Unfare Competition

It’s not really a huge surprise that Brussels, the home of EU bureaucracy, has recently banned ‘cab app’ service Uber from the city. The Brussels court unashamedly declared the company “unfair market competition” to the town’s two (yes, two…) taxi companies, and drivers face a €100,000 fine if they use the app to pick up customers.

This isn’t a one-off, either; Uber’s had a bumpy ride from the start. Across the USA and Canada they’ve endured cease-and-desist letters, impounded cars, sting operations and suspended trading. Taxi drivers in Chicago are suing the city itself over them,  Berlin’s slapped on an injunction, and in France enraged taxi drivers are getting physical.

Uber hit London in Summer 2012. Given the range of ventures on the scene- Black cabs, mini cabs and fleets of Addison Lee, as well as apps like Kabee and Hailo – Uber’s operation should be uncontroversial. Not so. Instead, the Licensed Private Hire Car Association (LPCHA) has called upon TfL to ban cab app services for failing to conform to relevant legislation, citing , uninventively, public safety concerns.

Reading all of this Uber come across as renegade cowboys, tearing through cities kidnapping passengers. Reality is far more boring.

Uber’s critics deem them an unlicensed taxi company (or as per the Chicago lawsuit, an ‘unlawful transportation provider’), who blatantly violate regulations. In actual fact, Uber are a new kind of entity: an app-based, ‘logistical’ intermediary. They use GPS to connect passengers with self-employed (and in the UK, licensed) drivers, and handle payment through a registered card. Their trick is that in only ‘matching up’ independent drivers with riders, they don’t count as a taxi operator.

Additionally, in the UK private hire vehicles can’t ply for trade like registered taxis and must be booked in advance. It seems that a rider requesting a pickup through Uber counts as a booking, allowing a nearby driver to accept a request and be there in minutes. In these ways it does seem that Uber and other like it have thrown away the rulebook, but only because they’ve been ingenious enough to innovate around it. Uber’s model also brings other innovations too, such as price discrimination through ‘surge’ pricing, truly flexible work for drivers, and a highly responsive rating system of both drivers and passengers.

There’s no wonder that incumbent players are worried. But it’s sad, if not surprising, that anti-Uber sentiment comes not from governments angry at rulebreaking but businesses threatened by fresh thinking.

State intervention imposes huge costs and barriers to entry on the taxi industry (think of London cabbie’s ‘The Knowledge’, fixed taxi fares, and America, where taxi medallions have sold for over $1m) - scuppering competition and innovation. Reform of the industry with its often cozy cartels is long overdue.

Companies like Uber show other firms how they can improve their game. In fairness there is an argument for ‘leveling the playing field’; it’s not one actors want to use. When Uber works around (or even flouts) a jurisdiction’s regulation, other players can use Uber’s success as evidence that restrictions are superfluous to providing a good service, and therefore unfair on them.

Instead of demanding more relaxed regulation, however, incumbent actors have decided which side their bread is buttered, and would rather keep the status quo than improve their service. Instead of competing, they cling to the regulatory chains binding them and wail for others to be shackled by them too. They might cry the cry of public safety, but it’s the safety of their market share which they’re really concerned about.

Sadly, vested interests have had far too much success in this area. Where Uber hasn’t been banned completely, lawmakers have often caved in and introduced new restrictions. Frequently, this doesn’t stop protestors. And it isn’t just Uber who has such woes. Companies with similarly innovative models such as AirBnb and Aereo have also faced an uphill struggle of acceptance.

TfL should disregard LPCHA’s demands. It certainly isn’t up to the government to protect old industries and vested interests, but sadly so many other cities clamping down on Uber adds false weight to their claims. It’s beyond obvious that consumers, not regulators, and certainly not business rivals should be the judge of an effective (and safe) service. That said, the fact that cab app services are making so many competitors uncomfortable is a pretty good indicator that they’re doing something right.

Edapt in Education

Michael Gove’s battle against  “the blob” rumbles on. Not only is he in the firing line over Ofsted appointments, but the NUT is set to announce the date for more teaching strikes on Friday. Cue the cheers of solidarity from some sources, and lofty dismissals of leftist militarism from others.

Though the saint-sinner dichotomy makes for easy reporting, the real relationship between teachers, politics and the unions is more interesting. Despite falling membership across other sectors, teaching remains a highly unionized profession. Teachers also report high levels of satisfaction with their union experience. Despite this, turnout for voting on industrial action is often low, and 44% teachers told a LKMco study that the right to strike isn’t important to them.

Instead, the most frequently-given reason by teachers for union membership is access to legal advice and support. With 1 in 4 teachers experiencing a false allegation at some point in their career, the expertise and advice a union offers in times of dispute is also cited as the most valuable service they provide.

