The taxi industry needs a new direction

Ridesharing is no safer than hitch-hiking

“Ridesharing. It’s no safer than hitch-hiking.” These are the words splashed across a massive billboard at Sydney’s Kingsford Smith Airport, paid for by the NSW Taxi Council.

According to the NSW Taxi Council’s website, “the new campaign is highlighting the risks of illegal taxi services, including ridesharing”. While this particular ad didn’t single out any particular company, it’s blatantly obvious who the message is aimed at — Uber, its users and everyone else in the sharing economy.

Poorly planned PR campaigns can actually turn existing customers away. Uber reports it has delivered a million rides locally which, if accurate, suggest that the cashed-up company is having more than a small impact on the taxi industry. At least a million people would instantly dismiss the NSW Taxi Council’s fear mongering because they have personal experience of ridesharing and can see no basis for the inaccurate comparison with hitch-hiking.

Yet if Uber wanted to resonate with disaffected taxi customers, they really couldn’t have asked for a better outcome. Earlier in April, strikes by cabbies in Perth, resulted in a 500 per cent increase in Uber requests. You would have expected the taxi industry to use that as proof that going on strike is not the solution. Instead, we saw more strikes from cabbies in Sydney and Melbourne just last week.

Complaining about your competitors is rarely an effective way of beating them – this is PR and Business 101. The NSW Taxi Council has failed to understand that safety of passengers in the 21st century does not require heavy-handed government legislation.

In 2012, a Taxi Industry Inquiry report led by former ACCC chair Allan Fels, recommended that the taxi industry must concentrate on improving driver quality, safety, fare structure, booking services and taxi availability. Yet the taxi industry has continued to tell people who call a cab that ‘first available’ is good enough.

When start-ups like GoCatch, Ingogo, Uber and other ridesharing services can provide driver details, pick up time and show it all on a map in the palm of your hand, you have to wonder if the taxi industry understands what customer service really means.

The list of disruptive companies that have gone on to dominate the industries they usurp is endless, but the number of companies that have been successful by rejecting change and ignoring consumer sentiment is almost zero. Does anyone remember Kodak?

Some paint this conflict as a fight between the taxi monopoly and disruptive startups, but the truth is that there’s a lot more at stake. Australia’s reputation for encouraging innovation is at risk if the NSW Taxi Council is able to bully the government to implement legislation that blocks the innovation and change that ridesharing represents.

Toronto is looking to update its by-laws to recognise new technologies like Uber by creating a new category for Uber and other ridesharing services, a system already used in more than 60 jurisdictions in the US. Taxi customers certainly won’t feel loyal to an industry that has failed to provide a strong argument in favour of its existence. Instead, consumers will vote with their wallets and opt for the one that provides a better product and service.

The taxi industry here would prefer that ridesharing services be legislated out of business entirely, the reality is that these services are making the best of constantly evolving and improving technology.

While Uber has some work to do to avoid regulatory hurdles in Australia and no company should be encouraged to deliberately break the law, we need the Taxi Council to join forces with innovators to make transportation more efficient, more accessible and less expensive than ever before.

 

This article originally appeared in the Australian Business Review:
http://www.businessspectator.com.au/article/2015/9/28/technology/taxi-industry-needs-new-direction

 

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Uber obsession means policymakers may miss the point of the sharing economy

Of the many commentators who have weighed in over recent months about what regulations should apply to sharing economy companies, I think few have a fundamental understanding of what the term “sharing economy” actually means.

For many it equates to a single company: Uber. But the $50 billion company disrupting taxi services isn’t involved in the sharing economy in the true sense of the word. Most of its services, from hailing taxis to hire cars, are simply traditional driver services powered by apps instead of call centres.

UberX, the controversial ride-sharing service, does involve a transaction between two peers. But when Uber touts uberX as a viable form of full-time employment for drivers with lofty salary goals, it falls short of the true nature of the sharing economy: taking the under-utilised assets in our country – from cars to driveways, tools, homes and our own time – and using them more efficiently.

You don’t have to look far to see how the real sharing economy is thriving. Thousands of Australians rent their homes every week on Airbnb. Airtasker’s crowdsourced army of 250,000 freelancers completed $10 million worth of outsourcing tasks last year. And DriveMyCar has organised more than 4600 bookings for long-term car rentals, with everything from a small hatchback to a Porsche on call.

DISRUPTING WITHIN THE LAW

Each of these are just as disruptive as Uber, without skirting the laws. Yet the legal challenges and question marks that sit over app-driven taxi services have the potential to harm real sharing economy services.

There is a difference, after all, between disrupting old business models and simply circumventing the law.

The majority of peer-to-peer businesses operate comfortably within existing regulatory frameworks. Most are Australian-owned, pay their taxes as required and use none of the sophisticated income-shifting tricks to avoid paying their share of tax.

Peer-to-peer businesses do more than most other businesses to ensure successful transactions and happy customers. They have to satisfy the needs of customers on both sides of the transaction – without it, they have no customers or suppliers.

And they act as an intermediary, to establish trust between owner and renter and ensure that the appropriate checks and balances are in place to avoid any issues.

SELF-REGULATION BENEFITS

That sort of trust, in sharing economy participants and the intermediary itself, is paramount. Recent PwC research suggested those who participated in the sharing economy were more interested in a service regulated by their peers – effectively determining the reputation of those who transact in this economy – rather than by government.

