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Arthur T Knackerbracket has found the following story:
A lot has been written on Uber's disastrous failure in Japan. Most authors point to the fact that taxies in Japan are abundant, clean, safe and affordable. While that's all true, it misses a more important truth.
The success of any market entry depends only partially on things like product-market-fit, sufficient capitalization and local competition. Sometimes the secret to success lies simply in not doing what Uber did
You see, Uber represents a new kind of startup. The very thing that makes them so successful in America dooms them to failure in Japan, and watching how this has played out illustrates an important difference in how disruption takes place in America and in Japan.
For any of this to make sense, we will need to put aside the feel-good fluff of the absurdly named "sharing economy" and understand that both Uber's business model, and Airbnb's as well, revolves around a kind of legal arbitrage. Their significant price advantage comes from the fact that they choose to ignore a great many laws and regulations that their competition must follow.
Airbnb hosts routinely ignore zoning laws, hotel taxes, safety regulations and insurance requirements. Most Uber drivers do not have taxi or chauffeur licenses, obtain commercial insurance, pass safely inspections or comply with ADA regulations.
The exceptionally clever part of the model is that the bulk of the rule breaking is not done by the companies, but by the drivers and the hosts. These people are not employees, so Uber and Airbnb can't be held responsible for their actions. Legally speaking, Uber and Airbnb are just platforms, and the hosts and drivers are operating independently and of their own volition.
Obviously, that's nonsense, but this legal fiction provides both businesses with a powerful legal shield.
[Continues...]
Authorities were initially reluctant to aggressively target the companies because they were not actually breaking the law, and targeting individual drivers is politically difficult. Back in 2012, officials in Washington D.C.arrested an Uber driver, and the Uber-sponsored backlash was swift and punitive. Uber was seen as an innovator being held back by anti-progress bureaucrats picking on hard-working Americans just trying to make ends meet.
And here, the model becomes very American.
Uber now employs hundreds of lobbyists and spend tens of millions of dollars recruiting friendly legislators to rewrite these laws. They simultaneously run aggressive publicity campaigns painting non-cooperative legislators as corrupt and in collusion with the taxi and hotel industries.
They have managed to woo legislators to their side, but they are simultaneously fighting a scorched-earth campaign against the regulators in courtrooms across America. Those bureaucrats may be slow, but they get to you eventually.
[...]
Mistrust of government is pretty much universal, and that's a good thing. Outside of the United States, however, people trust corporations even less.
Americans seem uniquely credulous of corporate claims of being the true champions of the consumer and of regulations existing primarily to benefit politicians and their cronies.
In the rest of the world, however, when Uber drives into town claiming to be a white knight who will fight the government regulators in order to provide good jobs and affordable services, people simply don't believe them. Nor should they. It's a laughable claim.
The U.S. playbook assumes that consumers will come down on the side of the disruptor, but that doesn't automatically happen in Japan.
In most of the world, when a company claims that labor protections, environmental laws, tax laws, insurance regulations, and licensing requirements all need to be changed so that they can do business, that company is viewed with extreme suspicion.
Uber grossly over-estimated the amount of grass roots support they would receive when they entered the Japanese market. They've since regrouped and are now taking a more patient and conciliatory approach to winning over Japan's consumers.
However, it's too late because ...
More accurately stated, it's not OK to break the law by yourself in Japan. If you've attended a movie in Japan or seen baked sweet-potato vendors driving around Tokyo with an exposed fire in the back of their trucks, you understand that many laws can be broken as long as everyone breaks them together.
America jails or fines individuals who break the law, but corporate non-compliance is different. In fact, there is a school of thought in the West that when the fines are cheaper than the cost of compliance, it is not only OK to break that law, but that the CEO has a fiduciary duty to break the law.
Fines are simply a cost of doing business. No executive is going to be fired over a few thousand dollars in fines caused by an action that saved the company millions.
Things don't work that way in Japan. People don't make a strong distinction between the actions you take as a CEO and the actions you take as an individual. You are either an honest, trustworthy person or you are not.
