Lost amid the hand-wringing over Uber is the bigger story of why the sharing economy is doing less and less sharingby David McGowan / June 27, 2017 / Leave a comment
Remember the “sharing economy?”
Back in 2013 the Economist heralded the rise of a new trend in business, where technology would be used to share excess capacity: we would rent or sell rides in our cars, space in our houses, indeed, sell anything we owned—to just about anyone, anytime and anywhere. The term persists, with Travis Kalanick, the bad boy co-founder and then CEO of Uber, often used as the poster-boy for the movement, even authoring a piece in the magazine’s recent “The World in 2017” edition titled “The Charms of the Sharing Economy.”
Last week, following a damning report on Uber by former US attorney general Eric Holder, not to mention months of accusations of a cutthroat workplace culture, Kalanick was forced out. That news was widely reported and analysed. But it should not distract from a broader trend: the decline of sharing in the “sharing economy.”
Four years ago the benefits of “collaborative consumption” were thought to be many: the increased use of underused assets, along with a long list of environmental and social benefits. The new system’s “immense potential” was loudly touted. There were early critics of the term—the Harvard Business Review preferred “access economy”—but there really was something to it at the start. And the label itself made us feel good about it: who doesn’t like the idea of sharing?
There’s plenty of debate about where the “sharing economy” really got its start, but one contender is eBay, the now-ubiquitous selling platform. By enabling all of us to reach a vast market for our accumulated stuff, and to crowdsource the trustworthiness of both buyers and sellers through user reviews, eBay became one of the internet success stories of the 1990s and helped to pioneer the platform model, where a store (for example) did not actually have to worry about what goods to stock, or even about acquiring any inventory at all. It didn’t even set prices—sales were conducted by auction. And it seemed democratic to include all of us in the market as more than consumers—now we were sellers as well.
But twenty years later eBay is less about open access to the market and more a department store featuring a range of super-sellers. With the “buy it now” feature in which sellers fix a set price to bypass the auction process now dominating sales, eBay has turned into another sales channel for established online and offline retailers. Bloomberg reported back in 2013 that less than 15 per cent of sales on eBay used the auction process it made famous, and today familiar UK brands like Argos and Sportsdirect are among the top sellers alongside familiar US megastore retailer Target.
It is Airbnb along with Uber, though, which are the flag-bearers of the sharing economy. Founded in San Fransisco less than ten years ago, the pair today have an estimated combined valuation of nearly $100bn. Airbnb was created with the idea that people could earn some extra cash by sharing the spaces they lived in: extra rooms, even sofas in living rooms were the bread and butter of the service. Airbnb was a true alternative to hotels, and not only because its prices were lower. Hosts really were sharing their homes with strangers.
Today Airbnb offers a different experience. The company has around 250,000 units to rent every day in the US alone, and Mark Woodworth of PKF Hospitality Research recently told Business Travel News that he estimated 70 per cent of those units were directly competitive with hotel rooms because they were offered as a living space, with no host on the premises. the New York Times has documented the ways in which the company has further tried to standardise the rental experience so that customers know what to expect, the same way they do when they rent a room from a major hotel brand. Sharing has less and less to do with the business.
But Uber may be the best example of why the “sharing economy” is such a misnomer. Originally categorised as one of a group of “ride sharing” platforms in which drivers of private vehicles could sell the unused passenger space in their cars using an app, in fact Uber is (and really always has been) a private taxi service. (“UberPool,” a carpooling-type service launched in 2014, accounts for about 20 per cent of rides). The company liked the “ridesharing” moniker, because it was helpful in its categorisation of drivers as non-employees, avoiding a host of thorny question about drivers’ insurance and other regulatory issues. But the California Public Utilities Commission re-categorised Uber and its competitors as “transportation network companies” in the 2013 settlement that allowed the companies to continue and expand their operations, and even the Associated Press has now banned the use of “ridesharing” in its style guide.
Along with the well-documented regulatory challenges they pose, most of the companies we think of when we use the phrase “sharing economy” have positive attributes: they have undoubtedly lowered the barriers to entry for participation in the labour force of several industries, and the low-friction transactions that their technology platforms enable are popular with users. But if the business model is less and less about sharing, it’s worth asking whether there’s really any sharing going on at all?
Lots of people participate as suppliers: a recent Pew study said that 24 per cent of all Americans reported earning at least some money from these companies in the past year. (Most of these, 18 per cent, earned money from selling something online, but a full 8 per cent reported earnings from performing work). The same study shows that those who consider this income “essential or important” to their livelihood are far more likely to be on lower incomes, without a college degree and to be ethnic minorities compared to those who consider the income “nice to have.”
Yet as the manual labour of workers is resold by sharing economy platforms, it is increasingly displacing opportunity in traditional jobs held by the “essential or important” group, jobs which were sometimes unionised and almost always almost always more stable and better-paid. A new study from Juliet B Schor at Boston College concludes that the “sharing economy” is exacerbating income inequality among the bottom 80 per cent by shifting more income to better-off households and providers.
Maybe Ariana Huffington and her band of new board directors can bring an end to the all-around bad behaviour at Uber that forced out CEO Travis Kalanick. That would be a good thing, and a sign of a company growing up. But we shouldn’t expect that Uber or any of its like will re-learn to share anytime soon.