Airbnb – Statistics are a bitch, when you disrupt!
The modern day, social web is an amplifier of underlying societal signals. When upstart firms ride the momentum of social web, they need to realize that they are amplifying certain kinds of behavior and hence are vulnerable & answerable to what comes out of it.
Last week, Airbnb – the hot startup that lets home owners rent their houses to strangers, landed in trouble when one such stranger ransacked a home-owner’s house. The trouble here is not just that the house was ransacked, but it took about 14 hours for Airbnb to get its PR act together and then they fumbled & fumbled once over. So did their investor.
These are smart individuals and very sane investors, we are talking about. How could they have gone wrong? The problem lies in the rationalization that statistics offers us, entrepreneurs when assessing business model risks. What are the odds that a stranger turns out to be a criminal and takes it out on a home owner/property? What are the odds that it’s a big enough crime that the home-owner goes to press with it? What are the odds that such an event occurs just before raising money/going for an IPO? What are the odds that this gets picked by mainstream press and hell freezes over?
However with Airbnb, all these happened. Call it coincidence or law of large numbers. Assure yourself that this won’t happen again for the next few hundred thousand transactions. But it has happened now for the company and its a crisis.
I hypothesize that technology entrepreneurs and investors with technology background look at risks with social disruptions, the same way they look at risks with technology disruptions. If a technology theme goes wrong or fails to disrupt, innovation clock is set back by few years in that field. Money is lost. That’s a risk that business or industry can manage and has been managing.
However, when social disruptions, of which there are plenty now like Airbnb, Getaround, Foursquare etc, go awry the implications are on the society and the web lends amplification channels to exacerbate it. It’s not a terrain for technology geeks, alpha males and investors. They perfectly rationalize the choice of ignoring such risks by pointing to probability of occurrences and need we say, statistics are a bitch, when you are disrupting something related to people’s lives?
There is value in what these startups do. There are life risks, however for the users. Its hard to tell the user in that terms and still build a business. Its easy to protect the company legally. But when you have to resort to that, you almost have to have screwed up your PR.
So what could we, disruptors do?
- Think through the risks that we put our customer community through
- Have a plan of action, when the crisis triggers. The stakes are high after the crisis breaks. So plan for it ahead when clarity of thought remains. In Airbnb’s case this means booking the flight to the homeowner’s city, for the cofounders and landing there before s/he blogs with anguish.
- When you have luxury money that you raised, invest on customer crisis management systems. Putting in a 24 hour call center after a criminal hazard is just bad PR
- When you become big enough to be the market leader and hence vulnerable to law suits, use your leadership position to your advantage and get the user verifications stringent, that it could spot/filter irrational behaviors. You have a responsibility to the customer community and to the market you created, that transcends shareholder responsibility.
While I say these, I am bothered about Airbnb’s approach of offering insurance to customers. That’s again a fix for monetary loss and not threats to security. Why does’t Airbnb run criminal checks with government agencies, provide a method for sellers to collect photo ID proofs for all tenants and perhaps collect a hefty escrow fee that discourages vandalism?