Introduction and the sharing economy
Being 'digitally disruptive' has become a buzzword in recent years. Radical new business models from the likes of Uber and Airbnb have shaken-up entire businesses on a global scale. This is the 'sharing economy', the 'gig economy' or the 'Uber economy', and its membership is growing.
The big players, at least by status, are Uber, Airbnb and Etsy, but others include JustPark, Bla Bla Car, Handy, Taskrabbit and Neighborrow. What these services all have in common is that they allow peer-to-peer sharing of goods and services.
That all sounds great in principle, but employees of traditionally run industries are fighting back against these new upstart arbiters of their terms and conditions, and regulators and politicians are joining in too. Uber executives are on trial in France on the charge that UberPop is an illegal taxi service, while the app's insistence that its drivers remain freelancers is being successfully fought across the globe, with several strikes and decisive court rulings against Uber.
Meanwhile, Airbnb-advertised pop-up hotels in disused office blocks in Tokyo have been closed down by authorities concerned about safety, while other towns are banning short-term home-sharing altogether.
The term 'digitally disruptive' has become an overused cliché spat out by the PR machines to market almost every new app going, but does it now mean something negative? To digitally disrupt increasingly means a startup that has contempt for local laws and public policy. Is that good or bad? Are tech companies attempting a coup on policymaking? Or is the sharing economy DOA?
What is the sharing economy?
"It's a new economy where workers are freelancing their services to start-ups or small businesses," says Rebecca Bridges, Employment & Immigration Solicitor at law firm Taylor Rose. "Freelancers are effectively sharing their human or physical assets, whether that is a taxi, accommodation or postal service, through marketplace-style businesses to promote their services."
Trouble is, the sharing economy is operating outside of traditional workplace constraints. "It's redefining traditional work and economic structures," says Bridges.
Proponents of this 'new world order' are largely those who run it – tech companies and the venture capitalists who back them – but the convenience of these apps has made them widely popular in some urban areas. "The Uber economy has enabled tech and app based companies to become labour brokers between consumers and the services they require," says Bridges, who thinks that the phenomena is most prevalent in San Francisco, New York and London.
The sharing economy is also about a new perspective. "A new generation of consumers, thanks to a history of social sharing, is quite comfortable to benefit from staying in another person's home, for example, and sees what traditionally people would view as an invasion of privacy as an advantage," says Mike Laming, Lead Technologist at digital innovation company Adaptive Labs. "They are also trusting enough to ride share with Uber rather than being sceptical and cautious – it's as much about mind-set as the technology that is enabling the physical organisation."
How is it supposed to work?
"The 'Uber economy', the 'gig economy' and the 'sharing economy' are all really talking about the same thing – the co-ordination of underutilised resources across a geographic area through technology," says Laming.
People can share their services and freelance for whoever they want. Oh, the freedom, the flexibility! The extra income! And it works perfectly! Err, hang on…
"To a large extent it doesn't work," says Laming. "Aside from a handful of high cost, high value services, like Airbnb, Uber or Handy, it's dead in the water." The reason for this, of course, is that these companies are under intense regulatory pressure. "It threatens to compromise their business models, making them potentially unviable in the long term," adds Laming, who also doubts that the sharing economy will spread.
He further observes: "If the cost of sharing is significantly lower than the purchasing option – either with time or money – then it's likely to work, but most items aren't like this … either it costs too much to rent, or it takes too much time to coordinate."
Although such apps are often fought against by those in traditional industries, they can be complementary, and merely extend choice. Airbnb says that 76% of its properties are outside the main hotel districts, while Boston University calculated that for every 10% increase in the size of the Airbnb market, revenues for hotels dropped by 0.37%.
- The reasons why innovation must be meaningful for tech startups
Tech firms shaping social policy
Who hates the sharing economy, and why?
Some worry that these new business models means only one thing; exploitation to cut business costs. "These new economies are creating new definitions of what an employee is, often with no legal standard," says Bridges. "So-called employees are being defined as contractors, freelancers and co-workers, and losing out on many typical employment benefits." Work for one of these companies and you can wave goodbye to minimum wage, health benefits, lunch breaks, annual leave, sick pay and overtime.
"Companies such as Uber, Airbnb, Etsy and JustPark do not take responsibility for their workforce, treating them as independent contractors even though the companies would not exist without their labour," says Bridges.
Companies at the forefront of the sharing economy have been accused of 'corporate nullification', and of flouting laws – especially employment law that has been constructed over decades to protect people. "The era of capitalism could very well be at its end," according to Bridges.
Does it matter if we let tech companies shape social policy?
"We've entered an age when technology companies hold far more power," says French Caldwell, chief evangelist of governance, risk and compliance at software firm MetricStream. "Whether it's Google and the 'right to be forgotten' issue, or Uber and its worldwide clashes with regulators and governments, the largest tech companies now have a lot of influence."
Caldwell blames the sheer speed of Uber's development; its business model just didn't fit within existing legislation, and by the time regulators reacted it had the public support and – crucially – the revenue to lobby against reactive laws.
Are tech firms' radical business models now at the mercy of politicians?
Employment law needs to adapt, and fast, because Uber et al are not going away. But 'sharing companies' also need to get real. "Many are classing themselves as technology companies, but they are actually car services, cleaning services or courier services," says Bridges, "and the misrepresentation is allowing them to avoid certain legal obligations."
However, the end result is a mixed bag, with the likes of Uber operating differently in specific countries. "Being able to fight back hasn't completely worked in Uber's favour, with governments such as Spain's protecting the status quo and simply banning it from operating," says Caldwell, though he also notes that in New York City, politicians who initially backed taxi companies and their drivers have caved to the pressure of all the riders and drivers who have adopted Uber.
He adds: "In most places regulators end up adapting the rules to fit Uber's services … in the end, we have a patchwork of regulatory regimes, some where disruptive business models go viral, and others where local and national governments block the new services."
This to and fro-ing of pro and anti-Uber sentiment is a good thing, thinks Laming, if the 'Uber style' business model is to continue to evolve and spread. "We have to be careful that existing, well-meaning regulations don't stifle innovation," he says. "To what extent are regulations protecting the incumbent's position versus providing adequate services for consumers? It's a trade off, and clearly Uber is a very popular service, and a net win for consumers overall."
National dimension
If the sharing economy spreads and becomes the norm globally, countries like Spain could soon be considered backward, but there's also a national dimension. What country's politicians or people want to have their economies and industries dominated by US tech companies? The answer is to find their own Uber. "Many governments are beginning to put 'insider' models in place, whereby national digital platforms and start-ups are nurtured, and e-commerce barriers are removed," says Bridges.
Established interests
While some worry that the fight against such apps is evidence that we're all at the mercy of established interests, which have little concern for the average punter, others are focused on leaving it all to the market. "We should let the market do its thing," says Laming. "The changes over the long term are likely to be a net positive although there will be short term pain for established players. Startups will always be pushing the envelope in terms of what's possible."
Either way, don't get carried away with the sharing economy; it may be here to stay, but it's both tiny and under huge scrutiny. Uber might well herald a step-change in how the world does business, but only in the long-term – and only if we let it.
- Uber's place in the sharing economy
from www.techradar.com
