Airbnb says this man does not exist. So I had coffee with him

http://pando.com/2013/12/08/airbnb-says-this-man-does-not-exist-so-i-had-coffee-with-him/

by antr • 13 years ago

184 190 13 years ago

bradleyjg3• 13 years ago

The Man Who Does Not Exist tells me he is a libertarian, an Ayn Rand disciple, and, in the parlance of Silicon Valley, views himself a disrupter.

Making money by breaking regulations and lease terms is hardly the stuff of the heroic inventor. What other criminals count as "disrputers"? Insider traders? Identity thieves? Insurance fraudsters?

This guy is sociopath and I hope he ends up in prison.

S4M2• 13 years ago

Yeah, I hate the fact that his actions will have for consequence to even increase the rents and real estate prices in New York, which, from what I heard, are already expensive enough.

aliston• 13 years ago

You also have to also ask why it is that these arbitrage opportunities exist in the first place. It seems to me that the fact that these folks exist is essentially the market arguing that there are inefficiencies in government regulation of the hotel industry. Perhaps the government shouldn't be implementing arbitrary taxes to direct to the politically connected.

pyduan• 13 years ago

The fact there are arbitrage opportunities are precisely the reason the regulations exist.

The problem is that the market equilibrium would be really bad for residents. You have to stop and think about what there being no such opportunity would mean: housing in these areas is in scarce supply, and letting the market do its thing would incentivize people to convert rooms to full-time hotels at the expense of people who actually live there (since the true market value of a room is much higher than the average rent; in other words, your arbitrage opportunity), which will in turn reduce the supply of apartments available for residents, thus making rent even more expensive than it is right now for the few that will be able to afford it.

I agree the regulations are not perfect, but people have to understand it comes from a conscious political decision to protect residents. And this by the way is why you need a government to create such rules, because contrary to what people like the man in this article might think, the market equilibrium is not always the most desirable situation.

bradleyjg3• 13 years ago

The FREEEDOM!!! argument only works for landlords who own the whole building and are running a hotel without following the hotel laws.

People who are subletting in violation of thier lease terms or co-op/condo agreement are not only breaking the law but also willfully breaching contracts they have freely agreed to. I thought that libertarians considered negotiated contracts a key mechanism of ordering a society?

_delirium2• 13 years ago

He's violating contracts he signed, not only government regulations. These contracts are in place specifically because the market demands them. Most people don't want to live in a condo building that also includes DIY hotel rooms. Taking this into account, condo developers usually include clauses in the sales contract where your more or less agree not to turn your condo into a hotel room. This allows them to reassure prospective purchasers that such a scenario won't happen.

That's why the person in this story not only needs to avoid the government, but also private-sector contract enforcement. Hence, he's looking for buildings with no doorman and no live-in super, since those would be more likely to notice his illicit activity. I don't see how that's libertarian or even Randian. Rand's view was that violating a contract is an act of indirect violence, essentially theft.

auctiontheory4• 13 years ago

the fact that these folks exist is essentially the market arguing that there are inefficiencies in government regulation of the hotel industry

The "inefficiency" you've spotted is that a business which ignores all rules, regulations and taxes will have a huge competitive advantage over those who comply. That's true in any industry, not just housing.

saalweachter2• 13 years ago

You can also take advantage of the arbitrage opportunities created by the regulations against selling cigarettes and beer to minors and make a tidy profit. A similar opportunity exists for all sorts of waste disposal, if you ignore all the pesky environmental regulations.

azernik• 13 years ago

By that argument, tax evasion of any kind is a symptom of "inefficiencies in the government regulation of income". Just because someone has a financial incentive to violate the law, doesn't mean that the law is bad.

awkward• 13 years ago

Is "inefficiencies in government regulation" code for taxes?

moocowduckquack4• 13 years ago

He seems fairly dislikable and he is probably on the wrong side of the law, but what possible benefit would prison be here?

dllthomas8• 13 years ago

It might be of benefit to neighbors he is bothering, and by extension anyone else who will be forced to bear the brunt of externalities he similarly ignores in the future.

gaius• 13 years ago

Removes him from circulation. Maybe he can AirBnB the other bunk in his cell?

ForHackernews• 13 years ago

He considers himself a New York entrepreneur who wants to make a buck and doesn’t have much patience for what he views as arbitrary rules and regulations, such as those that govern renting apartments to Airbnb subscribers.

I don't see how this guy is any different from Airbnb itself (or other disruptive-and-dubiously-legal operations like the various digital gypsy cab companies).

hapless13• 13 years ago

He's not very different from AirBnB.

He breaks the law directly. AirBnB merely induces its customers to break the law. In both cases, they're bad actors.

coderzach• 13 years ago

I think you're conflating morality and legality. How does breaking regulations make him a sociopath? Who is he harming?

In what world is renting an apartment, albeit against regulation and terms of the lease, an offense ANYWHERE NEAR insider trading, identity theft, or insurance fraud?

Am I missing something?

hapless13• 13 years ago

* He is defrauding his landlords. They rented him property on the understanding that it was a legal and low-risk engagement.

* He is hurting the neighbors to the properties he re-rents. They arranged to live in residential neighborhoods adjacent to other semi-permanent residents, not an illegal hotel. Hotels are not found in charming residential neighborhoods for a reason: nobody wants to live next to them.

