Why Uber must be stopped

The touted start-up is proving to be the embodiment of unrestrained hyper-capitalism. What happens when it wins?

 

Why Uber must be stopped
Jordan Belfort and Gordon Gekko

What is Uber? A paragon of free market efficiency and technological innovation serving the greater convenience and comfort of the general public? Or living proof for why capitalist societies require regulation?

It is testimony to the ceaseless striving of Uber that Silicon Valley watchers find themselves with new reasons to ponder these questions nearly every week. But the end of August brought special vim and vigor to the debate. In particular, Verge’s publication of Casey Newton’s great scoop about the tactics Uber has been deploying to recruit riders from its top competitor, Lyft, has excited reams of commentary.

No matter what you think of Uber, the scope of “Operation SLOG” (Supplying Long-term Operations Growth) is impressive. Uber has hired hundreds of private contractors in multiple cities and equipped them with multiple burner phones (so as to prevent Lyft from identifying recruiters and blocking them from using its service), as well as credit card numbers and recruitment kits, and mobilized them to lure Lyft drivers over to the other side. Collateral damage to Lyft has extended beyond the siphoning away of drivers. When a Uber recruiter ordered a ride and discovered that the driver was someone who had been previously recruited, he or she immediately cancelled the ride. According to Lyft, Uber has been responsible for more than 5,000 cancelled rides in recent months.

Defenders of no-holds-barred free-market competition see nothing to be alarmed or concerned about. Riders can only benefit from fierce competition for their services, and the number of cancellations is trivial compared to Lyft’s total volume of rides, explains Timothy Lee at Vox. On the other hand, if you are inclined to see Uber as the acme of ruthless and amoral profit-seeking, then the latest news on Uber’s “deceptive tactics” is just one more confirmation of how the company will do anything to win.



Whichever side you fall on, the story is fascinating. There’s little doubt that Uber is the closest thing we’ve got today to the living, breathing essence of unrestrained capitalism. This is like watching Andrew Carnegie or John D. Rockefeller in action. This is how robber barons play. From top to bottom, the company flaunts a street-fighter ethos.

Uber’s ambitions are limitless and it has the bankroll to do what it wants. Indeed, there is some irony to the fact that Uber has so much cash in the bank that it need not comply with the most basic premise of capitalism — the notion that survival is predicated on making more money than you spend. With access to an astonishing $1.5 billion in capital, Uber can simultaneously wage regulatory battles in multiple cities, engage in recruitment wars in which smartphones are distributed like candy, subsidize drivers at below cost, and employ whomever is necessary to achieve long-term goals.

The real question we should be asking ourselves is this: What happens when a company with the DNA of Uber ends up winning it all? What happens when the local taxi companies are destroyed and Lyft is crushed? When Uber has dominant market position in every major city on the globe? “UberEverywhere” isn’t a joke. It’s a mantra, a call to arms, a holy ideology.

What happens when Uber’s priorities turn to generating cash rather than spending it? What happens to labor — the Uber drivers — when they have no alternative but Uber? What happens when it rains and the surge-pricing spikes and there’s nowhere else to go? A company with the street-fighting ethos of Uber isn’t going to let drivers unionize, and it certainly isn’t going to pay them more than it is required to by the harsh laws of competition. It will also dump them entirely in a nanosecond when self-driving cars prove that they are cheaper and safer. Making the case that drivers are benefitting from the current recruitment wars starts to look like a pretty short-term play. The more powerful Uber gets, the more leverage it will have over labor.

So here’s what’s going to happen. Society is going to realize that power as great as Uber’s needs to be checked. Uber, by virtue of its own success, will demonstrate where the lines need to be drawn for the general good. When Uber is the only game in town, the necessity for comprehensive requirements for commercial insurance and background checks will be obvious. When Uber starts using its logistics clout and unlimited investment capital to go after UPS and Hertz and FedEx, regulators will start wondering about antitrust issues.

It’s probably too soon to cry out “Break up Uber.” The company hasn’t won yet. But the smart money is on Uber (by definition, if you consider Google and Goldman Sachs, two prominent Uber investors, to be “smart”). When we allow capitalism to play out without rules, and learn anew how labor gets exploited under that scenario, we may recall why we had rules in the first place.

