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* John Pletz in Crain’s…
Startups love disrupting old industries. But it can get messy and expensive when old industries fight back.
Opternative, a startup that developed an online eye exam, already has seen laws passed in three states looking to prevent it from doing business; two others created new regulations. The four-year-old Chicago tech company operates in 33 states.
Opternative’s 13th employee was a head of government affairs—brought on before it made a more routine hire like a controller, says CEO and co-founder Aaron Dallek. The company hired its first outside lobbyist last year and now has eight.
“They don’t teach you this in business school. There are very few startups who need to learn this stuff this early on,” says Dallek, 32, who has become familiar with state capitals such as Albany, Tallahassee, Lincoln and Sacramento.
As we’ve seen with Uber, Airbnb and fantasy sports games, professions that have had the playing field all to themselves will fight back hard against these “disruptors.” But, over time, it’s probably a losing battle.
* Uber and Lyft now have 90,000 drivers in Chicago, which would normally make them such a major player in the local economy that nobody would want to mess with them. Not so…
A Chicago City Council committee on June 17 approved regulations for ridesharing that would likely end the service as residents know it – and quite possibly drive Uber and Lyft out of town.
The proposed ordinance requires rideshare drivers, who already undergo company-required background checks, to submit to city-overseen fingerprinting and vehicle inspections and acquire a chauffeur’s license. Uber and Lyft warned aldermen that passing the ordinance would force them to cease operations in Chicago. The full City Council is expected to vote on the ordinance as early as June 22, mere weeks after the ridesharing platforms shut down in Austin, Texas, due to similar restrictions.
Beyond providing millions of safe rides for residents, the services have provided job opportunities for many Chicagoans struggling in a stagnant Chicago economy.
What the city should do is re-think its entire regulatory scheme for everybody. In the age of GPS, for instance, is it really necessary that drivers know all the intricacies of Chicago landmarks? And considering the fact that the Orlando terrorist passed two background checks, do they even work as advertised?…
Ald. Susan Sadlowski-Garza (10th) said the fingerprint checks were valid for ride-hailing drivers, just as for cabbies. “If Chicagoans are going to put themselves or their family members in the cars of strangers, they should be able to rest assured in knowing that driver has undergone a background check and that they will be safe as they travel,” she said.
Expect the heat to increase on the city council, now that a committee has forwarded a proposed ordinance.
* Along those lines, Vanity Fair published a glowing interview of Bradley Tusk over the weekend. Tusk was a higher-up in the Blagojevich administration who left for New York as fast as he could and wound up working for Mayor Bloomberg. He now runs “campaigns” for disruptive startups like Uber and FanDuel…
We’re campaign managers. So we do three basic things. We figure out how a business goal is going to be achieved, whether it’s fending off a piece of bad regulation, or selling your product into government, or being able to just write new regulations that will enable your product to exist or get licensed so that you can exist.
We figure out strategy to get from point A to point B. If necessary, we’ll build a team on the ground. That might mean lobbyists, that might mean P.R., it might mean polling, it might mean ads.
And then we run a campaign. During the 2009 mayoral campaign, I would send Mike Bloomberg an e-mail at five A.M. that said, “Here’s who’s endorsing you today. Here’s what we have on the air, and here’s what the polls say.” Whatever information he needed to know. And he then went about his day as mayor. And my view was, “Why can’t you run everything like this?” So every day at seven A.M., every company we work with, every client we have, gets an e-mail from us saying, “Here’s exactly what’s happening on every front, every issue, today.”
Our view is the more you run something like a high-stakes political campaign, the greater your chances of success.
* Related…
* ADDED: Emanuel wants to let precincts opt out of Airbnb
* Communities across Illinois take up Airbnb regulation debate
* Editorial: Legalized sports wagering now seems sure bet
posted by Rich Miller
Monday, Jun 20, 16 @ 11:11 am
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Given how little ridesharing companies pay their (for legal and tax purposes) “not-employees”, I don’t trust their ability or willingness to fully vet drivers.
I also don’t see any reason to grease the skids for any business that has “reduce overall wages and compensation in a given field” as a primary (if frequently unstated) goal.
