It’s not sharing if it involves buying and selling, no matter what price level. It’s more unregulated trading, which is a trait more akin to what is generally called an underground economy (usually the type of only economic system available to the most disadvantaged in a population or country. In this case, it is about the most efficient use of limited resources. If I have a car that works in a deprived environment where people have trouble getting from place to place, except through walking for hours, then, it makes sense for me to use my care to transport people: I make a little money, and they get more efficient transportation.
The only difference is that the current trend often involves Silicon Valley companies providing apps (and making money) and offering the services not to the disadvantaged in a resource-deprived environment. And so, because the media (apps) come from a privileged corner of the economy, it’s automatically defined as hip and cool, and disruptive, and revolutionary. If you read French, you can check out this fawning review of Instacart in Le Monde.
No wonder one finds Obama insiders involved with it.
But of course, the “sharing” economy is well in line with the current labor trends and despite PR work to present it as the ultimate sociability, unencumbered by regulations and laws and all that awful government stuff. Seriously, this is how proponents talk about it:
“So it was that Natalie Foster, the former Obama campaign organizer directing the San Francisco assemblage, enthused that the sharing economy was really one big exercise in community-building. Whenever we crash in a stranger’s guestroom or rent out their car, we aren’t taking advantage of a cheap, convenient service. We’re recreating the virtues of small-town America. “We are rejecting the idea that stuff makes us happier,” Foster said, “that ownership is better than access, that we should all live in isolation.”
The insistence that the sharing economy has tapped into a deep yearning for social interaction is both the most idealistic and least questioned assumption among its boosters. “People are both hungrier for human contact and more tolerant of easy-come-easy-go fluid relationships,” David Brooks wrote in a recent mash note to Airbnb. In a Wired story this spring, John Zimmer, the co-founder of the Uber competitor Lyft, invoked a stint on the Oglala Sioux reservation to summarize his feelings. “Their sense of community, of connection to each other and to their land, made me feel more happy and alive than I’ve ever felt,” he said. “We now have the opportunity to use technology to help us get there.””
Right, nice whitewashing there. Ignore the forced relocation, the starvation, the deprivation, and all that nasty, racially-based stuff and enjoy the exotic revisionism. But it boils down to a very tired trope: that government interference destroys human sociability. The fact that venture capitalist are flocking to the startups should be an indicator of same old same old.
Thankfully, Dean Baker tells it straight:
“The “sharing economy” – typified by companies like Airbnb or Uber, both of which now have market capitalizations in the billions – is the latest fashion craze among business writers. But in their exuberance over the next big thing, many boosters have overlooked the reality that this new business model is largely based on evading regulations and breaking the law.”
“Most cities and states both tax and regulate hotels, and the tourists who stay in hotels are usually an important source of tax revenue (since governments have long recognized that a modest hotel tax is not likely to discourage most visitors nor provoke the ire of constituents). But many of Airbnb’s customers are not paying the taxes required under the law.
Airbnb can also raise issues of safety for its customers and nuisance for hosts’ neighbors. Hotels are regularly inspected to ensure that they are not fire traps and that they don’t pose other risks for visitors. Airbnb hosts face no such inspections – and their neighbors in condo, co-ops or apartment buildings may think they have the right not to be living next door to a hotel (which is one reason that cities have zoning restrictions).
Insofar as Airbnb is allowing people to evade taxes and regulations, the company is not a net plus to the economy and society – it is simply facilitating a bunch of rip-offs.”
So, it’s more a parasitic economy.
And Dean Baker does not even get into the labor issues related to this, but Natasha Singer does, in the New York Times:
“In the promising parlance of the sharing economy, whose sites and apps connect people seeking services with sellers of those services, Ms. Guidry is a microentrepreneur. That is, an independent contractor who earns money by providing her skills, time or property to consumers in search of a lift, a room to sleep in, a dry-cleaning pickup, a chef, an organizer of closets.”