Given the structure of employment law and the difficult nature of dealing with children, it is no wonder that teachers value this support. However, there’s no reason why affordable expert advice should have to be bundled with a political agenda. Indeed, a quarter of teachers said that they’d rather not belong to a union if a good alternative existed. At a CMRE seminar last week John Roberts outlined the model of his company Edapt, a for-profit, teaching union alternative established in 2011. Edapt offers the legal advice and representation teachers seek, without engagement in political bargaining and lobbying. Instead of trading blows with governments they can focus on delivering quality employment support to their members. Many members approached Edpat with a pre-existing issue and unsatisfied with their union’s response, whilst Roberts boasts of Edapt’s 99% satisfaction rate.

Obvioulsly, this model would not be for everyone. Many teachers still consider collective bargaining an essential tool, and Edapt is small fry compared to the unions. Not all teachers are comfortable playing politics, however, and inter-union competition for members can encourage more politically aggressive strategies. Recent strikes have polarised teachers, with Edapt growing most quickly around times of industrial action. Further strike action could lead to another surge of teachers uncomfortable or simply exasperated with their union’s actions.

No matter what causes people to join Edapt, political neutrality is crucial for its long-term success. It’s ironic that eschewing sector politics can look ideological, but a ‘non-union’ is easily seen as an ‘anti-union’. Gove might have made this mistake himself in inviting Edapt to reform discussions last year. And, tellingly, his endorsement of the Edapt as a ‘wonderful organization’ actively lost them members.

Time will tell just how successful union alternatives can be. If Edapt can prove that it isn’t ideologically driven and its focus is right, the model might have relevance in other sectors and across countries. With only 25% UK workforce unionised, there might be scope to offer services to people who wouldn’t have considered joining a union. Either way, with 48 hours of tube strikes starting tonight, I bet TfL wishes that there were more union alternatives within public transport.

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Technology, Privacy and Innovation in 2014

Prediction lists for the coming year are always revealing, though perhaps more of the current public mood than the future. A write-up of the tech trends for 2014 by Fast Company’s design blog is hardly controversial, but what is interesting is how the areas they’ve chosen highlight the existence of two wider and seemingly divergent technological trends. This apparent conflict in the way technology is heading is far from problematic. On the contrary, it shows our success in adapting and experimenting with new ideas and in response to shifts in the social and political context, without the need for any central guidance.

One thing clear from Fast Company’s list is that 2014 will bring a continued increase in the volume and depth of the personal data we create. Things like Google Glass, the ‘quantified self’, hyperpersonalised online experiences and the interconnectivity of theInternet of Things all create new reasons and mechanisms for data capture. This in turn increases the value of our data to ourselves, the companies with access to it and, in some situations, the state.

However, the article also predicts that 2014 will see increasing concerns over cyber-privacy and a movement towards greater digital anonymity. Users will increasingly chose to control their own data and how this is profited from, whilst we will begin to discover the joy of ‘disconnecting’ from the digital world and see the creation of intentional blackspots.

The fact that we seem to be embracing deeper technological integration yet simultaneously finding ways to mitigate and avoid its consequences is certainly interesting. Does this show that we’ve raced forward too fast and are trying to claw back a space we’re realising we’ve lost? It’s perhaps possible that this is the case, but far from giving us cause for concern the two-track path we’re seeing shows the ability of consumers and the tech sector to adapt over time, and in turn gives some hints on the optimal tech policy.

Continue Reading…

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The net migration cap is hurting Britain

This morning’s Guardian carries a letter by the ASI, the Institute of Economic Affairs, the Institute of Directors, the Centre for Policy Studies, the Entrepreneurs Network and Conservatives for Liberty, on why we oppose the government’s migration cap. I wrote about why more free marketeers should care about immigration recently — we’re lucky that the UK’s foremost free market think tanks do.

The government’s net migration cap is hurting Britain’s economic recovery and long-term fiscal health. It can take around three months for a business to apply for a visa for a prospective employee, a significant unseen cost of the cap, and international firms may prefer to base themselves in countries where they can bring in staff from abroad more easily than they can in the UK.

Entrepreneurship is being affected, too: more than a quarter of Silicon Roundabout startup founders are foreign-born, and more than half of tech startups in California’s Silicon Valley are founded by immigrants. The cap on immigration is a cap on the innovative industries Britain needs to thrive.

According to the Office for Budget Responsibility, without net immigration of at least 260,000 people per annum, public debt will approach 100% of GDP by 2060 as we struggle to pay for a ballooning pensions and healthcare bill. Countless studies have shown immigrants create jobs, raise natives’ real wages and even boost productivity.