 

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

 

http://www.salon.com/2014/08/31/why_uber_must_be_stopped/

Who talks like FDR but acts like Ayn Rand? Easy: Silicon Valley’s wealthiest and most powerful people

Tech’s toxic political culture: The stealth libertarianism of Silicon Valley bigwigs

Tech's toxic political culture: The stealth libertarianism of Silicon Valley bigwigs
Ayn Rand, Marc Andreessen, Franklin D. Roosevelt (Credit: AP/Reuters/Fred Prouser/Salon)

Marc Andreessen is a major architect of our current technologically mediated reality. As the leader of the team that created the Mosaic Web browser in the early ’90s and as co-founder of Netscape, Andreessen, possibly more than any single other person, helped make the Internet accessible to the masses.

In his second act as a Silicon Valley venture capitalist, Andreessen has hardly slackened the pace. The portfolio of companies with investments from his VC firm, Andreessen Horowitz, is a roll-call for tech “disruption.” (Included on the list: Airbnb, Lyft, Box, Oculus VR, Imgur, Pinterest, RapGenius, Skype and, of course, Twitter and Facebook.) Social media, the “sharing” economy, Bitcoin — Andreessen’s dollars are fueling all of it.

So when the man tweets, people listen.

And, good grief, right now the man is tweeting. Since Jan. 1, when Andreessen decided to aggressively reengage with Twitter after staying mostly silent for years, @pmarca has been pumping out so many tweets that one wonders how he finds time to attend to his normal business.

On June 1, Andreessen took his game to a new level. In what seems to be a major bid to establish himself as Silicon Valley’s premier public intellectual, Andreessen has deployed Twitter to deliver a unified theory of tech utopia.

In seven different multi-part tweet streams, adding up to a total of almost 100 tweets, Andreessen argues that we shouldn’t bother our heads about the prospect that robots will steal all our jobs.  Technological innovation will end poverty, solve bottlenecks in education and healthcare, and usher in an era of ubiquitous affluence in which all our basic needs are taken care of. We will occupy our time engaged in the creative pursuits of our heart’s desire.



So how do we get there? Easy! All we have to do is just get out of Silicon Valley’s way. (Andreessen is never specific about exactly what he means by this, but it’s easy to guess: Don’t burden tech’s disruptive firms with the safety, health and insurance regulations that the old economy must abide by.)

Oh, and one other little thing: Make sure that we have a social welfare safety net robust enough to take care of the people who fall though the cracks (or are eaten by robots).

The full collection of tweets marks an impressive achievement — a manifesto, you might even call it, although Andreessen has been quick to distinguish his techno-capitalist-created utopia from any kind of Marxist paradise. But there’s a hole in his argument big enough to steer a $500 million round of Series A financing right through. Getting out of the way of Silicon Valley and ensuring a strong safety net add up to a political paradox. Because Silicon Valley doesn’t want to pay for the safety net.

* * *

http://www.salon.com/2014/06/06/techs_toxic_political_culture_the_stealth_libertarianism_of_silicon_valley_bigwigs/

“Sharing economy” shams: Deception at the core of the Internet’s hottest businesses

 

How companies like Airbnb use the language of “sharing” and “gifts” to conceal ambitions far more libertarian

 

 

(Credit: akindo via iStock)

 

“Sharing is the new buying.”

The title of technology analyst Jeremy Owyang’s survey of the sharing economy was exquisitely designed to grab attention: It was released just before the start of SXSW Interactive, the annual orgy of techie self-congratulation held every March in Austin, Texas. It boasted a clever, cognitively disjunctive twist: Sharing? Buying? Aren’t they opposites? And in an era of unlimited hype, it tabulated real data, reportedly “engaging 90,112 people in the US, Canada and the UK” to discern how and why they were embracing services like Lyft and Airbnb and Yerdle.

The study’s findings make for interesting and useful reading for anyone tracking the rise of what is called “collaborative consumption” — the proliferation of services that allow us to rent out our spare rooms and cars and junk gathering dust in the garage. But as I perused the contents, I found myself repeatedly coming back to a question I’d been obsessing over for months.

What, I wondered, would a Kwakiutl chieftain make of the sharing economy? (Bear with me for a moment.)

It is one of the delightful oddities of Internet anthropology: Dig deep enough into the early days of online communication and you are sure to stumble upon references to the practices of the Kwakiutl, indigenous inhabitants of North America who once reigned over a significant swath of what is now British Columbia. The Kwakiutl were famous for their “gift economy” rituals, festive gatherings in which gifts were exchanged to mark relative social status and create ties of reciprocity.