[Ed Note: I found this article to be extremely interesting, albeit long. A read of the entire article is a good idea, as it highlights cultural differences as well as legal ones.]
(Score: 5, Insightful) by mth on Sunday August 28 2016, @08:52AM
It's interesting how this author takes the side of taxi (rent-seeker) corporations over "legal arbitrage" corporations and spins it all in anti-corporation lingo (here with US residents somehow being gullible dupes because they heavily favor the Uber model with its lower prices and better service over the traditional taxi model). It's only dismissed as a "laughable claim", concerning only government regulators, that the traditional taxi companies enjoy rather abusive cartels in many cities in the US and elsewhere in the world.
The author is not taking sides, but explaining why the public in Japan is not siding with Uber.
The "laughable claim" is that Uber is a white knight. Even if you like Uber's business model, it should be clear that they're in it for the money, not to rescue the people from bad taxi service. Another claim that's laughable in my opinion, but not stated by the author, is Uber insisting that "ride sharing" is not a taxi service.
It's also worth noting that the existing taxi market differs a lot per location. For example, here in the Netherlands taxis are expensive, but service is usually good. And there had already been deregulation of the taxi market prior to Uber's arrival, making it much easier for new drivers to get in. However, Uber decided to ignore even the light regulation, which did not go over well with regulators. At first individual drivers were fined, which didn't stop Uber but did allow regulators to establish that there was a pattern of Uber violating the law, which led to the threat of marking Uber as a criminal organization (which would have allowed arrests of its employees). Uber caved in and cancelled Uberpop service, but still offers other services that do comply with regulations.
As I've said before, if bypassing what should be light weight regulation results in massive opportunity for profit, then there is something wrong with the regulation. Fix that first rather than plug the holes of a dike that shouldn't be there.
That is an opinion though that is not shared universally. There are times when civil disobedience is necessary to get laws changed, but it is debatable whether missing out on potential profits is a good enough reason for a company to choose non-compliance with regulation over lobbying.
Over here, regulation is viewed much like taxes: people don't like it when it applies to themselves, but think it's important that other people do comply. You can complain about high taxes all you like, but if you state "it's too much" and simply refuse to pay, you'll be in trouble.
The author also admits that the Japanese do break law en mass when they want to. After such ridership services have been around for a while (Uber may or may not be a member by then), they just might prove themselves good enough for the Japanese.
The difference is in the approach. Companies can get around regulation by using vagueness of laws, connections to regulators or politicians, or by moving towards compliance at a glacial pace. In other words, by pretending to want to comply but not actually doing it. Uber however takes a more adversarial approach and states that the regulations don't apply to them since they're not a taxi service and the regulations are outdated anyway.
For Uber's approach to work, they need sympathy from the public, who then pressure legislators to change the rules in Uber's favor. That sympathy was relatively easy to get in the US because people there are more likely to side with corporations against the government and because people were very dissatisfied with the existing taxi market. But those two things don't always apply elsewhere.
(Score: 0) by Anonymous Coward on Sunday August 28 2016, @10:36AM
If the author's premise is correct then AirBnB wouldn't be popular in Japan. However that doesn't seem to be true in Japan, maybe because most people in Japan don't know it's illegal?
http://www.japantimes.co.jp/news/2016/07/27/business/airbnb-home-sharing-war-heats-japan/ [japantimes.co.jp]
https://www.airbnb.com/s/Japan [airbnb.com]
(Score: 3, Insightful) by mth on Sunday August 28 2016, @11:30AM
What I gathered from that article is that it's popular with people making money renting out rooms and less popular with the neighbours who have to deal with increased noisyness. It doesn't say how the general population feels about it.
But Airbnb does seem to pay lip service to regulations:
“We often hear from many hosts that the current laws governing home sharing are unclear and difficult to understand. In fact, in some cases, they were written long before the internet even existed,” it said in a written response to questions.
So even though they know that some of their renters are likely breaking laws, they're not openly defying the regulators. That's different from Uber claiming they're not a taxi service, compensating drivers who got fined and playing cat-and-mouse games with inspectors.
