Airbnb is a 'cautionary tale' on how not to work with governments, says Uber's political adviser

Airbnb called it an "unprecedented step" when it decided to sue its hometown after San Francisco passed stricter home-sharing regulations. In New York, lawmakers voted to fine people who rent their apartment for less than 30 days, a move tech leaders slammed as limiting Airbnb's potential.

The clash in both cities is in part because of Airbnb's own efforts to shape the rules it's now complaining about. And startup political strategist Bradley Tusk doesn't know if Airbnb will be able to overcome the set backs now that Airbnb's political maneuvering has brought upon itself.

"I think it's a real problem, I don't even know how I'd tell them to fix it at this point," Tusk said at a dinner with reporters Wednesday in San Francisco. "I don't think it is fixable, at least in those two cities."

Tusk identified two areas where Airbnb will become a "cautionary tale" to companies in the future: It didn't take regulation seriously enough, and then it moved too slowly and let the opposition get oxygen and grow.

"I get wanting to be super aggressive. I started doing this with [Uber CEO] Travis 5 years ago and there's no one more aggressive than Travis. But still, there are times when you have to recognize the political reality of what you're dealing with," Tusk said.

Instead of agreeing to work with New York years ago, Tusk says Chesky gave the hotel industry and affordable housing advocates time to figure out what was going on and to become a powerful coalition against the startup. These aren't easily defeat-able groups either, compared to other constituencies Tusk has worked to beat.

"If the boogieman is casinos, like we just did FanDuel, or the taxi medallion owners, they're kind of bad sleazy guys. Affordable housing advocates are kind of likable. They're just harder to beat," he said.

It's even harder to understand how the situation in San Francisco went so wrong, since the startup had such a heavy hand in passing the legislation in the first place. A "miscommunication" would be a charitable way to put it, Tusk says, now that the city has backed Airbnb into a corner.

That leaves Airbnb with a really tough choice, according to Tusk. It can either operate in a legal grey area and risk lots of fines imposed on their hosts or on the company, or it has to right-size the market to only include legal listings, cutting into its profits.

"They're now in a situation, and it's just my view, that I don't see how they can overcome it. They've got a really tough choice," Tusk said. "They're raising now at a higher valuation. But if you were to say here's how much the San Francisco and New York markets are really worth in legal compliance and rerun the numbers, I don't know if it's a $30 billion company."