The following op-ed was co-authored by R Street Texas Director Josiah Neeley. 

Rarely has a vote had such an immediate effect. On May 7, Austin residents elected not to overturn restrictions on ridesharing companies their city council passed in December. Two days later, both Uber and Lyft ceased operations in the Texas capital. The new rules required transportation network companies (TNCs, as they’re known) to expand their background checks on drivers to include fingerprinting, processed through the FBI. Uber and Lyft—which hadn’t met government demands to have run fingerprint checks on 25 percent of their drivers by voting day—declared it was now impossible to do business in the city.

The popular ridesharing companies warned they would disable their apps in Austin if voters didn’t reject the regulations, but it seems neither the government nor the people believed them. “Nobody wants them to leave and we’re not asking them to leave,” council member Ann Kitchen, who led the effort to impose the regulations, told KUTX radio. Mayor Steven Adler said both before and after the referendum that he hoped the city could come to some compromise with the TNCs, hinting that the phase-in of fingerprint requirements could be delayed. Residents of the traffic-choked city with few mass-transit alternatives switched not to traditional taxis but to a new, decentralized ridesharing service that launched as soon as Uber and Lyft left. Arcade City, which had been working on its own app, set up a Facebook page to connect residents wanting transportation with residents willing to provide it (for a price). “Need a ride ASAP from riverside area to downtown!” one post reads. “How do I use this to get a ride?? Going to the Wal-Mart on w Anderson ln, I’m off 183 right now thanks,” says another. (The city’s transportation-department detectives have already starting busting the drivers coming to their rescue.)

So what no one wanted—except Austin’s Big Three incumbent taxi companies—is precisely what everyone got. Sadly, this fight is all too typical of what happens when technology companies run head first into the buzz saw of politics. India’s telecommunications regulator decided in February, for example, to ban “Free Basics,” a nonprofit Facebook program designed to give low-bandwidth information services to the country’s poorest citizens. What should have been an easy sell—offering free Internet to underserved rural poor—opponents successfully painted as a colonialist plot to exploit India’s poor economically and reshape its government to the company’s advantage. Given that fights like this are liable to keep popping up as technology changes the way people can connect, it’s worth considering what lessons both government and business can learn from how Austin’s ridesharing experiment unraveled.

Chief among the lessons for companies is that politics is a very different business from business. This is particularly true when it comes to making your case to the public. Tech companies often make the mistake of thinking that their services are so self-evidently valuable that people will automatically flock to their banner. Yet in Austin, many of the voters bombarded with flyers, ads, and text messages weren’t familiar with ridesharing services and those who were had concerns the companies didn’t address.

Companies are also vulnerable to being pegged “big greedy corporations.” That’s particularly true when they spend a lot of money advocating their point of view. By the end of the TNCs’ campaign backing Austin’s Proposition 1, opponents were talking almost entirely about the money the TNCs had spent—$8 million—and hardly at all about the substantive policy issues.

Guess what: Your superior economic resources can get you labeled a “bully.” (That word was thrown around a lot in Austin, though the success of the opposition in defeating the companies that massively outspent them suggests that flush businesses aren’t always the stronger players.) Companies need not deny that their proposals will make them money. But they need to show that they serve interests besides the bottom line. In Austin, ridesharing companies could have declared that their business model included having a more diverse, gender-balanced workforce of drivers, something that burdensome fingerprinting requirements would have made difficult to achieve. For many female riders, the prospect of more female drivers giving them that last ride home at night looked to be a safer alternative as well as a cheaper one. And that might have put opponents in the position of having to explain the composition of the taxi workforce.

Governments, too, have a lot to learn. First, don’t regulate just for the sake of regulating. Austin’s new ridesharing rules lacked any plausible rationale. The handful of assault complaints against drivers ultimately had resulted in only one conviction—of a taxi driver. An interim set of regulations had been working fine; there was no public outcry or incident demanding a shake-up. Indeed, it was the new regulations that sparked a backlash, with top law-enforcement officials, already grappling with Austin’s disproportionate numbers of DWI arrests, speaking out about the value ridesharing provided to the city. (Since Uber and Lyft ceased operations, there’s been a 7.5 percent increase in such arrests.)

Governments also need to consider how people will respond to their rules. Austin’s officials seemed to be in denial—almost on a daily basis—about the likelihood Uber and Lyft would leave the city if the new rules were implemented, even though the companies had followed through on that promise elsewhere. The TNCs had learned in other cities that this often had the effect of getting officials back to the negotiating table. (They didn’t anticipate that the city whose semi-official motto is “Keep Austin Weird” might decide to tread a different path.) Austin was also unprepared for how much interest the controversy would garner beyond city limits. State legislators have already pledged to pre-empt Austin’s new rules in next year’s legislative session. Austin, a traditionally left-of-center city, may have found itself in the position of inviting intervention on behalf of residents—including those who have lost their ability to make a living—from a Republican-dominated legislature. And the new ordinance has generated loads of bad press that risks damaging Austin’s brand as a tech-friendly metropolis.

All this said, cities and companies can take solace in the realization they can correct their mistakes. When San Antonio passed a fingerprint requirement in 2014, Uber and Lyft left that town. But after extensive negotiations, the city came to a compromise, instituting a voluntary fingerprint check everyone could live with. Austin had better act fast, though. The capital has already lost a competitive bid for a $50 million “Smart City Challenge” to fund transportation innovation. Austin lost to Columbus, Ohio—where, after state lawmakers intervened, Uber and Lyft can operate legally.

Featured Publications