Blowing up markets

July 6, 2010 | 11 comments

The Red VicBanning sublets

Last week, the State of New York passed a bill that bans short-term rentals: specifically, no homeowner or renter may sublet their home for less than a month. The target is sites like AirBNB, an up and coming website that allows travelers to eschew pricey hotels – and their accompanying hotel room occupancy tax – in favor of private homes.

If the governor chooses to pass the legislation (as opposed to veto it), AirBNB will effectively be outlawed, and with it, a grassroots marketplace economy for short-term accommodation. New York State will have cemented hotels and bed & breakfasts as gatekeepers to the city for travelers who can’t stay with friends or relatives.

To me, this is an interesting reaction: it shows, once again, that established gatekeepers are terrified of the Internet. We’re used to that by now in the context of media content – we already know that newspapers, publishers, record companies and movie distributors aren’t as important as they were – but this is a scarcity-driven marketplace. It used to be that finding a safe, clean room in a strange city was a hard problem, so we turned to hotels as a trusted source. Running a hotel is in itself an expensive, tough business, and as a result there were a limited number in any given city, and the price went up according to demand. Although the hotel business is a ruthless game, it’s always been hotels competing with other hotels.

Now, though, we can visit websites like AirBNB and Couchsurfing, where private citizens can offer their homes to travelers, and the site will let us know who we can trust based on other peoples’ experiences. The marketplace has been blown wide open, and it turns out that a lot of us would rather go for a cheaper, friendlier option. I wouldn’t put money on New York blotting out short sublets for long.

Power to the people

We’re going to be seeing a lot more of this, in all kinds of market sectors. We’re already seeing ridesharing sites become popular, for example, blowing up the market previously owned by taxicabs and making it available to anyone who happens to be driving somewhere. Effectively this formalizes hitchhiking, making it both safer and more efficient.

It all comes down to one simple rule: People want to be free.

The Internet is opinionated: as a medium, it inherently works to empower people and eliminate hierarchies in society. It shouldn’t be a surprise that the most popular Internet companies hail from California; their philosophies are direct descendents of the civil rights activism that took place there in the sixties and seventies. In many cases, it’s even the same people. (Or – and here I put up my hand as the son of Berkeley “radicals” – their children.)

Gatekeepers – companies, structures or processes that act as exclusive barriers or filters – are not long for this world. Where gatekeepers exist, they do so because the alternative was inconvenient at the time when the gatekeeper became established – not because they’re inherently better than an empowered population. Those organizations, companies, and even governments, need to look at themselves very carefully and figure out what needs to be changed, before those things are changed for them.