In other words, these companies create, and take advantage of, a fully precarized workforce, with no stable income, no benefits, no protections whatsoever, and no labor regulation.
“In a climate of continuing high unemployment, however, people like Ms. Guidry are less microentrepreneurs than microearners. They often work seven-day weeks, trying to assemble a living wage from a series of one-off gigs. They have little recourse when the services for which they are on call change their business models or pay rates. To reduce the risks, many workers toggle among multiple services.
“Having a diverse portfolio is the best protection,” says Sara Horowitz, the founder and executive director of Freelancers Union, an advocacy organization. “People are doing this in the midst of wage stagnation and income inequality, and they have to do these things to survive.””
And that is pretty much the bottom line of it: the economy stinks, stable jobs are hard to come by, insecurity is prevalent and people are desperate:
“A huge precondition for the sharing economy has been a depressed labor market, in which lots of people are trying to fill holes in their income by monetizing their stuff and their labor in creative ways. In many cases, people join the sharing economy because they’ve recently lost a full-time job and are piecing together income from several part-time gigs to replace it. In a few cases, it’s because the pricing structure of the sharing economy made their old jobs less profitable. (Like full-time taxi drivers who have switched to Lyft or Uber.) In almost every case, what compels people to open up their homes and cars to complete strangers is money, not trust.
Add to this the fact that 3.7 million Americans are long-term unemployed (meaning they haven’t had a job in the last six months), and the rise of the sharing economy makes total sense. When wages fall and full-time jobs are hard to get, workers seek out flexible part-time gigs to sustain themselves while they look for something better.”
But it does not work:
“As Sarah Kessler discovered in her Fast Company investigation, it’s hard to make it in the sharing economy. Many of the people renting out their labor and goods through these services will end up making a fraction of what they did at their full-time jobs, and having none of the benefits.”
So, there is no glorious march toward voluntary microentrepreneurship, or a great wave of communitarian and trust revival, simply people who are a lot more financially insecure than before (both on the buyer or seller side).
This is what it looks like from a worker’s perspective:
“To try to insulate herself from the uncertainty, Ms. Guidry makes herself available to drive most weekdays in the predawn darkness. At that time, she figures, ride seekers are likely to be business travelers headed to the airport, a profitable fare.
Around 4:30 a.m., Ms. Guidry ushered me upstairs to her home office, careful not to wake her family sleeping down the hall. She pulled up TaskRabbit on her laptop to check if any new offers had come in. She scrolled through Craigslist, where she occasionally picks up work as a private chef. Nothing doing.
She glanced at the sofa bed by her desk, musing aloud whether she could rent it out on Airbnb. “The thing is, I have kids,” she said, gesturing to a child-size desk on the other side of the room where her son Aden, who is 5, does his schoolwork. So much for the couch-rental idea.
Resigned, Ms. Guidry activated her Uber iPhone, a device that the company issues to its drivers. On her personal Samsung Galaxy phone, she activated the driver modes for her Lyft and Sidecar apps.
Moments later, the Uber phone pinged with a ride request. She accepted immediately. But, ever in risk-mitigation mode, she waited two minutes before leaving, lest the rider change his mind.
“There’s nothing worse than driving all the way over to some place and then having them cancel,” she explained, heading down to the driveway.
A little over an hour later, Ms. Guidry returned home, having completed an airport drop-off. She had made $28, not accounting for the cost of gas. She would do a second airport run, then come back to wake her family and make breakfast.”
Can you feel the entrepreneurial freedom? Rather, this is what the precarized look like. Time for everybody to brush up on Guy Standing’s The Precariat. He laid it all out years ago (I wrote about it then, here, here, here, here, here, and here).
