Ah, the hoverboard. A month ago, in her post Hoverboards: Fun toys or dangerous gadgets? Jenn pointed out that "they have to work out a few kinks." Since then, they have became the butt of jokes as YouTube has filled up with videos of exploding boards. But this is much more than just a toy or a fad; the board's rise and fall is a model of how the world works. In Quartz, Josh Horwitz described it as “the modern economy in a nutshell — viral trends, massive manufacturing hubs, IP disputes, weak regulation, immensely powerful businesses, and global ripple effects.”
In the Economist, columnist Schumpeter (writers don’t get to use their real names in the Economist, go figure) describes how the hoverboard craze is a model of modern business life, first in our inability to separate fantasy from reality. (It isn’t really a hoverboard; it's more of a Segway.) But the real fascination is how it went from fantasy to reality so quickly. In the old economy, it might have taken a few years for a toy to get developed, tested and brought to market through the traditional Toys R Us-type channels. Not anymore; now we have this:
A global supply chain that starts with a fantasy ends with an Amazon package and takes in a bustling Chinese assembly plant in the middle. Everything in the product’s supply chain emphasized speed over competence.
A British standards organization found that the vast majority of hoverboards were unsafe due to problems with batteries, wiring, plugs and switches. And it should be no surprise; lithium ion batteries are known to explode. Look at the examples: 787 new airplanes using the batteries were grounded for a while, and a key element in the design of the Tesla was figuring out how to keep the batteries cool.
There was also the issue of proprietary rights with the hoverboard: Who invented it? Who owned it? Apparently the Chinese manufacturers simply knocked off an American design.
Finally the whole hoverboard business exploded like a cheap board when the boards were banned in Britain and Amazon stopped selling most of them in the United States. But as Schumpeter notes, while the hoverboard is a nuts-and-bolts product, the same lessons apply throughout the new economy.
Many tech startups have tended to adopt the same approach as the hoverboard industry — exploiting legal grey areas on the ground that, if they build enough momentum, legislators and judges will simply adjust the law to take into account new commercial realities. That is a big bet: many of today’s biggest firms are like hoverboard riders heading for bumpy ground. Uber may be forced to reclassify its drivers as employees rather than contractors, rendering it liable for millions of dollars in back pay and upending its business model. Airbnb may be forced to abide by the health-and-safety and licensing rules that apply to hotels.
There's a reason products used to go through the processes they did. Companies would get sued if their product killed someone or burned down their house. But there's nobody standing behind the product in the hoverboard economy. Amazon is just a delivery system, and try even finding an assembly plant in Shenzhen, let alone going after one for damages.
Schumpeter calls the hoverboard saga “a parable and a prophecy.” It certainly is a lesson in how fast things move in today’s world, how dangerous it can be, and how it all might come to a fiery end.