[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
            THE POWER OF CONNECTION: PEER-TO-PEER BUSINESSES
=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                            JANUARY 15, 2014

                               __________




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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                       BLAINE LUETKEMER, Missouri
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                   JAIME HERRERA BEUTLER, Washington
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                       DAVID SCHWEIKERT, Arizona
                       KERRY BENTIVOLIO, Michigan
                        CHRIS COLLINS, New York
                        TOM RICE, South Carolina
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                        BRAD SCHNEIDER, Illinois
                          RON BARBER, Arizona
                    ANN McLANE KUSTER, New Hampshire
                        PATRICK MURPHY, Florida

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Sam Graves..................................................     1
Hon. Nydia Velazquez.............................................     2

                               WITNESSES

Professor Arun Sundararajan, Professor and NEC Fellow, Stern 
  School of Business Head, Social Cities Initiative, Center for 
  Urban Science and Progress, New York University, Kaufman 
  Management Center, New York, NY................................     3
Beth Stevens, Assistant General Counsel, Sidecar Technologies, 
  Inc., San Francisco, CA........................................     5
Alan Mond, CEO, 1000 Tools, Inc., Ann Arbor, MI..................     6
Philip Auerswald, Associate Professor, School of Public Policy, 
  George Mason University, Arlington, VA.........................     8

                                APPENDIX

Prepared Statements:
    Professor Arun Sundararajan, Professor and NEC Fellow, Stern 
      School of Business Head, Social Cities Initiative, Center 
      for Urban Science and Progress, New York University, 
      Kaufman Management Center, New York, NY....................    20
    Beth Stevens, Assistant General Counsel, Sidecar 
      Technologies, Inc., San Francisco, CA......................    29
    Alan Mond, CEO, 1000 Tools, Inc., Ann Arbor, MI..............    33
    Philip Auerswald, Associate Professor, School of Public 
      Policy, George Mason University, Arlington, VA.............    35
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    John Zimmer, Co-Founder of Lyft, Inc.........................    39


            THE POWER OF CONNECTION: PEER-TO-PEER BUSINESSES

                              ----------                              


                      WEDNESDAY, JANUARY 15, 2014

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 p.m., in Room 
2360, Rayburn House Office Building. Hon. Sam Graves [chairman 
of the Committee] presiding.
    Present: Representatives Graves, Chabot, Luetkemeyer, 
Herrera Beutler, Hanna, Schweikert, Collins, Velazquez, 
Schrader, and Kuster.
    Chairman GRAVES. We will go ahead and call the hearing to 
order.
    Good afternoon, everybody. And thank you for being with us. 
I thank all of our witnesses for being with us today.
    Today's hearing will continue the Committee's examination 
into new types of business models which are propelling 
entrepreneurship and small business formation and growth.
    As the ability to connect through innovative platforms has 
increased, there has been a rise in peer-to-peer businesses. 
Peer-to-peer businesses create new marketplaces to access goods 
and services by utilizing technologies such as smartphone apps, 
GPS locators, and the Internet to easily and efficiently 
connect individuals who may be able to meet each other's needs. 
While the newness of these platforms limits our ability to know 
the true economic impact, these new businesses appear to be 
creating significant shifts in the economy and demonstrate 
potential for significant economic growth and job creation. 
Forbes estimated in 2013 that revenue from the so-called 
sharing economy was likely to surpass $3.5 billion. With these 
sorts of numbers, it is necessary for the Committee to 
understand what these businesses are and what challenges they 
face. Notably, many of us have already seen the effects of 
peer-to-peer businesses in our daily lives as we utilize things 
like eBay or Etsy to purchase unique goods or use an app to 
contact a ridesharing company for a lift.
    At the state and local level, the rise of peer-to-peer 
businesses has fostered interesting debates over whether 
existing laws and regulations accurately fit these new 
companies. For example, in 2013, California became the first 
state to legalize and regulate peer-to-peer transportation 
companies finding that those firms were distinctive from 
traditional charter carrier companies.
    And again, I want to thank all of our witnesses for being 
here today and taking the time away from your jobs and making 
the travel here to Washington for this important hearing. I 
look forward to your testimony, and I now turn to Ranking 
Member Velazquez.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Technology has long been a catalyst for entrepreneurship. 
Just as small businesses often drive some of the most important 
scientific breakthroughs, developing new products and services, 
major technological advances also create opportunities for 
small firms to reach customers. This symbiotic relationship 
between entrepreneurship and technology has been an important 
source of economic growth and job creation.
    In keeping with this trend, development of the peer-to-peer 
business model has created new channels for entrepreneurs to 
sell goods and services. Technology innovators are harnessing 
the web to create new platforms and markets that allow the 
selling, renting, and trading of everything from apartment 
space to transportation to artisan craft goods.
    The numbers strongly suggest that this new sharing company 
based largely on interactions between consumers rather than 
traditional brick and mortar businesses is here to stay. On a 
single Friday night, 150,000 travelers are finding rooms to 
rent from private homes on their B&B website. More than 1.5 
million Internet users have used TaskRabbit to hire people for 
odd jobs. Lending Club, which facilitates loans between 
consumers, has led to $2 billion in lending so far and doubles 
almost every month. eBay has seen product sales reaching nearly 
$70 billion in a single year.
    One reason for this sector's rapid growth may be rooted in 
broader economic struggles. With job growth still sluggish, 
enterprising Americans and dislocated workers are seeking new 
ways to replace revenue. Renting out rooms, providing lifts in 
their car, and selling homemade goods, food goods, have all 
become ways for ordinary Americans to experiment with 
entrepreneurship and stay afloat during tougher economic times.
    While the explosive growth of these networks has created 
new opportunities, the rapid rise raises questions. As always, 
it is important that consumers utilizing these sites be 
protected against fraud and unscrupulous actors. Most of these 
sites contain a review and rating system to ensure users on 
both sides of this transaction live up to their commitments. 
However, as the popularity of peer-to-peer transactions grow 
and become a larger part of the mainstream economy, additional 
safeguards may be necessary. As always, the challenge will be 
ensuring businesses and consumers are protected without 
question or discouraging promising innovation.
    Many peer-to-peer networks are themselves small businesses. 
Orders are larger entities but are helping self-employed 
Americans and small firms identify new channels for reaching 
customers. It is important that as this technological 
revolution advances, government policy keeps pace. As of yet, 
the Small Business Administration's initiatives appear ill-
suited to help bolster this growing sector, something that I 
hope can be rectified. It is important this Committee fully 
understand what is happening in the new sharing economy and has 
a grasp on how we can minimize risk for consumers while 
maximizing growth and productivity from peer-to-peer business 
models.
    On that note, I would like to thank all of our witnesses 
for taking the time to be here. Your perspective will add 
significant value as the Committee seeks to learn about this 
rapidly emerging marketplace.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Chairman GRAVES. All right. Our first witness is Professor 
Arun Sundararajan, who teaches at New York University Stern 
School of Business where he studies how information transforms 
businesses and society. He has been published in Bloomberg, 
Harvard Business Review, and many other reputable journals.
    Thank you for being here. I appreciate you coming in.

  STATEMENTS OF ARUN SUNDARARAJAN, PROFESSOR AND NEC FELLOW, 
STERN SCHOOL OF BUSINESS, HEAD SOCIAL CITIES INITIATIVE, CENTER 
   FOR URBAN SCIENCE AND PROGRESS, NEW YORK UNIVERSITY; BETH 
STEVENS, ASSISTANT GENERAL COUNSEL, SIDECAR TECHNOLOGIES, INC.; 
 ALAN MOND, CEO, 1000 TOOLS, INC.; PHILIP AUERSWALD, ASSOCIATE 
  PROFESSOR, SCHOOL OF PUBLIC POLICY, GEORGE MASON UNIVERSITY

                 STATEMENT OF ARUN SUNDARARAJAN

    Mr. SUNDARARAJAN. Okay. Thank you, Chairman Graves, Ranking 
Member Velazquez, and Committee Members.
    I am delighted to have been invited to speak to you about 
digitally-enabled peer-to-peer business. Thank you for 
convening this important hearing. More light needs to be shed 
on this promising new segment, so I hope this hearing is the 
first of many.
    We need a clear understanding of the economic impacts of 
peer-to-peer businesses and changes to regulatory frameworks 
that nurture this rapidly growing segment of the economy 
because this segment will create work, stimulate consumption, 
raise productivity, catalyze innovation, and facilitate 
entrepreneurship. The new peer-to-peer economy is enabled by a 
set of platforms, new marketplaces powered by digital 
technologies. These platforms enable entrepreneurs, people who 
want to supply goods and services, to fulfill demand from 
consumers, people who want to buy, rent, or consume. Thus, they 
create millions of new, very small businesses or what are being 
called micro-entrepreneurs. In my written testimony, I discuss 
some of the technological drivers--consumerization, 
institutions, urbanization, ecological issues in some detail.
    Some platforms allow entrepreneurs to create services by 
using their own personal labor and assets, like Airbnb, and 
Relay Rides create new versions of familiar, commercially 
available services like short-term accommodation and car 
rental. Eatwith and Feastly, and perhaps even Sidecar, increase 
the efficiency and scope of familiar activities like supper 
clubs and paid ridesharing. Others, like Yodle and 1000 Tools, 
create new services for the rental of owned assets from one 
peer to another.
    There are a few other categories of platforms I discuss in 
some detail in my written testimony. Platforms like Uber and 
Kitchit that allow professionals of different kinds to leverage 
their skills and operate sole proprietorships. Markets like 
oDesk and TaskRabbit that connect freelance workers with new 
sources of work, marketplaces like Etsy and eBay that allow 
individuals to operate new online retailing businesses, often 
for products that otherwise would not have a mass market. There 
is also a host of new peer-to-peer finance and peer-to-peer 
education platforms that I do not cover because they have 
unique issues and impacts that I think require a separate 
discussion.
    I believe that peer-to-peer businesses enabled by digital 
platforms will constitute a significant segment of the economy 
in the coming years and will have a positive impact on economic 
growth.
    Why do I think so? First, these businesses and platforms 
put people to work, not always in traditional jobs but they are 
nevertheless creating work that generates income. We need to 
measure this work creation better.
    Next, they create new consumption. The peer-to-peer sharing 
economy expands the variety and quality of existing goods and 
services, as well as creating entirely new consumption 
experiences.
    Next, they will be a gateway to entrepreneurship. If you 
want to start a small business but the risks seem too high, you 
can transition as a peer-to-peer supplier or dip your toes in 
the water part-time on one of these platforms. As my colleague 
Lisa Gansky says, they may be like finishing school for 
entrepreneurs.
    Next, they are likely to increase productivity by tapping 
into underutilized labor sources, by increasing the efficiency 
of asset usage, and by increasing motivation levels for workers 
who can now better capture the value created by their labor. 
Again, further details in my written testimony.
    Over the next few years, we need robust measurement of the 
economic impacts of peer-to-peer business and especially of the 
small businesses created. We also need to refine existing 
economic measures so that they fully capture the new forms of 
production, consumption, and work facilitated by peer-to-peer 
business.
    The current regulatory infrastructure is likely impeding 
the growth of these businesses. The regulations are not 
fundamentally flawed and the safe harbors are not the issue 
here. It is primarily because this wage of digital disruption 
is altering how we experience familiar services. So there is a 
misalignment between the business models and roles of these new 
peer-to-peer businesses and the rules and guidelines for the 
older analog industrial-age ways of providing services through 
hotels, taxis, or car rental companies.
    So I believe that a self-regulatory solution with some 
government oversight, perhaps through the creation of new self-
regulatory organizations or SROs is worth exploring for these 
peer-to-peer business markets. The SROs could be the platforms 
themselves, new industry consortia, or may even emerge from 
consumer-collectives like peers, with government oversight.
    The reason why I believe this is a good solution is that 
delegating some regulation will ease the tremendous strain that 
government at all levels would otherwise bear from constantly 
having to monitor and correct misalignment as hundreds of new 
peer-to-peer businesses emerge in coming years. It is also that 
these new marketplaces have sophisticated digital controls, 
reputation systems, identity verification, quality screening 
built in, which play a natural regulatory role that we can rely 
on to some extent. Consumers already do.
    The interests of the platforms are also naturally aligned 
with the interests of a tax book regulator. They can also 
identify new regulatory issues faster as they arise and take 
action against infringing market participants more easily.
    To summarize, these peer-to-peer businesses and the 
platforms that enable them will create work, stimulate 
consumption, raise productivity, catalyze innovation, and 
facilitate entrepreneurship. We should make sure that our 
regulatory framework nurtures their progress. Thank you.
    Chairman GRAVES. Thank you, Professor.
    Our next witness is Beth Stevens. Ms. Stevens serves as the 
assistant general counsel for Sidecar Technologies, which is 
headquartered in San Francisco, California. Sidecar is a ride-
sharing phone app that operates on a peer-to-peer level 
connecting car owners with folks that need rides.
    So thank you for being here and coming all the way.