One of the arguments proposed in favor of the “sharing” economy is that either sharing companies can offer services for cheap (but that’s the Walmart model, and that’s not very attractive), or because the current model is bad. Taxicabs are often offered as an example. However, this article shows that the deterioration of taxicab model started with privatization and risk shift:
“t has experienced similar upheaval before. “Forty years ago, drivers went from laborers to independent contractors,” Desai explained. In the seventies, corporations lowered costs by hiring contract labor and leasing medallioned cabs to drivers. As contractors, drivers lost basic labor protections, like health insurance and paid vacations. Ed Rogoff, a professor at Baruch College’s Zicklin School of Business (and a former New York City cab driver), told me, “The independent-contractor taxi model is like sharecropping. Previously, cabbies and garage owners split proceeds fifty-fifty, with drivers keeping tips. The new system totally changed the structure of the industry by shifting all of the risk to the drivers.” The erosion of labor’s strength, Desai argues, explains the industry’s vulnerability to companies like Uber.”
But the bottom line is that these sharing companies behave like any other large corporations, attracting venture capital, and hiring political insiders, as I mentioned above. Profit, power, and political access are essential ingredients. But again, that is done on the back of labor. Take Uber, for instance:
“To keep spreading quickly, Uber needs to aggressively recruit new drivers, which could be difficult if price cuts also meant cuts to driver pay. Fiddling with prices has led to driver unrest, and the company’s assurances that drivers can make more than $90,000 per year in New York have been met with skepticism. On Twitter,Kalanick argued that lower prices meant drivers could make more, because increased demand would lead to more rides booked per hour.
The uncertainty that comes with attempting to regulate Uber out of existence can’t be too comforting to investors, though it also didn’t deter more than $1.2 billion in funding so far. Some of that money is going toward hiring high-powered lobbyiststo push back. But more powerful political leverage comes in the form of popularity. “The more they sort of popularize themselves, the stronger their argument becomes” against crackdowns, New York University Stern School of Business professor Arun Sundararajan told Businessweek.”
But is it yet another high-tech bubble? The labor trends are real and there is no reason to assume they will change anytime soon. This is bad time for labor, organized or not. On the other hand:
“Friday’s Uber valuation should mark a nadir in tech insanity: not only has the last sane person in the Valley left and switched out the lights, but someone probably paid him at least a billion dollars to do it.
Silicon Valley’s venture capitalists have collectively decided that a much-impersonated piece of taxi-despatch software – you might know it as Uber – is worth $18bn.
In reality, almost no-one will even blink at the number, because this sort of fantasy is created (and marketed) every day. So long as there are greater fools down the line – prepared to buy into the hype and load up on tech stocks – the train will carry on: founders cash in on the venture capitalists, who in turn get rich off the backs of our pension funds and 401ks, who load up on these stocks after buying into the West Coast hype.
Here’s how that theory works: sure, companies like Uber aren’t making much money now. But they’re growing fast and changing the world – so, after they have reach, suddenly it’ll be possibly to turn one’s investment into huge, world-changing profits.
But when you buy a tech stock at a huge multiple – and Uber’s revenues have been (generously) estimated at around $200m a year, which makes $18bn a borderline-insane 90x valuation – you’re making a bet that its profits down the line will be vastly larger than they are today. In fact, you’re betting that they will be almost unimaginably larger.
There is absolutely no reason to believe this is true.”
Why does it matter?
“It’s easy to think that this mad exuberance is victimless idiocy. It’s not. In any society, in any economy, there’s only so much investment cash to go around. The cash that’s getting thrown at overinflated companies in sunny California isn’t doing anything in the rest of the economy.”
Which gets us back to Dean Baker:
“If these services are still viable when operating on a level playing field they will be providing real value to the economy. As it stands, they are hugely rewarding a small number of people for finding a creative way to cheat the system.”
That is why they hire political lobbyists, so they don’t have to face a playing field, but to re-engineer a playing field that is vastly favorable to them.
Also, isn’t it amazing that every new innovation is always really good for the same people, and really bad (but good, because disruption!!) for the same people (labor)?
For a really, really good critical analysis of this with cartoons! Go read this.