It was once fashionable for both libertarian programmers and left-wing social critics to characterize the early growth of the Internet as following “gift economy” practices that broke the traditional rules of market capitalism. In the Internet’s gift economy, programmers built tools and wrote code that they contributed freely to the benefit of the common good. They didn’t labor for anything as crass as money. Because they wanted to “scratch their own itch,” or aspired to higher status among their own peers, or for reasons of simple pragmatism, voluntary coordination seemed like a more effective way to solve common problems. The Internet was one giant potluck (a word derived from the Kwakitul “potlatch”) — we brought what we had to give, and got to taste everyone else’s offerings. The theorist Richard Barbrook dubbed it “cybernetic communism.”

The new sharing economy overlaps with its predecessor, the gift economy, in many obvious ways: Before the emergence of globe-spanning digital networks, it was impossible for far-flung programmers to efficiently collaborate on huge projects like the Linux operating system. The infrastructure of the Internet enabled programmers to share, copy and modify code with ease. In other words, it was suddenly much easier to give away the product of your programming labor and coordinate that labor with others. Similarly, there’s no Lyft without networks and smartphones — and no way to find out where the nearest Lyft driver is to the would-be Lyft rider. The fact that the Internet and mobile devices have enabled much more efficient resource allocation is not hype. It’s a fundamental building block of our new world.

But there’s also an overlap of rhetoric. The early advocates of the Internet gift economy saw it as a better way to be. This amazing information-sharing network, built from code that anyone could modify or copy, would benefit all of society! The sharing economy is proselytized with similar language. Sharing apps, we are told, builds trust between consumers and service providers. Sharing our stuff also conserves resources (e.g., ride sharing is good for the planet). Stare long enough at the marketing materials for Yerdle — “a marketplace where everything is free” — and “cybernetic communism” seems alive and well.

But there’s one crucial area where the linkages between the gift economy and the sharing economy break down. Reciprocity. The anthropologists who studied the Kwakiutl and other cultures with similar gift economy practices argued that the act of gift giving was meant to be reciprocated. Gift giving created obligations to respond in kind. These mutual obligations were the ties that bound society together.

The sharing economy doesn’t work quite the same way. The most high-profile sharing economy apps are designed to generate significant profits for a relatively small number of people. It is an open question whether the concentration of wealth that will result will bind our society closer together or continue to exacerbate the growing income inequality that is ripping us apart. This is the defining contradiction of the new economy: apps that enable us to pinch pennies and survive in an era of intense competition — to make do with less — will make them rich. That’s not the Internet “gift economy” as originally conceived, a utopia in which we all benefit from our voluntary contributions. It’s something quite different — the relentless co-optation of the gift economy by market capitalism. The sharing economy, as practiced by Silicon Valley, is a betrayal of the gift economy. The potlatch has been paved over, and replaced with a digital shopping mall.

*  * *

In her introduction to Marcel Mauss’ “The Gift: The Form and Reason for Exchange in Archaic Societies,” the British anthropologist Mary Douglas wrote that “a gift that does nothing to enhance solidarity is a contradiction.” Mauss himself writes that potlatch implies “a succession of rights and duties to consume and reciprocate, corresponding to rights and duties to offer and accept.” When we give each other gifts we are not being altruists; we are strengthening our mutual connections. This is how a group of individuals becomes a society.

I won’t deny that you can hear faint echoes of this sense of solidarity in the sharing economy. When I fist-bump with a Lyft driver I feel more of a sense of connection with her than I do with my typical Yellow Cab driver. If your Airbnb experience has you ending up in a spare bedroom of a house that is occupied by its owner at the same time you are there, then you may very well strike up a bond more meaningful than those that you share with the concierge at the nearest Hilton.

But I can’t shake the suspicion that this nascent, fragile solidarity is nothing more than marketing for some of the most agile capitalists on the planet. Consider Lyft. Last week, Lyft announced it was halfway through a new round of financing that aims to add another $150 million of capital on top of the $83 million the company has already raised. The new infusion will value Lyft at around $700 million. If all goes as planned, Lyft will one day enjoy a spectacular public offering or be purchased by another company for billions of dollars — and the investors will happily haul in some significant multiple of their initial payout. It will be a great day for Lyft shareholders.

But what does that mean for solidarity? What will the Lyft shareholders do with their profits? Outside of a few philanthropists, it’s not at all clear they will “give” their bounty back to the larger community or otherwise “share” it. Quite the contrary! As best we can tell, the politics of the venture capital elite boil down to fending off higher taxes, keeping labor costs low and reducing the “burden” of government regulation.

