CapitalismEssays

The Politics of the Sharing Economy

“As best we can tell, the politics of the venture capital elite boils down to fending off higher taxes, keeping labor costs low and reducing the ‘burden’ of government regulation. … Silicon Valley could start by putting a stop to pretending that the sharing economy is about anything other than making a killing.” – Andrew Leonard

If you’ve heard about companies like Airbnb, Zipcar, Skype, Uber, Getaround, and Lyft, and you know a bit about crypto-currencies, you get the picture. The “sharing economy” is just as exhilarating and vexing as the Web 2.0 meme was nine years ago.

I am all there with Arun Sundararajan, professor at Stern School of Business at NYU, who describes walking down the street in New York City, musing on all the parked cars that remain unused ninety-two percent of the time. He gets it right; it seems awfully inefficient, even wasteful. Why couldn’t he just pick up one of those vehicles, run an errand, return the car to that same spot thirty minutes later, clip a twenty dollar bill under the sunshade, and be done?

But then he claims that such emerging marketplaces can perfectly self-regulate and should be left to their own devices. Sharon Ciarella, Vice President of Amazon Mechanical Turkmade a similar argument: Mechanical Turk workers would just vote with their feet — they could not be tricked into performing exploitative work. All good here; no intervention needed.

Not so fast. It is surprising that crowdmilking practices on Amazon’s Mechanical Turk still have not raised red flags in the offices of regulators. Based on these examples, it should be clear how sorely regulation is needed. I agree with Evgeny Morozov who pointed out that the so-called “sharing economy” is nothing but the logical continuation of crowdsourcing. A company like Uber is not free from those dynamics. There is a reason that taxi fares are regulated; it prevents abuse. I rode in a town car recently and was quoted $16 for my trip. Through Uber, the same trip would have cost between $21 and $27.

But it is also all so electrifying. Uber is valued at 10 billion dollars and Airbnb, a company founded in 2008, is valued higher than the Hyatt hotel chain. Airbnb offers as many rooms as Intercontinental, which has 4600 hotels with 120,000 employees in over 100 countries. It took Intercontinental sixty years to build this business empire. Hyatt and Intercontinental had to hire architects and build up an enormous infrastructure. And then here comes Airbnb, which offers an impressive 500,000 listings in 33,000 cities in more than 192 countries. So far, Airbnb has hosted 8.5 million guests without ever turning a brick. All they got is an app; it’s a logistics company. Are we looking at a secret plot, a covert p2p takeover? Companies in the “sharing economy” can only function because they are using your “assets,” your resources: your car (Bla Bla Car, Getaround), your apartment (Airbnb), and your computing power (Skype).

But the exploitative basis of such business ventures is overshadowed by their obvious appeal to consumers. In the sharing economy, surviving without a job suddenly seems to be in reach; people can now rent out all of their “assets.” The rush to wield unused capacity (“Buy a bigger car because now you’ll be able to rent it out!”) can quickly move from a bit of welcome extra cash to being a requirement. “Why don’t you just lend your car, drill, parking lot, blender, and house once your unemployment benefits run out?” And the sharing economy can even feed you. A new app lets you share your leftovers with strangers.

The appeal of the sharing economy to the consuming public is solidified through its rhetoric. Rachel Botsman and Roo Rogers’s book What’s Mine is Yours, published by Harper Business, is a frequent reference in the sharing movement, which, unlike its title suggests, has nothing to do with infrastructure socialism or Richard Barbrook’s “cybernetic communism.” The “sharing economy” comes with slogans like “Sharing is the New Buying,” “Sharing is Growing,” and “Sharing is Mainstream,” and vocabulary like love (!), open innovation, trust, co-creation, co-design, and mass customization. This sentimentality is easy to understand. Take the example of Etsy. Many people have a soft spot for this site and community. Who wouldn’t immediately line up when they hear about a culture that is community-centric, based on trust, sustainability, a novel type of horizontality, “a new social operating system based on unused value,” generosity, and a culture that is against wastefulness and for responsible consumption and completely new marketplaces?