                   STATEMENT OF BETH STEVENS

    Ms. STEVENS. Thank you.
    On behalf of Sidecar Technologies, I would like to thank 
Chairman Graves, Ranking Member Velazquez, and the members of 
the Small Business Committee for this invitation to speak on 
peer-to-peer businesses and ridesharing in particular.
    Sidecar was founded over a year ago and is a ridesharing or 
carpooling, if you will, information service that enables 
members to exchange information via the Sidecar smartphone 
mobile application or app with other members to enable 
ridesharing in a privately-owned vehicle.
    So the way that our service works is a passenger can enter 
their pickup and destination locations and the app will send 
that information out to available drivers and drivers will then 
choose to share a ride. In other words, we offer the digital 
equivalent of an on-demand carpooling service or for those of 
you who do slugging here in the District, a dynamic slug line. 
So instead of having to show up at a particular location or 
look on an employee corkboard, you can open up your GPS-enabled 
smartphone and say, ``I need a ride and here is where I am 
going,'' and a driver can say, ``I have got a car and I am 
going that direction.''
    So trust and safety is vitally important to the Sidecar 
community. The app is built with a number of important safety 
features, including a dual rating system. So just like eBay 
allows buyers and sellers to rate each other, Sidecar's mobile 
app allows a passenger and driver to rate each other. We also 
have a Share My ETA function which allows riders to text, 
tweet, Facebook, e-mail their estimated arrival time to a loved 
one or friend. We also have an in-app ability to contact the 
passenger or driver, so there is no need to share or avail 
personal contact information when trying to coordinate. We also 
include a picture of the driver and the driver's vehicle so 
that passengers can verify that the correct driver is showing 
up. We have an in-app receipt of the ride with the driver's 
name. Most often this gets used for lost items, but it also, if 
something were to go wrong on the ride, it enables the 
passenger to have comfort that they know who they shared a ride 
with.
    There is also an in-app ability to immediately call the 
Sidecar support team should there be an issue on either the 
driver or passenger side, and it is a completely cashless 
system, which protects drivers against potential crimes.
    We also have a $1 million commercial liability policy that 
covers passengers and third parties for any damage or bodily 
harm that is the result of the driver.
    We also prescreen our drivers. So we conduct Social 
Security Number-based background checks consistent with federal 
and state laws, which screen for sex offenses, DUIs, reckless 
drivings, and a whole host of other criminal offenses. We 
collect the driver's personal information, including their 
driver's license and personal insurance, and we train drivers 
how to use our app and provide tips on distracted driving.
    I am sure at this point you are saying, ``Well, yeah, I can 
just carpool with my neighbor. I do not need all this.'' And 
what this program allows you to do over traditional ridesharing 
programs and carpoolings and vanpools is to develop a critical 
mass to make sure that these ridesharing programs can succeed. 
The research shows that even though carpooling has been around 
since World War II, programs have failed because there has not 
been a critical mass of users. Users need to know if they are 
going to take a shared ride somewhere that they can get home, 
and we also have to encourage drivers and incentivize them to 
participate. One way to do that is through financial 
incentives. Allowing them to either earn the expense of 
operating a vehicle, which in an urban area can be quite a bit 
if you talk about $400 a month to park downtown, the cost of 
gas, the depreciation of the vehicle, insurance, and 
maintenance of a vehicle. And ridesharing allows individuals--
micro-entrepreneurs, if you will--to either earn those costs of 
the vehicle or maybe earn a little bit more as part of 
supplemental income that they bring in.
    Sidecar's mobile application offers the opportunity with 
the ubiquitous use of mobile location-based services to 
accelerate a broad-based adoption of ridesharing or carpooling. 
This adoption of ridesharing has the potential to produce 
large-scale public benefits, including easing traffic 
congestion and the strain on existing infrastructure, reducing 
pollution, and fostering a sense of community, all while 
providing car owners an opportunity to offset the cost of car 
ownership.
    Sidecar is grateful for the opportunity to discuss 
ridesharing with you, and I look forward to your questions.
    Chairman GRAVES. Thank you very much.
    Our next witness is Alan Mond, CEO and Co-Founder of 1000 
Tools located in Ann Arbor, Michigan. Mr. Mond is a self-
described mechanical engineer turned web developer and 
entrepreneur. He launched his company in June of 2003. 1000 
Tools is an online platform that allows individuals to rent 
tools from the neighbors.
    Mr. Mond, thanks for being here.

                     STATEMENT OF ALAN MOND

    Mr. MOND. Thank you very much.
    Chairman Graves, Ranking Member Velazquez, and members of 
the Committee, I am Alan Mond. I am the CEO of 1000 Tools and I 
am very grateful for the opportunity to speak with you 
regarding our peer-to-peer business. We actually started in 
June 2013, so we are one of the youngest around here.
    1000 Tools is an online platform that enables people to 
rent tools from each other. Our latest product allows local 
governments to rent underutilized equipment to one another, but 
we will get to that in a minute.
    We are based in Ann Arbor, Michigan, and it is an honor for 
me to be here today. I come from a family of tinkerers, and the 
idea for 1000 tools came when I had to replace the timing belt 
on my 1995 Ford Probe. I had the willingness to do it myself 
but I did not have the right tools for the job. So my solutions 
at the time were to buy a bunch of expensive tools that I am 
never going to use again or to borrow from my friends, but my 
friends did not have all the tools either, and if I 
continuously borrow from my friends that is going to erode even 
the best of friendships. So I thought, ``I wonder if anyone 
else has this problem? And would it not be nice if I could just 
access tools, a large network of tools?''
    So with this idea in mind, we built 1000Tools.com and we 
launched in June 2013 to test this hypothesis. Our website 
offers a secure interface for tool renters to pay with a credit 
card and for tool owners to get funded via direct deposit 
straight into their bank account. Prices are set by the tool 
owner and they compete directly against established tool rental 
stores. Tool exchange happens locally, in person, so no 
shipping is required. Reviews and ratings are also provided for 
each transaction.
    1000 Tools provides Americans the opportunity to become 
micro-entrepreneurs using assets they already own. This new 
generation of collaborative consumers and micro-entrepreneurs 
live in an ecosystem called the sharing economy and it has 
already crossed the chasm into mainstream adoption. As many of 
us have already explained here, Airbnb, for instance, the 
online marketplace for listing and booking short-term housing 
accommodations, announced in June 2012 that they have reached 
their 10 millionth booking and they compete head-to-head 
against even the largest hotel chains in the country.
    Most of our users in our space of tools rentals are early 
adopters. They have participated in other areas of the sharing 
economy, however, there are still some concerns about liability 
and property damage, and these are still predominant barriers 
to mass adoption. Additionally, there are very few insurance 
companies that are familiar with this type of exposure, and 
there are even fewer that are able to offer liability insurance 
for micro-entrepreneurs.
    So as we grow our user base, we started looking at a 
different customer segment, and this is how we found out the 
really interesting niche in local governments. Three months ago 
we started focusing on local government equipment sharing and 
after interviewing 30 municipalities in the southeastern 
Michigan region, we discovered an incredible gap. Large 
municipalities have expensive equipment that goes underutilized 
and small municipalities tend to rent at high premium rates 
instead of purchasing equipment. Out of the 30 city managers 
that I interviewed, 70 percent were extremely eager to try our 
prototype.
    So with this information in hand, we retooled our existing 
technology to cater straight and directly to municipalities. 
That is how we created Muni Rent. Muni Rent is a new website 
that spun out of 1000 Tools that allows different levels of 
local governments--like municipalities, counties, road 
commissions--to rent out the equipment to each other.
    Now, some of you may be asking, why are municipalities not 
doing this already? And that is really a great question. But as 
with most areas of local government, resources are limited. It 
takes a lot of resources for municipalities to set up a rental 
agreement, maintain some sort of catalogue of all the equipment 
they have, and let alone keep track of invoicing, hours, 
maintenance records, et cetera.
    Muni Rent. We provide a vetted roundtable agreement between 
the different municipalities and handle all the details, 
including insurance verification, payment, invoicing, and all 
of this is available through an extremely easy to use website 
and a just released yesterday Android app.
    Our journey began building a peer-to-peer tool rental 
marketplace, but we now look forward to welcoming 
municipalities as the newest members of this brave new sharing 
economy. Thank you very much.
    Ms. VELAZQUEZ. It is my pleasure to introduce Professor 
Philip Auerswald. He is an associate professor at the George 
Mason University, School of Public Policy, where he focuses on 
entrepreneurship and innovation in a global context. 
Previously, he was a senior fellow at the Kauffman Foundation 
and has served as an advisor to the Clinton Global Initiative 
since 2010 on topics related to job creation, education, and 
market-based strategy. Professor Auerswald is the co-founded 
and co-editor of Innovations, Technology, Governance, 
Globalization, a quarterly journal about entrepreneurial 
solutions to global challenges and is the author of The Coming 
Prosperity: How Entrepreneurs are Transforming the Global 
Economy.
    Professor, you are most welcome.

