<p>The regulatory woes seem to be never ending for the newest wave of tech start-ups — the on-demand apps that connect people who need something (a driver, a house cleaner, a grocery shopper) with people who want to do the job.<br /><br /></p>.<p>On Thursday, the New York State attorney general said most Airbnb listings in the city violated zoning and other laws. Officials in California and Pennsylvania recently warned car services like Uber and Lyft that they might be unlawful. And workers’ rights advocates have questioned whether the people who provide these services should receive benefits, spurred by recent reports that some Homejoy house cleaners are homeless.<br /><br />Why have these companies run into so many problems? Part of the reason is that they think of themselves as online companies – yet they mostly operate in the offline world. They subscribe to three core business principles that have become a religion in Silicon Valley: Serve as a middleman, employ as few people as possible and automate everything. Those tenets have worked wonders on the web at companies like Google and Twitter. But as the new, on-demand companies are learning, they are not necessarily compatible with the real world.<br /><br />The first principle is to be a middleman – or in tech lingo, a platform – connecting the people who post on YouTube with those who watch their videos, or the people who need a ride with people who will drive them. As platforms, the thinking goes, they are just connectors, with no responsibility for what happens there.<br /><br />For websites, this is codified in law – they are not legally responsible for what their users publish, according to the Communications Decency Act, perhaps the most influential law in the development of the web. That is why Yelp avoids liability when people post inaccurate or abusive restaurant reviews, and why YouTube does not have to remove videos that some find offensive.<br /><br />The law protects online speech, not actions people take in the offline world. Yet its ethos has permeated Silicon Valley so deeply that people invoke it even for things that happen offline. “These folks grew up in a world where platforms are not responsible, and then when they go do stuff in the real world, they expect that to be the case,” said Ryan Calo, an assistant professor at the University of Washington law school who studies cyber law.<br />Take Airbnb’s terms of service. “Airbnb provides an online platform that connects hosts who have accommodations to rent with guests seeking to rent such accommodations,” it says. “Airbnb has no control over the conduct” of hosts or guests, the terms continue, and “disclaims all liability in this regard.”<br /><br />Yet it is one thing to say a company has no control over the conduct of online commenters, and another when its users are in people’s homes or cars. Airbnb, like others, has been forced to learn the limits of its status as a platform. In response to reports of renters’ <br /><br />damaging and ransacking homes, it added a round-the-clock hotline for people in unsafe situations and a policy covering $1 million in loss or damages.<br /><br />The second web business principle is to minimise the number of paid on-staff employees. Tech companies have long shunned the idea of hiring lots of sales staffers or call-center workers. Instead, they automate ad sales with auction algorithms or offer help forums where other customers offer advice on their sites. When Instagram was acquired by Facebook, it employed 13 people; Kodak, in its heyday, employed more than 140,000.<br /><br />That mentality may be why new on-demand companies are running into trouble with workers. Most of these companies avoid having employees by using contract workers. But some are wondering whether the companies are pushing the definition of contract worker too far. Uber drivers have filed class-action lawsuits in Massachusetts and California, and advocates are pushing for things like benefits and disability compensation for workers at many start-ups.<br /><br />The third related principle is to automate everything – whether selling ads, flagging inappropriate content or assessing employee performance. That notion also meets its limits in the real world. When Brian Chesky, the co-founder and chief executive of Airbnb, responded to complaints about vandalism, he emphasised that Airbnb had “algorithms that identify suspicious behaviour.” That’s nice, yet algorithms, when people’s safety and well-being are involved, are not enough. Airbnb said it combined automation and human involvement with 100 people who reviewed suspicious activity.<br /><br />Faulty assumption<br />The belief that problems can be solved without involving people is probably why many of these companies did not meet with regulators and officials before starting services in new cities. And it has come back to haunt them. Luther Lowe, director of public policy at Yelp, had some basic advice for Uber that could apply to Airbnb, Lyft and others: Hire a lobbyist and meet with the mayor and the city council before setting up shop.<br /><br />Uber seemed to put that lesson into practice in August when it hired David Plouffe, an expert in grass-roots campaigning and the manager of President Obama’s winning run in 2008, as a senior policy and strategy executive. “Our roots are technology, not politics,” Travis Kalanick, Uber’s co-founder and chief executive, wrote about the hire. “The result is that not enough people here in America and around the world know our story, our mission and the positive impact we’re having.”<br /><br />Despite these three major differences between web companies and the ones that bridge the digital and physical worlds, they all share another guiding Silicon Valley principle: the belief that if enough people want to use a product, the company will succeed.<br />Web companies like Google and Twitter grew as quickly as they could, trusting that they would figure out how to make money later. Business software companies hope that if employees start using a new software tool at work, the IT department will give in. On-demand start-ups are betting that if they get enough consumers on their side, regulators will eventually come around.<br /><br />“This libertarian, independent streak that runs through Silicon Valley compounds the issue,” said Julie Samuels, executive director of Engine, which advises start-ups on policy. “The good side is, it created this environment where people came together and made crazy amazing stuff that changed the world. The flip side is, sometimes it makes it difficult for those companies to engage.” That leads to yet another principle shared by both older and newer tech companies: Regulators are little more than roadblocks standing in the way of innovation.<br /></p>