The concentration of great wealth in the hands of a small group that then employs that wealth to protect its own privileges and fortify its own status is the polar opposite of reciprocity. Growing income inequality weakens social ties. Our “sharing” is their windfall. That’s not how the gift economy is supposed to work.

Nowhere is this contradiction more self-serving than in the sharing economy’s stance on regulation. As articulated recently in “Trusting the ‘Sharing Economy’ to Regulate Itself,” a New York Times Op-Ed written by Arun Sundararajan, a business school professor at New York University, we are somehow supposed to believe that the forces of capital mobilizing behind the sharing economy are qualitatively different from any other potentially misbehaving market.

The profit-seeking interests of these private marketplaces aren’t that different from those of a textbook regulator: encouraging productive trade, keeping market participants safe and preventing “market failure.”

This is an extraordinary claim. The profit-seeking interests of private marketplaces are usually considered to be, by definition, at odds with the interests of regulators. The intersection of public safety and profit-seeking is exactly the point at which true friction enters the system. It’s exactly the point at which the general public can’t trust the private sector. It’s hard to understand why Sundrarajan thinks that sharing-economy companies are different from any other consumer-facing company. Don’t they all want to keep participants safe and prevent market failure?

In “Sharing Is the New Buying,” Jeremy Owyang declares that “brands that want to succeed in the sharing economy must tell stories around value and trust.” That strikes me as an odd formulation. Brands that want to succeed need to deliver value. And as for trust? In the earliest gift economy sense, trust was built from reciprocity and mutual obligation. Silicon Valley is going to have to work a lot harder to make that happen. It could start by putting a stop to pretending that the sharing economy is about anything other than making a killing.

 

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

http://www.salon.com/2014/03/14/sharing_economy_shams_deception_at_the_core_of_the_internets_hottest_businesses/?source=newsletter

 

Uber and Lyft Get a Lot of Hype — But Ridesharing Is a Parasitic Business Model

Labor  



There’s a lot of attention on the ‘disruptive’ ride share business, but its effects aren’t pretty overall.

Photo Credit: By Pkg203 (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)%5D, via Wikimedia Commons

Ridesharing companies like Lyft, Uber, and Sidecar use the ubiquitous ownership of smartphones to connect casual drivers and passenger clients through their proprietary applications. Like any broker they take their cut of the revenue in these transactions, (Lyft, for example, skims 20 percent off each payment made by a passenger through their smartphone.) Ridesharing companies encourage unregulated, hyper-privatized transactions among precarious laborers.

Their business model relies on marketizing formerly non-economic spheres of life, like giving a friend a ride in your car, and they have aggressively externalized costs like gas, insurance, payroll, etc. so that profits are maximized and expenses are as close as possible to nonexistent. In doing so they undermine the very existence of the taxi industry, but they also undermine public infrastructure in toto.

Taxis are not just some private sector dinosaur that should be hit from an innovation meteor. Taxis are an integral part of every major city’s transportation infrastructure. Taxis have been strictly regulated to ensure that the industry’s companies and contractor-drivers pay revenue into the city for the infrastructure they use: roads, signals, bridges, signs, sidewalks, etc. In San Francisco taxis generate over ten million dollars each year in revenue for the city to spend on maintaining transport infrastructure. The funds also pay for the costs of regulating the industry through the Taxi Commission. Regulators attempt to shape the industry in important ways to make it more accessible and equitable and therefore democratic. For example, San Francisco’s taxi fleet is 85 percent hybrid or CNG fueled, reducing the fleet’s carbon emissions and improving the health of city residents. This environmental standard is only possible because the industry is regulated, and ridesharing companies like Uber and Lyft undermine this effort. Taxis are also required not to discriminate among passengers, and to serve all parts of the city, among other things that might not be maximally profitable. It’s this public transportation infrastructure, a big part of which is comprised of taxis, that is being disrupted by the ridesharing companies who have inserted themselves as for-profit brokers in the transportation commons.

The people who will lose the most from the unbridled rise of ridesharing are those employed by the taxi industry which is seeing profits disappear. San Francisco’s taxi industry is very decentralized and highly competitive. There are about 31 cab companies today served by 10 dispatch companies, some quite big and some very small. No single firm is dominant. There are about 1,500 cabs authorized to drive within the city. The taxi industry employes several thousand workers. Taxi drivers are predominantly immigrants and people of color, and the average cabbie earns a very low yearly income.In 2000 upwards of 57 percent of San Francisco cab drivers were immigrants, with the largest groups having arrived from South Asia, East Asia, Russia and Africa. Of the 1,540 taxi drivers in the San Francisco, San Mateo, Redwood City metro region the hourly mean wage last year was $14.17, and the annual mean income was a mere $22,440.