                 STATEMENT OF PHILIP AUERSWALD

    Mr. AUERSWALD. Thank you very much.
    Chairman Graves, Ranking Member Velazquez, members of the 
Committee, I appreciate the opportunity to share with you this 
afternoon some thoughts on the economic context for peer-to-
peer business models.
    In 1988, a quarter century ago, I drove a stranger's Nissan 
Sentra from Washington, D.C. to Seattle, Washington. In the 
process, I earned $250 with the added bonus of moving both 
myself and my stuff across the country. The vehicle's owner 
made out well, too. She got her car transported 3,000 miles for 
less money than she would have had to pay if she had hired a 
commercial service and certainly at a lower opportunity cost of 
time than she would have incurred if she drove the car herself.
    Peer-to-peer, win-win.
    At its human core, the peer-to-peer or sharing economy is 
not a new phenomenon. Had Alexis de Tocqueville had the chance 
to write about the United States of today in addition to that 
of the 1830s, he would have found in peer-to-peer businesses 
like Sidecar and 1000 Tools, much of a distinctly American 
character.
    So is there any fundamentally new about the sorts of peer-
to-peer businesses that have been proliferating in the past 
five years? Yes. The difference between the past and the 
present is in the platforms over which people find one another, 
conclude transactions, and establish reputations? The triple 
revolutions in computation, communications, and algorithmic 
power that have unfolded over the past half century have, as we 
have been hearing, dramatically lowered the costs of finding a 
provider of a service, assessing their reliability, and 
ensuring that the transaction can be performed in an equitable 
manner.
    Participants in the peer-to-peer marketplaces are clearly 
drawn by the straightforward gains from trade that are made 
possible by lower search and transaction costs. Simply put, 
buyers pay less than they would without the service and sellers 
earn more, if only because they often would not be able to 
bring their service to market without the peer-to-peer 
platform. Furthermore, buyers have access to previously 
unavailable options in the marketplace, while sellers have 
opportunities to diversify their sources of income and increase 
their financial resilience.
    Of course, new business models that gain market acceptance 
almost invariably invite challenges from incumbents. New peer-
to-peer businesses are no exception. Wherever peer-to-peer 
platforms have gained traction across other country, regulatory 
challenges have followed. Invoking regulatory equity, for 
example, taxicab drivers have sought to slow the growth of car 
and ridesharing services like Sidecar and so forth in other 
areas of the peer-to-peer economy, these are largely local 
issues.
    So what does this all mean for the formulation of policy at 
the federal level? From the standpoint of the United States 
Congress, the peer-to-peer business models that matter most are 
the ones that we have not seen yet. It is instructive to ask 
ourselves while we are focused today on local transportation, 
hospitality, food service, and the rental of consumer goods as 
the most significant domains of innovation in peer-to-peer 
business models. The reason arguably is that these are 
industries in which regulatory complexity is relatively low.
    In contrast, there has been relatively little innovation of 
peer-to-peer business models within healthcare, energy, and 
education where regulatory complexity is relatively high. These 
three industries comprise more than a quarter of U.S. GDP. The 
greatest macroeconomic impacts of peer-to-peer business models 
for the United States thus will not be realized until we have 
established the training, certification, licensing and auditing 
mechanisms at all levels of governments that allow neighbors to 
earn their livelihoods by taking care of neighbors and by 
providing power to their communities and offering validated 
work-relevant training to people anywhere who seek expanded 
opportunities.
    In more general terms, the bottom line is this. Shared 
prosperity requires not only innovations that scale up to 
create new wealth but also innovations that scale out to create 
new opportunities. Let me be very clear about this point. Much 
of my own work, as well as important research conducted over 
the past decade at the Kauffman Foundation in Kansas City with 
which I have been affiliated, is about the value to society of 
scale-up innovation, particularly via new entrepreneurial 
entrants. This research had demonstrated that the small 
proportion of new ventures that scale up rapidly are 
responsible for a disproportionate share of value creation in 
the economy.
    But here is the problem we have run into. While some scale-
ups creates large numbers of new jobs, many do not. Companies 
like Apple, Google, Facebook, Instagram, and Twitter have all 
achieved valuations in the tens and even hundreds of billions 
of dollars but they directly employ far fewer people per dollar 
of revenue than their Fortune 500 counterparts did a generation 
ago.
    This is where peer-to-peer platforms come into play. By 
their very structure, peer-to-peer platforms scale out success 
to reach tens of thousands, even hundreds of thousands of 
people with opportunities to create viable livelihoods for 
themselves. They create new and enticing invitations to latent 
producers within the economy to employ their individual assets, 
talents, to create economic value.
    In the coming decades, the United States and other advanced 
industrialized economies will no sooner return to the 
routinized and manufacturing-centric economy of the 20th 
century than to the agrarian economy that preceded it. The 
issue is not whether new livelihoods based on peer-to-peer 
business models are better or worse than the industrial-aged 
jobs that are disappearing from large corporations. The real 
point is when jobs are eliminated in the process of digital 
disruption, they will not be coming back in their old form. As 
that happens, we humans have no choice but to fall back on our 
fundamental social skillset, creating and sharing with one 
another.
    There is, however, one big difference. Unlike our isolated 
ancestors of millennia past, Americans in this century are 
empowered by architectures of collaboration that allow for the 
creation of new and diverse livelihood at unprecedented rates. 
Therein lies the power of today's peer-to-peer economy.
    Chairman GRAVES. Thank you all very much. And we will now 
go on with questions.
    I am going to turn to Mr. Collins for the first questions.
    Mr. COLLINS. Thank you, Mr. Chairman.
    I think this is a great hearing because I, for one, really 
had not heard of peer-to-peer. We all know about Uber here in 
D.C., but I guess I had not considered the tool-to-tool, the 
1000 Tools and what Sidecar is doing. I am intrigued by that 
and I think your hearing today might spur some other 
entrepreneurs to think, well, there are people that want to 
borrow more than just tools.
    So I am curious, Mr. Mond, you have been in this year, and 
my first question is I am assuming you have a fee charged 
because yours is a cashless transaction so you must just charge 
a percentage?
    Mr. MOND. Yes, that is correct.
    Mr. COLLINS. And so what issues, I mean, do you have any 
issues, for instance, do you have to give out 1099s or if 
somebody really sees this going and they are renting out a lot 
of tools, it is kind of an underground economy so there is 
always the question of sales taxes. There is a question of 
income taxes, underground economy. Because you are conducting 
the financial transaction, what is your liability or what 
issues do you face?
    Mr. MOND. So we have not had to come across that point yet 
because we are not old enough as a company, but yeah, 
typically--I am also a super host on Airbnb, on the room 
sharing website. And, yeah, we receive 1099s as hosts. 
Basically, we receive an income.
    Mr. COLLINS. No, I am thinking more the person that is 
renting the tool. He is getting money. How does his income get 
reported?
    Mr. MOND. Right. Yeah. There is a form that you receive as 
the owner.
    Mr. COLLINS. Oh, from you? That you prepare?
    Mr. MOND. Yes.
    Mr. COLLINS. Oh, okay. All right.
    So you are a year in and is it--are you nationwide or are 
you in specific markets? And how do you, I mean, I wanted to 
replace my faucet the other day. I recognized I did not have 
the tools either so I just hired a plumber. But that was 
probably safer as well. But you need a critical mass as well, 
because if I go to Tool-to-Tool, 1000 Tools, and I cannot find 
what I need, I may not come back. And so how many cities or 
markets are you in?
    Mr. MOND. Well, Mr. Collins, hopefully after this hearing 
we will go nationwide. But right now we are very strong in Ann 
Arbor which is where we started. We actually have, for some 
reason, a critical mass in the D.C. area because when we were 
at the Maker Faire event in Detroit, we have had a contingency 
of people from the D.C. area and they said please open this up 
in the D.C. area. And so we did. And it is open here, so if you 
have tools that you would like to post for rent, it would be 
our honor to have you.
    Mr. COLLINS. I would think, too, I mean, you have developed 
the IP to the software. I mean, whether it is tools or whether 
it is boats or whether it is jet skis or, I mean, I would think 
it could expand beyond just tools; right?
    Mr. MOND. Yeah. We wanted to stay very focused on tools for 
an important reason and that is kind of dilution of focus. When 
people come to our site, we want them to know that what they 
are going to find are tools, and if they think of any tool that 
they will need, they can automatically relate that to 1000 
Tools. There are other sites that came and went that were very 
broad. So you could rent anything that you could possibly think 
of but that is the problem. Sometimes you just do not know what 
is going to be available so you get turned away.
    Mr. COLLINS. Sure.
    So Ms. Stevens, how do you make money? Is yours cashless 
and you charge a transaction fee?
    Ms. STEVENS. That is correct. We take a percentage of the 
ride payment that the passenger makes to the driver.
    Mr. COLLINS. And the driver sets that payment?
    Ms. STEVENS. Not currently. That may be an option in the 
future. We are just over a year old but currently the payment 
is determined based on time and distance using a third-party 
API.
    Mr. COLLINS. Okay. And I am assuming you must track repeat 
customers and the like. What is the biggest complaint you get?
    Ms. STEVENS. The biggest complaint. From drivers or 
passengers?
    Mr. COLLINS. Both.
    Ms. STEVENS. From drivers, the biggest complaint currently 
would be declined credit cards. So we are working on a 
preauthorization system and we are guaranteeing payment on all 
rides to drivers if for some reason that credit card is 
declined.
    From passengers, I am not sure we get a whole lot of 
complaints. We get a whole lot of questions of I left my 
cellphone in the back of the car. And fortunately, since we 
track every ride and they know who gave them a ride, we can 
usually find it pretty quickly.
    Mr. COLLINS. Very good. Well, my time is expired, but 
again, thank you for coming in because I think you are on the 
cutting edge of something new. It is intriguing. Thank you.
    Ms. STEVENS. Thank you.
    Chairman GRAVES. Ms. Velazquez.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Professor Sundararajan, given the nature of the peer-to-
peer platform, it will be difficult, if not impossible to 
capture their contribution in official employment statistics. 
What are the ramifications of excluding job creation from these 
government employment indicators?
    Mr. SUNDARARAJAN. I think that one of the ramifications is 
that we may be under--we may be not measuring the full extent 
to which the country is employed because we tend to count 
employment in terms of whole jobs. We do try and capture to 
some extent people's second jobs, but in a lot of cases 
individuals who are providing labor and assets through say a 
marketplace for renting tools or occasionally being an Airbnb 
host or selling stuff on Etsy do not think of this as a job and 
so they do not report it in the statistics. So one ramification 
could be that we are not measuring the extent of job creation 
as much as we should be. Another ramification might be that we 
may be moving into sort of an economy where a fraction of the 
population does not hold a full-time job but gets their income 
from providing sort of assets and services on a number of 
different peer-to-peer platforms. And if this is the case, then 
we need to start thinking about a bunch of issues that surround 
what happens when, you know, rather than people having sort of 
mainstream jobs from traditional corporations, a much larger 
fraction of the country are freelancers or self-employed.
    Ms. VELAZQUEZ. Professor Auerswald, do you have any 
thoughts?
    Mr. AUERSWALD. Thank you, Ranking Member Velazquez. I think 
you have asked an extremely important question.
    The statistics that we have came out of the middle of the 
20th century when the concentration of economic activity was 
essentially the way in which the economy grew. And employment 
within large-scale firms was considered to be employment 
success. We are really moving into a very different world today 
and I fully endorse the notion that we have to think about 
different forms of measurement. I am not representing George 
Mason today but I can say that we are daily facing the question 
of how best we can equip a new generation to be successful in 
the 21st century. We are well aware that we need to train 
students and train young people or people of all ages to adapt 
flexibly in a changing economy. But I think that this dimension 
of being able to provide services directly to other people, 
particularly in those large areas of the economy as I 
mentioned, a health above all, but also energy and education. 
Peer-to-peer services and the ability to serve other people 
directly and provide services directly I think is a tremendous 
area of growth.
    Ms. VELAZQUEZ. Thank you.
    Many of the new peer-to-peer entrepreneurs have had 
difficulty operating their businesses in a regulatory scheme 
that was formed for traditional brick-and-mortar businesses. 
With the changing environment in which companies conduct daily 
businesses, how can we adapt existing laws and regulations? To 
work for the entire marketplace?
    Mr. AUERSWALD. So entrepreneurs always will work within 
whatever the structure, regulatory and market that they are 
facing. I think peer-to-peer businesses have done the same 
thing. They have, as I noted, been most successful and have 
grown most quickly in those areas where that has been some sort 
of regulatory clearing. Maybe there is some uncertainty as to 
how the business model will be received, but that is part of 
the risk of being an entrepreneur.
    I think the important thing is for regulators to appreciate 
the contribution of the peer-to-peer economy, and that is 
exactly why this hearing is so welcome. And to understand that 
this is a new and valid mode of economic activity, neither 
better nor worse than what we have seen in the past, but 
something that brings a lot, even if it, of course, is going to 
be associated with new risks and new ways of thinking. I do not 
know that it varies greatly from industry to industry, what the 
appropriate responses are, but I think the most important thing 
is that regulators understand that these open spaces for 
innovation are not just important; they are, I think, critical 
for the economic future of this country.
    Ms. VELAZQUEZ. What we hear is that some of the peer-to-
peer businesses, the kind of obstacles that they face is in 
terms of regulations at the state and local levels. So my 
question is what can we do at the federal level to help foster 
growth with these businesses?
    Mr. AUERSWALD. Well, obviously, given our federal system 
and distributed authority, there are limits to what the federal 
government can do at the state and local levels. But I think 
there really are signaling issues. There are issues about 
coordination of regulation at different stages. And I think at 
the federal level there are issues of focusing in those areas 
where the federal role is particularly significant. And so that 
is why I say healthcare is one area where we could have very 