<p>The regulatory woes seem to be never ending for the newest wave of tech start-ups — the on-demand apps that connect people who need something (a driver, a house cleaner, a grocery shopper) with people who want to do the job.<br /><br /></p>.<p>On Thursday, the New York State attorney general said most Airbnb listings in the city violated zoning and other laws. Officials in California and Pennsylvania recently warned car services like Uber and Lyft that they might be unlawful. And workers’ rights advocates have questioned whether the people who provide these services should receive benefits, spurred by recent reports that some Homejoy house cleaners are homeless.<br /><br />Why have these companies run into so many problems? Part of the reason is that they think of themselves as online companies – yet they mostly operate in the offline world. They subscribe to three core business principles that have become a religion in Silicon Valley: Serve as a middleman, employ as few people as possible and automate everything. Those tenets have worked wonders on the web at companies like Google and Twitter. But as the new, on-demand companies are learning, they are not necessarily compatible with the real world.<br /><br />The first principle is to be a middleman – or in tech lingo, a platform – connecting the people who post on YouTube with those who watch their videos, or the people who need a ride with people who will drive them. As platforms, the thinking goes, they are just connectors, with no responsibility for what happens there.<br /><br />For websites, this is codified in law – they are not legally responsible for what their users publish, according to the Communications Decency Act, perhaps the most influential law in the development of the web. That is why Yelp avoids liability when people post inaccurate or abusive restaurant reviews, and why YouTube does not have to remove videos that some find offensive.<br /><br />The law protects online speech, not actions people take in the offline world. Yet its ethos has permeated Silicon Valley so deeply that people invoke it even for things that happen offline. “These folks grew up in a world where platforms are not responsible, and then when they go do stuff in the real world, they expect that to be the case,” said Ryan Calo, an assistant professor at the University of Washington law school who studies cyber law.<br />Take Airbnb’s terms of service. “Airbnb provides an online platform that connects hosts who have accommodations to rent with guests seeking to rent such accommodations,” it says. “Airbnb has no control over the conduct” of hosts or guests, the terms continue, and “disclaims all liability in this regard.”<br /><br />Yet it is one thing to say a company has no control over the conduct of online commenters, and another when its users are in people’s homes or cars. Airbnb, like others, has been forced to learn the limits of its status as a platform. In response to reports of renters’ <br /><br />damaging and ransacking homes, it added a round-the-clock hotline for people in unsafe situations and a policy covering $1 million in loss or damages.<br /><br />The second web business principle is to minimise the number of paid on-staff employees. Tech companies have long shunned the idea of hiring lots of sales staffers or call-center workers. Instead, they automate ad sales with auction algorithms or offer help forums where other customers offer advice on their sites. When Instagram was acquired by Facebook, it employed 13 people; Kodak, in its heyday, employed more than 140,000.<br /><br />That mentality may be why new on-demand companies are running into trouble with workers. Most of these companies avoid having employees by using contract workers. But some are wondering whether the companies are pushing the definition of contract worker too far. Uber drivers have filed class-action lawsuits in Massachusetts and California, and advocates are pushing for things like benefits and disability compensation for workers at many start-ups.<br /><br />The third related principle is to automate everything – whether selling ads, flagging inappropriate content or assessing employee performance. That notion also meets its limits in the real world. When Brian Chesky, the co-founder and chief executive of Airbnb, responded to complaints about vandalism, he emphasised that Airbnb had “algorithms that identify suspicious behaviour.” That’s nice, yet algorithms, when people’s safety and well-being are involved, are not enough. Airbnb said it combined automation and human involvement with 100 people who reviewed suspicious activity.<br /><br />Faulty assumption<br />The belief that problems can be solved without involving people is probably why many of these companies did not meet with regulators and officials before starting services in new cities. And it has come back to haunt them. Luther Lowe, director of public policy at Yelp, had some basic advice for Uber that could apply to Airbnb, Lyft and others: Hire a lobbyist and meet with the mayor and the city council before setting up shop.<br /><br />Uber seemed to put that lesson into practice in August when it hired David Plouffe, an expert in grass-roots campaigning and the manager of President Obama’s winning run in 2008, as a senior policy and strategy executive. “Our roots are technology, not politics,” Travis Kalanick, Uber’s co-founder and chief executive, wrote about the hire. “The result is that not enough people here in America and around the world know our story, our mission and the positive impact we’re having.”<br /><br />Despite these three major differences between web companies and the ones that bridge the digital and physical worlds, they all share another guiding Silicon Valley principle: the belief that if enough people want to use a product, the company will succeed.<br />Web companies like Google and Twitter grew as quickly as they could, trusting that they would figure out how to make money later. Business software companies hope that if employees start using a new software tool at work, the IT department will give in. On-demand start-ups are betting that if they get enough consumers on their side, regulators will eventually come around.<br /><br />“This libertarian, independent streak that runs through Silicon Valley compounds the issue,” said Julie Samuels, executive director of Engine, which advises start-ups on policy. “The good side is, it created this environment where people came together and made crazy amazing stuff that changed the world. The flip side is, sometimes it makes it difficult for those companies to engage.” That leads to yet another principle shared by both older and newer tech companies: Regulators are little more than roadblocks standing in the way of innovation.<br /></p>