* He is evading taxes that are used to improve new yorkers' quality of life at little/no expense to local residents.

* Insurance fraud is a probable consequence of his business. Since it's hard to get commercial insurance for your illegal venture, if he has ANY insurance, it would be a renter's policy and maybe a personal umbrella policy. Any claims he made would be fraudulent.

potatolicious3• 13 years ago

I think comparing it to identity theft or insurance fraud is a bit extreme, but the harm is real. There are many reasons why certain buildings are not allowed to operate as hotels - just a few off my head:

- Bedbugs. They're at pandemic levels in NYC, and the more volume of people moving in/out of a place the more likely you are to get them. Hotels are required to mitigate the bedbug threat with a level of thoroughness that simply is impossible unless the building owner is aware that there's a hotel operating under their roof. I would be mighty pissed if I found a AirBnb in my building, as that dramatically raises everyone's risk of infestation.

- Noise. Particularly in neighborhoods like mine that are restaurant and bar districts, where a large part of the attraction of the location is the ability to stumble home directly from an innumerable number of bars. Temporary residents have no incentive to keep things reasonable. Whenever this point is brought up you get a few anecdotal stories about "the British family that was sooooo quiet", but no mention of the rest of the time where we'd have to put up with the noise.

- Security. I live in a small pre-war building with 20 units. I've met literally every one of my neighbors. This building isn't Fort Knox - once you're inside the main door it doesn't take Harry Houdini to break into any one apartment. Real hotels have security cameras, personnel on-site, and much more elaborate locks on doors... we do not.

These are real risks and real harm happening to neighbors of guys like this. His actions have a negative impact. While calling him a sociopath might be a tad extreme, it certainly isn't completely without merit.

None of these problems are unsolvable - but they are unsolvable unless the hoteling party is operating in the open. If we're going to allow people rent out their apartments in a pseudo-hotel manner, then the neighbors, the building owner, and the city needs to know about it in order to mitigate all of the above.

greenyoda2• 13 years ago

If he has the attitude that "the law applies to other people, but not to me", he might very well be a sociopath.

And if you think that insider trading is a serious crime, why shouldn't tax evasion (he doesn't pay NYC hotel tax), which deprives needy people of city services or causes law-abiding people to pay higher taxes, be a real crime?

yapcguy• 13 years ago

The guy doesn't exist. The whole article is a work of fiction. Pando must be desperate for traffic.

After dropping out of college, the Man took a job in high-frequency trading when he was 20, where, he claims, he made a killing.

Are we supposed to believe that a person who dropped out of college, with no computer science or programming background, is hired by a hedge fund or the proprietary trading desk of a large bank to help develop their HFT software and algorithms?

fwr• 13 years ago

To be fair, there are a lot of other ways to "make a killing" in HFT which are not developing software and algorithms for hedge funds or large banks.

S4M2• 13 years ago

I was surprised by that as well, but there may be some explanation. For example, he was a teenage hacker and had connections - through his family or other. So maybe he knew someone at a high frequency trading hedge fund who saw that the guy could code, and gave him a chance.

I agree that it's a bit far fetched, but IMHO it's plausible and I wouldn't be surprised if more than one person had already landed a lucrative job in the financial sector that way.

rollo_tommasi• 13 years ago

Or maybe he just lied? He doesn't seem like the most trustworthy kind of guy to begin with.

Mikeb85• 13 years ago

Are we supposed to believe that a person who dropped out of college, with no computer science or programming background, is hired by a hedge fund or the proprietary trading desk of a large bank to help develop their HFT software and algorithms?

No kidding. Not to mention, if he indeed 'made a killing' in the finance industry, why would he be hustling trying to resell iPads and now Air-bnb suites? Seems something programming-related or becoming an ex-pat in a tropical country with nice beaches would be more suitable for someone in their 20's that hates their job and has a lot of money...

ErikAugust3• 13 years ago

While I think your final statement is rather vitriolic, I do agree the article styling him an "entrepreneur" or "disrupter" is ridiculous.

He is a step or two above a drug dealer. That's about where I would land him.

dnautics2• 13 years ago

would you have said the same about a speakeasy bartender during the prohibition era?

eruditely• 13 years ago

Your moral values a complete replica of the state?

olalonde• 13 years ago

This guy is sociopath and I hope he ends up in prison.

Woah, that escalated quickly. This type of comment is more what I would expect from a sociopath then the mostly harmless individual described in this article. Don't you have any empathy for him? Have you considered that the author might not have depicted him in an accurate way? Don't you think prison would be a disproportionate punishment for his alleged crimes? Geez, the world is not black and white.

greenyoda2• 13 years ago

People go to prison for tax evasion pretty regularly. This guy seems to be deliberately evading the NYC hotel tax on many transactions per year.

bjornsing• 13 years ago

And OP continues:

Business is a zero-sum game.

That's pretty much as far from "libertarian Ayn Rand disciple" as you can get. This Man That Does Not Exist sounds more like a Libertarian Straw Man, serving the purposes of a writer with an authoritarian streak.

jasonwocky2• 13 years ago

Plenty of "disciples" cling to a few soundbites from their idols that enable them to rationalize their behavior, without ever seeking to understand their idols' broader points.

trippy_biscuits• 13 years ago

Isn't his logic/mentality the same as those who speed while driving?

hapless13• 13 years ago

He knows that neighbors despise what he's doing, but he doesn't see any reason for us to have hotel regulations. That might stop him from making money.