Now, though I want to give the impression that I want to sign up for commons-based peer production, I also want to be crystal clear about which part of this conversation I don’t want to have any part of. There is a difference between non-market practices and greed-free business like Craigslist and Fairnopoly on the one hand and corporations like Airbnb or Uber that profit from peer-to-peer interactions on the other. Again, I support peer production and sharing practices but I am vexed by attempts to subsume them into the new corporate hype of “the sharing revolution” that comes with calls to make the world a better place and comparisons to the Arab Spring and Occupy Wall Street. What seems to be completely missing from the discussion about the “sharing economy” is a distinction between the shifts of markets (and labor practices) to the Internet and the surprising victories of market incumbents like Airbnb, Lyft, and Uber on the one hand, and commons-oriented peer production and greed-free companies on the other.

The market-oriented companies of the former group have given rise to a culture in which all “sharing”-oriented practices end up characterized by the celebratory Californian Ideology, complete with mandatory meditation, cheers, and group hugs followed by business pitches. Close your eyes and wake up in San Francisco circa 1995, then turn on an episode of HBO’s Silicon Valley (spiritual advisor to business tycoon: “You clearly have a great understanding of humanity”).

I am not sympathetic when practices and projects like Shareable and Wikipedia or — more generally — collaborative lifestyles with people exchanging resources such as food, skills, or time, are mixed up with often exploitative practices such as crowdsourcing or massively commercial online learning platforms that can be linked to the closure of Community Colleges. What Yochai Benkler defines as commons-based peer production shouldn’t be thrown into one pot with mass customization sites like MyTwinnGemvara, or Zyrra and co-design a la 99Designs. It is not to be mixed up with developers designing unique features for platforms in the app economy. SETI@home would not hit the “like” button on AMT, usertesting.commob4hire, or 99tests. The high-minded values of genuine commons-based production should not be confused with the user exploitation inherent in the practices of a company like Airbnb, which is not concerned with the fact that hosts who are rent-subsidized can be evicted on the grounds that they obviously did not need all that extra space. And do we really want to wave our lighters through the dark evening skies for the newly gained ability not to buy a table anymore but just get the parts and assemble it ourselves?

Let me be a bit more concrete. Economists now project a division of society, where a superclass of ten to fifteen percent of the population makes over one million dollars a year and the rest makes between $5,000 and $10,000 annually. The numbers and percentages may differ but there is a pretty coherent vision here of the overdeveloped world being transformed in a way that cuts out the middle class. Computer scientist Jaron Lanier has argued that the Internet is directly complicit in this transformation.

How would a society be able to move in such a direction? It would require an extreme de-skilling of large parts of the population and the reorganization of labor in a way that makes extremely low-paid work available for the vast majority of the population. The rhetoric of austerity can do wonders in this regard. As long as everybody understands that they have to tighten their belts, the ruling class can cut wages and transform the nature of work for the rest of us. This reorientation of labor and society also entails a prejudice against prospective workers who possess credentials or deep skills that could serve as bargaining instruments. If the goal is to undermine the educational system and replace it with a system of learning that does not allow for credentials and actual deep learning, then distributed learning (i.e. education not dependent upon a physical location) would be a highly efficient instrument on the way to a society without a middle class. To be clear, I’m not against massively open online courses in general, but I’m deeply skeptical about the commercialization of connected learning.

There is really a tricky undercurrent that sometimes gets forgotten. It is absolutely true that it’s phenomenal that Airbnb and Skype could “disrupt” entire industries (to use business lingo for a moment) without having to build infrastructure but instead using existing “wasted resources.” And it is true that consumers seem to benefit from the services. But let’s also acknowledge that this means that people have to open their homes, that the nature of the private has completely changed, and that life itself changes when your apartment turns into a B&B and you become an innkeeper.

If the goal is to undermine the traditional nature of employment and make the gig economy go viral, then businesses like TaskRabbit, Uber, or Lyft should be celebrated. If one thinks that the model of micro-entrepreneurship is something to aspire to, then all of that makes perfect sense.

At the end of their book, Rachel Botsman and Roo Rogers write: “The status quo is being replaced by a movement. Peer-to-peer is going to become the default way people exchange things, whether it is space, staff, skills, or services.” Statements like that could come straight out of the Occupy Wall Street handbook. But incumbents in several areas of the economy in fact iterate this activist rhetoric in the context of an industry takeover. It is fantastic that co-creation is possible on Amazon.com where authors can self-publish with the help of platforms like Blurb. At the same time, self-published authors who make it onto on Amazon’s best-seller list also make only a fraction of what they would have made in the context of traditional publishing. Therefore, I would not hold up companies like Lulu, Blurb, MooThreadless, or Amazon’s book reviews as shining examples of co-creation, powered by the living labor of intrinsically motivated producers. And I cannot even start to address here the harsh mistreatment of workers in Amazon warehouses all over the world.

