Airbnb's Chris Lehane rewriting Silicon Valley's political playbook
SAN FRANCISCO -- Chris Lehane rarely wears the tailored Italian suits that he was known for during his days as a high-profile Washington operative. Now he favors the Silicon Valley uniform of jeans and Patagonia vests. He no longer plants political attacks in the news media the way he did in the Clinton White House or for Al Gore's presidential campaign. Instead, he opts for TV spots that feature happy middle-class families promoting Airbnb, the home-sharing company where he is head of policy.
Lehane, 49, is at the forefront of a war to fight fundamental threats to the company -- scores of local laws that prohibit individuals from turning private homes into hotels, and the perception that Airbnb drives up housing prices by taking units off the market.
He is trying to turn a cutting-edge $30 billion company into an organized political movement -- one that is about helping a battered middle class earn extra money by renting out their homes. In a mere 17 months on the job, Lehane and his allies have persuaded officials in more than 100 localities to retreat from rules that would have been disastrous for Airbnb.
In the process, Lehane is rewriting a Silicon Valley political playbook that has long eschewed such in-the-trenches warfare. Nine years into the "sharing economy," many in the region see a new model of lobbying emerging. In it, Silicon Valley Utopianism -- a signature blend of arrogance plus earnestness -- is being replaced by realpolitik. For companies such as Airbnb, the ethos of "ask for forgiveness, not permission" has given way to calculated deal making on the local level. And Lehane is leading the charge.
"There's been a myth in Silicon Valley that you break and break things and get what you want. For some time, [Uber and Airbnb] did. I don't think others will," said Hemant Taneja, managing director of the venture capital firm General Catalyst, an Airbnb investor.
The question is whether the playbook will pay off in the long run, and whether it can be successfully embraced by other startups, the Airbnbs of the future. Sequoia Capital, Silicon Valley's top venture firm and an early Airbnb backer, is trying to replicate Lehane's model with other companies. Over the past 18 months, Menlo Park, California-based Sequoia has begun hosting mayors at its Sand Hill Road offices and advising startups to hire political strategists and legal experts early on.
"We've learned that a lot of this is local -- you can come up with one way to deal with regulators, but you must do it at a city-by-city, sometimes even a street-by-street or block-by-block basis," said Alfred Lin, an Airbnb board member and Sequoia general partner. "We may have known this intellectually, but we didn't quite grasp the complexity of it."
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Lehane's deals are viewed by investors as critical to the company's ability to go public. They've helped the home-sharing giant continue to grow despite opposition: Airbnb now has 1 million rooms available for instant booking in 50,000 cities -- on par with Marriott International, the world's largest hotel chain -- and is expanding into tourism.
But the effort has entailed a massive ground campaign. Lehane has installed campaign managers in more than 100 cities around the world. Notably, he has traveled to most of them. The managers chime in every morning from all 24 time zones. He takes their calls on his 6:30 a.m. jogs through the Presidio, the tony San Francisco neighborhood overlooking the Pacific where he has lived for the past several years.
"I'm a big believer that you have to go to a place," Lehane said in an interview at Airbnb's ultramodern and ever-expanding San Francisco offices. "Once you get on the ground, you can sort of decode the politics. You almost need an Enigma machine on some of this stuff."
Local deal making is Lehane's specialty. No subject or calculation is too small for him. At any given moment, he'll launch into chapter and verse on the history of housing law in Hawaii (vacation rental policies were influenced by indigenous land rights movements), Singapore (the government needs to keep tight control over the housing stock) and Tokyo (how Airbnb can stave off population loss in rural areas). He is on a first-name basis with aldermen in Chicago and officials from neighborhood councils in cities from London to Berlin.
In more than 100 localities, he has won green lights to operate by giving officials the ability to collect taxes from hosts. In Anaheim, Calif., and New York City, an aggressive political and legal strategy discouraged officials from enforcing statutes that would have all but banned hosts from renting out private homes.
Lehane says he has softened his brash style. "I've channeled my inner millennial," he said, chuckling.
But he has not let go of his roots as a combative political operative. In New York, he is funding a super PAC to support pro-Airbnb candidates, and his press shop regularly orchestrates leaks to the news media. During his first few weeks on the job, in August 2015, he even reached out to former Army generals to ask for advice on how to wage war on a new scale.
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During his 20-year career as a political strategist, Lehane had been known for combative and stunt-driven political theater. He orchestrated leaks about prosecutor Kenneth Starr from the Clinton White House and went on to serve as Gore's press secretary. After Gore lost the presidential election, he brought his brazen style of politics in 2001 to California, where he took on contentious state ballot initiatives. Representing billionaire environmentalist Tom Steyer in his opposition to the Keystone Pipeline at a news conference, Lehane once had organizers break open vials of stinky sludge that had been collected during an oil spill.
