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Summary:

ReservationHop is just the latest startup idea to trigger a firestorm of criticism from those who see its service as unethical. Just because a financial opportunity might exist in a particular system, does that mean it is necessarily ethical to exploit it?

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Maybe it’s the foolish amounts of venture capital swirling around Silicon Valley, but it often seems as though we are all playing a game in which the contestants have to determine what is a parody and what isn’t, and it’s getting harder instead of easier. Is the app that sends a single word — “Yo” — to another user a parody or a real company? Turns out it’s real. How about one that makes fake reservations at restaurants and then sells them to the highest bidder? Yup, that’s real too. But ReservationHop seems to have triggered a collective feeling of disgust that others haven’t, which may be a sign that there is still some hope left.

Creator Brian Mayer started the service as an experiment after he waited too long for a burrito, and apparently wasn’t intending to make it a big splash with it, but word quickly got out and Twitter had a field day with the idea, turning it into what the founder called “a maelstrom of hate.” The vast majority of the responses — as Mayer noted in a subsequent blog post about the blowback — called him a lowlife scumbag, or variations on that theme, and said his idea was morally bankrupt.

Part of the problem for Mayer could be that ReservationHop comes on the heels of some other ethically questionable startup ideas, including ParkingMonkey, which allows people to buy and sell public parking spaces (at least until the city said it could no longer do so). Restaurant reservations may not fall into the same category as public parking, but the idea that a business would make bookings under pseudonyms and then sell them seemed to trigger a warning bell for many — in part because, as Redpoint VC partner Ryan Sarver pointed out, it adds risk for restaurants instead of sharing that risk with them.

Ethics? Didn’t really occur to me

To Mayer’s credit, the ethical drawbacks of his idea seems to have occurred to him at some point during the firestorm of criticism, and he says in his blog post that he is thinking of approaching restaurants to see if he can work with them instead of just acting as a kind of parasite that takes advantage of a weakness in the system. But his post also contains a passage that to me at least says a lot — for better or worse — about the downside of the startup mentality. As he puts it:

“Let’s talk about the questions/criticisms everyone has. What was I thinking! How dare I sell something that’s free! Is this even legal? Is it ethical? Restaurants are going to hate this! To be honest, I haven’t spent a lot of time thinking through these questions. I built this site as an experiment in consumer demand for a particular product.”

The assumption in Mayer’s post — and, it seems, the assumption behind similar business models like ParkingMonkey or Sweetch — is that if something can be monetized, then it should be. It’s as though capitalism, or tech-startup life, was a game in which founders try to spot loopholes in the laws or social contracts that govern our behavior, and then figure out ways to get someone to pay to exploit them. This isn’t necessarily a recipe for disaster, but it avoids any question about whether such loopholes *should* be monetized. As Mayer puts it: “If someone does pay for it willingly, is it really unethical?” Well yes, maybe it is.

Should all loopholes be monetized?

As a number of people noted in the Twitter firestorm that occurred after the idea became public on Thursday, there are plenty of other opportunities to exploit monetizable opportunities other than just restaurants or parking spots: why not have a system where people hold a place in the line at the emergency department, and then people could pay to get quicker access to medical care? Or what if someone arranged for a date under an assumed name, and then you could bid on the right to get access to that particular person?

All of these seem absurd in various ways, or clearly unethical. But where is the line? And should that line be drawn before or after a startup founder launches a new app or service to take advantage of that need? Uber and other successful startups have run into similar challenges even after they became substantial businesses: for example, is it unethical and/or in poor taste for Uber to charge more for rides that occur in the aftermath of a massive storm, or is that a necessary way of redistributing the slack in the system?

I think Parker Higgins hinted at a really useful way to think of whether an idea is ethically questionable: Namely, does it produce some kind of value for all endpoints within the service — users, contributors, suppliers, etc. — or is it just about extracting some kind of value that already exists in the system so that the founders can get rich? With ReservationHop, users who bid on open tables clearly get a benefit, but the restaurants arguably don’t.

That’s not to say that a service that takes advantage of a legal loophole or makes questionable ethical decisions can’t make money, or become a successful company. It just means that it is going to continually be fighting an uphill battle to get people to treat it as a respectable business.