significant innovation in peer-to-peer models that would be 
cost lowering and that would reach particularly people over 50 
with care in their homes and through mobile services, business 
models that are nascent but really have not been seen because 
the regulatory environment is not inviting them. So I would say 
that that is the most important role for Congress is to focus 
on the areas where its regulatory oversight is most direct.
    Ms. VELAZQUEZ. Professor Sundararajan.
    Mr. SUNDARARAJAN. Yeah. This is a really important 
question. I think that the reason why we have seen state and 
city regulatory barriers to peer-to-peer businesses thus far is 
that a lot of the issues that have come up in the industries 
that are being disrupted--accommodation, transportation, urban 
transportation--tend to be regulated by city and state 
authorities. However, I do believe that there is a role for the 
federal government to play here on two fronts. One is to sort 
of provide the groundwork that might sort of lead to the 
creation of something resembling self-regulatory organizations 
for some of these industries. I think that there are going to 
be a lot of new regulatory issues that come up as more and more 
industries become peer-to-peer businesses and it helps to sort 
of delegate responsibility with oversight to the people who are 
closest to the changes and who also have the ability to take 
action most easily. So a platform can disconnect an infringing 
supplier from their platform very easily.
    Ms. VELAZQUEZ. But how do we provide a level playing field 
for those brick-and-mortar businesses that have to comply with 
regulations that might put them at a disadvantage with peer-to-
peer?
    Mr. SUNDARARAJAN. Well, it seems to me that a lot of the 
regulations that are in question here are ones that were 
developed to address specific issues that are sort of like 
prevalent in brick-and-mortar provision of say like if you are 
running a hotel chain or if you are sort of providing taxi 
services. Some of these regulations may be supplanted by 
digital technologies. I have also always had the impression 
that a brick-and-mortar company can also in addition, 
especially a large brick and mortar company. There is nothing 
that is preventing them from adding a peer-to-peer or a rental 
or a sharing dimension. I fully expect that Wal-Mart and Amazon 
will enter the space. BMW has entered sort of like the space. 
GM is an investor in Relay Rides. And so they are not sitting 
on their hands and waiting. They certainly have the opportunity 
to adopt these new business models themselves if it turns out 
that the lowered regulations on those fronts are going to sort 
of give them business advantage.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Chairman GRAVES. Mr. Schweikert.
    Mr. SCHWEIKERT. Thank you, Mr. Chairman.
    Professor, you were starting to go down a couple paths 
there that----
    Mr. SUNDARARAJAN. Which professor?
    Mr. SCHWEIKERT. I am sorry. I am not wearing my glasses. 
How many do I have?
    Mr. AUERSWALD. There are two professors.
    Mr. SCHWEIKERT. Okay. All right.
    Professor Number One.
    Mr. AUERSWALD. Okay.
    Mr. SCHWEIKERT. Okay. We actually have a number of examples 
of this in our economy that have been going on for quite a long 
time. In many ways private jets have been leasing out their 
excess capacity. I know of large printing facilities that, you 
know, you have these huge capital expenditures and the 
equipment is designed to run 24/7, so well your excess 
capacity. And many of us have always thought of the peer-to-
peer type sales as business-to-business, for those who have 
engaged in large capital expenditures, to basically maximize 
out, you know, how do you amortize out the cost of this? What 
is fascinating here, and to my friend from 1000 Tools, I am 
your new best customer because I own every tool you can 
imagine. I own tools I have no idea what they actually do. But 
it is fascinating. And Professor, have you looked at some of 
the modeling of what upheaval but also what opportunities? 
Because in many ways you are creating these high levels of 
efficiencies in the economy but you also may now change certain 
need for certain capital expenditures. If I have to go buy a 
$3,000 swaging machine that I am only going to use for one 
project, I no longer need to do that. So you may slow down 
capital expenditures but actually make the economy much more 
efficient.
    Mr. SUNDARARAJAN. That is true.
    Mr. SCHWEIKERT. So it is an allocation.
    Mr. SUNDARARAJAN. Yep. That is true and that is a very good 
point. At this point, the evidence suggests the direction of 
change is unclear. I mean, there are many different effects as 
you point out. On the one hand, you know, the increased 
efficiency of usage may cause some people to say, well, I do 
not need to buy a car. I can just sort of rent one through 
Relay Rides whenever I want one, or I do not need to buy a 
bunch of power tools. I can just rent them through 1000 Tools. 
On the other hand, there may be some people who are not 
incurring these capital expenditures because they cannot afford 
them. They want the asset but they cannot afford, like, I want 
that nice car but I cannot buy it. And now that there is a 
secondary market over which I can rent it when I am not using 
it, maybe I am going to increase my acquisition.
    Mr. SCHWEIKERT. It is a simple example. The person who buys 
the house with the guest room and they intend to rent it.
    Mr. SUNDARARAJAN. What I am reassured by is that 
historically whenever there has been a technological change 
that has led to greater asset efficiency, this tends to grow 
the economy rather than shrink it. It sort of creates new forms 
of consumption that tend to sort of have a positive rather than 
a negative effect. But as you say, the jury is still out. We 
need to gather data over the next few years to actually 
quantify the extent to which this is altering both welfare and 
capital expenditures.
    Mr. SCHWEIKERT. And to Professor--is it Auerswald?
    Mr. AUERSWALD. Auerswald.
    Mr. SCHWEIKERT. Auerswald. Do you agree with Professor 
Number One in regards that this actually makes an economy more 
efficient, therefore, you get a multiplier effect and economic 
growth?
    Mr. AUERSWALD. So the professors are in agreement. That is 
a good thing.
    Mr. SCHWEIKERT. But also just sitting here I can come up 
with probably a couple dozen examples of this that have existed 
for years in our economy in some fashion and have done actually 
quite healthy and quite well with actually a very soft touch 
from a regulatory environment?
    Mr. AUERSWALD. Well, I think that is partly what is 
fascinating about this space. Before the 20th century, the 
peer-to-peer economy was the economy. There was no other 
economy. We did not have large corporations providing services. 
This is a relatively new thing. Now we have platforms where we 
can return to something like an economy that we had in the past 
but with the efficiencies of the 21st century and with the 
computational power that we have developed over the past 50 
years with billions and trillions of dollars of investment.
    So what I think is different here is that--and I think part 
of the answer to your question is that there is a threshold to 
undertaking a project, and so I think that there are certain 
projects, whether in the home or for other people, that people 
would not have undertaken did they not have access to the tools 
once 1000 Tools grows to scale.
    Mr. SCHWEIKERT. But in that same is the threshold for--is 
it Ms. Mond?
    Ms. STEVENS. Stevens.
    Mr. SCHWEIKERT. So, no, Mr.----
    Mr. MOND. Mond.
    Chairman GRAVES. Mr. Mond. Yeah.
    Mr. SCHWEIKERT. Okay. On 1000 Tools, so your biggest 
barrier is to actually in many ways have participants in many, 
many different places willing to take their privately-held 
capital assets and make them available. So your biggest barrier 
right now is actually one of information and liability I would 
assume. And so now you have sort of a whole new world of law of 
what liability do I have? What sort of insurance do you require 
a driver to have if they pick up someone, if you let me loose 
with someone else's skill saw and I do not know how to ratchet 
it down. And I will not show you my toe that I put a nail gun 
through earlier this year.
    With that, Mr. Chairman, I am well over time. Thanks.
    Chairman GRAVES. And we have a set of votes coming up so we 
will try to get through everybody real quick.
    Mr. Luetkemeyer.
    Mr. LUETKEMEYER. Mr. Mond, everybody is sitting on the edge 
of the chair here wondering after your testimony did you get 
your car fixed?
    Mr. MOND. Yes.
    Mr. LUETKEMEYER. Did you use your own service? Did you find 
somebody else's tools or did you go to a rental place? Or how 
did you get it fixed?
    Mr. MOND. Actually, I went to Sears and bought a bunch of 
tools.
    Mr. LUETKEMEYER. So now you are one of your own members of 
your own company; right?
    Mr. MOND. Absolutely.
    Mr. LUETKEMEYER. Renting out your tools?
    Mr. MOND. I eat my own dog food.
    Mr. LUETKEMEYER. Okay.
    I am kind of curious, what is the biggest impediment that 
you have come across so far in your business, Mr. Mond and Ms. 
Stevens?
    Mr. MOND. So the biggest barrier was or still is education 
about this. And essentially, mass adoption of this type of 
business model. And the second impediment has been the 
litigious society that we live in prevents a lot of people from 
just joining blindly. They are very careful about liability. So 
having some sort of liability insurance for micro-entrepreneurs 
would be, if I were an insurance company, something I would 
seriously look into because Airbnb, who is kind of been around 
for a while, since 2008, they do not offer liability insurance. 
So just so that is on the record. On their website they say 
that you have to protect yourself from liability.
    Mr. LUETKEMEYER. Ms. Stevens.
    Ms. STEVENS. Our biggest issue is local regulators and 
viewing these--what we really believe is an information and 
technology platform in an online marketplace in the lens of a 
traditional taxi or a commercial carrier. So while we have made 
good progress with regulators in California and here in the 
District of Columbia who are willing to look at this in a 
different lens, the Seattle City Council has reacted quite 
aggressively and with the express and stated purpose of 
protecting incumbent taxi drivers. So it is really about 
competition and protecting the status quo in some local 
municipalities, which we think does not benefit the consumer. 
So that is our largest hurdle. We were shut down in New York 
and Philly and Austin by local regulators.
    Mr. LUETKEMEYER. I assume that you are probably not too 
capital intensive so you probably do not need lots of funding, 
but do you have any access to credit problems from the 
standpoint that you are a startup company and you are doing 
something that is unique, never been done, or has not been done 
very much anyway? Do you find that to be a problem?
    Ms. STEVENS. We are the traditional startup with VC 
backing. We have not experienced limitations in that way, the 
way that maybe a traditional small business would going to a 
bank, asking for a loan, so I cannot say that we have suffered 
that. But the challenge here is proving that this can work in a 
way that is cash flow positive.
    Mr. LUETKEMEYER. Mr. Mond, have you had any problems with 
that?
    Mr. MOND. We are even less traditional of a startup because 
we are bootstrapped, meaning we pay for our own way through 
other means.
    Mr. LUETKEMEYER. Okay. To attract people to list their 
tools with you, how much marketing do you do? Do you have 
somebody that goes out and contacts all these people or do you 
just have a mass mailing? How do you do that?
    Mr. MOND. So our main means of marketing this is actually 
going to the biggest Maker Faires that we can find. There is 
where it is our biggest bang for our buck. So Maker Faires are 
places where a lot of people congregate and they are all people 
that work with tools. And people just go nuts when we go there. 
But that is really our best way, just word of mouth.
    Mr. LUETKEMEYER. How do you market your product then to the 
consumer? How do you market the product to your consumer?
    Mr. MOND. What do we tell them or what is the vehicle?
    Mr. LUETKEMEYER. How do people find out about you?
    Mr. MOND. Mostly through word of mouth.
    Mr. LUETKEMEYER. Word of mouth. Really?
    Ms. Stevens.
    Ms. STEVENS. For us, there is a lot of traditional social 
media advertising. So Facebook, Twitter, et cetera. Word of 
mouth is really important. So for any peer-to-peer marketplace, 
the secret is how do you crack virality? How do you get people 
to talk about your product, to share referral codes, to use it?
    Mr. LUETKEMEYER. Are you on Craigslist? Will Craigslist 
have you?
    Ms. STEVENS. We do have some ads on Craigslist to attract 
drivers.
    Mr. LUETKEMEYER. Wow. Fantastic.
    I will stop right there, Mr. Chairman. Thank you very much.
    Chairman GRAVES. Ms. Herrera Beutler. And welcome back. We 
have been thinking about you and your baby.
    Ms. HERRERA BEUTLER. Thank you very much.
    Ms. Stevens, I was really intrigued. I am from Washington 
State. I was intrigued to hear you say that the City of Seattle 
focused a little bit more on what it sounds like protecting a 
certain subset of--I guess I do not know if it would be workers 
or owners--taxi drivers versus the entire commuting population 
of a very busy city with a lot of really bad traffic. And it 
sounds like you have experienced--because when you were talking 
about it I thought, well, similar with 1000 Tools, go to a big 
city. It does not surprise me that 1000 Tools works well here 
in D.C. People do not have a lot of space to store stuff. They 
do not want to invest in going to buy a bunch of tools. I have 
been in this place myself. My car broke. We had serpentine 
belts. We had to go buy some big weird tool, like this big, 
that was more than the belt that we will never use again. And 
then I think we left it somewhere because it is like I do not 
have room for this.
    So that does not surprise me when I think about your 
services. You are going to look in the big cities. And it 
sounds like several of them have created either a regulatory 
barrier or almost kind of, I do not know, I think you described 
it as defending the status quo which to me is just absolutely 
nuts because congestion in some of these cities is some of our 
biggest problems. So why would you not want to develop this 
system?
    I actually was in the state legislature when someone 
brought up slugging. And having been back here I said, ``Hey, 
slugging is a good option for us.'' How could we help with 
that? I mean, do you see that as just kind of protectionism? Is 
it education? I mean, how could we help?
    Ms. STEVENS. I absolutely agree. We are flabbergasted by 
it. And our goals, and this is why we have always included 
destination, passengers entering their designations because we 
want to get to true ridesharing. And there is this idea with 
perhaps some of our competitors that suggests that this is 
really just quasi-tax. And so it is education. It is also 
signals that you all can send to your home states about the 
importance of this and the potential. But it is really about 
fostering innovation and waiting for, not cutting off before we 
can achieve all of the potential that I mentioned in my opening 
remarks about reducing congestion, reducing strain on existing 
road infrastructure, and potentially reducing pollution.
    Chairman GRAVES. I want to thank all of you for 
participating today. I really appreciate you taking the time 
out of your hectic schedules to come and help us understand 
better some of the peer-to-peer businesses out there and get 
your perspective on how these are affecting our economy. 
Particularly when we have jobs that are so scarce, these new 
business are offering unique opportunities for individuals to 
monetize some assets and for entrepreneurs to pursue some 
really good ideas. But I do appreciate you all coming in.
    We do have a series of votes coming up, so the timing ended 
up being just about right.
    I would ask unanimous consent that members have five 
legislative days to submit statements and supporting materials 
for the record. Without objection, that is so ordered. And with 
that, the hearing is adjourned. Thank you.
    [Whereupon, at 1:59 p.m., the Committee was adjourned.]
                            A P P E N D I X