When people say the taxi industry is “ripe for disruption,” what they’re saying, besides the real inefficiencies and problems affecting most big city taxi operations, is that it is a decentralized, highly competitive industry, most of whose owners and operators are low-income people of color, many of who are immigrants. They are susceptible because they are marginalized, and because they lack political and economic clout. In San Francisco the cabbies are definitely a noisy political lobby, but up against the tech and venture capital bosses and entrepreneurs, who are most influential in the Mayor’s office, the cab drivers are impotent.

That’s who is being disrupted, a competitive industry that is owned by, and which employes, working class people of color.

So who’s doing the disrupting? Who benefits from this attack on the taxi industry, and more generally on the principle of a regulated transportation sector?

The two biggest ridesharing companies in San Francisco are Uber and Lyft. Although they virtually didn’t exist until two years ago, between them they have raised about $390 million over the past 2 years according to securities filings with the state and SEC. Uber and Lyft are quickly expanding their ridesharing enterprises to New York, LA, Chicago, and other cities far beyond the laboratory of San Francisco.

Where is this money coming from?

Uber’s financial backers include Goldman Sachs, Google Ventures, and four other private equity groups. Perhaps Uber’s biggest financial backer isTPG Capital. Co-founder of TPG, David Bonderman, one of the wealthiest men on earth, is now on Uber’s board of directors. Bonderman’s personal net worth is somewhere in the ballpark of $2.6 billion. TPG reportedly has $55 billion in funds under management making it one of the largest private equity firms in the world.

Lyft’s financial beneficiaries are similarly elite members of the economic hierarchy. Earlier this year Zimride, the ridesharing company that developed Lyft, sold its Zimride ride-sharing application to Enterprise Holdings for an undisclosed sum. (Zimride was the equivalent of a combined craigslist ride-sharing bulletin board and Facebook.) Enterprise Holdings is a giant global corporation that booked $15.4 billion in revenue last year. As a private corporation, Enterprise is owned and controlled by the Taylor family of St. Louis. Jack Taylor, the family’s patriarch, is reportedly worth $11 billion. The Enterprise acquisition of Zimride is an example of how powerful corporate interest often respond to potential disruptors who might undermine their existing product; they purchase them and integrate them into their larger operations. In this case Enterprise, which peddles rental cars it owns, saw Zimride as something that could disrupt their profit stream, so Enterprise gobbled up the disruptor. The way Enterprise does business is changing as a result, but the distribution of economic power isn’t shifting.Uber’s other investors like Menlo Ventures, Benchmark Capital, and First Round Capital are pretty typical of Silicon Valley’s private equity network. The firms are owned and run by mostly white men with Ivy League college pedigrees, places like Stanford, Cornell, Harvard, Yale and other bastions of privilege. The partners at these firms are millionaires, and billionaires are not uncommon. They leverage pension fund, university endowment, and sovereign wealth dollars to invest in speculative ventures as well as established companies (and from their limited partners they extract hefty management fees). To call them members of the 1% would be inaccurate. Many of Silicon Valley’s private equity investors quality as bona fide members of the 0.1% due to the large sums of wealth and income at their command. While most are socially liberal, many of them make political investments with influential Democratic and Republican members of Congress to ensure the country’s tax code and business laws allow them maximally build their fortunes.
Ben Horowitz (son of the arch-conservative David Horowitz) was a founder of Opsware, a company Hewlett Packard bought for over a billion dollars back in 2007. Andreessen was a funder of that company. Opsware was possibly a disruptor to established tech companies like HP, so HP devoured it.Zimride’s Lyft ridesharing product which directly competes with taxi companies and bigger competitors like Uber received $80 million this year, mostly from theAndreessen Horowitz private equity firm.Again, Andreessen Horowitz is about as wealthy and establishment as you can imagine in American business. Marc Adreesseen, who half the firm is named for, got rich from developing one of the first web browsers. From the fortune he obtained doing that he invested in other big tech companies and became wealthy. Today Andreessen is a director of HP and Ebay, two Fortune 500 companies, as well as a director of Facebook.

Andreessen Horowitz manages probably upwards of $3 billion, and they have dozens of investments.They’re major backers of other disruptive tech startups like Airbnb and Udacity, two companies that are similar to ridesharing in that they are threatening the welfare and livelihoods of low-income communities and politically less powerful workers within the precariat.

