I’m an AirBnB superhost, with 22 apartments. I was with them way before they went public. They are a country mile better than most of the competition. But there was a shift in attitude after their listing. Changes in how things could be billed, some unrealistic expectations (given they book rentals around the globe this was surprising). I live in the Dominican Republic. Addresses are often uncertain, electricity comes and goes, but our banks are way ahead of US regional banks. An eclectic mix.
Now AirBnB seem to have got back to a balanced approach. Like Uber they have two constituencies: owners and renters (or drivers and passengers). They interact with both, and need to tread a tightrope to keep both happy and on board. So it is not just company v customers - it is a three-way balancing act. None should be billed as the bad guy, none should be automatically supported. AirBnb opens opportunities to both hosts and guests that otherwise would not exist.
One thing ABB has done is to have excellent support arrangements for Superhosts - this bonus alone is worth the effort (and occasional cost) of remaining a superhost. This has nothing to do with money, it is a blend of service and information. It changes the balance between the three parties.
So even within a financial regulatory straitjacket, there are ways to flex the balance between the parties, and bravo to AirBnB for finding some.
The profit-seeking startup can raise $30M with a pitch deck because investors believe it has a good enough chance to return 10x in a couple of years. It's always as simple as that. The business environment isn't the way it is because of unreasonable forces, but because it has evolved to prefer and facilitate the ways of doing business that are most conducive to profit. And Airbnb and Uber's founders' gestures towards prosocial/inclusive governance, if they were ever sincere in the first place, likewise died when it became clear what was needed to maximize profit, etc. And to belabor the point, even if the SEC starts allowing co-op-like corporate forms, they largely will be outcompeted because the form hampers (is designed to hamper) profit maximization.
Of course, maximizing profit through commons-depleting practices is bad. But that badness is likely to continue unchecked, other than in physical commons where the consequences of depletion are "people dying" level bad.
Well, but I would argue, it's not quite as simple as that. You say: "Startup can raise $30M with a pitch deck because investors believe it has a good enough chance to return 10x in a couple of years"—> That very equation is determined by government policy.
As Nathan says in this interview, venture capital didn't take off until the late 1970s when specific policy changes enabled it. The current incentive structure is not some natural law, it's a policy artifact that we created that incentivizes that behavior. Other countries don't.
For instance, capital gains adjustments could fix a lot of this right away. For instance, no capital gains if you sell your company to employees or a trust, a lot if you sell to PE or another company. No capital gains if you roll investments into a cooperative or EOT, a lot if you don't. That would change what people invest in immediately.
You're right that even if Airbnb and Uber were benevolent, they wouldn't be fully "good" in all the ways we would prefer, but better incentive structures would force them to act good because it's the most profitable way to be. That, I think, is the goal.
What I'm arguing is precisely that the US's policies are the way they are not because of some evil conspiracy or misguided decisions, but in order to facilitate the accumulation of profit. And economists, for all they get wrong, get this one right: artificially meddling with incentives and trying to battle the logic of "capital flows where the profit is" is an error-prone and often self-defeating endeavor, resulting in less business, sluggish growth, less prosperity. Having founded startups in the US, Brazil and Europe, I can certainly tell you from experience that "ease of doing business and of raising money" is crucial (not that the US is perfect in this regard, or that the causal chain is unambiguous -- far from it).
Sure, there may be improvements at the margin. For instance, I don't disagree that capital gains taxation can help in theory. But how much exactly? If the average status quo, VC-fueled, high-growth, extractive-by-default startup creates returns at a rate more than 2% per year greater than its co-op counterpart, no capital gain exemption will make a difference. Etc.
Oh ok, that makes sense. I agree the government isn't structuring things this way to be evil. But why would the government try to facilitate the accumulation of profit? They don't need to do it that way, and could do it another way instead. The government would earn a lot more in tax dollars if the average middle class worker made more money, and if it taxed investments more highly. So it's not like there is some natural incentive that makes the US only operate the way it currently does. It could be changed!
I agree that ease of doing business and raising money is important, but that doesn't mean we couldn't also engineer better exits. Or better incentivize other options!
