KENNEDY: Change impatiently confronts government

This week’s IBJ is devoted to a consideration of “innovation,” which (let’s be honest here) is a less-alarming word than “change.” Innovations typically introduce new ways of doing things we’re already doing—we Google that question rather than consult a reference book, or we socialize via Facebook rather than face-to-face.

Then there’s government.

Whereas “change” can be threatening, “innovation” sounds positive. So cities strapped for resources hype “new and improved” financing mechanisms, for example, that are often thinly veiled sales of public assets or end-runs around inconvenient legal requirements.

On the other hand, global migration from rural areas to urban centers has unleashed some truly creative approaches to common civic problems. One need only visit a site like CitiScope.org, which highlights breakthroughs and innovations from cities around the globe, to be impressed with both the variety of innovative projects and the relative ease of sharing ideas and best practices in our Internet age.

This (entirely proper) emphasis on new approaches by the public sector, however, tends to obscure one of the more significant consequences of private-sector innovation—the fact that government at all levels must deal with dislocations and challenges to the status quo triggered by emerging technologies and new business models.

The rise of what has been called “the sharing economy” provides a particularly useful example. As Christopher Swope recently reported:

“The first time I heard trust come up at CityLab was at a panel on the ‘sharing economy.’ Airbnb co-founder and CEO Brian Chesky described how his service, which lets people rent out their homes or spare bedrooms to strangers, had in only six years expanded to more than 34,000 cities in 190 countries.

“At its core, the thing that we invented wasn’t the ability to book someone’s home,” Chesky said. “What we invented was a very streamlined mechanism for trust.”

As with other sharing sites, such as Sidecar or Lyft for car rides, that mechanism has a lot to do with online profiles. Users on both sides of a transaction can rate their experience with one another, allowing others to know what to expect when they pair up with someone they don’t know.

“Before us, essentially everyone was a stranger,” Chesky said. “The only thing you could buy was from companies—those companies had brands, and those brands said the companies could be trusted. A person—you couldn’t trust. The moment identity got attached to people, suddenly the playing field was level. People could act as businesses. They could act as micro-entrepreneurs.”

What this sunny summary of the sharing economy ignores, however, is its impact on long-standing regulations governing taxis and hotels, not to mention the impact of services like Uber on the value of taxi medallions in New York, or the uncertain legal (not to mention safety and sanitary) obligations of Airbnb hosts.

How should city managers mediate these competing interests? What new regulatory approaches will protect consumers without suffocating promising new ventures? How will those rules be enforced?

It isn’t just the emergence of the sharing economy; the quickening pace of innovations both technical and social requires skillful and highly sophisticated responses from our public managers and elected officials.

And therein lies the real challenge.

I hate to be Debbie Downer, but have you looked at some of the folks we Americans keep electing? How many of these one-dimensional culture warriors firmly rooted in the 1950s have what it takes to navigate the complex policy landscape created by 21st century innovators?•

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Kennedy is a professor of law and public policy at the School of Public and Environmental Affairs at IUPUI. She blogs regularly at www.sheilakennedy.net. She can be reached at skennedy@ibj.com. Send comments on this column to ibjedit@ibj.com.

Check out the rest of IBJ's 2015 Innovation Issue.