(Score: 2) by DutchUncle on Monday August 29 2016, @12:12AM
The fact that laws were written "long before the internet" has nothing to do with it. Mail-order started in the mid-1800s, and email is mail (or should be). Nobody wants strangers in their apartment building as changeably as a hotel. It would be a problem if you were managing it in person from the next hallway, or by mail, or by phone. Things are not suddenly different "with a computer".
(Score: 2, Interesting) by khallow on Sunday August 28 2016, @10:39AM
The author is not taking sides, but explaining why the public in Japan is not siding with Uber.
I disagree. The language is obviously slanted against Uber, the author brags in several places about how regulators have gotten wise to the Uber game plan, and the author is extremely derogatory about the Uber business model from the start. For example:
The exceptionally clever part of the model is that the bulk of the rule breaking is not done by the companies, but by the drivers and the hosts. These people are not employees, so Uber and Airbnb can’t be held responsible for their actions. Legally speaking, Uber and Airbnb are just platforms, and the hosts and drivers are operating independently and of their own volition.
Obviously, that’s nonsense, but this legal fiction provides both businesses with a powerful legal shield.
There's no "obvious" about this "nonsense". Or this:
Japanese lawmakers, and those elsewhere in the world, now know how this plays out, and they are acting quickly. Actually, I think this window has closed in the United States as well.
For example, In 2014 a San Francisco company called MonkeyParking launched an app that allowed drivers to auction off the parking spot they were occupying to other drivers. If you don’t see why this is a horrifically bad idea, you’ve probably never had to park in San Francisco. If you have and still think it’s a good idea, then we can debate it in the comments section.
Bonus points for making a false equivalence with parking scalpers. And notice the idea is "horrifically bad" only because of the extremely limited supply of parking in San Francisco (extremely limited supply combined with the incentive to squat the supply leads to all sorts of nasty market manipulation, including, of course, the above scalping) which would be the City of San Francisco's fault not some app.
And that brings to me to what I think the point of this article was. It wasn't to inform us about a newsworthy failing of this particular company or business model to penetrate another market. That's just the hook. But instead to spread FUD about Uber and its approach (and maybe some bashing of other targets of opportunity that the author doesn't like like libertarians and corporations). And with such a blatant slant, just maybe the author is exaggerating the difficulties facing Uber as well.
(Score: 4, Insightful) by mth on Sunday August 28 2016, @12:09PM
The exceptionally clever part of the model is that the bulk of the rule breaking is not done by the companies, but by the drivers and the hosts. These people are not employees, so Uber and Airbnb can’t be held responsible for their actions. Legally speaking, Uber and Airbnb are just platforms, and the hosts and drivers are operating independently and of their own volition.
Obviously, that’s nonsense, but this legal fiction provides both businesses with a powerful legal shield.
There's no "obvious" about this "nonsense".
I'd say it's non-obvious nonsense. Uber can't operate without its drivers and the drivers can't operate without Uber, so they form an organization regardless of the legal construct used. But it's not obvious enough to be prone to immediate shutdown.
And that brings to me to what I think the point of this article was. It wasn't to inform us about a newsworthy failing of this particular company or business model to penetrate another market. That's just the hook. But instead to spread FUD about Uber and its approach (and maybe some bashing of other targets of opportunity that the author doesn't like like libertarians and corporations). And with such a blatant slant, just maybe the author is exaggerating the difficulties facing Uber as well.
I think you're missing the point. US tech companies like Uber use a disruption plan of initially ignoring laws and stalling with legal tactics while they try to grow as fast as possible. Later, when it's time to write the new laws, they'll be influential enough to get the laws they want. That plan won't work in countries where regulators have more teeth, operate quicker and corporations have less sympathy from government and the public.
That doesn't mean that disruption of markets is impossible in those countries, but a successful strategy would be based on dialogue and negotiating instead of defying regulators. There are many markets that could use some disruption and I think it's inevitable that they will modernize sooner or later. But the US approach doesn't apply everywhere.
