Each Saturday, Farhad Manjoo and Mike Isaac, technology reporters at The New York Times, review the weekâs news, offering analysis and maybe a joke or two about the most important developments in the tech industry.
Farhad: Hello, Mike. Iâm not including an exclamation mark there because this is my first week back from vacation in Hawaii, and Iâm not that excited about being here. Sorry.
Mike: After visiting Hawaii for the first time in my life this year, I fully understand. Mahalo.
Farhad: So letâs get to the news of the week. Facebook announced its earnings and crushed all expectations; the company keeps getting more users, and it keeps making more money from advertising to each user, than many on Wall Street dreamed possible.
Mike: Remember back when Facebook went public and no one thought it could make any money? I barely do, and it seems as if itâs now a distant memory for almost everyone else too, since the company is worth like infinity dollars.
Farhad: Yeah. Amazon, which has been stung by The New York Timesâs reporting on its hard-charging corporate culture, added some new perks for its workers. It also opened a physical bookstore in Seattle, an odd move that may signal a new direction for the company (or may not),
Fortune reported that Jet.com, a start-up that aimed to compete directly with Amazon, was close to raising around $ 500 million from investors; according to The Wall Street Journal, though, the company needed the financing desperately because it risked running out of money by the end of the year. Competing with Amazon isnât easy, as pretty much everyone predicted.
Oh, also, Twitter changed the Favorite â a star-shape button that would let you express some vague response to a tweet â into a heart-shape button called a Like. I think this change is awful. Twitterâs favorites, as Iâve argued before, are wondrous precisely because theyâre vague. Theyâre an example of what I call digital body language.
Youâre not as troubled by the change, but because hardly anyone uses Twitter anyway, I donât think we should spend much time arguing about it.
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Mike: I would interrupt you to reinforce the point that I am right and you are wrong, but I think anyone reading this newsletter sort of assumes that anyway.
Farhad: Donât start, Mike. Instead, letâs talk about San Francisco votersâ rejection of Prop F, a measure that would have imposed substantial restrictions on Airbnb rentals in the city. The short-term rental start-up spent a lot of money fighting this measure, and it won big. The win was surprising because if you follow the local news, it seems pretty clear that San Franciscans hate techies. So how did Airbnb win this?
Mike: Airbnb is smart, and this is not its first rodeo in dealing with regulators on a local level.
Look at its historical game plan: Itâs sort of an âask forgiveness, not permissionâ approach to moving into cities. Airbnb starts up widely in an area â San Francisco, for instance â and gets to a large enough scale that renting out oneâs home starts to become a normal thing. Perhaps people even support it publicly, or at least rave about it to their friends.
Thatâs just the beginning. Years, or in some cases months later, regulators pick up on the fact that hey, a lot of folks are doing this. And thereâs no tax structure or really zoning rules around any of it. We should probably do something.
So things come along like Prop F which, to a great degree, was backed by local tenantsâ unions and folks who claim that Airbnb is raising housing prices around San Francisco to an absurd degree. (The median monthly rent in San Francisco is nearing 3,500 bucks, or like, one-twentieth of a Tesla.)
Anyway, by this time enough people use Airbnb so that the company can mobilize its user base with a bunch of campaigns and direct email marketing to rally folks against Prop F, which they did quite effectively. Prop F failed, and some say that was largely brought about by the mail-in vote. My guess was those were folks directly targeted by Airbnbâs anti-Prop F digital campaigns.
What is the lesson here? There will be a lot more of this type of thing from this type of company. Just look at Uber, which seems to have perfected the art of bum-rushing cities, then becoming a much-loved necessity to the population.
Credit Justin Sullivan/Getty Images
Farhad: Of course, this behavior is not really preferred. It would be nice if tech companies asked permission first, worked with regulators to cut through all the red tape, and only then started operating in an area. But does anyone really think that would work?
Unusual new ideas tend to induce immediate skepticism. Just about everyone who first heard of the app that lets you rent strangersâ bedrooms or get random drivers to ferry you around the city thought they were laughably unworkable, dangerous or worse. Regulators, who tend to be cautious and conservative, and who are sometimes in the pocket of incumbent industries (hotels, taxi coalitions), are especially unlikely to look favorably upon bold tech ideas that are merely in the prototype state.
Mike: Holy moley, you sound like a venture capitalist. But go on.
Farhad: Given this climate, start-ups often have no other option but to barge in and cultivate a loyal customer base that can then press for favorable rules on their behalf. This works especially well when the start-ups are marketplaces â that is, when they have sellers and buyers, like Uberâs drivers and riders, or Airbnbâs hosts and renters. These companies can often present solid evidence that real people would be harmed financially if the start-ups were forced to shut down â which is exactly what Airbnb did here and what Uber did in New York this year.
Sure, itâs a messy process. But in the long run it works â and Iâm not sure thereâs a way around it if we donât want to shut out any innovation in these markets.
Argh, I really sound like I live in Silicon Valley, right?
Mike: Basically Iâm waiting for you to start your own firm. Farhad Capital has a nice ring to it.
So I agree with you, insofar as it takes aggression and sometimes plunging headlong into an industry to overcome natural monopolies, and Uber and Airbnb sure have done that. But does that apply to all companies in every sector? Theranos, for instance, is dealing with peopleâs lives. Is it cool to be âdisruptiveâ in that case?
Ahem, booyah. That was one good point I just made. And I think I got the last word until next week!
Farhad: O.K., you get the last word for now. But donât come looking for funding from Farhad Capital. See you!