    Peer-to-Peer Businesses and the Sharing (Collaborative) 
                            Economy:

        Overview, Economic Effects and Regulatory Issues

                       Arun Sundararajan

 Professor and NEC Faculty Fellow, NYU Stern School of Business

 Head, Social Cities Initiative, NYU Center for Urban Science 
                          and Progress

    Written testimony for the hearing titled, The Power of 
Connection: Peer-to-Peer Businesses, held by the Committee on 
Small Business of the United States House of Representatives, 
January 15th, 2014.

    Chairman Graves, Ranking Member Velazquez, and Committee 
Members, I am delighted to have been invited to speak to you 
about digitally-enabled peer-to-peer businesses. Thank you for 
convening this important hearing. More light needs to be shed 
on this promising new area, and I hope this is the first of 
many such hearings that contribute towards an understanding the 
economic impacts of peer-to-peer businesses, while facilitating 
changes to the regulatory framework that nurture this important 
and rapidly growing part of the economy.

    To summarize: I believe that peer-to-peer business enabled 
by digital platforms will constitute a significant segment of 
the economy in the coming years. It is likely that this 
transition will have a positive impact on economic growth and 
welfare, by stimulating new consumption, by raising 
productivity, and by catalyzing individual innovation and 
entrepreneurship. Robust measurement of the economic impact of 
peer-to-peer businesses, and especially small businesses, is 
important, as is the possible refinement of existing economic 
measures so that they fully capture new forms of production, 
consumption and work facilitated by smaller peer-to-peer 
businesses. The current regulatory infrastructure can impede 
the growth of these businesses, in part because of misalignment 
between newer peer-to-peer business models/roles and older 
guidelines developed to mitigate safety concerns and economic 
externalities for the existing ways of providing the same or 
similar services. A path to lowering these barriers while 
ensuring that market failure is avoided could be to restructure 
the regulatory framework to address new issues raised by the 
expansion of peer-to-peer businesses, delegating more 
regulatory responsibility to the marketplaces and platforms, 
while simultaneously preserving some government oversight.

    Overview

    A classification all the different kinds of businesses in 
this new economy that is comprehensive and useful would make 
this section quite lengthy. Rather than attempting to be 
exhaustive, I provide a few examples (along with a detailed 
discussion of the forces shaping peer-to-peer business) that 
will motivate the subsequent discussion about economic impacts 
and regulatory issues. More information about the `sharing 
economy', the `collaborative economy', or peer-to-peer commerce 
is available from a variety of sources \1\.
---------------------------------------------------------------------------
    \1\ Detailed early discussions are in Rachel Botsman and Roo 
Rogers, What's Mine Is Yours: The Rise of Collaborative Consumption 
(Harper Business, 2010), or Lisa Gansky, The Mesh: Why the Future of 
Business is Sharing (Portfolio Trade, 2010). For more recent and 
succinct discussions of definitions, drivers and business implications, 
see Arun Sundararajan, From Zipcar to the Sharing Economy (Harvard 
Business Review, 2013), or Rachel Botsman, The Sharing Economy Lacks a 
Shared Definition (Fast Company, 2013).

    First, let's distinguish between three different 
constituents: platforms (marketplaces), entrepreneurs (small 
businesses, micro-entrepreneurs) and consumers. The platforms 
are the person-to-person marketplaces which facilitate the 
exchange of goods and services between peers. The entrepreneurs 
are the individuals or small businesses that supply goods and 
services in these marketplaces. The consumers are the 
individuals who demand: buy, rent, consume. (Both the 
entrepreneurs and the consumers are often referred to as 
`peers'.) Typically, the payment from the consumer to the 
entrepreneur is mediated by the platform, which often charges a 
---------------------------------------------------------------------------
commission to one or the other trading party.

    For example, in the context of peer-to-peer accommodation: 
Airbnb and VRBO are platforms, an individual who offers living 
space for short-term rentals is the entrepreneur, and an 
individual who rents the living space from the entrepreneur is 
the consumer. In the context of peer-to-peer car rentals: 
Getaround and RelayRides are platforms, a car-owner who offers 
their vehicle for short-term rentals is the entrepreneur, and 
an individual who rents this vehicle from the car-owner is the 
consumer.

    The forms of peer-to-peer business facilitated by the new 
platforms are of many kinds. I describe some of these (again, 
non-exhaustively) below \2\.
---------------------------------------------------------------------------
    \2\ A evolving directory of different peer-to-peer, sharing and 
collaborative businesses and platforms is maintained at http://www. 
collaborativeconsumption.com/directory/

    (1) Repurposing owned assets as `rental' services: These 
platforms create a marketplace for the provision of asset-based 
services, often generating new labor opportunities for 
individuals who are not professional providers. Many of these 
services bear a resemblance to those that have historically 
been provided by more `traditional' business. For example, the 
platform Airbnb allows individuals to become entrepreneurs who 
offer part or all of their living space to their peers as 
short-term accommodation (a service traditionally provided by 
different kinds of hotels). The platforms RelayRides and 
Getaround allow car owners to become entrepreneurs who offer 
their vehicles to their peers as short-term car rentals (a 
service traditionally provided by car rentals companies like 
Hertz and Avis). The platforms Lyft and Sidecar allow people 
who own and drive their cars to offer short-range (and 
sometimes, point-to-point) ridesharing or chauffeured urban 
transportation (a service traditionally provided by taxicabs 
---------------------------------------------------------------------------
and limousine services).

    Often, the emergence of these peer-to-peer platforms 
increases the scale and scope of small business that is 
traditionally local. For example, the platforms Eatwith and 
Feastly allow entrepreneurs to offer `social dining' services 
where a small group of semi-anonymous peers dine on a meal 
prepared by the entrepreneur at his or her home (historically 
provided by informal `supper clubs').

    In other cases, the platforms create a new category of 
commerce that converts an informal peer activity into a 
business. For example, the platform 1000tools.com facilitates 
the short-term rental between peers of power tools and 
equipment that a consumer would traditionally purchase (or 
borrow from a neighbor). The platform SnapGoods allows 
individuals to offer short-term rentals of their household 
appliances (like vacuum cleaners) to others (who would 
traditionally either buy the asset themselves, or borrow it 
from a friend/neighbor).

    (2) Professional service provision: These platforms create 
a new channel for existing providers of different services, 
often expanding their business opportunities in a way that 
allows individuals to become entrepreneurs rather than working 
with a traditional organization. For example, the platform Uber 
allows professional drivers (entrepreneurs) to offer point-to-
point chauffeured urban transportation to consumers. The 
platform Kitchit allows professionally trained chefs to become 
entrepreneurs who prepare meals in the kitchens of their 
consumers.

    (3) General-purpose freelance labor provision: These 
platforms create new marketplaces for different kinds of 
freelance labor. For example, the platform oDesk allows a 
variety of technology professionals, translators and writers to 
find work \3\. Some other platforms like TaskRabbit and 
FancyHands are more closely associated with the creation of new 
categories of freelance work.
---------------------------------------------------------------------------
    \3\ The distinction between (2) and (3) is often not clear-cut. I 
make the distinction because providers on the marketplaces in (2) are 
more likely to be thought of as entrepreneurs rather than as contract 
or freelance workers.

    (4) Peer-to-peer asset sales: These platforms create 
marketplaces that allow entrepreneurs to sell goods directly to 
consumers. Some of these platforms, like eBay, have been 
operating for over a decade, and are more closely associated 
with peer-to-peer trade of traditional retail items, thus 
facilitating entrepreneurship in retailing. Other platforms, 
like Etsy, have emerged more recently, and are more closely 
associated with expanding peer-to-peer trade of items which do 
not have mass-markets, thus facilitating entrepreneurship in 
---------------------------------------------------------------------------
both manufacturing and retailing.

    Two other categories of peer-to-peer businesses that 
require a different (and dedicated) economic impact and 
regulatory discussion are peer-to-peer education (including the 
provision of education and training by individuals directly to 
groups of others over platforms like Skillshare and Udemy), and 
peer-to-peer finance (including the provision of venture 
funding by individuals to others over platforms like 
Kickstarter, Rockethub and Indiegogo, or of peer-to-peer 
lending over platforms like LendingTree).

    The new peer-to-peer businesses frequently involve new ways 
of providing familiar and ``real world'' services, like short-
term accommodation (Airbnb, Couchsurfing), urban transportation 
(Lyft, Sidecar, Uber) and venture financing (Indiegogo, 
Kickstarter, Rockethub). This distinguishes them from many 
other disruptions of business that have been caused by digital 
technologies over the last two decades.

    It is also worth pointing out that there are a number of 
new ``rental'' business models that, while not peer-to-peer, 
are associated with the `sharing economy'. Some are in markets 
which have traditionally had rental markets: for example, 
Zipcar offers short-term flexible rentals while maintaining 
ownership over a fleet of cars; BMW's `Drive Now' offers on-
demand access to vehicles without the need to buy them. Other 
companies, like Rent the Runway (which offers short-term 
rentals of high-end apparel), are creating rental markets in 
new categories, which in turn, may stimulate peer-to-peer 
business in these categories.

    A number of factors have led to the development of this new 
economy. I summarize a few of the key drivers below.

    (1) The consumerization of digital technologies: In the 
1980's and 1990's, innovation in digital technologies was 
driven by the needs of business and government; the needs of 
consumers were generally an afterthought, met by adapting 
technologies developed primarily for businesses into consumer 
products. However, over the last ten to fifteen years, we have 
witnessed the ``consumerization'' of information technologies, 
whereby radical innovation is driven by the needs of consumers 
rather than of businesses or government. (Social media and 
mobile technologies provide two recent examples.) This trend is 
pertinent because it is often the mass-market placing of the 
capabilities of these new digital technologies (powerful mobile 
computers, GPS technology) in the hands of millions of 
consumers that creates the possibility of digitally 
intermediated peer-to-peer business. It has also led to a 
growing familiarity \4\: with the idea of platform-enabled 
peer-to-peer exchange (initially of digital content) among 
consumers, as well as a greater level of acceptance of the idea 
of renting rather than ownership as a primary form of 
consumption (again, initially in markets for digital content)
---------------------------------------------------------------------------
    \4\ I discuss these technological drivers in some more detail in 
The Sharing Economy (http://youtu.be/nOVjP59NSOo).

    (2) The emergence of ``digital institutions'': As a growing 
fraction of human interaction and exchange is mediated by 
digital technologies, we have witnessed the emergence of a 
number of different kinds of ``digital institutions'': digital 
technology-based platforms that facilitate economic exchange in 
the same way that economic institutions historically have done. 
For example, over the last 15 years, a digital `reputation 
system' (which allows buyers and sellers to provide feedback 
about their transactions) has enabled semi-anonymous peers on 
the platform eBay to trade assets with each other without being 
physically collocated or having to relying on traditional 
business infrastructure. The digital rights management 
technologies of platforms like Apple's iTunes and Amazon's 
Kindle are, de facto, subsuming government-mediated 
intellectual property laws for digital music, video and books. 
Today, a wide variety of other digital identity verification, 
reputation and credit scoring systems (which often leverage the 
real-world social capital that mobile device usage, Facebook, 
LinkedIn and other social technologies bring online) facilitate 
trusted economic exchange in hundreds of different peer-to-peer 
---------------------------------------------------------------------------
marketplaces.

    (3) Urbanization and globalization: The U.S. is currently 
experiencing positive rates of urbanization, and there is also 
some evidence of a recent trend of migration to more densely 
populated metropolitan areas \5\. (Worldwide, both these trends 
are projected to be substantially more pronounced than in the 
US: the UN estimates that by 2050, the global urban population 
will double, and about 70% of the world's 9.3 billion people 
will be city dwellers). Cities are already natural ``sharing 
economies''--the space constraints and population density of 
urban living favors consumption that involves access to shared 
resources over asset ownership. Urban residents have shared 
their assets and space informally for centuries, but innovative 
network technologies and social tools have made co-producing, 
lending, trading and renting assets cheaper and easier than 
ever before--and therefore possible on a much larger scale.
---------------------------------------------------------------------------
    \5\ The population in U.S. urban areas grew by about 30% between 
1990 and 2010, accompanied by a growth in urban population density of 
about 10%.