Comment by Graduated College Student Monday, Jun 20, 16 @ 11:20 am
When your pitch to investors includes the idea that the major roadblock to a profitable enterprise is the fact that the business model is currently illegal, I’m a little suspicious.
“All we have to do is change the law,” said Uber, Lyfy, Airbnb, Fan Duel, etc.
That’s not to say certain closed industries shouldn’t be opened up, and the taxi industry is ripe for that. It just means that things like background checks and training for drivers, insurance and licensing/taxes are fair and equal for everybody, the new players and the old players too. Let them compete on equal footing if you’re trying to encourage competition.
Comment by 47th Ward Monday, Jun 20, 16 @ 11:32 am
Determining refraction sister part of an eye exam, not an eye exam.
It’s unjustly comparing a meal to a hamburger patty.
Comment by Chicago 20 Monday, Jun 20, 16 @ 11:32 am
47 the bet they make isn’t that they can change the law, the bet they make is that they’ll become so popular that demand will outsize any movement to stop/prohibit them. It falls to lawmakers to then perform that balancing act.
Comment by Conn Smythe Monday, Jun 20, 16 @ 11:35 am
Stupid. Uber and Lyft know exactly who’s driving who where at all times. They only come when they’re called. No one hails an Uber or Lyft. You call. They know more about the person in the car and the person (people) getting in the car than taxis ever will. Stupid!!
Comment by A guy Monday, Jun 20, 16 @ 11:35 am
Uber’s issue in Chicago is no longer about a level playing field and background checks. It’s a City Council no longer willing to be bullied by a bully (Mayor) and seeing this as an opportunity to stick it to Rahm and his brother in Hollywood.
Comment by Wow Monday, Jun 20, 16 @ 11:35 am
===Let them compete on equal footing if you’re trying to encourage competition. ===
Exactly. But you also need to realize that existing regulations are too often designed to keep competition out. Ergo, my points above.
Comment by Rich Miller Monday, Jun 20, 16 @ 11:37 am
Uber should welcome an official background check on their drivers. It would make security more credible. What is Uber so afraid of?
Comment by DuPage Monday, Jun 20, 16 @ 11:41 am
DuP, They have an official background check. The taxi companies would like to add fingerprinting to the mix. Most Uber/Lyft are part time drivers, not making a career out of it. They did this in Austin, Uber left. Same thing would happen here. My hunch (opinion, not a verifiable fact, completely anecdotal- disclaimer) is that many DUIs and many alcohol related accidents have been eliminated because these services exist. That’s reason alone for me to support them.
Comment by A guy Monday, Jun 20, 16 @ 11:45 am
Interesting to watch Democrats such as Tusk, Burns, etc go to bat for startup businesses that strive to avoid regulations and paying taxes.
And not “good” interesting, either.
Comment by Linus Monday, Jun 20, 16 @ 11:46 am
The more experience you have with taxi cabs (more of a Chicago thing I think) the more you like Uber/Lyft.
Comment by A guy Monday, Jun 20, 16 @ 11:48 am
I agree that Uber should run background checks or allow the City/State to do them. I am less concerned with the Chauffeur License which doesn’t seem to be on the table. Agree with DuPage that it makes the drivers seem sleazy or like they have something to hide.
But, during a time when people in Chicago seem to own fewer cars than ever, Uber is filling the gap, When you leave a party, you don’t have to walk to the nearest busy street to find a cab since you can just call. Flash Cab used to have that service back in the early 90’s but no more.
It’s interesting that Uber walked away from Austin since besides being a big vacation spot, it is also full of young people.
On the other hand, Uber won in Ft Lauderdale with a totally different population.
Comment by Belle Monday, Jun 20, 16 @ 11:50 am
===But you also need to realize that existing regulations are too often designed to keep competition out.===
Agreed, which is why I said: “That’s not to say certain closed industries shouldn’t be opened up,…”
Comment by 47th Ward Monday, Jun 20, 16 @ 11:50 am
===the more you like Uber/Lyft.===
Another suburban resident heard from.
At least when a cab is double parked on Rush street, I know who is blocking the road and why (waiting for a fare). When it’s Uber or Lyft, it’s looks like just another (deleted) driving like a jerk.
