Wednesday, August 31, 2016

Cracked takes on AirBNB

For a wide range of business models, the advent of the Internet and smartphones greatly reduced barriers to entry, transaction costs , and turnaround time. One predictable result was that very small scale businesses became practical. For instance, before eBay, you probably needed to accumulate at least a few hundred dollars worth of collectibles to make it worth your time to sell them. After eBay, the cut-off was more like 30 or 40 bucks. The basic business was the same. What had changed were the size of the market you could easily reach and the threshold of how big a transaction needed to be to make it worth pursuing.

This could be very beneficial. For one thing, it allows us to take better advantage of people and resources that have been underutilized up till now. On the other side of the scale, there are serious concerns about abuses and unintended consequences. How do you control fraud, guarantee quality, maintain safe and reasonable working conditions? What's worse, the contact point between these vast markets of buyers and sellers often comes down to one company (two if you're lucky). This means there is a huge potential for these companies accumulating both monopoly and monopsony  power.

This might be OK if the "new economy" were occurring under better conditions, but it's not. We have gutted regulation and largely abandoned the concept of antitrust laws. We can't even have an intelligent conversation on the subject because almost the entire discussion now consists of bullshit narratives about visionary CEOs and ddulite  dreams of the future.

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