Look across the other smaller ridesharing startups that are competing for market share in this gold rush sector and you’ll see similar stories, fast growing companies with very disruptive business plans backed by very powerful investors. The people whose lives will be most disrupted are going to be the less powerful working class who toil in the competitive and disorganized taxi and other transit industries. The public sector will be disrupted as it is partially privatized and as regulations are undermined in favor of new rules that allow tech companies to externalize costs as much as possible onto precarious workers. More and more parts of our lives will be transformed into relationships of market exchange. As San Francisco’s recent battles over ridesharing show, this is by no means a “natural” process. It’s politically determined as to what kind of economy we want, and how the rules of the economy will distribute wealth and income and provision for public goods.

“Disruption” is the zeitgeist of Silicon Valley’s tech industry, especially in the realm of startups. The mythos is this: small scrappy hackers with very little capital and a few computers can create new business models that will topple older fossilized companies, even whole industries. In the process the economy will become more efficient and everyone will have more choices. We all win thanks to the new Internet-enabled economy. That’s not at all what is happening in reality, however.

The ideology of disruption goes back a long way in the annals theorizing capitalism, but the current ideology really grows out of the work of Clayton Christensen, a Harvard Business School professor and devout Mormon who has built his academic career on case studies of disruptors. Christensen’s seminal 1998 article in the Harvard Business Review on disruption tells a story about dominant companies atop their industries —Firestone, Xerox, IBM— that were caught flat footed, and in several cases destroyed, by their smaller creative competitors. They failed to innovate and grow beyond their core markets. They failed to recognize the potential of a new technology that would make their existing products and services obsolete. This has fidelity with the actual history of American business.

Christensen, along with his son Matthew, manages a hedge fund that purports to bet on disruptors and short the stock of bumbling giants. Christensen also sponsors a think tank he named after himself, the Christensen Institute, which, according to its web site is, “dedicated to improving the world through disruptive innovation.”

California’s tech entrepreneurs have embraced Christensenian disruption. The big case studies in tech that seem to confirm Christensen’s theory are well known. Digital cameras destroyed film. Personal computers displaced mainframes as the core hardware business, and laptops have since eaten into a huge share of the personal computer market. Now mobile devices are eroding PC sales. None was ever seen as a threat to the existing dominant product and producer, but displacement happened nonetheless. Tapes replaced vinyl, CDs replaced tapes, but MP3s and iTunes-like services have replaced CDs. Cloud is displacing both the idea of storing your data on physical drives you own. Software as a service is chipping away at the idea of buying and owning software. And so on…

In a lot of cases disruption ends up being a battle of big corporations for market share. Consumers and employees within the industry aren’t necessarily better or worse off when the smoke clears and a winner emerges with a new technology and business model.

But the tech boom today is characterized by a another kind of disruption. It’s social disruption. New technologies and business models don’t just attack the existing dominant corporations; they attack social relations and transform non-business spheres of life into methodical instances of economic exchange from which the new tech innovators extract revenue. The tech boom is also characterized by disruption of smaller competitive markets by emergent tech monopolists backed ultimately by huge pools of private equity and giant, monopoly-seeking corporations.

The winners and losers in many cases of disruption are split along existing racial and class lines of inequality. Those with little economic or political power to defend themselves from the disruptors are seeing their livelihoods and communities turned upside down. Their small businesses are being destroyed. Their communities are becoming unaffordable. Those with cultural capital, and access to economic capital have a shot at being disruptive, at skimming some wealth off of deregulated industry and precarious labor. And the wealthy individuals and companies that should be disrupted by a clever tech startup —the tax dodging banks, the Fortune 500, the health care companies and insurance giants— have the resources to defend themselves, fend off the geeks, deploy an equally clever response to retain market share, or to just buyout the scrappy competitor and fold it into their existing empire.

The ridesharing phenomenon reflects all of this and more.

Do companies like Lyft and Airbnb help democratize the economy?

 

Those cars with the pink mustaches may not be smiling for long, if regulators get their way. (via Lyft)

The ‘Sharing’ Hype

BY Rebecca Burns

Last year year marked meteoric growth in the new “sharing economy”—a catch-all term for websites and apps that let people charge others for use of resources such as cars and rooms. Ride-sharing company Lyft saw a twentyfold increase in users of its signature mustachioed cars, and room-sharing platform Airbnb gained 6 million customers.