    (4) Ecological and resource considerations: Many `sharing 
economy' business models facilitate more efficient use of 
natural and other physical resources. Over time, people's 
desire to choose `asset-light' forms of living that utilize 
fewer resources and lower their ecological footprint is likely 
to favor peer-to-peer sharing. Furthermore, the global pressure 
to rapidly create massive new urban infrastructure may induce 
city planners to adopt `sharing economy' approaches less 
reliant on physical resources and more cost-effective than 
---------------------------------------------------------------------------
traditional approaches for managing growth and urbanization.

    Economic Impacts of Peer-to-Peer Businesses

    The expansion of peer-to-peer business that is being 
facilitated by these new platforms will have a number of 
economic impacts. The economic impacts stem from lower 
marketplace transaction costs; `production' that is more 
efficient; a greater level of output being created from the 
same level of physical assets and labor; and the creation of 
production and exchange opportunities that were not previously 
possible. It also is likely that such platforms will be new 
engines for innovation by creating `micro-entrepreneurship' 
opportunities that empower individuals previously constrained 
by employment at traditional corporations.

    It is still too early in the evolution of this newly 
enabled peer-to-peer businesses to draw any robust empirical 
conclusions about whether their eventual economic impacts will 
have a positive effect on economic growth and welfare, although 
it seems very likely. During the next five years, ongoing 
measurement of the economic impact of peer-to-peer businesses, 
and especially small businesses over the next five years is 
important, as is the possible refinement of existing economic 
measures so that they fully capture new forms of production, 
consumption and work facilitated by smaller peer-to-peer 
businesses.

    The phrase `sharing economy' often creates a misconception 
about these platforms and the businesses they enable. While 
some may facilitate sharing, they are typically not organized 
like food cooperatives or farmer collectives. Rather, they are 
grounded in simple free enterprise, individual property rights, 
external financing, trade-for-profit, market-based prices, and 
new opportunities for exchange.

    Here is a discussion of some of the economic effects that 
are anticipated.

    Expansion in consumption: The peer-to-peer businesses 
created by these new platforms are creating new consumption 
experiences of higher quality and greater variety that are 
likely to stimulate economic growth. It is thus very likely 
that the peer-to-peer business facilitated will not merely 
substitute old forms of commerce with new digitally enabled 
ones: they seem poised to grow the pie, rather than simply 
carving it up differently.

    Productivity gains: The peer-to-peer businesses enabled by 
these new platforms can lead to more efficient use of physical 
capital by tapping into assets like real estate and automobiles 
that are not being fully utilized. They also draw on 
underutilized human capital: people supplementing their full-
time jobs with extra work as Airbnb hosts or Lyft drivers, 
professional providers who find more employment via platforms 
like Uber, TaskRabbit and Kitchit. Technological change that 
generates more output from the same capital, or that 
facilitates more efficient usage of labor, increases 
productivity. A consistent historical pattern associated with 
this kind of producitivity-enhancing technological change is 
that in the long run, it typically leads to economic growth.

    Entrepreneurship and innovation: There is very little doubt 
that the peer-to-peer business facilitated by new platforms 
will lead to an expansion in entrepreneurship and innovation. 
The creation of these platforms allows society to tap into 
abilities and aspirations that individuals have which would 
have otherwise not been realized (Etsy and the ``maker 
movement'' being prime examples). For many individuals, the 
relatively low-risk micro-entrepreneurship allowed by peer-to-
peer business may be the first step to broader 
entrepreneurship, perhaps an ``on-ramp'' of sorts to 
freelancing or starting an independent business, by generating 
supplemental income, extending expertise and creating a broader 
professional network. The extent to which this will stimulate 
the creation of larger traditional businesses, and their 
ensuing economic impact, is an empirical question. However, 
there is very likely going to be a short-term rise in the 
number of freelance workers and sole proprietorships.

    The emergence of `invisible work': The peer-to-peer 
business facilitated by new platforms shifts labor from more 
narrowly specialized activities to a broader range of 
activities. Although many entrepreneurs work full-time to 
provide the services they supply, many do not. Moreover, many 
of this latter set are engaged in labor that does not reflect 
their primary skills. Thus, it is quite likely that the 
``work'' that is being created by peer-to-peer businesses is 
not being fully measured by government employment surveys \6\. 
As peer-to-peer business starts to constitute an increasing 
fraction of the economy, it seems important that these be 
updated to reflect work that is not considered by the worker as 
traditional ``employment''.
---------------------------------------------------------------------------
    \6\ For a more detailed discussion on this point, see Emily Badger, 
The Rise of Invisible Work (Atlantic Cities, 2013)

    Shifts in asset markets: The creation of new peer-to-peer 
rental opportunities has a number of effects on the extent to 
which people purchase manufactured goods. For simplicity 
consider the example of peer-to-peer car rentals. The increased 
availability of short-term rentals is likely to expand overall 
consumption because consumers have access to a broader range of 
driving options (relative to when they were constrained to 
driving the car they owned). Some of these consumers will 
choose not to purchase their own vehicles, which lowers car 
sales. However, others who might not have made a purchase might 
now be induced to buy a vehicle because the supplementary 
income opportunities offered to them by the peer-to-peer rental 
marketplace facilitates making otherwise unaffordable car 
payments. The net effects (which bear some resemblance to those 
---------------------------------------------------------------------------
induced by secondary markets) are not immediately clear.

    A brief discussion of some regulatory issues \7\
---------------------------------------------------------------------------
    \7\ There are a distinct set of regulatory issues associated with 
peer-to-peer finance, and with peer-to-peer education, which are not 
covered as part of this testimony.

    The platforms and businesses associated with the new forms 
of peer-to-peer businesses described earlier seem to face 
regulatory hurdles more frequently than one might expect from 
new technology businesses or small entrepreneurs. In part, this 
is due to a misalignment between newer peer-to-peer business 
models/roles and older guidelines developed with existing ways 
of providing the same or similar services in mind. For example, 
an entrepreneur (`host') who provides short-term accommodation 
occasionally via a platform like Airbnb is not a traditional 
`hotelier'. Similarly, individuals who occasionally offer 
rideshares via a platform like Lyft or Sidecar are not 
---------------------------------------------------------------------------
traditional `taxi drivers'.

    The creation of new kinds of services has also been 
accompanied by new questions of liability, and the need for the 
creation of new forms of insurance: in particular, when assets 
owned by peers are now commercially ``rented'' to other peers 
for payment. For example, the platforms RelayRides and 
Getaround have created entirely new insurance products that 
cover entrepreneurs and consumers in the peer-to-peer rental 
marketplace.

    Regulatory uncertainties and concerns about liability can 
impede individuals from pursuing otherwise productive and 
profitable peer-to-peer business opportunities. (In a recent 
example, the New York State Attorney General has subpoenaed 
information about the 15,000 or so Airbnb hosts operating in 
New York. This had led to many discussions about whether Airbnb 
is ``legal'' in New York, and it is quite likely that this 
situation has caused many potential entrepreneurs to become 
hesitant about being providers via this platform.)

    Existing federal ``safe harbors,'' like those under the 
Digital Millennium Copyright Act that limit the liability of 
digital intermediaries for illegal activity conducted via their 
platforms, are likely to help nurture the evolution of peer-to-
peer business platforms a little. However, by themselves, they 
are an insufficient solution to today's regulatory barriers to 
peer-to-peer business. In particular, the central issue here 
concern what constitutes legal peer-to-peer exchange. A 
platform cannot ``take down'' illegal providers unless there 
are clear and accepted definitions about what constitutes legal 
trade.

    Typically, government intervention is necessary when it is 
required to ensure consumer safety, or to avoid market 
failure--the inability of a marketplace to facilitate trade 
that would be good for society, or to facilitate the provision 
of something society deems necessary. In thinking about how one 
might lower regulatory barriers for peer-to-peer business, I 
would suggest pursuing a path that delegates more regulatory 
responsibility to the marketplaces and platforms.

     The interests of the platforms are well aligned 
with facilitating safe and profitable peer-to-peer trade (since 
their revenues are directly linked to the volume and continued 
growth of such trade). The platforms are also better positioned 
to `take action' against infringing entrepreneurs and consumers 
(for example, by simply disconnecting them from the platform).

     As discussed earlier in this document, the 
platforms that facilitate peer-to-peer business have created a 
wide variety of digital identity verification, reputation and 
credit scoring systems, often leveraging the real-world social 
capital that mobile device usage, Facebook, LinkedIn and other 
social technologies have digitized. These `trust mechanisms' 
currently facilitate economic exchange in hundreds of different 
peer-to-peer marketplaces, and may play a significant 
``preventive'' role that historically has required government 
oversight \8\.
---------------------------------------------------------------------------
    \8\ For further discussion on this point, see Balancing Innovation 
And Regulation In The Sharing Economy (TechCrunch, 2012)

     New forms of technology-mediated peer-to-peer 
business are likely to continue to emerge rapidly over the 
coming years. It would strain the government's resources to be 
constantly monitoring and correcting regulatory misalignment 
---------------------------------------------------------------------------
across a wide variety of industries.

    However, this does not imply that the new peer-to-peer 
marketplaces should be completely unregulated. There are, 
potentially, safety and equal access concerns that the market 
may not self-provide. Further, the newness of many peer-to-peer 
businesses is bound to raise new regulatory issues. (A recent 
example related to liability for accidents between fare-paying 
rides for a driver who connects and disconnects frequently from 
an urban transportation platform.) Some level of government 
oversight seems necessary, certainly until there is enough data 
about the extent to which the platforms can prevent market 
failure by themselves, and enough data about any new safety or 
liability issues.

    A historical example that might be instructive in this 
regard is the 1934 Securities and Exchange Act (and its 
numerous subsequent amendments), which requires securities 
exchanges to operate as self-regulating organizations (SROs) 
with oversight from the Securities and Exchange Commission. 
While the nature of peer-to-peer trade on the newer platforms 
discussed in this testimony has complexities different from 
those associated with trade of financial securities, the 
structure--of creating a set of SROs with federal government 
oversight--seems like one that is worth exploring further.
 TESTIMONY OF ELIZABETH STEVENS, ASSISTANT GENERAL COUNSEL OF SIDECAR 
                           TECHNOLOGIES, INC.


              BEFORE THE HOUSE COMMITTEE ON SMALL BUSINESS


          ``THE POWER OF CONNECTION: PEER-TO-PEER BUSINESSES''


                            JANUARY 15, 2014


    On behalf of Sidecar Technologies, Inc., I would like to 
thank the House Committee on Small Business and Chairman Graves 
for the invitation to speak on peer-to-peer (``P2P'') 
businesses and ridesharing. On behalf of Sidecar Technologies, 
Inc. (``Sidecar''), a peer-to-peer ridesharing company, I 
respectfully submit this testimony to assist in understanding 
how modern ridesharing as a peer-to-peer business works and the 
significant and varied benefits its offers governments, 
communities, and citizens.

    Overview of Sidecar Mobile App

    Sidecar is a ridesharing, or carpooling, information 
service that enables members to exchange information via the 
Sidecar smartphone mobile application (``app'') with other 
members to enable ridesharing in privately owned vehicles. 
Sidecar was founded over a year ago on the idea that private 
individuals would be willing to fill empty seats in their 
private vehicles with other private individuals seeking a ride 
with similar starting and destination locations. Sidecar 
enables carpoolers or ridesharers to find ride matches with 
greater convenience, security, and efficiency through its 
interactive app.

    Sidecar is only the provide3r of the software and the 
operator of the technology platform that facilitates this peer-
based exchange of information leading to a ridematch. In other 
words, Sidecar does not own the vehicles that are used to 
rideshare. Sidecar does not employ or control drivers or 
riders. Sidecar does not dictate hours, schedules or shifts for 
drivers, nor does Sidecar dispatch drivers to pick up riders. 
Rather, through the app, people choose to share carpool in a 
safer, more convenient, and more dynamic way than other 
electronic networks for carpooling and ridesharing, such as 
Craigslist or company bulletin boards.

    As a trust and safety service to its users, Sidecar 
facilitates driver criminal background checks consistent with 
federal and state laws, which screen for sex offenses, DUIs, 
reckless driving and other criminal convictions, and bars any 
driver with the enumerated offenses from participating on the 
Sidecar platform. Sidecar also requires prospective drivers to 
provide proof of a current and valid drivers' license, proof of 
valid personal automobile insurance as required by state law. 
Sidecar additionally provides a commercial liability policy 
that covers passengers and third parties for up to one million 
dollars per occurrence.