Color me surprised that he's a Rand disciple.

RockyMcNuts3• 13 years ago

Must be nice to go through life believing you're entitled to ignore externalities that cause discomfort to others, or not pay for public goods that you benefit from. Keeps things simple when you just have to worry about getting what's yours.

hacker7892• 13 years ago

Everyone is entitled to (and does) ignore externalities that cause discomfort to others.

If Alice performs well at her job, and her company gains a lot of marketshare as a result, she has likely caused discomfort for the employees of her company's competitors. It's frightening to imagine a world in which Alice is forced to stop performing as well because of her competitors' discomfort.

A simpler example: "hapless" is all over this thread, causing discomfort for those who don't want this man thrown in prison. Should "hapless" be forced to stop?

Additionally, everyone is entitled to (and does) ignore public goods that they don't pay for. It's frightening to imagine a world in which we force Alice to pay for her neighbor's renovations, or to pay for a weekly advice newsletter she never signed up for.

People like the man in the article make these value judgments more independently from government policy than most people do. If anything, that is your contention with him, not that he doesn't pay for things he didn't ask for, and not that he sometimes ignores the discomfort caused by his actions.

johnbpetersen2• 13 years ago

I'm going to start selling drugs to kids on the playground of their elementary school so I can get some shady investors and be labeled as a disrupter.

jeiting• 13 years ago

Two very different activities.

nico5• 13 years ago

If you get away with that, you would actually be a disrupter, except not a particularly nice one.

Currently the most successful people doing that are child psychiatrists and big pharma, but they convince the parents to buy the drugs for the kids instead. Government seems to be fine with this though, as well as most of society.

johnbpetersen2• 13 years ago

well played

dllthomas8• 13 years ago

"Business is a zero-sum game."

I'd be surprised if he actually thinks this (though only mildly) - Some business activities are zero-sum, but in general business exists precisely because it's not a zero sum game.

hapless13• 13 years ago

He's a criminal. Of course his business is zero sum. His profits and the consumer surpluses of his customers are balanced against the losses to society.

dllthomas8• 13 years ago

The claim that his business is zero sum is tremendously more narrow than the one that was made. Even so, it's probably false. Very much criminal activity has a negative sum (eg, smash a window to steal a laptop). It's also perfectly possible for an illegal activity to nonetheless have a positive sum (legislators are imperfect, laws are necessarily generalizations, etc); though we shouldn't expect it in any individual case, I think it's most likely to be the case in a situation like this with a willing exchange of goods (where there clearly is a surplus for two parties).

randyrand8• 13 years ago

His business is not zero-sum. It actually creates wealth. People that used to not be able to afford a visit to New York now can.

joelgrus• 13 years ago

Right, if he really thinks this then he's not a very good Ayn Rand disciple.

dllthomas8• 13 years ago

Seriously. A focus on the positive sum is just about the entire point of Atlas Shrugged. If the industrialists (who had been making a bunch of money) left a zero-sum game, the others should benefit!

yetanotherphd2• 13 years ago

Interesting article but they really should have dropped the "man who doesn't exist" stuff after the first paragraph.

trimbo• 13 years ago

Good point. Typically journalists would do something like "We will refer to him as Joe, not his real name."

nico5• 13 years ago

I'm impressed by how much hate is directed in the comments to the guy in the article. Seems like a lot of people here are either jealous about this guy "hacking the system", or are just too self-righteous.

Why not instead use the article (as it was probably intended) as a way to think and debate about things that are hard to agree on or that are hard to define?

This caught my attention for example: "The Man Who Does Not Exist claims regulations that govern rental apartments are akin to drug laws. They are useless, unenforceable, and an affront to the general public.", and although I don't have a strong opinion about hotel regulation in NY (or elsewhere), I do agree that current drug laws pretty much only benefit government agencies (they get funding) and drug cartels (by artificially raising prices).

hapless13• 13 years ago

I approve of the law as it stands. Hotel taxes and hotel regulation improve my quality of life.

He breaks the law for money. As a result, I would like to see him punished.

(As a secondary matter, he is loathsome for defrauding his landlords -- renting out space to be used as a hotel is a much higher-risk proposition than a long term residence)

nico5• 13 years ago

Except there is a debate now, because hotel law was not created to regulate people renting out their places. So now people on both sides need to agree on a solution, given it's not clear whether hotel laws apply directly to people on Airbnb or not.

This is a similar (if not the same) issue that Uber/Lyft and similar companies are facing with current regulation all over the world.

Slavery was legal in the US for a long time, and a lot of people were fine with it. Does that mean it should have stayed that way?

claudius• 13 years ago

But while drug laws are primarily intended to restrict access to one resource (drugs), hotel regulations are intended to ensure that a resource (living space) is available and only as a side effect restrict another resource (hotel rooms).

The analogy also fails because while drug laws are motivated by health/moral concerns, hotel regulations are to a large extend motivated by the fact that the common resource required by both tenants and hotels is limited simply by the amount of available space in NYC,. This restraint on the available space would effect the outcome of a perfectly free market to be rather bad™, since it would turn the whole of the city (and most other popular cities) into one large hotel without any permanent residents.

zachrose• 13 years ago

"According to NYC Research and Analytics, the average price for a hotel room in New York City is $281 a night. That’s for all five the boroughs. In Manhattan, it’s hard to find a room for under $350. Add that hefty 15 percent tax and lodging in Manhattan is an activity for the 1 percent."