Comment by 47th Ward Monday, Jun 20, 16 @ 11:57 am
Amen. My experience in the private sector has not impressed me. Most of the people I have worked with would wash out on a campaign in less than a week. It’s hard to maintain that pace, that’s why most campaign staffers tend to be younger (and they’re cheaper) but if Tusk’s business model is to provide campaign-like staffing and support for some of his business clients I think it’s going to be a successful model for as long as they can keep it up.
Comment by The Captain Monday, Jun 20, 16 @ 11:58 am
Uber is the future. This will be a HUGE mistake and further adverse publicity for Chicago. If Uber leaves then is demonstrates that Chicago has zero future as a tech modern location for companies and techies in general
Comment by Sue Monday, Jun 20, 16 @ 12:13 pm
Innovation is fine so long as these disruptors plan for dealing with regulators and try to work within the law. An attitude that our company is the greatest thing since sliced bread that puts profits first and compliance last won’t cut it. Take the Zenefits example in the insurance industry for one. They tried to operate loosely without complying with state licensing laws and are paying the price for it.
Comment by Ron Burgundy Monday, Jun 20, 16 @ 12:21 pm
There areas in the Metro East where a cab just isn’t a viable option. A college town with no cab company, a dirth of public transport choices and all bars are off campus? Uber is a lifesaver in that circumstance.
Comment by illini97 Monday, Jun 20, 16 @ 12:21 pm
Uber and Lyft will, almost assuredly be regulated in a similar manner as taxis will- in other words regulations will change and traditional taxis law will likely be motor lax while ride sharing companies will fall under the same regulator umbrella.
That said, never under estimate concern for public safety. Also, it must be acknowledged that medical services are not easily compared to ride sharing services. Just look at Theranos. The risks associated with different types of services, which we attempt to mitigate through regulation, often vary quite widely
Comment by Anon Monday, Jun 20, 16 @ 12:33 pm
So if you start frequenting tech sites, you’ll find a lot of skepticism about Uber’s valuation and long term viability. The theory goes Uber’s burning through cash subsidizing driver fees in many markets, that to be profitable they need a near monopoly on car-for-hire in a town to set prices for drivers and riders. They also need these sort of monopolies to justify their sky-high valuation, as the entire worldwide car-for-hire market is just not that big (and their chances of out-Amazon’ing Amazon in stuff like delivery are pretty low).
It’s an interesting theory, and it would explain why Uber takes such scorched-earth tactics against any regulation which might hurt its chances of developing monopoly power in a market.
Comment by ChicagoVinny Monday, Jun 20, 16 @ 1:17 pm
===Another suburban resident heard from.
At least when a cab is double parked on Rush street, I know who is blocking the road and why (waiting for a fare). When it’s Uber or Lyft, it’s looks like just another (deleted) driving like a jerk.====
Oy dude. Getting a ride on Rush St. has never been too tough. Hey you love regulation so much, you love over-regulation. These cab interests ain’t a whole lot different than the towing companies when it comes to locking everyone else out of the game.
One of our “suburban” corporate residents is moving into the city. McDonald’s. You may have heard of them. They kinda like those youngsters who really like Uber. They’re all citified nowadays.
Comment by A guy Monday, Jun 20, 16 @ 1:26 pm
Forcing UBER and LYFT out of the City will be a grave mistake and make Chicago a much less attractive tourist designation. The last thing this City needs is to add to the negativity already affecting it with budget problems, perceived safety etc.
Comment by Anonymous Monday, Jun 20, 16 @ 1:27 pm
As someone forced to sit thru several Uber/Lyft versus Taxi Medallion hearings in Chicago it’s been really interesting to hear almost no discussion of relaxing the taxi driver standards too.
Lowering the barriers to driver employment for all ride providers just hasn’t been a focus of the taxi advocates at all or the rideshare guys.
If the various practice exams online for City taxi drivers are accurate they’re just ridiculous. Very little about providing good or even competent service, whole lot of how well do you know the minutae of the rule book.
Comment by Chicago Bars Monday, Jun 20, 16 @ 1:42 pm
The Taxi companies spent a lot of money on politicans to buy themselves a protected marketed where they don’t have to innovate to compete (because they all offer the same thing), and keep out new and little guys who are willing to innovate. They aren’t happy that their little shared monopoly is getting busted up by Uber.