I think the simplest explanation is to take the history of 20th century economic science at face value: present US policy is largely the consequence of several decades of consensus in enormously influential US economics circles to the effect that "trickle-down economics is the only thing that works; everything else is hopeless socialism". One reason why this Chicago School orthodoxy continues to hold is that it has worked tremendously well in some aspects (ex: the focus on private retirement accounts, injecting massive amounts of capital into the stock market, instead of the "robbing Peter to pay Paul" generational trap that is public social security; and, to your first example, "the average middle-class worker" makes more money in the US than in other developed countries, *because* they are employed by companies that generally are more profitable, grow faster, and have to incentivize their workforce more due to competition). In others, this focus may have blinded them to better policies, but honestly, this is hotly debated economics territory, not at all a foregone conclusion. Ex: to your second example, "The government would earn a lot more in tax dollars (...) if it taxed investments more highly" -- The counterargument is the classic Laffer curve: after some point, more taxation means businesses are disincentivized or outright relocate, which means tax revenue starts *dropping*. While the static Laffer curve model is certainly not a realistic one, the key takeaway is certainly true, as can be easily attested by just seeing how business owners fare under different countries with different taxation levels.
So, the basic trickle-down recipe of "let's just keep focusing on making the US the best place for doing business -- ie, for maximizing profit -- and prosperity will ensue" may be flawed, but is not as naive and unrealistic as it might seem, and any substantial policy proposals have to contend with the reality that it will continue to be more or less the default. Especially in an environment where the US continuously loses economic ground to China, and policy attention will be primarily on retaining business.
That said, there are certainly policy changes that would not *harm* the US's competitiveness, and that can be advanced along the "prosperity" axis rather than the "social equity/welfare" axis. A great template to follow has been the YIMBY movement, especially in California and Texas. If cooperative economics can frame itself in this way, and come up with policies that are clearly pro-business, then I think it has a fighting chance in the US. If not.. Hey, come to Europe, here they LOOOOOVE regulating things, the more anti-business the better ;)
I’m an AirBnB superhost, with 22 apartments. I was with them way before they went public. They are a country mile better than most of the competition. But there was a shift in attitude after their listing. Changes in how things could be billed, some unrealistic expectations (given they book rentals around the globe this was surprising). I live in the Dominican Republic. Addresses are often uncertain, electricity comes and goes, but our banks are way ahead of US regional banks. An eclectic mix.
Now AirBnB seem to have got back to a balanced approach. Like Uber they have two constituencies: owners and renters (or drivers and passengers). They interact with both, and need to tread a tightrope to keep both happy and on board. So it is not just company v customers - it is a three-way balancing act. None should be billed as the bad guy, none should be automatically supported. AirBnb opens opportunities to both hosts and guests that otherwise would not exist.
One thing ABB has done is to have excellent support arrangements for Superhosts - this bonus alone is worth the effort (and occasional cost) of remaining a superhost. This has nothing to do with money, it is a blend of service and information. It changes the balance between the three parties.
So even within a financial regulatory straitjacket, there are ways to flex the balance between the parties, and bravo to AirBnB for finding some.
The profit-seeking startup can raise $30M with a pitch deck because investors believe it has a good enough chance to return 10x in a couple of years. It's always as simple as that. The business environment isn't the way it is because of unreasonable forces, but because it has evolved to prefer and facilitate the ways of doing business that are most conducive to profit. And Airbnb and Uber's founders' gestures towards prosocial/inclusive governance, if they were ever sincere in the first place, likewise died when it became clear what was needed to maximize profit, etc. And to belabor the point, even if the SEC starts allowing co-op-like corporate forms, they largely will be outcompeted because the form hampers (is designed to hamper) profit maximization.
Of course, maximizing profit through commons-depleting practices is bad. But that badness is likely to continue unchecked, other than in physical commons where the consequences of depletion are "people dying" level bad.
Well, but I would argue, it's not quite as simple as that. You say: "Startup can raise $30M with a pitch deck because investors believe it has a good enough chance to return 10x in a couple of years"—> That very equation is determined by government policy.