Yes, hotels in Manhatten are expensive, but calling it an activity for the 1% is a stretch. The rhetoric of 99%/1% was in response to 1% of US earners taking 20% of total income, at an average of like $400,000.

psn• 13 years ago

I'm bored; lets go deeper.

Why think the man who does not exist exists? why not assume pando made him up, and made the whole story up? The story isn't so implausible that people would doubt it. If anything,the story is toogood - count the number of times the man comes across as a bad guy. Randian of the worst kind? tick. Used to work in wall street? tick. In HFT? tick. Why did he grant an interview if he was trying to keep his business secret? I don't know if the story is made up, but its ringing bells in my head...

alanctgardner2• 13 years ago

Why does AirBnb even allow more than one listing per user? How many people have multiple residences which they can legitimately rent out legally? It seems like it would stem a lot of criticism if they only allowed one residence per user, along with real-name and address verification (which they already use for renters).

marquis3• 13 years ago

There are a few places listed, for example in California, that are actually registered as hotel/hostels and pay city taxes and advertise multiple rooms. Though, I don't see they should be on AirBnB in the first place (my view is that if you are a business you should not be on AirBnB).

_delirium2• 13 years ago

As an AirBnB user I would really like a way to at least filter such places out of my searches. When I rent on AirBnB I want to rent from an individual who lives in their home; I see it as basically couchsurfing but with money and (often) nicer accommodations. If I wanted to rent a hostel bed or a room from a vacation-rooms-for-rent agency, I'd be on another site. I basically treat them as spam in the search results.

mahyarm• 13 years ago

Best buy also lists on ebay.

marquis3• 13 years ago

Current laws, for example, include a tax that goes directly to the Javits Convention Center — a place scant numbers of New Yorkers have ever visited.

And yet which brings thousands and thousands of visitors to New York (with spending and lodging money) yearly. Move the Javits Center to Jersey and the surrounding hotels, restaurants and immeneties suddenly have very little reason to be there.

bbanyc• 13 years ago

In theory that's how convention centers should work. In practice, the Javits Center is isolated by the surrounding railyards and few desirable amenities have sprung up in the area.

(This may finally change in a few years' time with the opening of the Hudson Yards redevelopment and the western extension of the 7 subway - so of course it's been proposed to tear down Javits and build a new convention center at the even more isolated Aqueduct Racetrack site. Ugh.)

marquis3• 13 years ago

Ah, I didn't know it was proposed to relocate. What would be the benefit to having a convention centre away from built-up areas where it's even harder to get to (or get away from..)

ErikAugust3• 13 years ago

"Entrepreneurship fits him."

No, sounds like easy-to-pull-off arbitrage models fit him.

bluepool• 13 years ago

Which is the core of entrepreneurship: Deliver something at a price that is more than what you paid for that thing.

Lucadg2• 13 years ago

I've been making tourist apartments available online since 2001, long before Airbnb (a competitor for me) even existed, and I never heard anyone in any city ever complain about tourist apartments, be it Prague, Venice or Paris.

What happens is that a certain, usually small, percentage of residential apartments is made available to the tourists.

Each apartment means about one/two less hotel rooms.

Hotel rooms take space too, they are not floating over the city. They often replace old residential buildings to build hotels effectively taking away space from residents who are pushed out of the city.

So we may say that tourism takes space in the center, not apartments.

I didn't hear much complain about this neither, as tourism brings money and, if anything, they want more of them. It seems to me that NY has a very specific situation so Airbnb may be actually harming the residents, I don't know, but in general Airbnb is not doing anything particularly new in Europe, where apartments for short term rent have been existing for long time.

The hype is all about "rent from another human being" but the reality, and I guess most of their business in Europe, is simply providing a better platform.

Maybe NY regulators could look at Prague or Croatia to solve the problem.

[edit: formatting]

wcummings• 13 years ago

Housing in NYC is definitely a special-case, people should keep this in mind when discussing AirBnB

modfodder2• 13 years ago

I believe, imho, that the issue has exploded because AirBNB is a Silicon Valley backed company, and the worry is with explosive growth and scale. It's not a big problem when a miniscule amount of the apartment stock is tied up as short term rentals, but it can become a huge problem as that percentage grows.

The public and our representatives in government are more internet savvy too so these issues (or at least the stories) bubble to the top more quickly.

As a resident in NY and I can appreciate the ability AirBNB gives me to rent out my apartment easily (I haven't). But I also see that "The Man That Doesn't Exist" is "stealing" apartment stock for hotel use, which drives up my cost of living as a renter (on the flipside, his "theft" of the apartment would be beneficial to me if I was an owner, driving up the value of my property).

Lucadg2• 13 years ago

In Prague, just to give you an example I know well, the number of apartments for short term rent is pretty high and it grew pretty quickly too in the 90's. The reason was not Silicon Valley growth but the end of socialism. Internet was not involved but I don't really think the source of bookings or change really matters. What matters is the effect on the rest of the economy and society. As you say some people (owners in this case) profit in this situation while others suffer and are pushed in less desirable areas (that would be 99% of the time out of the center in Europe, and out of nice neighborhoods in US). At the end for "people" aggregate (vs corporations) it may be a neutral change.

