As the verticalized remnant labor/asset pool economy explodes (or whatever else you want to call what Airbnb and Uber do), fights over government regulation of these companies and the people who interact with them are increasing.

I think it's time to take a moment to discuss a rational perspective on how these companies, and those who interact with them, should approach government regulation. Airbnb, Uber, and the dozens of others like Zeel for massages, or Dog Vacay for dog sitting, will have to make big decisions regarding how they deal with government regulations as this part of the economy expands and they disrupt entrenched industries with huge lobbying power.

Last year the hotel lobby pressured the New York State Attorney General into doing something profoundly stupid, requesting via subpoena all of Airbnb's New York City records. Every name and address of all New York City hosts. Airbnb wisely fought this, and won in court. More recently, protests over Uber have spread throughout Europe as extremely entrenched labor groups (we're not even talking about the government anymore) are appalled at the idea of a free market for transportation without price fixing. Yes, Uber drivers are driving down the price of a taxi ride giving consumers a better deal, this is what happens when you allow the supply/demand curve to find equilibrium instead of artificially fixing the price with low supply. This is the same thing happening to the price of hotel rooms in cities hosting large events, supply will expand via Airbnb to keep prices relatively stable.

But we're not arguing here over whether or not adding supply to a market is good or bad, well at least I'm not, and if you are, well you're wasting everyone's time.

The bigger question here is, how do we regulate, if at all, these activities by individuals that are currently heavily regulated by the government? Because this is where the whole economy is moving, software and smart phones have enabled everyone to sell their excess capacity of time or assets, and while it will most likely crush GDP, it will unleash gains in living standards and access to goods and services cheaply that are off the charts.

I would submit that companies like Airbnb, Uber, Dog Vacay, Zeel, and all of their users should basically pay zero attention to government regulations. Why? Because built into these platforms is a far better regulatory system than the government could ever wish to concoct, even if it had trillions of dollars to do so.

What makes these platforms work is the feedback loop between providers, hosts, and the platform in the form of reviews, identity verification, and social proof.

When the government regulates a hotel, the standard to which that hotel must live up to is pretty damn low, not to mention there is almost zero enforcement of these standards to begin with. The reason you pay so much money to stay at the Four Seasons is because you know without a doubt that you are going to get a great experience, no matter where you are in the world. You are using the brand name as a proxy for trust.

These social platforms trade brand name for algorithms that look at all of the reviews published by your peers, which at the same time provides trust that your experience will be quality, and gets rid of the premium charge you pay to the Four Seasons for the piece of mind.

The government couldn't even dream of a regulatory system that is so effective as the Airbnb or Uber ratings system.

As well, when it comes to insurance, all of these peer to peer activities should be directly covered under current plans. What is the difference between me picking my cousin up at the airport and having him buy me a pizza and picking someone else up at the airport and having them pay me $50 via Square, or better yet in Bitcoins, are they really even paying me currency then, what say you to that government?

Not only does the government need to completely step out of the way here and allow these systems to regulate themselves, but these companies should as a strategy directly ignore government regulations for another reason. The government can not regulate at scale. Government regulation is largely dependent on scaring everyone by punishing a few severely making examples out of them. And even in these cases we see that activities which have reached significant penetration are impossible to stop, even through these means. See prohibition for a direct example.

You can not stop New York City residents from breaking the law (we all are by renting out our apartments every single time), because we're all doing it, and when everyone breaks a law, it's not enforceable at all and will be ignored by law enforcement. See file sharing for direct example.

The key for these platforms is to get to scale as quick as possible so that the government can not make examples of early adopters and crush them in the crib. We haven't yet seen this happen and hopefully never will.

It is inevitable that a good portion of the service economy ends up in verticalized remnant labor/asset pool apps, and how they deal with government regulation will tell the tale of how fast this shift happens. I say give the government a big middle finger and race for scale so that you can call the shots.