As Nathan says in this interview, venture capital didn't take off until the late 1970s when specific policy changes enabled it. The current incentive structure is not some natural law, it's a policy artifact that we created that incentivizes that behavior. Other countries don't.
For instance, capital gains adjustments could fix a lot of this right away. For instance, no capital gains if you sell your company to employees or a trust, a lot if you sell to PE or another company. No capital gains if you roll investments into a cooperative or EOT, a lot if you don't. That would change what people invest in immediately.
You're right that even if Airbnb and Uber were benevolent, they wouldn't be fully "good" in all the ways we would prefer, but better incentive structures would force them to act good because it's the most profitable way to be. That, I think, is the goal.
What I'm arguing is precisely that the US's policies are the way they are not because of some evil conspiracy or misguided decisions, but in order to facilitate the accumulation of profit. And economists, for all they get wrong, get this one right: artificially meddling with incentives and trying to battle the logic of "capital flows where the profit is" is an error-prone and often self-defeating endeavor, resulting in less business, sluggish growth, less prosperity. Having founded startups in the US, Brazil and Europe, I can certainly tell you from experience that "ease of doing business and of raising money" is crucial (not that the US is perfect in this regard, or that the causal chain is unambiguous -- far from it).
Sure, there may be improvements at the margin. For instance, I don't disagree that capital gains taxation can help in theory. But how much exactly? If the average status quo, VC-fueled, high-growth, extractive-by-default startup creates returns at a rate more than 2% per year greater than its co-op counterpart, no capital gain exemption will make a difference. Etc.
Oh ok, that makes sense. I agree the government isn't structuring things this way to be evil. But why would the government try to facilitate the accumulation of profit? They don't need to do it that way, and could do it another way instead. The government would earn a lot more in tax dollars if the average middle class worker made more money, and if it taxed investments more highly. So it's not like there is some natural incentive that makes the US only operate the way it currently does. It could be changed!
I agree that ease of doing business and raising money is important, but that doesn't mean we couldn't also engineer better exits. Or better incentivize other options!
I think the simplest explanation is to take the history of 20th century economic science at face value: present US policy is largely the consequence of several decades of consensus in enormously influential US economics circles to the effect that "trickle-down economics is the only thing that works; everything else is hopeless socialism". One reason why this Chicago School orthodoxy continues to hold is that it has worked tremendously well in some aspects (ex: the focus on private retirement accounts, injecting massive amounts of capital into the stock market, instead of the "robbing Peter to pay Paul" generational trap that is public social security; and, to your first example, "the average middle-class worker" makes more money in the US than in other developed countries, *because* they are employed by companies that generally are more profitable, grow faster, and have to incentivize their workforce more due to competition). In others, this focus may have blinded them to better policies, but honestly, this is hotly debated economics territory, not at all a foregone conclusion. Ex: to your second example, "The government would earn a lot more in tax dollars (...) if it taxed investments more highly" -- The counterargument is the classic Laffer curve: after some point, more taxation means businesses are disincentivized or outright relocate, which means tax revenue starts *dropping*. While the static Laffer curve model is certainly not a realistic one, the key takeaway is certainly true, as can be easily attested by just seeing how business owners fare under different countries with different taxation levels.
So, the basic trickle-down recipe of "let's just keep focusing on making the US the best place for doing business -- ie, for maximizing profit -- and prosperity will ensue" may be flawed, but is not as naive and unrealistic as it might seem, and any substantial policy proposals have to contend with the reality that it will continue to be more or less the default. Especially in an environment where the US continuously loses economic ground to China, and policy attention will be primarily on retaining business.
That said, there are certainly policy changes that would not *harm* the US's competitiveness, and that can be advanced along the "prosperity" axis rather than the "social equity/welfare" axis. A great template to follow has been the YIMBY movement, especially in California and Texas. If cooperative economics can frame itself in this way, and come up with policies that are clearly pro-business, then I think it has a fighting chance in the US. If not.. Hey, come to Europe, here they LOOOOOVE regulating things, the more anti-business the better ;)