    The Sharing Economy

    To understand the importance of Sidecar in the modern 
economy, a discussion of the ``sharing economy'' \1\ and the 
history of ridesharing is informative. Sharing personal assets 
is not a new concept; however, new technologies are 
facilitating the emergence of new sharing economy that enables 
peer-to-peer exchanges and the efficient use of underutilized 
assets. Other companies that are part of this sharing economy 
include eBay (matches sellers of goods with buyers), 
couchsurfing.com (matches travelers with available couches to 
``crash'' on), AirBnb (allows home owners to share their empty 
rooms or homes), and TaskRabbit (matches handyman and 
deliverymen with individuals in need of limited support).
---------------------------------------------------------------------------
    \1\ In addition to sharing economy, terms such as ``collaborative 
consumption'', ``distributed capitalism'' have been used. See, e.g., 
Zuboff, Shoshanna, ``Creating Value In The Age Of Distributed 
Capitalism'', McKinsey Insights, September 2010, available at http://
www.mckinsey.com/insights/strategy/
creating--value--in--the--ag
e--of--distributed (last accessed January 11, 
2014).

    In this new economy, ``asset owners use digital 
clearinghouses to capitalize the unused capacity of things they 
already have, and consumers rent from their peers rather than 
rent or buy from a company''.\2\ Or as Lisa Gansky, author of 
the Mesh: Why the Future of Business is Sharing, explains 
``[w]e're moving from a world where we're organized around 
ownership to one organized around access to assets.'' \3\
---------------------------------------------------------------------------
    \2\ Geron, Tomio, ``Airbnb and the Unstoppable Rise of the Share 
Economy'', Forbes, January 11, 2013, available at http://
www.forbes.com/sites/tomiogeron/2013/01/23/airbnb-and-the-unstoppable-
rise-of-the-share-economy (last accessed January 10, 2014).
    \3\ Id.

    This technology-led sharing economy, of which shared 
transportation is just one segment, is growing rapidly, and, 
despite general economic slow-down in other sectors, the United 
States is poised to become a global leader in this enterprise. 
According to a recent Economist article, Rachel Botsman, a 
leading expert on the sharing economy, estimates that just one 
segment of this sharing economy, the peer-to-peer rental 
market, is worth at least $26 billion.\4\ The shift to such 
collaborative consumption benefits owners, renters, companies 
and the wider society for several reasons:
---------------------------------------------------------------------------
    \4\ ``The Rise of the Sharing Economy'', The Economist, March 9, 
2013, available at http://www.economist.com/news/leaders/21573104-
internet-everything-hire-rise-sharing-economy (last accessed January 
10, 2014).

          Owners make money from underused assets. Renters, 
        meanwhile, pay less than they would if they bought the 
        item themselves. And there are environmental benefits 
        too: renting a car when you need it, rather than owning 
        one, means fewer cars are required and fewer resources 
        must be devoted to making them.\5\
---------------------------------------------------------------------------
    \5\ Id.

    As consumer and cultural patterns shift to broader 
participation in the sharing economy, established veterans in 
technology and e-commerce are forecasting significant change 
for existing businesses and for the economy at large. According 
to eBay's chief executive officer, John Donahoe, often ``these 
businesses and entrepreneurs are portrayed as disrupters,'' but 
``[i]n many ways, you're empowering individual consumers to get 
what they want'' and ``empowering human beings to be able to 
create jobs.'' \6\
---------------------------------------------------------------------------
    \6\ Kramer, Katie, ``Take a seat with Rising Stars of the Sharing 
Economy'', CNBC.com, April 24th, 2013, available at http://
www.cnbc.com/id/100668331 (last accessed May 6, 2013).

    The sharing economy model addresses this cultural and 
economic change by delivering greater efficiencies with fewer 
environmental impacts, while creating a more interconnected 
community. Substantial literature and research suggests that 
sharing economy companies have great potential to support 
important federal and state policy initiatives and produce 
demonstrable, beneficial change that will improve individuals' 
daily quality of life, particularly in crowded urban areas. 
From housing to transportation to parking, the sharing economy 
marries the best of capitalist enterprise with societal and 
---------------------------------------------------------------------------
environmental consciousness.

    Sharing economy companies, like Sidecar, are leading this 
wave of innovation, producing important changes in consumer 
behavior and consumption. This shift will be as profound as the 
Internet revolution that preceded and enabled it. Sidecar has 
the potential to create cascading social benefits by making car 
ownership and consumption more efficient, both financially and 
environmentally.

    Ridesharing

    Nowhere are the benefits of collaborative consumption more 
apparent than in the transportation sector. While carpooling 
and ridesharing have existed for decades, the shift towards 
cultural acceptance of peer-to-peer commerce and asset sharing 
between strangers has accelerated mainstream adoption of 
ridesharing.

    Since the 1940s, federal, state and local governments in 
the United States, as well as non-profits and companies, have 
sponsored, funded, and managed carpooling and ridesharing 
networks to achieve critical and economic and social goals, 
including reducing energy consumption, environmental impact, 
commuting costs, and traffic and parking congestion. In the 
last thirty years, government-sponsored regional programs 
shifted, focusing on reducing traffic congestion and pollution, 
mainly by creating employer-sponsored vanpool incentives, 
including federal tax credits. With the advent of the Internet, 
this ridesharing evolved from telephone-based ridematching to 
online ridematching services. Today, federal, state, and local 
governments continue these carpool and vanpool initiatives to 
ease traffic congestion, reduce pollution, and reduce 
dependence on foreign oil.

    Although federal, state, and local governments have 
expended resources to develop ridesharing, sustained successes 
have been scarce. The academic and government literature 
documenting these programs demonstrate that the majority of 
ridesharing programs are limited in scope or temporary.\7\ This 
is because the ridesharing market, like many markets, benefits 
from economies of scale. Numerous studies have concluded that 
sustained ridesharing success is dependent on developing a 
``critical mass'' of participants.\8\ To transition from 
``casual carpooling'' based primarily on repeated, common 
commutes to a more ``dynamic'' model focused on spontaneous 
trips, ridesharing demand must be stimulated.
---------------------------------------------------------------------------
    \7\ See, e.g., John A. Volpe National Transportation Systems 
Center, ``Ridesharing Options Analysis and Practitioner's Toolkit'', 
Department of Transportation, Federal Highway Administration, December 
2010.
    \8\ ``Critical Mass'', available at dynamicridesharing.org, (last 
accessed January 10, 2014).

    The success of any ridesharing model depends on developing 
a critical mass of ridesharing economy participants, as 
discussed above. Most fledgling ridesharing trials have failed 
because they did not achieve the critical mass of users to 
sustain a dynamic ridesharing model. More plainly, if the 
number of participants is not high enough to support consistent 
and good ridesharing matches, riders will not continue using 
the system.\9\
---------------------------------------------------------------------------
    \9\ Deakin, Elizabeth, Karen Trapenberg Frick, and Kevin M. Shively 
``Markets for Dynamic Ridesharing?: Case of Berkeley, California,'', 
Transportation Research Record: Journal of the Transportation Research 
Board, No. 2187, Transportation Research Board of the National 
Academies, Washington, D.C., 2010, pp. 131-37, at 131-32.

    Researchers have identified several barriers to achieving a 
critical mass of ridesharing participants: safety concerns; 
lack of comfort with technology; a preference for other modes 
of transportation such as conventional carpooling programs; and 
a basic lack of awareness of dynamic ridesharing programs. 
Study results found that major obstacles, however, appear to be 
a lack of perceived incentives such as savings in costs and 
time and a fear that a ridematch will not be available, leaving 
potential ridesharers stranded on the return commute.\10\
---------------------------------------------------------------------------
    \10\ Id.

    With the recent introduction of mobile, location-based 
services and real-time matching capabilities, there is a 
historic opportunity to accelerate the broad-based adoption of 
ridesharing, thereby producing large-scale public benefits. 
Regulatory frameworks and enforcement, having already long 
supported ridesharing goals, should support, not hinder, this 
opportunity.
                         Testimony of Alan Mond


                         CEO of 1000 Tools Inc


                   House Committee on Small Business


          ``The Power of Connection: Peer-to-Peer Businesses''


                      Wednesday, January 15, 2014


    Chairman Graves, Ranking Member Velazquez and members of 
the committee, I am Alan Mond, CEO of 1000 Tools, and I'm very 
grateful for the opportunity to speak with you regarding our 
peer-to-peer sharing business.

    1000 Tools is an online platform that enables people to 
rent tools from each other. Our latest product allows local 
governments to rent underutilized equipment to one another, 
which we'll get to in a minute. We are based in Ann Arbor, 
Michigan and it is an honor for me to be here today.

    I come from a family of tinkerers and the idea for 1000 
Tools came when I had to replace the timing belt on my 1995 
Ford Probe. I had the willingness to do it myself, but not the 
right tools for the job. My solutions at the time were to:

           buy the tools outright - expensive and 
        clutters your living space

           borrow from friends - don't' have the right 
        tools, can erode friendship

    So I thought:

          1. Does anyone else have this problem?

          2. Wouldn't it be nice if I could access a large 
        network of tools to rent on a short term basis?

    We built 1000tools.com and launched June 2013 to test this 
hypothesis. Our website offers a secure interface for tool 
renters to pay with a credit card and tool owners to get funded 
via direct deposit. Prices are set by the tool owner, competing 
directly against established tool rental stores. Tool exchange 
happens locally, in person - no shipping required.

    1000 Tools provides Americans the opportunity to become 
micro-entrepreneurs using assets they already own. This new 
generation of collaborative consumers and micro-entrepreneurs 
live in an ecosystem called the sharing economy and it has 
crossed the chasm into mainstream adoption. As an example, 
Airbnb, the online marketplace for listing and booking short-
term housing accommodations, announced in June 2012 they 
reached their 10 millionth booking. This competes head to head 
against the largest hotel chains in the country.

    Most of our users are early adopters, who have participated 
in other areas of the sharing economy. However, concerns about 
liability and property damage are still predominant barriers to 
mass adoption. Additionally, there are very few insurance 
companies that are familiar with this type of exposure to offer 
liability insurance for micro-entrepreneurs.

    Due to the nature of our rental transaction technology, we 
decided to search for a customer segment which would already 
have liability covered by insurance. This is when we found a 
really interesting niche.

    3 months ago, we started focusing on local government 
equipment sharing. After interviewing 30 municipalities in the 
southeastern Michigan region, we discovered an incredible gap. 
Large municipalities have expensive equipment that is 
underutilized and small municipalities tend to rent at a high 
premium rate instead of purchasing equipment. I interviewed 30 
city managers about their equipment needs, and 70% were very 
eager to try out a prototype.

    With this information in hand, we retooled our existing 
technology to cater to municipalities, and created MuniRent. 
MuniRent allows different levels of local government to rent 
out equipment to each other.

    Some may ask why aren't municipalities dong this already? 
As with most areas of local government, resources are limited. 
It takes a lot of resources for a municipality to set up a 
rental agreement and maintain some sort of catalog, let alone 
keep track of invoicing, hours, maintenance records, etc. We 
provide a vetted round-table agreement between the different 
municipalities and handle all the details, including insurance 
verification, payment and invoicing. All of this is available 
through an easy-to-use website and mobile app.

    Our journey began by building a peer-to-peer tool rental 
marketplace. We now look forward to welcoming municipalities as 
the newest members of the brave new sharing economy.
                 Written Testimony of Philip Auerswald


                  Associate Professor of Public Policy


                        George Mason University


                  U.S. House Committee Small Business


                 United States House of Representatives


                            January 15, 2014


    Chairman Graves, Ranking Member Velazquez, Members of the 
Committee, I appreciate the opportunity to share with you this 
afternoon some thoughts on the economic context for peer-to-
peer business models.

    In 1988, a quarter century ago, I drove a stranger's Nissan 
Sentra from Washington, DC, to Seattle, WA. In the process I 
earned $250, with the added bonus of moving both myself and my 
stuff across the country. The vehicle's owner made out well 
too; she got her car transported 3,000 miles for less money 
than she would have had to pay for a commercial service, and 
certainly at a lower opportunity cost of time than she would 
have incurred if she drove the care herself.

    Peer-to-peer. Win-win.