There’s a reason people want Uber. I’ve yet to hear someone who refuses to ride in Uber again, but I know a ton of people who have sworn off taxis after trying Uber.
Maybe the city council should think about changing the bad, outdated product (taxi rides) more like the preferable high tech competitor.
Comment by m Monday, Jun 20, 16 @ 1:53 pm
I’m all for a level playing field, but the taxi industry is one of the great examples of failed over-regulation and crony capitalism.
Uber has shown everyone what the taxi service could be if big brother was out of the way.
Comment by m Monday, Jun 20, 16 @ 1:57 pm
These are just new fronts to an old war. Businesses using regulations to maintain competitive advantages.
Both sides have valid points. The taxi industry is a failure in large part because the city’s regulations have strangled it into what it is today. There are also legitimate public concerns about oversight of Uber and Lyft and expectation for them to comply. The rideshares tried to make their point in Austin, TX by leaving and now there are reports of new operators filling the void and willing to abide by the rules the city’s residents voted to support.
If Beale’s ordinance is intended to level the playing field by lowering the industry to the current level of that of taxis, then it is a failed policy and should be rejected. But if it is designed to encourage competition within reasonable bounds, even if Uber and Lyft do not want to abide by those rules, then it should be given due consideration.
It’s the same balancing act we see in a lot of competitive industries. In the end, the Third House is the winner.
Comment by CLJ Monday, Jun 20, 16 @ 2:01 pm
All these “disrupters” just seem like legalized cheaters to me. They are paying lobbyists and funding politicians to give them special carved out breaks that mature already-regulated businesses don’t get. I don’t see their successes so much a result of technological advancement or business savvy so much as more efficient rent-seeking behavior.
Uber/Lyft cheat taxpayers and their employees to classify their workers as independent contractors rather than employees.
Until recently Airbnb was cheating taxpayers out of hotel tax money and undercutting taxpaying hotwls through regilatory arbitrage. There are still a ton of unresolved issues with insurance, liability, residential zoning and property values unresolved with the proliferation of airbnb.
Fantasy sports games are cheating Illinois taxpayers with adding to the social cost that comes from increased gambling in this state without appropriate commensurate taxation to make up for those social costs the way that casinos are required to do.
Comment by hisgirlfriday Monday, Jun 20, 16 @ 2:08 pm
Do the current rules prevent a tax company from starting a new Uber type of business?
Comment by m Monday, Jun 20, 16 @ 2:19 pm
===Uber is the future. This will be a HUGE mistake and further adverse publicity for Chicago. If Uber leaves then is demonstrates that Chicago has zero future as a tech modern location for companies and techies in general ===
I must have missed the mass techie exodus from Austin.
Comment by Graduated College Student Monday, Jun 20, 16 @ 2:21 pm
An interesting difference between Opternative and Uber’s governmental battles is that the laws are currently in favor of Opternative, and the optometric industry is trying to ban them; rather than Uber trying to change laws to suit their needs.
Comment by Anon Monday, Jun 20, 16 @ 2:23 pm
We joke about driving behind these slow Uber/Lyft drivers who don’t know where they’re going. They are also letting people out in the middle of traffic instead of at the curb. Uber works well in small cities w/ poor public transit & few cabbies It’s a good alternative to car rentals. Local municipalities should determine their licensing requirements. Driving is not a right.
Comment by Emily Booth Monday, Jun 20, 16 @ 4:13 pm
If you say that regulation-free Uber and Lyft represent the natural trend, you could probably say the same about contracting out a lot of public-sector work for $10 an hour.
Pretty sure IPI has made that connection.
Comment by Anon Monday, Jun 20, 16 @ 5:18 pm
Alas Jane Byrne has passed and now no one is around to spread rumors about “greasing” taxi fare increases in Chicago…..
Comment by DuPage Dave Monday, Jun 20, 16 @ 8:52 pm
Admittedly my time in the Windy City has always been finite(grandbaby duties), however, if Uber goes it will expedite my departure. I love the service. Its BETTER, CHEAPER, FASTER and yes SAFER than typical cabs.I use it no less than 12 times/ week.
Comment by blue dog dem Monday, Jun 20, 16 @ 9:07 pm