But where regulation is required, policymakers need to be careful as to how they weigh up these differences. The Australian Tax Office’s ruling last week was a small but positive step to show why this distinction needs to be made. In recognising Uber and Airbnb – and by extension many other sharing economy companies – as fundamentally different business models, it recognised the difference between a true sharing economy business, as opposed to one that simply says it is.

Labor’s recent Sharing the Future discussion paper, released in March, is a step in the right direction. The NSW government has also shown that it is willing to embrace peer-to-peer collaboration to make better use of its own assets.

Given recent discussions around governments conflating start-ups with small businesses, it should probably come as no surprise that the sharing economy faces a similar identity problem.

The problem is greater than just the government. When DriveMyCar attempted recently to book advertising on the back of taxis, we were told they wouldn’t accept the ads because they thought we were an unregulated, competitive taxi service, when in fact DriveMyCar complies with all regulations and provides long-term rental cars, not taxis.

We welcome greater engagement with governments at all levels and look forward to a greater understanding of the scope and potential of peer-to-peer transactions to deliver benefits for consumers and businesses on financial, social and environmental levels.

But as Dutch academics Toon Meelen and Koen Frenken have argued, policymakers must get over the first obstacle – separating Uber from the true sharing economy – before they proceed with laws that have the potential to tar everyone with the same brush.

Chris Noone is chief executive of Collaborate Corporation, an ASX-listed operator of online peer-to-peer marketplaces, including DriveMyCar and MyCaravan

This article originally appeared in Australian Financial Review http://www.afr.com/technology/uber-obsession-means-policymakers-are-missing-the-point-of-the-sharing-economy-20150525-gh7s9q

Why trust is so important for the sharing economy to thrive

The saying goes that trust takes years to build, seconds to break and forever to repair.

It’s certainly true in everyday life, where we have spent thousands of years developing ways to trust one another, whether it’s how we trust our neighbours or whether we trust major brands.

Online, where we don’t have the benefit of face-to-face interaction, trust becomes harder to build, but more important than ever.

Given the internet as we know it is only two or so decades old, those trust methods are still developing but maturing rapidly. In the process, it’s making entirely new businesses possible that would not have existed ten years ago.

Trust, for instance, underpins the emerging sharing economy. Without it, we don’t know the house we’re renting over Airbnb will be cared for by the tenant, or if the job we outsource through AirTasker will be done correctly and to specification.

Without trust, the sharing economy wouldn’t thrive. According to recent PwC research, nearly 70 per cent of survey respondents said they would only use a sharing economy company recommended by someone they already trusted.

At the same time, 64 per cent wanted to participate in a sharing economy regulated by their peers, rather than the government. In other words, they want to establish trust themselves among one another.

Establishing that trust isn’t easy. As the infamous New Yorker cartoon once stated “on the internet, nobody knows you’re a dog”. While people now live more of their lives online, there are often few elements to truly determine who that person is on the other side of the internet connection.

It’s a bit like running a nightclub. You can have the best location, a funky design, good drinks and great music, but it all comes down to what the patrons experience. If they have a great time, they will stay longer, drink more and bring their friends the next time. A really popular nightclub is a result of both the nightclub and its patrons — they both add value to the overall experience and make it a place that others want to enjoy.

Another nightclub may open nearby with a similar formula but could be a total failure. They may have got the tangible elements right, but they failed to create the right ‘feel’.  Similarly, many online communities fail because they do not demonstrate why members need to co-operate and provide incentives for good behaviour.

Online trust rarely develops spontaneously. It has to be nurtured, and this is where intermediaries play a vital role: after all, most people would be unlikely to rent out their home over Twitter, because there is no way to establish and monitor trust on the social network.

Intermediaries provide the tools necessary for people to establish initial trust between one another, using credentials that confirm their identity (ensuring they are who they say they are), and determine their ability to pay when the time comes.

That level of trust increases as people continue using the platform, publishing and receiving feedback on their interactions. The marketplace sets the rules about how people should interact to achieve the most positive outcome and provides the tools for people to provide their details and then have them validated.

Once people begin interacting with each other, the community takes over, by adding feedback on their experience with other members. Feedback mechanisms promote good behaviour by the community’s members and ensures that, if they are trusted, they can continue being involved with the community.

Take Jeff Folland, a member of the DriveMyCar community who has rented out up to four BMWs at any one time to everyone from international students to someone waiting for their Porsche to be delivered. His level of trust in the community prompted him to purchase cars purely to rent them out — because he knew that the cars would be taken care of by those he rented to.

Without the intermediary, there are no rules that determine how such an interaction should take place, and no safety net that ensures that, if something does go wrong, the owner or renter isn’t left in the lurch. The intermediary’s ability to provide insurance, secure payment systems, deposit bonds or penalties for inappropriate behaviour are vital to ensuring the community continues to exist.

As peer-to-peer transactions continue to grow globally, online trust profiles will be essential to participate in the sharing economy. Those without it will not be able to access the best value or the widest range of choices, because others in the community don’t know to trust them.

A person with a good reputation may even pay less for products or services because they are deemed to be a lower risk. Though people have multiple trust profiles — often one for each website they use — we may soon reach a point where we have a single profile used across the web, telling other users that we can be trusted.

This article was originally published in Business Spectator