What I am saying is that NY may seems pretty special but it may not be. The fact that Hotels are so expensive may be a sign that Airbnb is bringing some needed change in an overly protected business environment.

What if Airbnb forces some hotels to close and they free up residential space? Is this a possible effect?

gaadd33• 13 years ago

Very few old residential buildings in NYC are converted into hotels, in fact it seems more common for old hotels to be converted partially or entirely into residential space. (Hotel Chelsea, The Plaza, etc) Also at least in NYC, not very many people (that I've met at least) look at living in the city center (aka Times Square) as very desirable.

Didn't Paris have a big uproar a few years ago over shorter than 30 day rentals similar to NYC's current issues?

nlh• 13 years ago

I don't think AirBNB actually claims this guy doesn't exist - that's a clickbait gimmick. What they do claim is that he's in the minority, which I believe is true.

I'm an AirBNB host in NYC and I know a lot of other people who are too. We're all exactly the kind of people AirBNB wants -- we have places that occasionally are available/empty, and AirBNB has become a great way for us to make a few extra $$. I personally don't make a dime of profit off my place (I do, however, offset a good portion of my rent).

I know the bad actors exist, and I know we do need some form of compromise between "No AirBNB!" and "AirBNB free-for-all". Not sure what the perfect solution is just yet, but I m confident a good one can be found.

hapless13• 13 years ago

The good compromise already exists:

* Sub-leasing is legal in NYC, for medium-term rentals. You are free to sub-lease your place during your month in europe, you are not free to sub-lease it nightly to transients.

* Owner-occupied Bed-and-Breakfasts are legal, but carefully regulated.

If AirBnB restricted itself to listings in these two (completely legal) categories, no one would object to them.

RubberSoul• 13 years ago

If you're going to break the law, why go to the trouble of forming a Delaware LLC? Won't that draw more attention to the operation and result in double taxation? Doesn't it also mean breaking Delaware law by forming a corporation for illegal purposes? Title 8, Chapter 1 says "A corporation may be incorporated or organized under this chapter to conduct or promote any lawful business or purposes..."

Furthermore, he takes all these steps to avoid 15% hotel tax, but pays 30% on the LLC profits and then pays income tax when he takes earnings from the LLC?

Am I missing something here?

gojomo• 13 years ago

The LLC can be taxed as a pass-through/partnership... meaning no double-taxation. Any income taxes are only on net income, while I believe the hotel tax is on gross revenues.

gamblor9563• 13 years ago

No you're not. It's another arbitrage play. He's creating the LLCs to cap his legal liability for each rental unit while at the same time trying to get the benefit of pass-through taxation benefits (meaning, no corporate level income tax but also meaning that all of his income is subject to gross taxation).

In practice, it probably wouldn't work. LLCs are subject to a lower veil-piercing threshold in New York than corporations are (though the requirements are otherwise generally the same), so the LLC will do little to protect him legally, especially since he's violating Delaware's laws regarding the formation of the LLC.

He's also most likely using this structure avoid attracting unwanted attention, since one of NYC's avenues for tracking down AirBnB offenders has been to compare corporate filings with rentals offered on the site.

stefan_kendall• 13 years ago

LLCs aren't double taxed. Or S-corps.

asveikau• 13 years ago

Current laws, for example, include a tax that goes directly to the Javits Convention Center — a place scant numbers of New Yorkers have ever visited.
“Why are they entitled to a cut?” he asks.

The hotels may pay the tax, but I believe the idea behind this sort of arrangement is that they would take this into account when pricing rooms. So effectively, out of towners pay the tax when they get a hotel room. Even if you ignore the other benefits the city and its businesses get from out of towners passing through, the question being asked here is: why does money paid by out of towners go into something that benefits out of towners?

Of course I agree with others that this story is at least embellished, too much of this guy's history seems like goofy fantasy. (Paying homeless people to purchase iPad 2 for export, really?) So this question being asked probably reflects the author more than it does the interview subject.

xacaxulu• 13 years ago

Cartels hate competition. I love AirBnB because they level the playing field.

7Figures2Commas• 13 years ago

After dropping out of college, the Man took a job in high-frequency trading when he was 20, where, he claims, he made a killing.
Thus far, he's found two properties that fit the bill. He charges around $500 a night for the first one; this second one is set to launch in the coming weeks with a similar price tag. He’s received funding from outside investors...

Parts of this story seem odd. If the Man Who Does Not Exist made a "killing" in finance, why exactly does he need or want investors for this venture? It sounds like the investment required is relatively modest and would quickly be recouped. And I can't imagine that increasing the number of people formally involved in his illegal enterprise will be to his benefit when, for one reason or another, the gig is up.

webmaven• 13 years ago

There is probably enough information (# of properties, rates, $78k, etc.) in the article for AirBnB to de-anonymize The Man Who Does Not Exist if they wish.

grellas• 13 years ago

I am intrigued by the antipathy that is often expressed toward Airbnb in the very circles where technological changes is heartily approved. Much of this antipathy is centered around the issue of persons who use the service to circumvent local laws and regulations governing hotel and rental units, with the complaint being that illicit profiteers should be suitably punished and (impliedly) so should those whose services allegedly abet them. This piece makes that complaint without stating it directly dramatizing the fact that such a person is there, in the flesh, exploiting the system, while stating that Airbnb wants to deny his existence.

