Don't Disrupt Things; Fix Them

Friday, September 7, 2018

People talk about disrupting industries when those industries appear to be in a stable but inefficient state. For example, the taxicab industry: there was little innovation going on in it, and it was stable, but it seemed like it was far from ideal. Along came Uber, intent to disrupt the industry - and disrupt it they did.

Uber has a culture of ignoring laws around the world when it's convenient to do so, when it helps them earn a buck and disrupt the existing industry. As a result, we have an app that millions of people love and use regularly, and which provides income to millions of drivers. This seems pretty good, in this framing: we got something we all like using, and people are earning money from it.

However, there is a darker framing to it. If Uber disrupted something, what did it disrupt? It disrupted the livelihoods of the millions of taxicab drivers.

The drivers who existed in the old, stable-state system were obeying the laws, in general. They played by the rules, even when it was expensive for them to do so. Taxi medallions in New York City cost over $1 million at their peak, and drivers or taxi company owners had to invest lots of money in this resource which appeared scarce. Now, those medallions are often valued under $200,000, having lost over 80% of their value. Uber has gained value by breaking the law (creating unregulated taxis) and law-abiding businesses have lost out by playing by the rules. The old rules did not make sense in many instances, as there was clearly artificial scarcity at play here, but that does not change the fact that the ethical businesses lost by being ethical.

Similarly, Airbnb has disrupted the hotel industry. The loser here? Big hotel chains which abide by regulations and pay their local hospitality taxes. And consumers, who are now staying in unregulated, potentially unsafe hotels rather than staying in hotels which are regulated by their local governments. Again, you can argue against paying the taxes and against the regulation, but what you can't argue with is this: the businesses who played by the rules lost, and the players who ignored laws and rules came out ahead financially.

Clearly, there is something broken here. It should not be a viable business model to ignore and violate local rules and regulations and then just pay fines down the road, because the economic impact to many is so great. The focus of these businesses should not be disrupting, but fixing. If the taxi industry is broken, let's fix it! If the hotel/hospitality industry is broken, let's fix it! But consider the side effects in the process. Consider who you're putting out of business and what will happen to their livelihood if you do disrupt their life.

Disrupting things is not inherently valuable for society. In fact, while a disruption will push you out of a steady state, you have absolutely no guarantee that you will be in a better position when you get to the new steady state. You could leave society a better place - but you could also make it actively worse.

Think about that next time you set out to solve a problem: instead of disrupting an industry, let's solve a problem and consider the wider impacts.

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