The Sharing Economy: Undressed

A Terminological Reassessment

In the face of continuing economic recession, environmental concerns and xenophobic attitudes, the ‘Sharing Economy’ rose from the ashes as a Phoenix of economic and societal revival. Through a technologically capable cohort, it promised a set of seemingly simple solutions to our most pressing problems by leveraging information technology to empower individuals and firms to distribute, share and re-use excess capacity. With early adopters reaching the Elysian fields of 9 digit figures, such as Uber and Airbnb, its economic prowess is beyond doubt, and has demonstrated the ‘sharing economy’s’ shrewd ability to unlock the true commercial value of our underutilised assets. As this emergent paradigm of sharing resources has grown into masses, it has irreversibly changed our consumer patterns as the new modus operandi, prompting us to rally over technological platforms for our every purchase whilst simultaneously conditioning our emotions to the point where a poor WiFi connection leaves us in distress and boredom.

Whilst the myriad of opportunities that the Sharing Economy provides would be an impressive list to document. Attempting to catalogue, let alone forming an opinion of those, goes beyond the scope of this blog post. Instead, I aim to take a critical approach, and look towards examining the nasty implications that are found beneath the guise of the term’s current usage. Drawing upon the Sharing Economy’s founding principles of “benefiting the entire community” (Botsman & Rogers, 2010), I will argue that the proliferation of new business ventures falsely claim to be a part of the sharing economy to acquire the economic benefits of its positive connotation and undeveloped legal framework, leading decades of progress in labour rights astray. Within this blog, I will therefore advocate for a reassessment of the term, as well as urging for a full-scale education of its intended use that so many are yet to fully understand.

My intent here is not to rain on the ‘sharing economy’ parade. My purpose is rather to show you that the concept of sharing economy has been twisted by commercial interests, and that clarity around its factual use is desperately required — especially now when both supporters and opponents demand clear regulations regarding the Sharing Economy’s bellwethers; Uber and Airbnb.

“Yes. But, what is it really?”

The pledge of this digitally based new economy is embedded in a system of “collaborative consumption” (Botsman & Rogers, 2010), where the sharing of resources should supposedly benefit the “entire community”. Founded on principles of trust, market transparency and efficient asset utilisation, it proposes a system that aims to redress the foibles of capitalism that besieges the modern economy. In a cheerleading type manner, optimists will tell you about a ‘social revolution’, where workers have been given the freedom to take their breadwinning fates into their own hands, making them in charge of their own schedules and level of compensation (Hall & Krueger, 2015). They call it a post-ownership capitalism, built on a new form of intimacy and humanitarianism through a peer-to-peer network that is destined to contribute to the greater good in a bliss of economic, social and environmental well-being. It is no surprise then that the burgeoning SE model has been embraced worldwide, pledged to a Utopian future.

Amazing. Every word of what I just said is wrong.

Well, it isn’t that the above isn’t a possibility. I think that if accurately adopted, the SE business model may provide a panacea for many of our world’s most prominent issues. However, the proliferation of new business ventures that claim to be part of the sharing economy umbrella are often nothing more than a structural change in the marketplace adjusting to new technologies. By structural change I mean a fundamental shift from traditional business models to platform technologies, as well as a sea change in the behavioural preferences of consumers. In other words, “what has changed is the decline in transaction costs and increase in market efficiency brought by adding the world of clicks to the world of bricks” (Strauss, 2014).

In her latest typology, Rachel Botsman (2013) notes that the term ‘sharing economy’ tends to be confused with other new ideas, and that it is in fact merely a subset of collaborative consumption, confined to the concept of “sharing underutilized assets from spaces to skills to stuff for monetary or non-monetary benefits”. This interpretation forms the backbone of my argument and revolves around the “maximum utilization of assets through efficient models of redistribution and shared access”. While, platform technologies may facilitate the sharing of assets, on its own it seems to have little to do with the concept of sharing economy.

The absurdity of this confusion between the ‘sharing economy’ and ‘platform capitalism’ becomes immediately evident in the realm of the taxi industry. While Lyft started out as a carpooling app, convinced that their drivers did not engage in any commercial activity, it is today difficult to make a clear distinction between them and traditional cab drivers. The silliness of the first ought to be self-explanatory. The Lyft driver that picks you up from a nightclub three in the morning to then drive you home does not do it because he is already going that way and has a spare seat in his car. Nor does he do it out of the generosity of his heart. He does it because he expects he will be paid and because he considers it as a job to drive you from A to B.

Understanding the second is a bit closer to my purpose here.

I doubt that many readers of this post have navel-gazed much about the terminology on the issue of the sharing economy. If you are like most, you probably associate the word with companies such as Uber, AirBnB or Lyft as I have consciously done up until this point. However, is such a depiction accurate? What asset is it that Lyft or Uber make more efficient by sharing? The drivers’ cars? If so, relative to what? Many of London’s black cab drivers own their own taxis and operate as independent businesses. So, how then is Uber or Lyft much different to other taxi companies, except that they provide a technological platform that efficiently matches supply with demand? Even more confusing is it when people associate the sharing economy with websites such as Taskrabbit or Needto.com. Whilst these technological platforms provide valuable services, they do not improve upon any idle capacities between consumers.

