Antiquated mental models

“If God had designated that His intelligent creatures should travel at the frightful speed of 15 miles an hour, He would have foretold it through his holy prophets. It is a device of Satan to lead immortal souls down to Hell.”

That was a quote from the debate on the practicality of railroads in 1830 (Freeman Hubbard, Encyclopedia of North American Railroading). Today, bullet trains travel at a speed of more than 300 km/hour, rivaling even the speed and efficiency of air travel for domestic or shorter distances.

If there is one point to be made from what I quoted, it is that antiquated mental models cannot defeat modernization. The best evidence of man’s mental model are its laws. And the basis of today’s newest, Internet-based business models is practicality. This Sunday, I wish to share with my readers how our laws stack up against Internet-based business models in the so-called “sharing economy”.

Taking away the complications of these new business models, Philippine laws are already among the strictest among democratic countries in terms of nationalized activities. The ownership of land, public utilities, and retail trade entities are among the most popular areas of investment where foreign capital is restricted. Add to foreign equity limitations the difficulties of doing business in the country, and you instantly have your answer to why the Philippines, despite good strides, is still in the quadrant of the least favorite investment destinations in Southeast Asia. Yet, even our investment laws could not prevent the new business models in a sharing economy.

When our laws are made based on physical connectivity, it may be fair to say that they could not have anticipated situations in a virtual connection, leveraging on mobile devices, that covers intercontinental distances in seconds, and without need of any form of travel.

For example, the retail trade law, before foreigners can engage in retail in the Philippines, they need to put in a whopping $2.5 million in capital. But online sales of imported goods are made by directing consumers in the Philippines on a daily basis to, for instance, the eBay or Amazon website. They can do so without breaching the retail trade law because these websites are venues for customer-to-customer sales transactions, including transactions when an individual from the Philippines is the one selling.

Public utility companies, or those for instance that provide telecommunications, electricity, or transportation services to the general public, are required to be at least 60 percent Filipino-owned. So Uber, the app, is now being used in the Philippines and the Land Transportation Franchising & Regulatory Board (LTFRB) is asking Uber, the company, to secure a special certificate of public convenience. The question that comes to mind is whether it is a public utility company in the first place. Uber provides an app—a platform for an ordinary car owner and an individual in need of transport services to meet. It has no investment in cars or SUVs, and it has no employees. But it has an app that addresses the lack of access to cars or taxis, and gives an earning opportunity to private car owners. This is the opportunity to those who are now in between jobs, or even those with jobs, like call center agents who double as Uber registrants when they are not on call center duty. They can make cash enough to, at least defray, their own gas expenses for the day.

A hotel business needs to be accredited with the Department of Tourism. What rules will apply to a new model such as Airbnb? It is an app that allows those looking for a room for a few days to access private individuals with extra room capacity, or an unused pad, who are willing to host transients. In Makati for instance, hotels are not able to serve the city’s lodging requirements, so much so that people are already looking even at nearby Mandaluyong for temporary lodging despite their agenda that requires them to be in Makati. An app such as Airbnb provides both a chance to earn and a place to stay in the city.

Vayable, an Internet-based business that brings together tourists and private individuals capable and willing to provide tour guide services in Europe, can give travel enthusiasts earning potential as they guide tourists to destinations and activities that they themselves have personally experienced as tourists. If Vayable or a similar foreign app eventually caters to Philippine tourists, would it be required to secure accreditation from the Department of Tourism (DOT) and be bound by nationality requirements even if all that it provides is a platform for a travel experience to happen?

There are more, and there will be more. Government efforts to protect the public will always be required and are logical. What these efforts though should not result to is the imposition of difficulties or inhibition on public access to these new streams of services that improve the public’s quality of life and increase much-needed human interaction. Our people have been faulted for being biased for white collar jobs and for not being entrepreneurial. These Internet-based businesses certainly jumpstarted for many individuals the idea of doing business and taking some risks. They are disruptions that should be welcomed, especially for a country that strives for inclusive growth, as these new models provide, for many, the baby steps towards liberation from employee mentality to business mindedness.

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Alexander B. Cabrera is the chairman and senior partner of Isla Lipana & Co./PwC Philippines. He also chairs the tax committee of the Management Association of the Philippines (MAP). Email your comments and questions to [email protected]. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.