Legally speaking, Airbnb is like YouTube and similar services in offering a service that is perfectly legal to do in proper cases and that can be done today to the immeasurable benefit of many in ways that could not even have been dreamed of in the pre-internet age. When the service is used legally and properly, it transforms how millions of people do things in their lives and does so for the better: in YouTube's case, as an outlet for video display and in Airbnb's, as a way of helping all sorts of people make more efficient use of their residential holdings. When the service is misused, however, others can be hurt: in YouTube's case, with persons posting and potentially profiting by infringing the copyrights of others; in Airbnb's, with persons attempting to circumvent laws regulating uses of commercial rental space. In each case, there is legitimate reason for many to complain of the misuses because they hurt people and people react to being hurt, and the law has measures in place to punish the direct malefactors in various ways. Yet what does this mean, legally speaking, for the provider of a lawful and, indeed, exceedingly useful service that is seen to profit in part from the activities of those who not only use their service legally but also from those who do not.

When you get to such cases, you arrive at the intersection of law with public policy. Unless one is to bar technological progress and the change that it brings altogether, one must devise rules to address the illegal uses that are bad while preserving incentives to promote the technological progress that is good.

In the case of YouTube, this was done through DMCA, which (whatever its other problems) did a pretty good job of setting up safe harbors that enable services such as YouTube to continue to do what they do without incurring liabilities for the wrongs of malefactors while at the same time requiring them to build in safeguards to protect the rights of those who might be hurt by their wrongs. This was not an easy task and even today the courts are sorting through the frictions occurring at the edges. But, though not perfect, the law has set up fundamental rules that, in the end, have managed to curb a good number of the wrongs while enabling a worthwhile service to survive and prosper.

In the case of Airbnb, the fights are occurring at the local level and are at an early stage. As the players sort through the policy issues, though, the same sort of primary issue needs to be addressed as happened with YouTube in the video streaming area: how can the rights of victims of third-party wrongdoers be protected without barring or significantly impairing the new-found value for many in using a great new service wrought by technological advances (and, of course, by the skills and talents of those who have built the service)?

I don't know the New York rental market at all and have nothing to say about how the issue is best resolved for the various persons affected by Airbnb's service there. I sense intuitively, though, that things like "15% across-the-board tax" are innately retrograde solutions that would serve to choke the beneficial and legal side of the service. Occasional users really are not in the business of providing hotel lodgings and it is a pretty big leap to say that they should be required to pay taxes as if they were. Or to require them to be subjected to liabilities and risks in ways that hotels are. These "solutions" are really just a way of governmental regulators, should they adopt the, acting on behalf of some narrow lobbing interest or other to choke a service that benefits countless others. They are overkill and would be the same as if Congress, at the federal level, had passed laws saying that YouTube-style services should be banned because they can facilitate copyright infringement that hurts others. That sort of "solution" would have been folly in our digital age and so too would any overkill-style governmental solution affecting any beneficial and innovative technologically-driven service that can come about by linking what people have to offer with what people need to use, and that includes Airbnb. Many other such services can easily follow (the "Airbnb for food" or the "Airbnb for whatever"). Do we really want to choke off the great benefits that can come from all this just because third-party abuses can arise.

The key to all this is to deal with the abuses while preserving the values conferred by the new services. If there is antipathy toward the wrongdoers, there is no basis for directing this to the innovators themselves. Why this should be happening among those who otherwise favor technological change is something that really baffles me. I for one commend Airbnb for what they are doing and for the benefits it can bring to many. If they make fortunes out of it all, so much the better. The potential third-party abuses do need to be dealt with so that innocent people are not harmed. But they need to be dealt with in narrow ways focused on the actual problems, not in blunderbuss fashion that is short-sighted and, in the long run, harmful to us all.

gamblor9563• 13 years ago

Somehow, every other VRBO site (such as VRBO.com) manages to comply with local laws. AirBnB doesn't--by choice. It refuses to comply with local laws because this lets it avoid the costs of compliance. Ultimately, AirBnB's competitive edge over its competitors is simply regulatory arbitrage.

This is why AirBnB generates such apathy. Take the regulatory arbitrage away and AirBnB isn't a technical startup or a market disruptor; it's just another VRBO site with pretty CSS.

They are overkill and would be the same as if Congress, at the federal level, had passed laws saying that YouTube-style services should be banned because they can facilitate copyright infringement that hurts others.

No, completely different, and as a lawyer you know this. Local issues are valid concerns for local laws. If New York wants to pass an across the board tax on temporary rentals, it is absolutely not the same as if Congress passed a country-wide ban on Youtube-style service.

Existing laws already do this. And as a business that injects itself into the market governed by such laws, AirBnB has taken on the burden of complying with such laws. Moreover, AirBnB isn't an innovator--it's a copycat. The only innovation AirBnB provided was sub-unit rentals (i.e., just a room or a couch), which is no longer the mainstay of its business.

brudgers3• 13 years ago

The illegal hotel use in my neighborhood was primarily offered on VRBO.

pbreit2• 13 years ago

I rarely use airbnb because it's so hard to find non-couch-surfing situations. And I think you are clearly understating the ingenuity and improvements that airbnb has brought to the industry.

subsystem• 13 years ago

From what I've seen I agree with your first point. AirBnB is more like The Pirate Bay than YouTube.

walden42• 13 years ago

Take the regulatory arbitrage away and AirBnB isn't a technical startup or a market disruptor; it's just another VRBO site with pretty CSS.