  1. Jacques Meharde Friday, July 4, 2014

    I can’t even pretend to be surprised that a Libertarian is arguing that the fraudulent acquisition of an asset is somehow ethical, just because he’s the one profiting off of it.

    If Brian was a real Libertarian, he’d recognize that the fraudulent acquisition of reservations is clearly unethical, but he (like essentially all 20-something SF libertarians) is not actually a Libertarian. He is just an immoral selfish prick.

    I hope that a restaurant industry organization sues him into oblivion.

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  2. Hannah Usai Friday, July 4, 2014

    These programs are the result of gap analysis and not loopholes. The good and the bad will get sorted out. How does it differ from preferential seating for critics or celebrities, or big tippers, etc.?

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    1. This is an old idea that was offered by several firms in the bubble. Restaurants would refuse anyone they caught with these paid for reservations. The restaurants stated that these service detracted from teh atmosphere of their places

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      1. Contrary to the popular belief, restaurants ( even good ones ) struggle to fill the seats even when they refuse to take reservations looking for the star-studded clients to show up. If the restaurants were actually owned by smart people, then they would have practiced demand based pricing – the same pricing that would make ReservationHop to be irrelevant.

        It is no different from Priceline or Hotwire.

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  3. “That’s not to say that a service that takes advantage of a legal loophole or makes questionable ethical decisions can’t make money, or become a successful company.”

    Ah, but that’s precisely one of the arguments the winning side made in the SCOTUS decision on Aereo! You *don’t* get to exploit loopholes for profit, carefully crafting a hardware and software system to rebroadcast major league sports without express written consent. Aereo made questionable ethical decisions and SCOTUS shut them down!

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  4. Punch-a-jerk Saturday, July 5, 2014

    The problem is we stopped punching jerks. If we got back to that, we would have less of them. But now jerks can do anything they want. If you care about a civilized society, punch a jerk. Or use my app that let’s you pay someone already near a jerk to punch them.

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  5. Funny enough I just came accross reportthisbitchdotcom and was wondering if it was true or not

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  6. What these start ups are doing are examples of the tragedy of the commons. They exploit common resources or create common costs but keep the profits to themselves.

    You didn’t mention AirBnB, which exploits the neighbors of the rented locations, by decreasing quiet enjoyment by converting peaceful neighborhoods into hotels.

    The solutions are the same as for other attempts at exploitation: laws that criminalize the behavior (theft, fraud), private suits under common law, and public and private shunning and humiliation of the participants and the profiteers.

    What I worry about isn’t the ethics of the founders so much–greed wasn’t invented in Silicon Valley after all–but the investors who enable their greed. They ought to know better.

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  7. ReservationHop’s concept is valid; perhaps it was Brian Mayer’s approach that is controversial. There are other approaches of obtaining “VIP tables” at short notice which may seem more “ethical” — e.g., table8.com or American Express Platinum Card’s “Fine Restaurant” reservation services — where the service is up-front and works with the restaurant to reserve specific tables each night for VIP guests.

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    1. I’m going to make an educated guess that you don’t actually know how Amex works for “fine restaurants” service. It actually works much closer to this “Remember, restaurant owner, it is the condition of you accepting Amex”

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  8. If someone ever tries to charge me for an individual, public, parking space, I will happily punch them in the face. :D

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    1. We need an app that will let you hire someone to do that.

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  9. “why not have a system where people hold a place in the line at the emergency department, and then people could pay to get quicker access to medical care?” – in many countries with public health services this exists. It is called private health insurance and is implemented very similarly to this. In exists in the USA too, but you can’t even join the line unless you pay, and then you pay more to advance in it.

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    1. Which public health services are you referring too? The country I live in which has public health any of those I have visited with public health care allows this type of behavior. Emergency cases are seen on based on how urgent the care required is, nothing more. If you can wait, you wait. If you need to go right in, you become first in line. It’s not first come first served.

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      1. Edit: Do NOT allow this behavior.

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  10. As a restaurant, just require the person to make a reservation under their name, and to be present with valid ID in order to be seated. Problem solved. Sure, the person who sold the reservation could show up and still confirm the table then give it away to the “auction winner” and leave, but that would likely be enough of a pain in the ass for them not to do it in the first place.

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