But 2013 also exposed the iffy legalities of “sharing,” as ride-sharing services tangled with city regulators and taxi unions, and Airbnb faced off against New York State Attorney General Eric Schneiderman in what Fortune magazine called the “seminal legal dispute” for the burgeoning sharing economy. In October, Schneiderman subpoenaed Airbnb for information on its hosts, alleging that some are using the platform to operate de facto hotels. The company is fighting the order in court.

Proponents of the sharing economy bill it as a way to reduce consumption and create jobs, and say that the crackdown on Airbnb would harm New Yorkers just trying to pay their bills. But critics argue that beneath their feel-good veneer, sharing businesses are little more than a new way for corporations to circumvent regulations, rob city coffers and undercut unionized labor.

In These Times convened a discussion on the sharing conundrum with David Golumbia, assistant professor of English at Virginia Commonwealth University and author of The Cultural Logic of Computation, Neal Gorenflo, co-founder and publisher of Shareable Magazine, and the SolidarityNYC collective, which supports the growth of cooperatives in New York City.

Proponents of the sharing economy tend to portray it as benefiting ordinary people by giving them a leg up over corporate actors like hotel chains. Is this accurate?

NEAL: As the cost to create, market and sell an increasingly wide variety of products and services plummets, people have a new system to go to: the sharing economy. Much of what was only possible for large corporations just a few years ago is accessible to ordinary individuals now. There’s a possibility for a power shift in favor of ordinary people, but they must wake up and take action to secure it.

DAVID: Siding with upstart venture capital is not my idea of giving ordinary people “a leg up.” The “sharing economy” doesn’t have much to do with individuals. Instead, it represents corporate capital doing what it typically does: Monetizing parts of the social world that have previously avoided it. The difference between renting one’s apartment on Craigslist and Airbnb might seem small, but it’s huge: the role of the intermediary converts the effort from an individual one to a corporate one that is all about extracting profit from resources that are not, currently, monetized enough, in the opinion of some venture capitalists.

SOLIDARITYNYC: There’s a spectrum of sharing economy groups, from cooperatives to private companies like Airbnb. Airbnb is portrayed as helping cash-strapped individuals, which may be true in some cases. But in the long-term, it will likely exacerbate New York City’s housing crisis, by allowing landlords to charge more in rent because their tenants can turn to this secondary market to make up the difference.

DAVID: Yes, and as this proceeds, “sharing” tends to become required by market prices rather than voluntary, in a dynamic I’ve been calling “crowdforcing.”

Most of the criticism of the sharing economy so far has come from conservatives. Writer Milo Yiannopoulos has called it an “ugly throwback to the dark days of socialism.” Is the sharing economy in fact socialist, or in any way anti-capitalist?

DAVID: How can a movement that has been started by corporate and venture capital be any kind of socialism? If we reframed Airbnb as “Hilton wants access to every Manhattan resident’s apartment when he or she is out of town,” we’d see more directly what is happening.

NEAL: The best parts of the sharing economy are bottom up, self-governed phenomena. It isn’t limited to tech companies, either—think about cooperatives, as well as depositor-owned credit unions. At Shareable, we use the term “sharing economy” in the broadest sense possible, as the wholesale democratization of the economy.

But we definitely need to use resources more wisely, so startups that help us better use idle assets have tremendous value. One shared car replaces up to 13 owned cars. Nothing else but sharing has the potential to radically reduce resource use, radically increase access to resources, and act as a big, local economic stimulus package.

DAVID: “Sharing” can be seen as a form of resistance to the capitalist economy. But the “sharing economy” becomes a way of capitalizing on that resistance. This strikes me as a strong instance of cyberlibertarianism, which is the yoking of far-right ideas about “freedom” and government to an apparently apolitical digital utopianism. The political mushiness of the rhetoric surrounding such projects masks what the leaders of the projects want, which is the extraction of profit from sectors so far insulated from such monetization. The only “freedom” such efforts ultimately serve is the economic freedom of concentrated capital.

SOLIDARITYNYC: “Solidarity economy” organizers define and try to frame our work through five principles: democracy, cooperation, social justice, mutualism, and ecological sustainability. Without the explicit commitment to some or all of those values, then the sharing economy—or the social economy, the new economy, or whatever other label we use—is just a new space of capitalist exchange where it didn’t previously exist or predominate. It’s the politics of the stuff that really matters here.

How should urban policy address the legal challenges presented by “sharing” businesses like Airbnb?