Public concerns about benefits tourism are legitimate but are better addressed by reforms that restrict access to the welfare state. The migration cap does not discriminate between the small number of would-be welfare tourists and the many people who would like to work productively to create a better life for themselves and their families. The cap is hurting Britain and should be scrapped.

Sam Bowman, Research director, Adam Smith Institute,

Mark Littlewood, Director general, Institute of Economic Affairs,

Simon Walker, Director general, Institute of Directors,

Ryan Bourne, Head of economic research, Centre for Policy Studies,

Philip Salter, Director, The Entrepreneurs Network,

Thomas Stringer, Director, Conservatives for Liberty.

Should fans be concerned by Bitcoin’s fall in value?

The last few months has seen a breathtaking rise in the price of Bitcoin. Starting around $15 at the beginning of the year, Bitcoin’s price went from round $200 to a peak of over $1,200 just during November. Then from early December BTC’s price began to falter, with a sudden drop and a low of $550 on the 18th: less than half its price just weeks before.

Commentary has been just as volatile, with some seeing BTC’s rising price as its explosion onto the scene and proof of its revolutionary potential. Others have scoffed, calling the whole thing a bubble inflated by overoptimistic geeks and people looking for a quick profit. Now that BTC’s price has come tumbling, should proponents of the crypto-currency be humbled and/or worried?

Recent rises and falls in Bitcoin’s price have reflected developments in China.  In November Bitcoin exchange BTC China secured $5m investment from Lightspeed Venture Partners, and surpassed Mt Gox as the largest exchange in terms of trading volume. However, on the 5th December the People’s Bank of China announced that it does not consider Bitcoin a currency, barring banks & other financial institutions from dealing with it. Around this time Bitcoin’s price took a sharp downwards turn. Then, on Monday, the central bank banned 3rd-party payment companies from working with Bitcoin exchanges. This left Chinese exchanges unable to take deposits, and the price cfurther tumbled.

This is potentially bad news for entrepreneurs who want to see Bitcoin widely adopted, as well as for more ideological fans who consider Bitcoin’s strength its decentralised and stateless nature. Governments will never be able to stamp out Bitcoin completely, but making it as difficult as possible to use will hamper the objectives of both groups. The Mercatus Centre’s Bitcoin Primer explicitly urges policy makers to consider the technology morally neutral, warning against restricting its development and its use by non-criminal users. Whilst China cracks down on BTC its uptake in developing countries -particularly amongst the unbanked-is strong, and Denmark has just announced that it will not regulate Bitcoin or its exchange. China may well realise that it is missing a trick and relax its hostility.

Nevertheless, innovation around this problem will occur if it continues. Bitcoin is a global start-up project, with swathes of  passionate and seriously techie fans.

Some take Bitcoin’s crash as proof that that it is an unstable and unsustainable folly- nothing more than a risky virtual commodity bet.

Certainly, Bitcoin’s volatility is an established fact, with its last big crash in April wiping out 80% of Bitcoin’s value over 6 days. Nevertheless, BTC has always recovered and increased in value. Indeed, since the 18th Bitcoin’s price has been creeping up yet again.

Calling bubbles is a funny thing, because both falls in price and continued rises offer ‘proof’ of the hypothesis. It is perhaps more accurate to say that Bitcoin is undergoing a long period of ‘price discovery’. A lot of purchases have been speculative or made out of curiosity, but as more users and ways to spend the currency emerge, so will a clearer and more stable idea of its price. Bitcoin’s shifting price isn’t even that much of an issue for those using it for purchases: vendors adjust their Bitcoin prices regularly to reflect the changing exchange rate. It is short-term investors and those calling Bitcoin the ‘new gold’ who should perhaps be more wary.

Others say that Bitcoin’s falling price reflects underlying concerns with the currency – such as issues with security and fraud, and exchanges’ ability to cope with demand. Some suggest these issues mean that Bitcoin will never be much more than a digital curiosity. But at the early stages of the computer and the internet few thought they would be so transformative, or could imagine how they would evolve. Bitcoin is certainty not ready for mainstream adoption or about to cause a central banking crisis, but that is zero reason to write it off.  So much of how Bitcoin can and should operate is yet to be discovered, let alone decided. Despite all the recent attention it is still in its infancy, and growing pains and price shifts are an inevitable path of its development.

Even if Bitcoin’s price were to come crashing devastatingly down, the world’s first digital, decentralised ledger-based currency has created a new paradigm: a new way of thinking about money, transactions, anonymity and even our relationship with the state. Even some of Bitcoin’s biggest fans say it could one of the alternative, retweaked and ‘improved’ cyrpto-currencies which will really take off.

On which note- why care about the price of Bitcoin when you can be an early adopting millionaire of everyone’s favourite meme-cum-cryptocurrency, the shibe-tastic, very money Dogecoin! (wow)

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