While, ‘Voxplainers’ and regulators quibble (justifiably so in the latter case) about whether it is accurate to define companies such as Uber, Lyft or Taskrabbit as businesses of the Sharing Economy, I can tell you right now that it isn’t. Don’t believe me? Fine. Go full Cosmo and ask your friends, relatives or co-workers these two questions:

1. In what sense does Uber/Lyft/Taskrabbit make use of any underutilized assets or idle capacity?
2. Removing the technological platform that it relies on, how does its operations differ from their traditional competitors?

From this instinctive, random, subjective scale I am certain you will understand a lot more about the issue of the meaning behind the current use of Sharing Economy than any other etymologically thorough review of the term itself. How can I be so sure about this? Because it asks the question that we always need to ask when we are unsure about terminology. “Yes, but what does it really mean?”.

So, what does the concept of Sharing Economy “really mean”? It means making use of resources or skills that has idle capacity that can be further utilized.

Example, please.

Borrowmydoggy is the perfect illustration of an effective Sharing Economy. It is a website that matches dog-lovers who cannot or do not own their own canines with owners who need someone to mind or walk theirs. It perfectly blurs the lines between supply and demand, maximises utilization, and benefits everyone; the owner, the borrower and the dog. It is also the reason behind how I met my ‘9-to-5-Jack-Russell’, Lexi.

“Yes. But, why does it matter?”

… okay, Nils, you have exhausted me. Maybe we cannot say that Uber, Lyft or Taskrabbit (to name a few) follows the concept of Sharing Economy. But why does it matter what we call these businesses?

Two reasons.

• It directly affects how we regulate these companies.
• It indirectly affects workers’ labour rights.

As technology has developed swiftly, companies have been playing regulatory arbitrage, exploiting the foibles of employment regulations that has not kept up with the pace of technological advancement. In many countries, the SE business model is yet to be accurately regulated, allowing businesses such as Uber, Lyft or Taskrabbit to often operate in grey zones. In one sense, nothing is really new about these companies, but by claiming to only be an intermediary between ‘micro-entrepreneurs’ and consumers, these businesses have been able to circumvent unfavourable laws.

For instance, similar to Lyft, Airbnb also started out as a good idea: allowing people to rent vacant rooms at a stranger’s house for a few days or weeks at a time whilst the regular occupant is temporarily somewhere else. But, recently Airbnb has morphed into a platform where homeowners continuously rent out entire houses and apartments whilst permanently living elsewhere. While the former is sharing, the latter is not. As homeowners have discovered the regulatory and economic benefits of letting out their dwellings on Airbnb, they have started to evict long-term residents and replaced them with (often illegal) Airbnb hotel-guests, eating up the local supply of housing. In fact, recent findings indicate that almost a third of Airbnb’s revenues are now generated through commercial listings.

You can see the same pattern in employment standards. The issue of out-dated regulations has led to a marginalization and regressed model of labour, where businesses increasingly classify their workers as independent contractors in order to lower their cost by often 30 percent. The workers who have been lured in by the enchanting rhetoric of becoming their own boss, in charge of their own schedule and level of compensation, have instead been reduced to a cheap and disposable commodity of a centralised platform. For all their rhetoric, many of these platforms still have free reign over their community members (Kenney & Zysman, 2016) and can exercise the same control over their ‘contractors’ as traditional companies can over their ‘employees’. The author Evgeny Morosov has intensified this concern by further arguing that the current usage of the term ‘Sharing Economy’ has not only a harmful effect on equality (Schor et al., 2015) and basic working conditions, but also “amplifies the worst excesses of the dominant economic model”. For instance, a couple of years ago Uber fired a group of drivers without warning who had begun to refuse short rides that they wouldn’t be able to make a profit on. The message was clear: Uber’s drivers were in fact not their own bosses, and could be fired if they didn’t follow orders.

It is then also clear that these companies have not invented a new economic model that will transform capitalism into a sharing economy. Compare, for example, online dating services, that use similar software of matching supply with demand, with Uber. It is semantically false, but not offensive, to say that Uber provides a ride-sharing service. However, it is both semantically false and offensive to speak of Tinder as sharing. It may sound unromantic, but following the reasoning behind those who claim that Uber is not a taxi service but rather a ride-sharing app, individuals on Tinder are “shared” in a similar manner.

Ironically, it seems that much of the criticism against the sharing economy seems to root in an unshared understanding of the term. While we thought that the sharing economy would change supply and demand; disrupting the relationship between buyers and sellers; and decentralizing the power relations between big companies, employees and consumers; the reality has been remarkably different. The sharing economy, as currently used, has been perverted by commercial interests, only to be concerned by the economic benefits of its unclear legal structure whilst ignoring the founding principles of trust, transparency and efficiency. Unless the sharing of resources includes the maximum utilization of assets that benefits the entire community, then indeed, it is merely empty rhetoric or utopian thinking without substantiation.

Hence, if we ever are to achieve the full potential of this angelic movement, we need to establish clear lines of what the term ‘Sharing Economy’ entails and reevaluate what businesses that belong to its term.