Apparently a lot of people are attracted to AirBnB for this very reason. This shows how badly regulations affect so many different kinds of markets.

brudgers3• 13 years ago

[In typical US local jurisdictions]

The difference between AirBnB and YouTube is obvious. There are vast arrays of ways in which the average person can use YouTube without any question that such uses are legal.

Conversly, there are very few ways in which the average person - whether renter or rented, can use AirBnB in a way that is unquestionably legal. Few local jurisdictions allow the sort of transactions AirBnB is built upon facilitating, and even fewer allow such use without at least some minimal regulatory oversight such as business licenses and tax reporting.

The reason is the same as for other land use issues, adjoining and nearby properties are effected and real property cannot be moved. Transient lodging uses place unique stresses on a community, and their benefits tend not to accrue to nearby properties with orthogonal uses.

The better analogy would be Craigslist if Craigslist only advertised prostitution related material. Then we would stop pretending that there is wide spread legality and focus in on whether existing laws make sense, and striving to change them where they don't.

saidajigumi• 13 years ago

grellas writes: > When you get to such cases, you arrive at the intersection of law with public policy.

you replied: > The better analogy would be Craigslist if Craigslist only advertised prostitution related material.

My, what a big hammer you have! We've now equated avoidance of hospitality taxes on a legal and moral scale with facilitating prostitution. I'm all for the rule of law, but these days that means keeping as close an eye on the law itself as for potential lawbreakers.

Your big hammer, of course, completely dodges the nuance that grellas was getting to. Laws are created and implemented in a context. What we'be seen in recent decades with the MP3 revolution, Uber, YouTube, and ostensibly services like AirBnB are business models that are matched poorly to existing law and precedent. That is, the context has changed. Neither extreme -- throwing out The Law entirely, nor draconian implmentation of The Law -- is really a suitable response in most cases. I think Uber is a particularly relevant example, as it's been thrust directly into the midst of innovating in an existing class of business, occasionally at odds with local laws, regulations, and incumbent businesses.

To this situation, AirBnB has put forth its case that it facilitates uptake of temporarily vacant lodgings. There are good arguments as to the social benefit this provides. Imagine where AirBnB and similar services are so successful that they curb construction of dedicated hotel space. As a society we've then managed to curb unnecessary resource use. I would argue that truly occasional use of the service in this regard has little to no impact on the associated community.

However, I also agree with your comments about transient lodging and its impacts on communities. There've been a few good essays on this problem in the NYC area in recent years, but from the angle of transient owners. IMO, The Man Who Doesn't Exist falls clearly into the category of "transient facilitator". There's not even the ostensible intent to live in these properties, damn the excess, but just to use them as part of a business strategy. And there's our nuance. Some users of AirBnB are engaging in activity that steps over the line. But the law currently doesn't have any nuance to distinguish between AirBnB's stated business model and the occasional "transient facilitator" using the service.

And thus the earthquakes at the fault line between law and society's shifts rolls on.

JohnTHaller4• 13 years ago

Unlike YouTube, which has tons of legitimate uses for folks uploading their own content, Airbnb is basically built on the illegal uses in its major markets like NYC. The places in NYC on Airbnb that are illegal aren't some annoying minority. Every single offering on Airbnb that is for less than 30 days and is not operated by a licensed hotel is illegal. Every single one. Unlike YouTube which has significant legitimate uses in all markets based on original content (and is a majority of what YouTube is used for), Airbnb has no legal uses in NYC for sublets of less than 30 days.

If Airbnb wanted to operate legally and protect the rights of its legitimate customers while still preventing illegal activities (as you are suggesting they do), it would only permit rentals of 30 days or more unless the 'host' has a hotel license and the proper permits. The simple fact is that Airbnb knows its business in NYC is nearly entirely built on illegal rentals and doesn't care.

pbreit2• 13 years ago

A not-insignificant portion of airbnbs business is host-present which is legal in NYC.

avn21092• 13 years ago

Yet the temporary housing market in NYC (and probably in other places) is deeply, fundamentally broken-on-purpose. Public perception attributes this to the actions of a hated group of entrenched stakeholders (landlords/hoteliers/etc) who use their economic power to buy political muscle and distort the market to screw the common man.

This public perception is perhaps near-isomorphic with reality in the most extreme cities, which is precisely where AirBnB is the strongest. Regulatory objections aside, this suggests they are a boots-on-the-ground solution to a real pain point.

At what point must the law be recalibrated to follow norms and good sense?

jquery• 13 years ago

You may be guilty of making a false equivalency between YouTube and AirBnB. Both are online, both are operating in legal grey zones. That does not mean antipathy toward one must necessarily be the same as antipathy toward another. Copyright might have been overdue for a significant rethinking. That doesn't mean that property rights are equivalently overdue.

AirBnB threatens a vastly wider swath of people than YouTube ever did. If you don't understand why people do not want to share a neighborhood or a residential tower with transients, perhaps you've never had to deal with the fallout and quality of life issues. Ever had to deal with bedbugs? I think I'd rather be stabbed and spend a day in the ER than have to deal with them again.

pasbesoin• 13 years ago

Amongst other things, I think a fair number of us have had asshole neighbors, at one point or another -- or several.

