people "host a dinner" that you had to pay to get into. And somehow that made it not a restaurant, so you didn't need to have a commercial kitchen (hint: this isn't legal).

Kalanick's recruiters reached out to me about CloudKitchens and I straight up said that no, I do not want to work for that guy.

[buran77]

It appears that CloudKitchens explicitly caters (no pun intended) to restaurants and commercial kitchens. So establishments already ostensibly having all the required authorizations according to existing regulation. There's no part that seems to encourage private individuals to start delivering food from their personal kitchen.

Uber for a long time did exactly that. Saying "we're just a tech company" is like ThePirateBay, YouTube, or The Silk Road saying "we just store and transfer blobs of unidentified data between completely anonymous users". You are responsible for what happens on your platform especially if you are encouraging people to break the law by giving them tools explicitly for this and paying them. They could have easily asked "upload evidence of x, y, z which allows you to provide the service in this particular geofenced region".

[emteycz]

What's the difference from calling by phone, also served by many limo companies?

[908B64B197]

> But taxi companies have a far, far higher bar in the eyes of the law. In most countries you can't just decide to climb in your private car and provide commercial transportation service. You have to spend a lot of time and money to get there, authorizations, commercial insurance, driver certifications, etc. Uber bypassed it by saying "we're a tech company" and left it to the drivers, making the enforcement of the law a lot harder.

Let's be real, most of it is getting a taxi medallion (sure you need a different driving license but any 18 years old can get it).

Posted it in an other thread [0] but do we really want to go back to the medallion system? Pre-Uber, either the driver rented the car to a middleman who rented the medallion from a rich owner, or said owner was selling and financing (most banks won't touch these medallions!) a medallion at a ridiculous interest rate to a driver that planned to use it as his retirement savings (an extremely volatile asset and not very liquid). The more I spoke to cab drivers the more it seemed their industry was a pyramid scheme aimed at helping established rent-seeker take advantage of often poor new immigrants. Uber brought a breeze of fresh air: Someone could simply buy a car, calculate the depreciation and it's value on the market (since unlike medallions cars are relatively liquid assets!) do rideshare and calculate their profits or loss. They can get out of the game at anytime, and they know exactly how much they are going to get for the car they have should they sell it.

Also, the argument on Uber/Lyft drivers not being contractors since they can't set their own rates and decide which ride they take strikes me as weird since medallion drivers were contractors, had to charge the price set by the city and could only pick-up customers in the (arbitrary) zones covered by their medallions.

And I'm not even touching the usual pain points and often discriminatory practices of medallion drivers (refusing card payments, refusing rides to non-white passengers and to non-white neighborhoods...).

[0] https://news.ycombinator.com/item?id=24225648

[syshum]

The problem here is you failed to identify the regulations as the problem in the first place, especially with Taxi's and Uber

The regulations created an artificial scarcity for transportation that increased prices, and lowered quality of service to the point where people were BEGGING for a service like Uber to come along

The solution to this problem is not "make Uber follow the tax regulations" which seems to be what you are suggesting

[buran77]

That's the kind of explanation you get from anyone breaking the law and claiming it was because the law not conducive to the greater good. Every regulated sector could get the same characterization from entities failing to meet said regulation making all of it in effect invalid. Uber has deep enough pockets to lobby for changing regulation but that would apply to everyone and they would again have to fight on a level playing field. They broke the law for profit.

Robbery is illegal even if you steal from a criminal, or if people are BEGGING for someone to do it. Sure, when it's a social movement it's still breaking the law but has a different moral value. As it stands the value now is in Uber's pockets.

> The solution to this problem is not "make Uber follow the tax regulations" which seems to be what you are suggesting

No. Not only did I literally start my comment with <I never said (or meant only) "tax loopholes">, I also ended it with:

> > The solution to an industry being crap isn't to allow someone to bypass existing regulation, it's to create a set of effective regulations that can be applied equally to everyone.

I'm trying to assume good faith but replying to me while completely ignoring the content of my comment or twisting my words to imply the exact opposite of what I said is disrespectful and disqualifies your opinion in my eyes at least. Pretty sure also in the letter and spirit of HN's guidelines. Makes it seem like you don't want to be part of a conversation but rather throw your personal ideas out there everything else be damned.

[throwaway201103]

You can sort of make a moral argument for Uber, maybe others in that one of the problems with the legacy taxi services is that they would refuse to provide rides to minorites, blacks in particular. With an artificially constrained supply of taxis, they could do this without penalty, possibly even profitably.

With Uber, sure an individial driver can decline a ride based on the destination and assumptions he makes about the passenger, but it's far more likely that someone will take the ride, since there are many more drivers. They also have less to fear with Uber since they don't carry cash or deal with cash payments, and there's some level of trackability/identifiability of the passenger in comparison to picking up a random person on a street hail.

[syshum]

>>claiming it was because the law not conducive to the greater good

No, I never claim the greater good, that is what people that support government and regulations claim.

We need all these laws, regulations, taxation, etc "for the greater good"

Anyone that claims to be doing something for the greater good chances are is evil.

>>Robbery is illegal even if you steal from a criminal, or if people are BEGGING for someone to do it.

Some how I bet you would not agree in all situation, income taxation as an example...

That said, I do not place much stock in an argument "well that's illegal", as an Individualist libertarian I assess things based on the ethical foundation of liberty or the principle of self ownership..

