It’s getting harder to tell what’s a real Silicon Valley startup and what’s a parody

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.