Any service that appears to increase that likelihood, I will oppose.

And no, I don't think it should be up to me to individually invest in pursuing each and every case -- particularly when there may be a new case every few days or weeks or I don't know when.

Real, stable tenants (hopefully) have an investment in keeping or finding peace with their community. Or, they can be compelled to do so.

Hotels cost more. Some of that may be "bad", but there is also a reason -- it costs more to deal effectively with transient populations.

From my perspective.

P.S. There is also the security factor. I don't want to live in a "hotel" where the faces change every day and I end up not knowing what the fuck is going on.

P.P.S. And bedbugs. Etc.

lmm5• 13 years ago

Legally speaking, Airbnb is like YouTube and similar services in offering a service that is perfectly legal to do in proper cases

Is there actually a legal use case? I can imagine that this law is virtually unenforceable against private individuals renting out a spare room for a few days, but I suspect it still (notionally) applies.

hbags• 13 years ago

My antipathy towards AirBNB comes because my experiments using AirBNB exposed me to:

- hosts using fake names - hosts using fake addresses - hosts giving deeply inaccurate descriptions - hosts telling me that the super might swing by, and I should introduce myself as (some other name) friend of (another name I'd never heard) if I ran into him. - neighbors of the unit giving me the stink eye, presumably because of what other guests had done.

My personal experience leads me to believe that AirBNB is, at it's heart, a platform that is built to create negative externalities. The processes in place to correct these issues are non-existent, which indicates to me that AirBNB knows this, and does not care.

x0054• 13 years ago

Not sure why, but instinctually, I really do not like the man who does not exist. Perhaps it's because I am an Ayn Rand hating libertarian. Or perhaps it's because he is the kind of man who takes advantage of the market with little to no regard to externalities, and when someone questions his actions, he wraps himself in an American Flag and screams about his god given rights.

anon4• 13 years ago

What's so hefty about a 15% tax? Just pay the city the 15% and pocket the rest. If you need to, raise the price a bit.

Assuming your rent is 500$/month, to give one room to some random person for a night you should charge them 20$/night to offset your entire rent for that day after deducing the city tax. The person in the article charges 500$/night. In that case you can even charge 50$/night and make money on top of having enough to pay rent.

In no case would you need to charge more than a hotel - you both pay 15% tax, but you don't need to pay a whole hotel's worth of workers for that room's upkeep.

exhilaration• 13 years ago

There are other issues, in many jurisdictions being a legally zoned hotel requires things like sprinklers that the average AirBNB lister might be unwilling or unable (in the case of a renter) to invest in.

CamperBob2• 13 years ago

The Man Who Does Not Exist tells me he is a libertarian, an Ayn Rand disciple, and, in the parlance of Silicon Valley, views himself a disrupter. Business is a zero-sum game...

It would be so nice if journalists who write about "Ayn Rand disciples" would actually read something by her first, so they would know what they're talking about.

jasonwocky2• 13 years ago

Why? Assuming he's being truthful, all he's reporting is what the Man claims.

mcguire• 13 years ago

Unfortunately, it's rather difficult to tell the difference between real Christians and those who merely say that they are Christians.

rajacombinator• 13 years ago

So is the hotel industry paying bloggers to write these hit pieces?

yetanotherphd2• 13 years ago

There seems to be some confusion about the term "externality" in this thread that I want to clarify.

Not every effect that a person has on someone else is an externality. In general, externalities are direct physical impacts you have on others. In this case, noise is a good example, though the general "vibe" of having strangers moving in and out, and the risk of violence from these people, assuming it is higher, is also an externality.

On the other hand, anything that operates via prices is never an externality. If AirBnB increased demand for rental housing and therefore raises prices, this wouldn't constitute an externality.

The ethics of free market economics basically states that the government should regulate externalities, but if someone is only effecting you via market prices, that's your own problem.

Another kind of externaility is network externalities. Even though pricing residential housing out of the market isn't itself an externality, there may be a network externality associated with residential housing which means that the market wouldn't provide the optimal balance of residential housing and hotels (even if there was no noise issue). Because of this, the government may also want to intervene by restricting the total amount of hotels. However, I doubt this is a big factor in real life since the demand for hotels is clearly much smaller than the demand for residential housing (who spends more than a tiny fraction of their life in a hotel?)

e12e• 13 years ago

So, he rents out an apartment for 500 a night, while an average hotel room is 281 -- or 244 ex 15% tax. His 500 with added tax is 575. Essentially this is in the same price range? Am I missing something?

So, he makes an extra profit dodging taxes (as he did by dodging VAT by smuggling ipads). Well, surely it isn't news that crime does pay, as long as you can avoid getting caught?

microcolonel• 13 years ago

Why should these restrictions even exist in the first place? People claim it's about recourse, but that's what review sites and extensive contracts are for.

The author(s) of this drivel obviously want to paint this man in 50+ shades of dark grey and blood red, but really is there anything wrong, morally, with what he's doing, what is the purpose of the law other than to retroactively add value to the investments of people who could already afford to offer housing like this, and increase the barrier to entry for those who couldn't?

Airbnb says this man does not exist. So I had coffee with him

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