So I base my support or rejection of a public policy, law, or regulation based on that ethical foundation. I do not outsource my thinking to a legislature.

>>I'm trying to assume good faith but replying to me while completely ignoring the content of my comment or twisting my words to imply the exact opposite

I was not "completely ignoring" your content, it seemed to me then, and continues to be my belief now based on this further comment that you desire increased regulations on Uber to make them fall inline with existing regulations, to "close the loop hole" as it were

This is in stark contrast to my belief that the regulations are the problem and adding regulations to uber is not the solution to the problem

Eliminating regulations on everyone is the solution.

[jahaja]

> The regulations created an artificial scarcity

Is the classification as an employee, with attached benefits, artificial scarcity in a negative sense? If so, we got quite a few industries that would also love to remove this "artificial scarcity" and allow the use of day labourers.

[syshum]

Many taxi drivers, like uber drivers, are also classified as Independent contractors

Employment classification was not what I was referring to, I am talking about the endless regulations around taxi medallion system that puts a government regulated cap on the number of taxi's

[jahaja]

Alright, but that's not the case in the majority of the places where Uber have, and have tried to, introduce day labourers.

[throwaway201103]

There are taxi owner/operators, but since the owner cannot drive 24/7, and since the cost of a medallion is more than one can afford by working only 8 hours a day, most (all?) of them sublease their cars to several drivers in shifts. That way the car and medallion can be producing income around the clock. Those subcontracted drivers are not employees of the taxi company, they might be considered employees of the car/medallion owner but if they work for several different owners, maybe they are considered independent.

[syshum]

>>Alright, but that's not the case in the majority of the places where Uber have

I would love to see your source on that, most cities with any kind of taxi system have some permitting or medallion system that limits the number of taxis

>>and have tried to, introduce day labourers.

Do you view this as a negative? because I do not

[jasode]

>Airbnb: we don't need to own hotel properties and employ managers and housekeepers

Fyi because this is a common misunderstanding: Hotel chains like Marriott, Hilton, Four Seasons, etc also do not own most of their physical properties[1]. They are primarily management companies instead of owning a portfolio of real estate. If you see a Hilton logo on the side of a building, it doesn't mean that Hilton actually owns it. The logo is there because they have a long-term contract to manage the hotel for the real owners of that property.

>Amazon: we don't need to own retail stores or inventory

Amazon isn't a totally "virtual" company. Amazon owns (or leases) physical distribution centers instead of retail stores. They've always paid sales taxes based on nexus of those DCs. What's recently changed (circa 2017?) was collecting sales taxes on behalf of 3rd-party marketplace sellers.

[1] https://www.quora.com/Do-hotel-chains-like-Hilton-Mandarin-o...

[miohtama]

> Airbnb: we don't need to own hotel properties and employ managers and housekeepers

This is correct for AirBnb, but incorrect for the value chain. Someone must have the flat on their balance sheet. Someone must have a cleaner lady on a payroll. Is Airbnb value chain more effective that hotel value chain? Maybe. Maybe not. But for AirBnb host having a tax advantage of not being charged as a tourism business while in fact being one was clearly an advantage.

Similar laws have been passed all over the world, including the US where it goes by a city or a state, Las Vegas being notable.

[TheOtherHobbes]

Amazon: We don't need to pay sales tax or look after our warehouse employees

AirBnB: We don't need to pay sales tax or look after our hosts

Uber: We don't need to pay sales tax or look after our drivers

The sales tax problem is only a loophole in some territories. The "look after" part is a problem in all of them.

[rob74]

Can't think of any, but it's still fair to say that tax loopholes (and lack of other regulations that the established competitors are subject to, e.g. Taxi licenses) provide an additional advantage...

[qwerty456127]

Nevertheless, all these are legitimate things if viewed from a different perspective.

As a driver I like to have a platform to list my own services an independent way at instead of applying for a job at a transportation company. And as a passenger I like to be able to hire an individual driver. I don't want a taxi company nor the Uber company, just a private individual + a convenience website where I can find one.

As a traveler I don't want a fancy hotel, let alone a shitty one - I prefer a decent room or a bed in an ordinary private home.

If only Uber and AirBnB were just doing their job connecting individuals rather than trying to conquer the markets for themselves I would certainly be on their side.

[ghaff]

>As a traveler I don't want a fancy hotel, let alone a shitty one - I prefer a decent room or a bed in an ordinary private home.

I think that's a generally minority position though. For the most part, people prefer their own room, bathroom, and possibly kitchenette/sitting space. Along with flexibility about checking in and out. Not always of course. Sometimes you need to adapt if you're off the beaten path. But I'm pretty sure that if you surveyed most people, especially business travelers, they're not really looking for a speare room or bed in a private home.

[qwerty456127]

Obviously.

But I believe there is enough no-hotel people to consider this an option worth existing.

Same thing with transportation: a significant portion (if not the majority) of people would prefer to be serviced/employed by a serious company yet many drivers prefer to freelance and many customers prefer real people over corporations.

In fact I myself mostly use classic taxis and hotels but I understand the value of being able to choose the other model.

[mellavora]

uber: we don't need to demand/provide commercial insurance even though the vehicles are used commercially, private insurance can pick up the risk.

[jonny_eh]

Opendoor is disrupting real estate agents by buying real estate and selling directly. Seems fair to me.