    This personal anecdote is intended to support my first 
point, which is that peer-to-peer businesses were around long 
before the Internet. Indeed, there was a time in this country 
and elsewhere in the world (roughly until the end of the 19th 
century) when the peer-to-peer economy was the economy. Large 
corporations providing consumer services simply did not exist. 
Regulation governing consumer services was minimal. People 
provided services on a personal basis to other people who were 
very much like them. There were no call centers, no focus 
groups or strategic planning retreats. The archetypal 
entrepreneur hung up a shingle on Main Street. While not to be 
taken literally, this image correctly reflects a world in which 
barriers to entrepreneurial entry were very low.

    Markets in the 19th century and earlier were not the 
anonymous and abstract entities they sometimes appear to be 
today. They were physical spaces where people met to exchange 
items that, in many cases, they themselves had created or 
harvested. This of course is what markets are fundamentally 
about: realizing the productive possibilities of people.

    At its human core, then, the peer-to-peer or ``sharing'' 
economy is not a new phenomenon. Were Alexis de Tocqueville to 
write about the United States of today he likely would see a 
distinctly American character in the peer-to-peer businesses 
such as Sidecar and 1000Tools. The question is, therefore, 
whether there is anything fundamentally new about the sorts of 
peer-to-peer businesses that have been proliferating in the 
past five years. The answer is yes. The difference between the 
past and the present is the platforms over which people find 
one another, conclude transactions, and establish reputations.

    The triad of revolutions in computation, communications, 
and algorithmic power that have unfolded over the past half-
century have, as we have been hearing, dramatically lowered the 
costs of finding the provider of a service, assessing their 
reliability, and concluding a contract to engage their 
services.\1\ Two decades ago, the first Internet commerce 
companies brought consumer markets into new ``virtual'' spaces. 
Companies like eBay and Amazon (via Amazon Marketplace) made it 
newly possible for regular folks to find and exchange goods 
across large distances. Peer-to-peer businesses employ the same 
sort of powerful platforms to enable the exchange of services. 
Since services make up more than 84% of the economy, this is a 
big deal.
---------------------------------------------------------------------------
    \1\ Butler, Patrick, Ted W. Hall, Alistair M. Hanna, Lenny 
Mendonca, Byron Auguste, James Manyika, and Anupam Sahay, ``A 
Revolution in Interaction,'' McKinsey Quarterly no. 1 (1997): 4-23.

    My colleague Lisa Gansky, author of The Mesh and cofounder 
of the photo-sharing site Ofoto, illustrates the popularity of 
peer-to-peer business models by comparing the Intercontinental 
Hotel chain with the room-sharing site Airbnb. Intercontinental 
Hotels have been around for 62 years, and they have an 
inventory of 650,000 hotel rooms of which they own 100%. In 
contrast, Airbnb has been around for five years and has an 
inventory of 500,000 listings, of which it owns 0%. This means 
that Airbnb has unlocked latent assets comparable to 62 years 
of cumulative investment within the corporate world, and it has 
done so with essentially no capital outlay beyond its 
---------------------------------------------------------------------------
investment in the platform itself.

    In 1988, when I took the trip in the Nissan Sentra to which 
I alluded at the outset, the costs of finding a car-sharing 
match were sufficiently large that the relevant peer-to-peer 
services were limited to trips across the country. Today, costs 
have dropped to the point that using peer-to-peer car-sharing 
services makes sense for trips across town or down the street.

    Participants in peer-to-peer marketplaces are clearly drawn 
by the straightforward gains from trade that are made possible 
by lower search and transactions costs. Simply put, buyers pay 
less than they would without the service, and sellers earn 
more--if only because they often would not be able to bring 
their service to market without the peer-to-peer platform.\2\ 
Furthermore, buyers have access to previously unavailable 
options in the marketplace, while sellers have opportunities to 
diversify their sources of income and increase their financial 
resilience.
---------------------------------------------------------------------------
    \2\ See, for example, Etsy, ``Redefining Entrepreneurship: Etsy 
Sellers' Economic Impact'' (2010), https://www.etsy.com/blog/news/
files/2013/11/Etsy--Redefining-
Entrepreneurship--November-2013.pdf

    Buyers and sellers alike also report deriving a 
Tocquevillian satisfaction from participating in such 
markets.\3\ They enjoy exchanging services on peer-to-peer 
platforms not just for the pecuniary benefits they derive but 
also for the sense of connectedness they experience with others 
in a community. In some cases these communities are 
geographically defined, in others they are organized by areas 
of interest. Such connections themselves have economic value, 
as informal relationships built across social and geographical 
boundaries create what sociologists have come to term ``weak 
ties,'' which can materially enhance the success of 
entrepreneurial ventures and other collaborative 
undertakings.\4\
---------------------------------------------------------------------------
    \3\ See, for example, Sonari Glinton, ``For Ridesharing Apps Like 
Lyft, Commerce Is A Community,'' National Public Radio: All Tech 
Considered (2013). http://www.npr.org/blogs/alltechconsidered/2013/11/
14/245242805/for-ridesharing-apps-like-lyft-commerce-is-a-community
    \4\ Granovetter, Mark S. ``The Strength of Weak Ties,'' American 
Journal of Sociology 78, no. 6 (May 1, 1973): 1360-1380.

    Of course, new business models that gain market acceptance 
almost invariably invite challenges from incumbents. New peer-
to-peer businesses are no exception. Wherever peer-to-peer 
platforms have gained traction across the country, regulatory 
challenges have followed. Invoking regulatory equity, for 
example, taxi drivers have sought to slow the growth of car- 
and ride-sharing services like Sidecar. Invoking consumer 
safety and production, hotel and restaurant owners, 
respectively, have sought to slow the growth of room-sharing 
services like Airbnb and the proliferation of food trucks in 
urban areas that has been accelerated by ratings platforms such 
---------------------------------------------------------------------------
as Yelp. These, of course, are largely local issues.

    So what does all this mean for the formulation of policy at 
the federal level?

    From the standpoint of the United States Congress, the 
peer-to-peer business models that matter are the ones we've not 
yet seen.

    It is instructive to ask ourselves why we are focused today 
on local transportation, hospitality, food service, and the 
rental of consumer goods as the most significant domains of 
innovation in peer-to-peer business models. The reason, 
arguably, is that these are industries in which regulatory 
complexity is relative low. In contrast, there has been 
relatively little innovation of peer-to-peer business models 
within healthcare, energy, and education, where regulatory 
complexity is relatively high. These three industries together 
comprise more than a quarter of U.S. GDP. The greatest 
macroeconomic impact of peer-to-peer business models for the 
United States thus will be realized when we have established 
the training, certification, licensing, and auditing mechanisms 
at all levels of government that allow neighbors to earn their 
livelihoods by taking care of neighbors, and by providing power 
to their communities and offering validated, work-relevant 
training to people anywhere who seek expanded opportunities.

    In more general terms, the bottom line is this: shared 
prosperity requires not only innovations that scale-up to 
create new wealth but also innovations that scale-out to create 
new opportunities.

    Let me be very clear on this point. Much of my own work, as 
well as important research conducted over the past decade at 
the Kauffman Foundation in Kansas City with which I have been 
affiliated, is about the value to society of scale-up 
innovation--particularly via new entrepreneurial entrants. This 
research has demonstrated that the small proportion of new 
ventures that scale-up rapidly are responsible for a 
disproportionate share of value creation in the economy.

    But here's the problem we've run into: while some scale-ups 
create a large number of new jobs, many do not. Companies like 
Apple, Google, Facebook, Instagram, and Twitter have all 
achieved valuations in the tens and even hundreds of billions 
of dollars, but they directly employ far fewer people per 
dollar of revenue than their Fortune 500 counterparts did a 
generation ago.

    This is where peer-to-peer platforms come into play. By 
their very structure, peer-to-peer platforms scale-out success 
to reach tens of thousands, even hundreds of thousands, of 
people with opportunities to create viable livelihoods for 
themselves. They create new and enticing invitations to latent 
producers within the economy to employ their individual assets 
\5\ and talents \6\ to create new economic value.
---------------------------------------------------------------------------
    \5\ See, for example, Lyft, Sidecar, and Airbnb.
    \6\ See, for example, Task Rabbit, Zaarly, and Mealku.

    The significance of peer-to-peer business models thus is 
not effectively measured by adding up the share of GDP they 
represent in terms of monetized transactions. These innovations 
in work are rushing in at the fringes of the advanced economies 
to fill the void left behind as large corporations continue to 
``lean up''--that is, to shrink their payrolls by employing 
algorithms and machines to perform routine tasks previously 
performed by people. As Gansky puts it, ``We're in a period of 
exploration. While we might be looking at a relatively small 
magnitude of overall economic activity now in the peer-to-peer 
economy, it's happening at a time when all the tried-and-true 
industries are going through significant transformations.'' 
Steven Straus, former managing director of the Center for 
Economic Transformation at the New York City Economic 
Development Corporation, looks at the same phenomenon from the 
standpoint of service providers: ``We currently have about 
three job seekers for every available job and 11 million people 
looking for work--so the growth of the sharing economy isn't 
---------------------------------------------------------------------------
surprising.''

    In the coming decades, the United States and other advanced 
industrialized economies will no sooner return to the 
routinized, manufacturing-centric economy of the 20th century 
than to the agrarian economy that preceded it. The issue is not 
whether new livelihoods based on peer-to-peer business models 
are better or worse than the Industrial Age jobs that are 
disappearing from large corporations. The real point is that 
when jobs are eliminated in the process of digital disruption, 
they will not be coming back in their old form. As that 
happens, we humans have no choice but to fall back on our 
fundamental social skill set: creating and sharing with one 
another. There is, however, one big difference: unlike our 
isolated ancestors of millennia past, Americans in this century 
are empowered by architectures of collaboration that allow for 
the creation of new and diverse livelihoods at unprecedented 
rates. Therein lies the potential of today's peer-to-peer 
economy.
                   WRITTEN TESTIMONY OF JOHN ZIMMER,


                        CO-FOUNDER OF LYFT, INC.


                TO THE HOUSE COMMITTEE ON SMALL BUSINESS


          ``THE POWER OF CONNECTION: PEER-TO-PEER BUSINESSES''


                            JANUARY 15, 2014


    Chairman Graves, Ranking Member Velazquez, and members of 
the Committee, my name is John Zimmer, Co-founder and President 
of Lyft, Inc., and I want to thank you for the opportunity to 
submit these written comments about the peer-to-peer sharing 
economy.

    Before my Co-founder, Logan Green, and I came up with the 
concept for Lyft, we were struck by a statistic that showed 
that 80% of the seats in cars go unused everyday. We were 
inspired to maximize the number of unused passenger seats by 
creating a model that would incentivize ridesharing and make 
the ridesharing experience safe, friendly, and efficient. The 
greatest challenge to making this a reality is developing a 
model that creates a reliable base for critical mass. That 
model is Lyft, and since the beginning of 2013, we have 
expanded to 20 new markets and shared over one million rides.

    Our story is only one of many that show how ubiquitous the 
sharing economy has become, and how peer-to-peer platforms can 
maximize existing resources. In just a few short years, the 
sharing economy has become a $350 billion industry with over 
100 million participants. Cities worldwide are looking to the 
peer economy to drive sustainability, affordability, and local 
economic activity. Trailblazers like Mayor Ed Lee in San 
Francisco and Mayor Greg Ballard in Indianapolis are leading 
the push for safe and innovative consumer choices for products 
and services that are needed and used everyday. These leaders 
also recognize the economic benefits of a free and fair market 
that embraces this innovation as an economic driver for their 
community. They know that towns and cities with active sharing 
economies are more favorable places for people to live, 
commute, and even start a company.

    As is often the case with innovation, government must now 
identify its role in this conversation. The Federal Trade 
Commission (FTC) has recognized the value and consumer benefits 
of the sharing economy, and ridesharing networks in particular. 
The FTC has demonstrated their belief that state and local 
jurisdictions should not enact protectionist and anti-
competitive laws around the emerging ridesharing industry. They 
have sent letters to municipalities and state agencies 
advocating for an open market and pro-business policies while 
still addressing public safety and consumer protection.

    This is the type of leadership we need from our Federal 
government. We need the Federal government to encourage state 
and local governments to embrace innovation, and to look past 
powerful special interests that seek to stymie the sharing 
economy's place in a fair and open market.

    We believe that Congress, and this Committee in particular, 
will play a critical role in shaping the future of the sharing 
economy. In order to promote the innovation, entrepreneurship, 
and economic development that go hand in hand wit the sharing 
economy, state and federal legislators and regulators must do 
their part in supporting and fostering this rapidly growing 
segment of the economy.

    Thank You,

    Written Comments Submitted by John Zimmer, Co-founder and 
President of Lyft, Inc.