The implications of the flexible economy

My Friday column in Expansión, Spain’s leading financial daily, is called “The flexible economy” (pdf in Spanish), and raises some of the questions associated with an economy in which resources that have traditionally been on the margins of the system can suddenly become part of it thanks to technological applications that allow for more efficient supply and demand, taking better advantage of the area below the supply and demand curve.

I was prompted to write my column after hearing about the new financing round that the extremely controversial Uber has just completed. This is a company that has had its share of problems, but that has just taken on board new shareholders and been valued at 40 billion dollars, a record for a company that has been around for such a short period of time, and an ascent that outdoes even that of Facebook. What do these investors know that we don’t? Quite simply, that Travis Kalanick intends to create a huge pool of drivers, and eventually, when the technology permits it, of driverless vehicles able to move any kind of goods as well as humans, and that could prove to be fully scalable and hugely profitable.

At the same time, this week has seen an independent report commissioned by the British government about the need for legislation to unlock the sharing economy and give companies like Uber, Taskrabbit or Airbnb the opportunity to create new jobs. At the same time, relaxing current legislation could also create many headaches for sectors until now subject to intense regulation.

This is clearly a complex question. Bearing in mind that these types of companies do not generate direct employment but instead limit themselves to providing a meeting point between supply and demand, would their growth mean that huge numbers of people would be further pushed into precarious working conditions, bereft of any protection under labor law? Is the sharing economy leading us to a society in which we’re all self-employed?

This is also a subject that arouses strong passions depending on which side you fall. Once again, we face disruption.

Below, the text in full:

The flexible economy

Two recent news stories point to economic changes that will be of concern to many: on the one hand, Uber, a company that has made head-on conflict with a traditional industry its hallmark, has just closed a round of financing that has put its value at above 40 billion dollars.

At the same time, an independent report commissioned by the British government recommends relaxing the rules and restrictions that constrain the sharing economy from reaching its full potential to help create more jobs.

The growth of the sharing economy is linked to the availability of technology that makes it easier for a better fit between supply and demand by taking advantage of resources that until now have been largely idle. Transporting people, temporary contracts to carry out simple tasks, renting out a property… these are activities until now subject to rules, requiring licenses and controlled by closed shops, and that attempted to regulate demand. Any attempt to bypass them risked breaking the law.

Technology allows us to carry out the regulation process unaided and to integrate these activities into the economy. Many of the former restrictions no longer make sense, and are contrary to what we as consumers want.

At the same time, we need to be aware of the downside: these new platforms do not offer any type of job security; they simply coordinate supply and demand. In which case, will we all end up being self-employed, living from day to day with no long-term benefits from working? And what about those sectors of the economy that are not directly profitable?

It’s not going to be an easy transition, and it will leave many fallen by the wayside. But it seems as though there is no going back.

(En español, aquí)