One thing is clear: there is something irresistible and important about commons-based peer production. But what is compelling is not that millions in revenue have shifted from the owners of the Intercontinental hotel chain to the youthful owners of Airbnb or that a completely new breed of business has taken hold. What matters are collectives and greed-free economic practices that are infused with values relating to ecological concerns.

In “When Push Comes to Pull,” David Bollier defines the pull economy as being based on demand rather than supply, an economy that is built by like-minded individuals who “pull” the goods and services that they want on their own terms. Nobody needs to create the demand for me to want a place to stay in when I’m in another city. That need already exists and services like home sharing and boat sharing meet that need. Yes, there are new marketplaces for labor, things, ideas, and money, but we should look closely and see whether they are addressing issues of income inequality or if they are just about delivering the next Jeff Bezos.

Community-based tool lending libraries, bike and car sharing initiatives, meal exchanges (e.g., to feed the Walmart employees who can’t afford a Thanksgiving dinner) or potlucks, peer-to-peer land initiatives, personal fabrication with 3D printers, open hardware, the free exchange app Yerdle, and even team-buying services like the Chinese Twangou set the needle of our moral compass in a much better direction than platforms that expropriate and capitalize on our labor.

Value creation is no longer bound to corporate wage-labor. The value that is created through the collaborative economy is based on social connectedness, it is based on communities, it is based on connectivity; it is grounded in the ubiquitous use of mobile phones, collaboration, and economies of scale.

Free labor may not be the problem itself but at the same time, I am not interested in being a wheel on the bandwagon of any soon-to-be billionaire incumbent.

Trebor Scholz

  • This is a very interesting piece indicated that the way we “share” can make all of the difference. How it can both empower or exploit the powerless. I have an empirical question, though. How does skype fit into this problem? You mention it as an exploitative, but what makes it so? I guess I want to know the details of the workings in many of the cases you, Trebor, mention. What makes Wikipedia, good; Skype Airbnb, Zipcar, Uber, Getaround and Lyft, bad? Is it just profit?

    • Trebor Scholz

      Thank you, Jeffrey, for the follow-up. Skype is based on Kazaa, a peer-to-peer network application that followed on the heels of Napster. I don’t want to wear you down with technical details but at the core, Skype is using a network of computers, they call them Super Nodes, to route your calls or video. That means that your PC likely operates as such a node for other Skype users. Now compare that to the way, that’s say telegraphy, radio, or television operators and in many cases still operates: it is expensive in terms of infrastructure. What companies like Skype and Airbnb and Uber simply skip is a decades-long process of investing in telecommunication infrastructure- cables, operators, engineers, the works. Skype merely uses what they call your

      “untapped assets.” We are talking about the computing power that your PC is able to perform but that you do not make use of and that companies like Skype simply capture. Their entire business model is based on your hardware. I’m not claiming that Skype or Airbnb are exploitative. But I do take issue with this whole rhetoric of these market incumbents Uber, Airbnb, etc), which is really not very surprising but annoying as hell nevertheless, which is this supreme blend of the ” I want to change the world” rhetoric, mixed with a few references to Occupy Wall Street or the so-called Arab Spring, followed by business pitches. You can sit in conferences on the so-called sharing economy for days on end, without ever hearing a consideration of how these disruptions change the life of actual workers on the ground. A second aspect, and that speaks to the second part of your question, concerns the way in which these market incumbents and their ideologues absorb public-spirited practices into their spin. And yes, there’s a fundamental difference between sharing my knowledge on a website like Wikipedia, which is run by the Wikimedia Foundation, and turning my apartment into a hotel, and thereby turning some 30-year-old into a billionaire. This is definitely material for a longer conversation but I hope that starts to answer it.

      • Yes, certainly this will be the beginning of a long term conversation, and I believe not only between us. As I read your answer, being grateful for the explanation of how Skype works. I wonder if the issue may be about the (re)distribution of wealth. Since we are creating value for “a few 30 year billionaires,” we should have an opportunity to share the wealth, either as part as a contractual relationship, or more likely through a new form of taxation. Just some initial thoughts.

