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EDITORIAL: Taking on City Hall
San Francisco crushes a bright and enterprising dream
Question of the Day
Being an entrepreneur isn’t easy. The economy is tight and credit scarce, so getting a good idea to market takes determination and willpower. Even that’s not enough when dull-witted government gets in the way.
Three teenagers in San Francisco learned that the hard way. They came up with a new way to get frequent fliers to the airport with a minimum of headache and hassle. They didn’t know that their new business, which they called FlightCar, would threaten the established rent-a-car business and put FlightCar on course to a head-on collision with City Hall.
Kevin Petrovic, Shri Ganeshram and Rujul Zaparde dropped out of Princeton, MIT and Harvard, respectively, after they figured out how they could organize a unique and imaginative transportation service without having to spend millions of dollars to buy a fleet of new cars. They created a website to arrange for travelers to rent their own cars to others while they’re away on their trips. Not everybody would entrust a car to strangers, but if the price was right, enough would do so to make FlightCar successful.
In their business plan, customers drive to FlightCar’s lot and the company drops the traveler off at the terminal. The customer’s car is washed, tidied, rented out, and he gets a cut of the proceeds. There’s no charge for parking, and he gets his car back when he returns. This naturally undercuts the car-rental agencies — it’s called a threat from the man with a better mousetrap — and the car-rental agencies and the city of San Francisco smelled competition.
For breaking up a cozy arrangement at San Francisco International Airport, the city sued FlightCar for “unlawful and unfair” operation of a rental-car company and parking lot. Because it’s located four miles outside airport property, FlightCar argues that it’s not subject to airport regulations. Hertz, Avis, National and other established car-rental companies pay 10 percent of their profits and $20 per rental to the airport, which comes to $94 million annually. FlightCar has no friends at City Hall.
The city insists FlightCar must pay the tax and raise the price of its services to what other companies charge. The city asked the San Francisco County Superior Court to impose a $2,500 fine for every rental transaction the upstart company has made, enough to put it out of business for good.
This lesson in take-no-prisoners capitalism for the young founders of FlightCar demonstrates a sad truth for the rest of us. Governments often serve the interests of established business more than they encourage innovation and enterprise. It wasn’t always so. Only a few decades ago, 50 miles from San Francisco’s airport, two young college dropouts, working in a family garage, had a bright idea for cobbling together a few components into a computer in a new and interesting way. Their enterprise grew into Apple Inc. Steve Jobs and Steve Wozniak could never get away today with operating an unlicensed manufacturing facility in a residential neighborhood, but if they hadn’t, we might have written this cautionary tale on an old Smith-Corona.
The Washington Times
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