Sharing Economy Hurtling Ahead of NZ Laws

By Kevin Jenkins –

Over the warmer months, the Otago Farmers Market has the best fresh produce in New Zealand – like Central Otago apricots the size of peaches, old-school gooseberries, and greengage plums – along with artisan products like seaweed condiments, craft beer, and bread of every kind. But, sited at Dunedin’s famous Railway Station, the market also offers an appealing physical pun. A ‘platform’, according to Sangeet Choudary and Geoffrey Parker, is ‘a business model that uses technology to connect people, organisations and resources in ecosystems to exchange goods, services and ideas’. Take a broad view of ‘technology’ and the Otago Farmers Market is a ‘platform on a platform’.

Talk of platforms – or the ‘sharing economy’ – sometimes seems to be everywhere. The digital economy is a key part of the world economy, and the new platforms are on the way to being the dominant business model in the digital economy. The huge online marketplaces like Facebook, Amazon and Uber are the face of it, but the model is expanding and innovating quickly, and much of this is at smaller local scales – including here in Aotearoa. New local players like Campable are unsettling the landscape because of the speed with which they’re growing and changing, and they’re presenting some thorny challenges for policymakers.

Is it ‘sharing’, or ‘good, old-fashioned deals’?

The commentators aren’t all agreed on exactly what is going on with the digital platform phenomenon, nor on exactly what to call it. The more academic commentators favour ‘platform’, but more commonly it’s ‘the sharing economy’, which suggests something more unambiguously benign. But all this talk of ‘the sharing’ is in fact, misleading, because what these platforms actually provide is access to good deals.

Successful platforms can usually be reduced to three key characteristics: first, they allow producers and consumers, or owners and hirers, to exchange value, often with added value through an algorithm (so that users get only the most valuable information). Second is a great user experience in how the platform goes about making transactions happen. The third characteristic is that they also add new layers of interactions – the Uber offshoot, Uber Eats, is a recent New Zealand example.

The success of start-up businesses in this space has led to a number of traditional firms following suit by working to add their own platforms.

Daimler, for example, bought RideScout, a US transaction platform that aggregates transportation and parking options in real time, and MyTaxi, a German ride-sourcing platform akin to Uber. Time will tell how successful the traditional firms will be at disrupting themselves.

Platforms in Aotearoa: Origins and recent developments

TradeMe was an early New Zealand platform, established in 1999, quickly followed by Bookabach in 2000, Holiday Houses in 2003, and Holiday Homes in 2004. Since then, local platforms have started to emerge exponentially, with transport as a particularly fertile area.

For example, MyCarYourRental matches people wanting to rent a car with people overseas who have parked their car at Auckland Airport – instead of paying for parking, the travellers can make cash. YourDrive matches people seeking cars for casual rental with car owners seeking to share their cars when they don’t need them. Zoomy is a local competitor of Uber in the related ride-sourcing sector.

 

There are also lots of new local financial services platforms, like Sharesies, which allows people to invest $50 in the same options as people investing $5,000, and Harmoney, self-described as a ‘peer-to-peer money marketplace’.

In fact, local platforms are multiplying everywhere – for example Boosted 365 is ‘here to remove every possible barrier between artists and backers’, and has funded a Māori trading card game, an annual arts and theatre event for shoe lovers, and more.

Parkable and Campable: Home-grown disruptive platforms

Parkable, which addresses the difficulty in finding places to park in our cities, is an excellent homegrown example of the three hallmarks of successful platforms. The Parkable app matches demand with supply (reported ‘live’ via an Internet of Things network of sensors), creating value for both – the first characteristic of success. One key innovation here has been on the supply side, with most of the over 4,000 bays they manage in Auckland being non-traditional parking areas like under-used church, supermarket and school parking lots.

Thousands of drivers are now using the app, which is growing fast in Auckland and other cities – this testifies to a great user experience, the second feature of successful platforms. But things really get interesting though when we look at how Parkable is adding new layers of interactions, as it learns from how people behave on both sides of the platform.

One fast-growing example is Parkable for Business, which manages excess demand and under-used supply of parking spaces within an organisation, enabling an internal day market for the parks that aren’t fully used. As well as matching supply with demand within the business, the app is also relieving pressure on the city’s overall parking supply.

Brody Nelson, who founded Parkable, also launched Campable (www.campable.com), which matches motorhomes with private land. It solves the problem of excess demand for traditional motorhome parks by adding private land to the supply, and it also eases the freedom camper problem. There’s been much debate in Wellington about freedom campers congesting and even befouling the south coast, because of the limited space and toilet facilities. Campable allows a visitor to find a local person willing to let them park in their driveway – and perhaps use some of their facilities – for a fee.

