The Death and Life of the “Sharing Economy”

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Tom Slee (author of No One Makes You Shop at Wal-Mart: The Surprising Deceptions of Individual Choice) recently published an article called “Sharing and Caring” on the left-leaning (and very interesting), webzine Jacobin in which he decries the commercialization of “sharing economy” pioneers such as Airbnb, Uber and Task Rabbit.

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Writes Slee:

Both Uber and Lyft have adopted controversial tactics like “surge pricing,” in which the price of a ride rises in busy times or during bad weather conditions in order to attract more drivers on the road, a move that places market incentives at the center of their business model. While Lyft originally called its fares “donations,” it has now abandoned the pretense. Over the course of two years, all elements of “sharing” have been effectively purged from these new transport companies.

After criticizing Uber for trying to match supply with demand, he goes on to bemoan the fact that Airbnb is not really a site for ordinary people looking to share their home with out of town guests; rather, it’s an efficient way with people who have empty space to get some value from it.

Writing of Airbnb’s claim to be a site for private individuals with one or two rooms to share, he notes:

This is being economical with the truth. Information I collected from over 22,000 New York listing pages on the Airbnb web site (the bulk of their listings) paints a different picture. In October I scraped the Airbnb web site in order to evaluate Airbnb’s business. I estimate that almost half of Airbnb’s New York revenue comes from people with multiple listings, and almost three quarters of Airbnb’s business comes from whole-home rentals, where the host is absent during the rental period.

Slee’s conclusion is that the original utopian view of the sharing economy is on it’s last legs:

While the “sharing economy” is being pulled ever farther from actual sharing, it might not be a completely lost cause. These ventures could take actions that might help to restore some semblance of credibility to the “sharing economy” name. Ridesharing companies could limit income to remove insurance liability and taxation issues. For example, BlaBlaCar limits the money that any driver can earn on one ride so that it never exceeds the cost of the trip: this means the money is costsharing and not income, and so removes taxation issues and insurance clauses that forbid commercial use of a car…

The chances of the adoption of any of these recommendations are slim. Taking a modest supporting role in reviving the supposed spirit of the sharing economy is incompatible with the hubris of leading large companies, and most of these suggestions would compromise the revenue growth that investors are looking for.

The “sharing economy” has seen a rapid slide away from collaborative sharing towards further deregulated and precarious employment — the direct consequence of venture capital funding and the growth imperatives that come with that money. Such a project won’t bring us any closer to the more equitable society we want to see any time soon.

This is an interesting conclusion since I, an Austrian school-leaning libertarian, happen to believe that the future belongs to sites with models such as Uber’s. What Slee sees as the decline of the “caring” ethos that, he naively believed, fueled most of these startups I see as the logical alignment of a fuzzy business model with the economic laws of free markets. Indeed, there is nothing wrong with Uber’s market-based pricing, and anyone who complains about it can simply find another way home in a snowstorm.

What’s worse for Slee and supporters on the left is that the rise of analytics is going to make market-driven pricing, individual and tailored to each consumer, ubiquitous. In the future, more and more goods will be priced according to person-level micro-economic models and not the broad “consumer group” strategies that are common today. What implication does that have for the “sharing economy”? In my opinion it’s the opposite of Slee’s, since I think that the more micro-pricing becomes feasible the more collaborative commerce models become viable. Take consulting, for example. I know of individual consultants who have to price their work on general market rates, which in many cases hurts their earning potential. Should someone start a website that allows experienced consultants to find work based on actual market demands, they would have an economic alternative to working for the large global firms that aggregate demand and set pricing based on macro-market models and not individual value.

In sum, the experience of Uber et al. is not the death of an utopian dream so much as yet another validation that technology is enabling the creation of micro-price-based markets. This trend will continue as computing power continues its migration from the mainframe to the mobile device. For those of us who believe the market should decide what is shared for money and what is not, this is good news not bad.

Read more at: https://www.jacobinmag.com/2014/01/sharing-and-caring/

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3 comments on “The Death and Life of the “Sharing Economy””

  1. So we see the same developments, even agree on the implications of them, but then in the end disagree on the desirability. I suspect that’s a bridge too far to cross, but thanks for reading. Maybe I should have charged you for it? 🙂

    1. Hi Tom: Thank’s for reading my post. We do see the same developments and implications, but I am willing to change my opinion of the desirability of first-generation collaborative models should new evidence prove me wrong. By the way, there is was an interesting piece in the last MIT Tech Review on the transformation of Wikipedia that examines this issue closely (http://www.technologyreview.com/featuredstory/520446/the-decline-of-wikipedia/). I would be curious to read your analysis of this evolution, since this has nothing to with corporate antagonism: here the first-gen collaborative models seems to be decaying organically (though the jury is still out).

      Cheers, Carlos

      PS: And, yes, I do see the irony in writing that fee-based models are best when I blog for free, but I am hoping that will change 🙂

  2. It will be interesting to see if Wikipedia can move beyond being a movement to being something more static. I once went to a talk by EP Thompson (social historian and anti-nuclear activist) and he said that single-issue social movements generally have a lifetime of 8 to 10 years, so if that’s what Wikipedia is then it hasn’t done badly. Wikipedia is such a one-off thing that I don’t have much of an analysis. I like that it’s an alternative to the commercial sites though.

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