NEAL: The sharing economy doesn’t hinge on one ruling, or one company: There are many practical policy directions to increase the capacity citizens to co-consume, co-produce, and create their own jobs. Shareable and the Sustainable Economies Law Center recently put out the first ever sharing economy policy primer for urban leaders. In the case of housing, policies supporting housing coops, micro-units, and mother-in-law suites can increase density, make more affordable housing available, and build social capital.

DAVID: But the NYC case is emblematic because it exposes what Airbnb is really up to: getting around taxation and regulation for profit. While there may be nothing wrong with individuals offering their apartments for short-term rental themselves, coordination of these efforts together by a central corporate entity was always about getting around laws that were put in place by the democratic process and are mostly there for the protection of the public. Airbnb, like much of the “sharing economy,” is a project designed to bypass democratic governance, which is something no progressive should favor.

SOLIDARITYNYC: Yes, and the kind of profit-making that Airbnb enables can also act as backdoor gentrification that prevents communities from having a say in whether a neighborhood is mostly long-term residents or a collection of pop-up hotels and the businesses that cater to them.

It’s also worth noting that Airbnb takes business from the hotel industry, which offers many living-wage union jobs in the private sector in New York. Those jobs are backed by a complex web of regulation, collective bargaining agreements, and cultural custom that has generated economic well-being for a largely immigrant workforce. Undermining democracy and labor isn’t sharing, in our book. Democracy and social justice will need to be included and protected within sharing economy initiatives from the start if it’s going to be more than a tool for extraction and exploitation.

How about the growing numbers of people who work in the sharing economy? The car-sharing companies Uber and Lyft have both become the subject of lawsuits from drivers who say they were ripped off. But sharing economy companies tend to argue that those providing services are users of their platforms rather than employees, potentially making labor action more difficult.

DAVID: I would suggest refraining from getting involved in large-scale venture capital-backed projects to begin with. Anyone who doesn’t is making not just themselves but their peers and relations into targets for capital, and historically capital tends to get what it wants out of such relationships.

SOLIDARITYNYC: The abuse of labor can exist in any enterprise or organization, no matter how progressive. Instead of signing up as an Uber driver, these drivers could form their own company as a taxi collective—like Union Cab in Madison Wisconsin. Another way to do this that would improve upon the labor issues and the allocation and distribution of the surplus would be a consumer cooperative in which the vehicles were actually owned and shared by people who were the consumer-owners. You could even combine the two: a consumer-cooperative that had stake in the equity and governed a worker collective, which would run the service as drivers.

NEAL: The possibility to combine community financing, a cooperative business form, and an internet-based sharing platform exists.  Why not a “Fairbnb?” The challenge, however, is that community financing and cooperative businesses take more time and money to set up.  You typically see coops execute on well-understood business models like retail, distribution, and manufacturing.  I don’t see coops tackling unusual, risky tech ideas.  I think that this can change, but it’ll take a lot of time and hard work.

Given these challenges, how should progressives approach the sharing economy at this juncture?

NEAL: Progressives need a business model.  Republicans and Democrats have corporate America; progressives have a collection of issues to appeal to people’s moral instincts. But that can only go so far when people can’t house, feed, or educate themselves.  Progressives need to get behind the people-powered economy, all those ways ordinary people co-own what they need to thrive, as their main strategy.  Until progressives play the needed role as an institution builders in the new economy, they will continue to fade in importance.

DAVID: Progressives should be very suspicious of any and all liberatory claims stemming from venture capitalists, including those being made about the potential of the “sharing economy.” The advent of cyberlibertarianism has provided capitalists with a means to attract Left activism without making clear how divergent their goals are from those of the Left. Many existing cooperative enterprises have clearly articulated their relationship to Left politics, and it is important to support them. Newer “sharing economy” initiatives should be looked at very skeptically, especially if they appear to have backing from venture capitalists, and we should think very carefully about what the ultimate picture such efforts paint appears to be. While voluntarily sharing some extra space in one’s apartment may well be appealing, the prospect of being essentially compelled to “share” one’s living space in order to afford it is much less so.

SOLIDARITYNYC: We should be organizing around economic activities that contribute to community wealth and that include all people, not just those with the ability to access capital for a start-up based on sharing technology. Progressives need to ensure that the idea of the “sharing economy” is translated into real policies for economic democracy.

Rebecca Burns, In These Times Assistant Editor, holds an M.A. from the University of Notre Dame’s Kroc Institute for International Peace Studies, where her research focused on global land and housing rights. A former editorial intern at the magazine, Burns also works as a research assistant for a project examining violence against humanitarian aid workers.

http://inthesetimes.com/article/16111/the_sharing_economy_hype/