In May 2015, he was recruited to Airbnb in a moment of crisis for the company. The home-sharing giant was fighting Proposition F, a San Francisco ballot initiative that would have restricted private home rentals to 75 nights a year. Lehane was on his way to coach his son's Little League game when got a call from Kim Rubey, Airbnb's communications chief and a former Democratic operative.
Can you come in right away? she asked. Lehane, still in his sweatpants and jersey, rerouted his electric Fiat and headed down to SoMa, the startup-filled San Francisco neighborhood where Airbnb is located. As he sat down in a room that is a replica of the war room in "Dr. Strangelove," Rubey and the company's general counsel, Belinda Johnson, expressed worries that the city was stepping up its ballot campaign against the company. They asked Lehane to sketch out what he would do.
At first, the executives were skeptical. "I said, 'Here's how you run a ballot campaign. You kick the s--- out of the other guy; you drive them into the ground,' " Lehane recalls. "I realized, as I was giving these answers, that they weren't really resonating."
Airbnb's chief executive, Brian Chesky, didn't want a slash-and-burn campaign that would demonize San Francisco officials, whose blessing they ultimately needed to operate, Johnson said. Lehane remembers thinking, "So, if you're not going to go on TV saying there's worms in the other guy's burgers, what do you do?"
Still, Airbnb hired Lehane as a consultant. He was surprised to find out that there were 130,000 people living in San Francisco who had either stayed in an Airbnb or had been an Airbnb host. So he embarked on a campaign to mobilize them, knocking on doors, making calls, sending email blasts and targeted ads. The work paid off: Airbnb hosts who were contacted voted at a rate of 81 percent, enough, in an off-election year, to beat Proposition F by a small margin. Lehane became head of policy.
He has spent the past year trying to reproduce that strategy around the world. His campaign managers have set up "home-sharing clubs" in 100 cities, with clubs as far-flung as Rome, Rio de Janeiro and Mexico City. Their members are Airbnb hosts who say they depend on the platform to stay in their homes, but they also see Airbnb as part of their identity as business owners. They write letters, op-eds and attend local meetings in support of the company. They organize street cleanings and toy drives. Together, they make the case that is central to Lehane's campaign: Counter to the company's early image as a service for couch-surfing, entitled millennials or its current image as a slick Silicon Valley company, Airbnb is a platform that helps sustain the middle class.
A history buff, Lehane describes the home-sharing clubs as a 21st-century version of the craftsman's guilds that sprung up in Europe in the Middle Ages, an early example of workers banding together to protect their interests. He likes to say that Airbnb is "democratizing capitalism" and talks about the firm's "social compact with cities." Recently, the company published a position paper saying that senior citizens on pensions are the fastest-growing group of Airbnb hosts. (Sometimes, however, the company's middle-class messaging seems at odds with itself: In the past year, Airbnb has also given away rentals to Kim Kardashian, Beyoncé and the supermodel Karlie Kloss.)
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But Lehane's social compact goes only so far. For all his talk of responsibilities to cities, the company is arguing in court that it essentially has none. In lawsuits the company filed in San Francisco, Anaheim, Santa Monica, Calif., and New York, Airbnb argued that it isn't responsible for illegal activity that takes place on its site.
The lawsuits rely on Section 230 of the Communications Decency Act, a 21-year-old law that is considered a pillar of the Web because it says that digital platforms, from Twitter to Craigslist, can't be held responsible for lawbreaking content posted by third parties.
While Airbnb has managed to settle its other cases, the ongoing San Francisco case is the most critical. There, the company is fighting a local ordinance that would subject it to steep fines if hosts don't register with the city. The case is seen by legal experts as a crucial test of Section 230, and if Airbnb loses, it could open the floodgates to lawsuits elsewhere.
Ben Edelman, a Harvard Business School professor who researches Airbnb and is writing a legal brief supporting San Francisco, said that Airbnb is not an advertising platform like Facebook or Craigslist. "If Visa was processing charges for drug dealers, no law enforcement officer would hesitate to sue Visa," Edelman said. "But Airbnb has managed to convince other local governments not to sue them. It's a hell of a thing."
Lehane's stances have also infuriated some officials and affordable-housing advocates, who claim that Airbnb is reducing the supply of affordable housing and therefore fueling gentrification in such cities as Los Angeles, San Francisco and New York. They say a significant portion of Airbnb's revenue are coming from commercial actors -- those who rent their apartments most of the year or have multiple listings -- and that the company does next to nothing to kick out people who are creating a crunch on the local housing supply.
