By GAREN BRAGG
Bragg Insurance Agency
When billionaire and Oracle co-founder Larry Ellison said that “When you innovate, you’ve got to be prepared for people telling you that you are nuts” he left out the part where the government might also try to make it illegal. Established business interests will often try to stifle the new competition through legislation, seeing it as a cheaper alternative to adapting to the new threat that could put them out of business. Busybody bureaucrats and politicians will try to protect the old businesses and provide an argument with the implication that a person’s property is not truly his or her own or that citizens aren’t as smart as they are. In the end, it’s all just an aggressive way for them to tell someone with a new idea that they’re nuts. We’ve seen all of this unfold very recently right here in Indiana in the controversies surrounding Airbnb and Tesla Motors.
Airbnb is a company that operates in a very similar way to Uber; it allows homeowners to rent short term lodging in their residential property. For the consumer, it allows a personal and comfortable experience and for the homeowner it allows the opportunity to use their own property to generate a little extra income. It’s a model that in most situations is a win-win and what has led to revenue growth of more than 80 percent last year and has a $30 billion valuation according to a CNET report last week.
The arguments against Airbnb boil down to three issues: Neighbors, competition with hotels, and lack of government involvement to include taxes. Of the three issues, I’m most sympathetic to the neighbors. Yet, as long as the guests are not causing a disturbance or blocking their driveways with their vehicles, which are issues that can be handled through the normal channels, then there is no real harm being done. And if they are worried about property values there is no evidence that suggests that short term rentals decrease property values – in fact many believe it does the opposite by generating more economic activity in the neighborhood.
Airbnb is not likely to put hotels out of existence and many argue that because it is such a different experience from a hotel that it is not in direct competition. Government action defending private business from competition however is the opposite of being business friendly. Free markets mean free competition and freedom to innovate. Protecting existing business from a new idea is like banning light bulbs to protect candle makers. There are still companies that make candles, but most of us prefer light bulbs and it’s better that way. As far as the lack of government involvement, government should strive to get out of the way of innovation and progress. All of that is to say nothing of the implicit argument that property owners do not truly own their own property, only rent it from their government overlords.
It’s the same story with Tesla Motors. HB 1592 is a bill that would ban manufacturers of electric vehicles from selling directly to consumers. The measure is very transparently aimed at the company whose entire business model is building electric cars and selling it to consumers without dealerships. The reason given for the bill is that if a consumer buys a vehicle without a dealership then they won’t be able to get it fixed. So naturally, since the American citizen is nothing but an ignorant sheep our all-knowing superiors have determined that it’s in our own interest to be protected from ourselves. This is the second year that legislators have attempted to go after Tesla. In response, Tesla has made a website freemarketindiana.com to educate the public and push back.
Paying lip service to freedom is a time-honored tradition in American politics during campaign season but when it comes time to wield power our leaders have often been found wanting. Free markets and only free markets have been historically demonstrated to improve the lives of citizens in a long term and tangible way. What is a free market? You have something, I give you money for it. That’s it. The government’s role is to set the boundaries of the market, for example to make it illegal to sell meth or commit fraud. Within those boundaries however business should be free to invent, innovate and improve. Preventing short term rentals on the grounds that it is unfair does not defend business, it prevents business from taking place. Using the excuse of protecting consumers for the purpose of stifling competition for a more favored business hurts consumers by limiting choice.