(Score: 1) by khallow on Sunday August 28 2016, @12:23PM
I'd say it's non-obvious nonsense. Uber can't operate without its drivers and the drivers can't operate without Uber, so they form an organization regardless of the legal construct used. But it's not obvious enough to be prone to immediate shutdown.
Somehow I doubt you're trying to claim that organizations are against any sort of regulation. Merely being organized is not enough for a lot of these regulations to be relevant, particularly, any having to do with employment.
I think you're missing the point. US tech companies like Uber use a disruption plan of initially ignoring laws and stalling with legal tactics while they try to grow as fast as possible. Later, when it's time to write the new laws, they'll be influential enough to get the laws they want. That plan won't work in countries where regulators have more teeth, operate quicker and corporations have less sympathy from government and the public.
Which is fine as far as it goes. But the article goes through some interesting meme dynamics and shows biased hostility towards Uber which is what I was writing about.
That doesn't mean that disruption of markets is impossible in those countries, but a successful strategy would be based on dialogue and negotiating instead of defying regulators. There are many markets that could use some disruption and I think it's inevitable that they will modernize sooner or later. But the US approach doesn't apply everywhere.
It is interesting that Uber tried a one-size-fits-all strategy here. It'll be interesting to see if they can recover from that.
(Score: 1) by khallow on Sunday August 28 2016, @11:01AM
As I've said before, if bypassing what should be light weight regulation results in massive opportunity for profit, then there is something wrong with the regulation. Fix that first rather than plug the holes of a dike that shouldn't be there.
That is an opinion though that is not shared universally. There are times when civil disobedience is necessary to get laws changed, but it is debatable whether missing out on potential profits is a good enough reason for a company to choose non-compliance with regulation over lobbying.
Over here, regulation is viewed much like taxes: people don't like it when it applies to themselves, but think it's important that other people do comply. You can complain about high taxes all you like, but if you state "it's too much" and simply refuse to pay, you'll be in trouble.
Anything is debatable and hence, the debatability of a subject is quite irrelevant. And I find it telling here that you immediately cast my observation in terms of compliance. It's worth noting that these taxi cartels present in many cities run against the public interest yet they were created just the same. They have no trouble complying with laws that heavily advantage themselves. Rather than mealy-mouth about how you can't see the point of civil disobedience for profit, how about we fix what is broke?
(Score: 2) by mth on Sunday August 28 2016, @01:20PM
Compliance, or at least showing a willingness to work with regulators rather than against them, is at the heart of the issue, I think.
While there are certainly cases where regulation is unnecessarily strict or acts as a way to keep out competition, a lot of regulation is there to protect workers and customers. A company unilaterally deciding not to comply with regulation means they can operate on lower costs, but some of that cost is externalized rather than eliminated.
Also I think motive is important here. If someone decides not to comply with an unfair law with the goal of protesting against that law, it is much easier to sympathize than if there is profit to be made as well. I don't see Uber as a hero who will chase away the rent seekers for the good of the public, but as potential future rent seekers themselves.
(Score: 2) by Runaway1956 on Sunday August 28 2016, @11:29AM
I think that many people, especially Americans, view these things through their own personal experience.
As you point out, taxi regulations vary wildly, even within the US. Taxi service varies wildly. Taxation on taxis varies. Corruption within the taxi industry and the taxi regulation varies as well. There are places in the US where taxi services are good, reasonably regulated, and reasonably taxed, with little if any corruption involved. Then - there are places like New York City, where medallions are in short supply, and ultra expensive. Corruption reigns - but they don't call it corruption, becuase it is so deeply ingrained into the industry, as well as regulation.
Likewise, Uber doesn't take the same approach to business in all places, and a lot of fail to understand that.
It's really simple to understand, if people just take a step back, and think a moment. No corporation can do business around the world, when the regulations vary so much. In one country, bribery is a way of doing business, while in other countries, bribery is a ticket to jail. Corruption in all it's forms varies from one city to another, one state to another, and one nation to another. If a corporation hopes to do business globally, it needs to understand how corruption works, and use that corruption to it's own advantage.
TL:DR - global corporations are adept in corruption, or they don't stay global very long.