When I first heard about Uber, Lyft and AIRbnb, I thought the “sharing economy” was one of the worst ideas I had ever encountered. I’ve been involved in gauging risk in the insurance industry for five decades and have some expertise on innovative stupidity. For the last year or so I’ve watched huge amounts of venture capital pour into these entities and have had to reassess my opinion.
Bottom line, with the Federal Trade Commission reporting that 7% of all U.S. citizens over sixteen were victims of identity theft in 2012, why would you turn over your personal security to anyone outside of a traditional setting where you have regulations to protect you, and recourse if something goes wrong.
Taking considerable risk for what seems to be small gain is stupid.
Yet . . . I like to think I have an open mind. One of my favorite essays is called “Youth” by Samuel Ullman. He contends that as long as you’re receptive to new ideas you remain young. I agree wholeheartedly.
Unfortunately for me, I’ve been an innovator for five decades in an industry that hates change. My life has been all about rolling a boulder up a hill. That hill has been all the more inclined against my efforts because of people who “innovate” without regard for long-term consequences. Although many of my ideas have been embraced, some on a national level, the amount of effort involved could have been substantially less.
I’ve read quite a lot about the sharing economy and most of it has been positive. It is heralded by many as positive disruption of a staid and lazy industry. You can even book a ride through Facebook now.
While I understand that not everyone has a positive experience in a taxi, I can’t believe that our very competitive capitalistic society has allowed that particular niche to languish to the point of needing a major remodeling, especially if that change comes with a huge “risk” price-tag.
Over the years I’ve been a fairly good salesperson. My agency was the top producer in the nation for Metropolitan Property and Casualty Insurance Company for two years in a row. We continue to be a top producer for several national companies. I know enough about selling to realize that discovering the potential buyer’s pain and solving that problem leads to commission.
However, one of my favorite movies is “The Music Man” which teaches us all about creating a “problem” you can “solve”. “Well, ya got trouble, my friend, right here,
I say, trouble right here in River City.” I have to wonder if the taxi industry isn’t being wrongly maligned in an effort for the founders of Uber and Lyft to profit?
While I’ll admit the app for the sharing economy is an innovative idea, I’m not convinced that all innovative ideas are good for society.
Let’s take a look at some “innovative” ideas that didn’t turn out to be all that wonderful. These are in no particular order…
1. New Coke
In the mid 1980s I was addicted to Coke, drinking two to four cans a day. I was young and running five to ten miles a day, often competing in road races. It was a very dark day for me when Coke decided to change their formula to a sweeter model, which had supposedly wowed the test tasters. Obviously many others felt the same way I did about taking away “our” Coke. Coca-Cola eventually decided to make a “Classic” move by reinstating its old formula as Coke Classic.
I haven’t had a Coke for years, but my taste buds fondly remember that unique bouquet. If only my knees and other joints would allow me to run enough miles to drink that many calories, and my heart was fifty years younger so I could stand the caffeine.
2. Subprime Mortgages
Remember the TV ads for Countrywide Financial. Their tag line, “No one can do what Countrywide can” became tragically prophetic. As it turned out “no one” could, including Countrywide. They were later merged into Bank of America, who paid a $335M settlement for alleged racial bias in their lending practices. Their actions were part of a recent $17B settlement with the Department of Justice for mortgage practices.
Countrywide’s actions and those of thousands of people in the financial industry resulted in financial problems for most of the people in the world. Personally I believe the mortgage crisis cost me about $2 million. It remains to be seen if I can recover in time to retire as comfortably as I might have.
3. Hydrogenated Oils
Those of us who have had a heart incident, I had total blockage and had to have my heart restarted by a terrific EMT, understand the effects of trans fats. It might surprise you to learn that a French scientist, who is known as the father of hydrogenated oil, won a Nobel Peace Prize for his efforts. The process he invented allowed people to store food on the shelf for much longer, which seemed like a truly marvelous advancement.
Unfortunately, what he invented didn’t occur in nature and his innovation caused the unintended consequences of contributing to bad cholesterol. Bad cholesterol, according to my cardiologist, contributes to heart disease. So much for French Fries, although many food processes now have eliminated hydrogenated oils and the day may come when Woody Allen’s movie comes true and French Fries are known as the perfect food.
4. The Ford Pinto
In 1986 I purchased a home in Bismarck, North Dakota. My family had grown, and we went from a small colonial with about 1,200 square feet of living room to a house with about 5,000 square feet and a pool. The previous owner was a man by the name of Harry Pearce. Mr. Pearce had moved out of Bismarck after his career took off in the wake of him being the lead attorney on the infamous Pinto Case. He later became Vice-Chairman of General Motors and later Chairman of Hughes Electronics.
Ford rushed the new and innovative Pinto into production in an effort to stop the erosion of market share to Volkswagen. Along the line Ford made what some have termed “unethical” decisions regarding the gas tank, which had a tendency to explode in a rear-end collision. Those decisions were said to have led directly to the deaths of between 500 and 900 people in accidents that otherwise would not have resulted in serious injuries. Ford had done a cost benefits analysis that placed an economic figure on human death. Ford paid out $millions in court awards and out-of-court settlements.
5. Leaded Gasoline
I grew up on a farm. All of the gasoline we used when I was a boy was leaded. Gasoline contained lead to maintain a higher octane rating, which allowed for better engine performance without “knocking”. Another benefit was that leaded gas prevented premature wear to valve seats. If you’ve ever done a valve job and gone through the tedious process of grinding using compounds, you can appreciate that enhancement.
After a long day in the fields it was almost a daily ritual to wash my hands and arms with gasoline to remove the grease and oil that had accumulated. I find that cleaning process disturbing now considering that when leaded gasoline was first “invented” by General Motors in the 1920’s they were warned of the dangers of poisoning. The General Motors employee brushed aside the warning stating the no one would come into daily contact with the gasoline and pushed the product out into the market. Within a very short time, people started to die. In 1985 it was estimated that about 5,000 people a year died in the United States due to heart disease attributable to lead poisoning. The product remained generally available in the United States for seventy years. It still is used for some sanctioned industries.
I could go on for a very long time listing inventions and ideas that were lauded as wonderful at the time and later found to be poorly conceived. This list might include doing away with streetcars so that cars could rule the road, cigarettes, TNT, the guillotine, and land mines.
I am not a Luddite. I embrace new technology and love the energy it takes to create new concepts. I’ve been on the cutting edge of many new and innovative programs. I have great empathy for pioneers. I understand the old saw about being able to tell the pioneers, “because they’re the ones with the arrows in their backs”.
However, I despise the Professor Harold Hill wannabees, cynical salesmen who make life harder for real innovators. I believe we really do have “trouble, trouble, trouble” coming in the not too distant future, when the bad element realizes the opportunities abounding for mayhem in the “sharing economy”.
When that trouble hits, it will cause turmoil in the insurance industry because people don’t like it when their losses aren’t covered by their policies. For the immediate future I see bad times for little gain, except for those few who have ownership in these new companies.
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