It's hard to tell who is right. While some researchers have found that Airbnb is too small to have widespread effect on urban housing markets, the home-sharing giant has declined to share enough data for a robust independent assessment to take place. (The company cites the privacy of its hosts.) That also makes it virtually impossible for officials to find the people breaking the laws and the commercial operators whose many listings may be driving up housing prices.
"Suppose your job is to try to find all the hosts who are noncompliant. Every city has someone with that job. How are you doing to do it? You can't," Edelman said. "[Airbnb's] attitude is, they do what they want."
While Lehane has carefully cultivated an image of everyday people renting out their homes to make extra money -- $3,073 on average each year -- at least one analysis suggests that the company makes a significant portion of its profits from commercial activity that sometimes breaks local housing laws. Earlier this year, the news site FiveThirtyEight and an independent consultancy, Airdna, scraped data from Airbnb's website and found that in cities such as Portland, Oregon; Los Angeles; New York and San Francisco, 30 to 50 percent of the company's revenue comes from commercial listings, which they defined as homes that are rented out for at least half the year. (Airbnb disputes the analysis.)
Of course, many people who rent out their homes commercially -- even if they are breaking local housing laws by doing so -- aren't aspiring to be the next Marriott. They're middle-class people trying to make an extra buck. They may be fighting gentrification even as they are fueling it. And Lehane, who has worked for Democrats, unions and middle-class defenders throughout his career, has firmly decided that he's not going to go after them.
In recent months, he has extended olive branches in San Francisco and New York, where resistance from affordable housing advocates has been fiercest, by notifying hosts that they should be renting out only their own home. He has also booted several thousand hosts from Airbnb. But the efforts are largely pro forma. He said building goodwill in cities is slower and more expensive than litigation, and that lawsuits are a "last resort."
A Harvard-trained lawyer with a gift for plain-spokenness, Lehane has a well-considered retort for every argument that has been waged against Airbnb. (The Washington Post's owner, Jeffrey Bezos, is an investor in Airbnb.) Lehane said he firmly believes that there is a compromise where the middle class can make extra money renting their homes while the unwanted social consequences of Airbnb's immense success can be curbed. But the question persists: How fundamental are those undesirable consequences to sustaining Airbnb's global home-sharing empire?
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It's not clear whether Lehane will ultimately win his ground war.
If Airbnb loses the San Francisco case -- by far its most formidable legal threat -- it could open Airbnb up to a spate of lawsuits in other jurisdictions.
Moreover, Lehane's attentiveness to local dynamics had led to several one-off deals. For example, in Chicago, the company has agreed to a host registration system, part of an effort to appease local political bosses, who want to know which houses in their neighborhoods are being used as vacation rentals. But in San Francisco, the company is fighting efforts to register hosts. In other cases, the company has conceded to help collect taxes from hosts, but claims in court that it doesn't have responsibilities to police them. In Amsterdam and London, Lehane recently agreed to let the cities cap the number of days people can rent their homes -- a tactic other cities could copy. A painful compromise in one city could open the floodgates in another.
Lehane's model is evidence of an ascendant trend in Silicon Valley, a recognition that the region needs a new tool kit to foray into the political process.
Software giants Apple, Google and Facebook long derided Washington, but they have become some of the biggest spenders of federal lobbying dollars in the past several years, focusing on intellectual property and patents.
Airbnb and Uber were part of a new wave of Silicon Valley companies that moved beyond the region's core competence of software-building and into the physical world. They set up shop in cities without asking permission -- or understanding how those businesses might conflict with existing laws. Eight years later, Lehane -- and, to a lesser extent, Uber -- has developed a playbook that involves both compromises and red lines, an in-the-trenches strategy where the results look different in each city.
In the past two years, a crop of firms and political consultants has sprung up to service startups operating businesses that extend beyond software -- such as drones, driverless cars and marijuana delivery, which are highly regulated areas. The firms boast Rolodexes at all levels of the political food chain, including mayors, governors and bureaucrats.
The Silicon Valley firm Andreessen Horowitz, also a large Airbnb investor, recently created a team focused exclusively on political networking and strategy for portfolio companies. The team has held invitation-only conferences in Washington and has hosted, at its Sand Hill Road offices, governors of Arizona and Illinois, Republican Reps. Paul Ryan (Wis.) and Kevin McCarthy (Calif.), former President Barack Obama's undersecretary of defense Michele Flournoy, and commissioners of both the federal trade and communications commissions.
Lehane said his goal is less about winning any individual deal, lawsuit or campaign than it is about getting the public to rally around a bigger idea -- to believe that this relatively new and disruptive form of economic activity, home-sharing over the internet -- squares with society's greater aspirations.
"As a consultant, you're being judged by whether you win those battles. Not necessarily the bigger war," he said. Here, "you're really trying to win the right away."
The consummate dealmaker, Lehane insists that he can do that.