Platforms are outpacing policy and regulation

Platforms like Campable are presenting unprecedented challenges for regulators. It’s an example of how the new model is disrupting old pre-digital rules and demanding new ones.

For example, when Uber first arrived in New Zealand, it sparked a high-profile public debate about regulation of the ride-sourcing industry, leading eventually to changes in the law. The new ‘gig’ economy is throwing up similar challenges in the employment area – as Victoria University law lecturer, Professor Gordon Anderson remarked, “You can’t use a mid-20th century legal structure to deal with a whole new mode of employment”.

There are several dimensions to the platform phenomenon that make it so complex. One is that the new platforms and their technologies cross over different sectors of the economy, which raises issues for how our current machinery of government is structured. Most policy advice is generated by agencies that deal with a single sector – like transport or tourism for example. The new digital platforms are reinforcing the need for government officials to work across their different organisations with a new multi-sector approach to regulating.

Traditionally, our officials have had a deep understanding of the particular industry they create policy for and regulate. But in our new world of cross-discipline, cross-technology platforms, New Zealand’s policymakers and regulators are grappling with the problem that disruption to their industry may well come from outside it – for example, algorithms from ICT allowed TradeMe to displace printed ‘Trade and Exchange’ publications.

Regulators therefore also need to be aware of what’s happening outside their industry and beyond its traditional technologies.

Another big challenge is the sheer speed with which the platform model is working and innovating. Network effects mean that platforms often grow exponentially, with this pattern only being noticed when scale is achieved and new ‘facts on the ground’ are in place. Policymakers can find themselves with little time to identify an issue and develop a response – instead they may be faced with a new mass phenomenon before they’ve barely identified and studied it: Platform entrepreneurs increasingly believe that if they possess a first-mover advantage, they can, in fact, remake existing law by creating new practices on their platforms that essentially establish new norms of behaviour. It is often said in Silicon Valley ‘Don’t ask permission; ask for forgiveness.’

The regulatory challenge in Aotearoa

Two districts have already banned Campable, seemingly because of fears of negative impacts on local motorhome parks (similar to cities looking to ban Airbnb to shield local hotels and motels). And like Parkable, the Campable app runs the risk of getting ahead of existing laws and regulations. The current Camping-Grounds Regulations 1985 were born in an earlier era – after punk, but before mobile phones and the Internet – and they require landowners to get a resource consent before they can have more than one motorhome stay on their land, with local authorities being able to issue exemptions.
The motives for regulating this area are obvious and worthy – to ensure there’s an appropriate level of capacity, to provide good environmental management, and to set health and safety standards. But Campable offers a different way of meeting those objectives, and one that provides a lot more useful data – useful not just to app users, but also to regulators about compliance.

Freedom camping is arguably a response to lack of supply in the right places, and Campable can effectively match up supply with demand. Displaying the second feature of good platforms, Campable uses algorithms to provide valuable information to all sides. Campers can access real-time amenity and capacity data and feedback from others about their experience. Landowners can access feedback about campers. Regulators can access data about usage, feedback from both sides and so on.

Experience of the platform era so far seems to be telling us that the traditional regulatory model of policy development and review is simply too slow to cope with the rapid-fire disruptive change we’re seeing. Responding successfully to new disruptive platforms will likely depend on regulators taking a wide-angle lens, beyond just a single industry or sector, and also finding ways to get early intelligence about new technologies and business models.

This is a massive challenge, but New Zealand officials do have one advantage here – the opportunity to learn from overseas experience. We are certainly not trailing the international field, but there are some frontrunners whose regulatory responses we can dissect and learn from, whether in competition law or property rights or other fields. Developing new regulatory models in Aotearoa for the age of the platform will depend on us successfully applying lessons from abroad.

Back in Dunedin

Back on the platform at my favourite local farmers market, Dunedinites are connecting, sharing, and exchanging – including talk and ideas, not just berries from the Taieri Plains – but doing it in their largely pre-digital ways (there’s a bit of EFTPOS). In parallel though, many of the products are also being sold online, and – naturally – a new New Zealand platform was launched in November 2017 called Ooooby, described as ‘An online farmers’ market that delivers boxes of seasonal, organic fruit and veggies directly from grower to customer’.

It’s that kind of local dynamism that’s driving much of the growth and innovation among digital platforms. It’s the quickening pace and unpredictability of the phenomenon, with its tendency to go off in unexpected directions, that’s presenting such exciting potential for the mass of users – and such headaches for policymakers.

* Reproduced with permission from The New Zealand Herald. Originally published 10 April 2018.

Kevin Jenkins is Managing Director of professional service firm MartinJenkins and a director of digital firm Quanton.