        • Trebor Scholz

          Economic justice, I think, is central to this discussion. We could talk about guaranteed basic income, or, for starters: shorter hours, but also post work imaginaries. In terms of taxes, the French tax proposal advanced by Colin N. and P. Collin was interesting. They suggested that companies like Google or Apple etc. by extracting value from French users of their services but that this monetized value is not taxed. It was a hint that tax fraud is being committed. And lastly, when you’re talking about taxing billionaires, why not start with the top 0.1%?

          • I agree. What you show is that how we pursue economic justice has changed, and that it is becoming more difficult to imagine, let alone achieve.

  • Guest

    Thank you, Jeffrey, for the follow-up. Skype is based on Kazaa, a peer-to-peer network application that followed on the heels of Napster. I don’t want to wear you down with technical details but at the core, Skype is using a network of computers, they call them Super Nodes, to route your calls or video. That means that your PC likely operates as such a node for other Skype users. Now compare that to the way, that’s say telegraphy, radio, or television operators and in many cases still operates: it is expensive in terms of infrastructure. What companies like Skype and Airbnb and Uber simply skip is a decades-long process of investing in telecommunication infrastructure- cables, operators, engineers, the works. Skype merely uses what they call your
    “untapped assets.” We are talking about the computing power that your PC is able to perform but that you do not make use of and that companies like Skype simply capture. Their entire business model is based on your hardware. I’m not claiming that Skype or Airbnb are exploitative. But I do take issue with this whole rhetoric of these market incumbents Uber, Airbnb, etc), which is really not very surprising but annoying as hell nevertheless, which is this supreme blend of the ” I want to change the world” rhetoric, mixed with a few references to Occupy Wall Street or the so-called Arab Spring, followed by business pitches. You can sit in conferences on the so-called sharing economy for days on end, without ever hearing a consideration of how these disruptions change the life of actual workers on the ground. A second aspect, and that speaks to the second part of your question, concerns the way in which these market incumbents and their ideologues absorb public-spirited practices into their spin. And yes, there’s a fundamental difference between sharing my knowledge on a website like Wikipedia, which is run by the Wikimedia Foundation, and turning my apartment into a hotel, and thereby turning some 30-year-old into a billionaire. This is definitely material for a longer conversation but I hope that starts to answer it.

  • Frank Pasquale

    We can only get to distributive justice by acknowledging one key fact: many of the big billionaire winners here just happen to be lucky. They happened to offer a service when, for whatever reasons, millions of users wanted on. (And many happened to be rich and connected enough to scale up the software and hardware to serve/exploit a big user base.)

    All this militates in favor of high tax rates to pay for the real risk taker in the economy–the government. As Mariana Mazzucato shows, the govt funded the key innovations that made all these platforms possible. Gar Alperovitz & Daly draw the normative conclusions.

  • Ifigeneia Konstantinidou

    aaaand the free swapping site Swapdom…

  • Alison Powell

    A great piece that articulates some key distinctions that are not always made explicit. I’ll recommend to the student I have writing a dissertation on this topic. I just wanted to add one more comment about Air BnB – surely the company is profiting not just from apartments but also from the full payments that they take from renters at the point of reservation and hold (presumably earing interest on) before releasing them to hosts later? Has anyone done a study on this aspect of the business model? Thanks again for this article.

  • peter

    Great opinion piece …bottom line for me is in today’s world, everyone is in everything for themselves … the public good has disappeared.

  • jancsika

    Please don’t refer to centralized web services like AirBnB as “p2p”. There is no way in which their design or even the social interaction they foster can be labeled that way. Even the companies which have coopted the term “sharing economy” don’t use that term. What your misnomer obscures is that actual p2p services– like Bitcoin– are indeed self-regulating, in the sense that every category of scam you can think of has made its way through its wide-eyed userbase.

    There are problems associated with any p2p software that are extremely difficult to solve– how to allocate resources, ward off cheaters while granting privacy to users, etc.– that are exponentially easier for centralized services to address. But solving these problems is an important task because p2p designs can create more resilient networks that are difficult to shut down or censor. It has nothing to do with exploiting people for money, and everything to do with putting the users in control of their own networks.

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