Defending the Value of the Sharing Economy

I was trying to write something about the Avis buyout of Zipcar when John Kolko alerted me to this post critical of some of the collaborative consumption startups as they negotiate regulatory resistance. The post made interesting points but in what felt like an excessive baby with bathwater way. It seemed to get at exactly what must now be sorted out. But I got carried away with a stupid conceit in the form of what I wrote, and it is in the end pretty incoherent. I’m putting it here to be done with it as I try to prepare for semester and finish all that I failed to finish over the Winter break:

Dear Dean,

I write to report on the academic progress of Tom Slee, and in particular provide an evaluation of a recent piece of work that he submitted – to the public domain – one that he himself claims to be most proud of.

I must first try to bracket personal loathing for the ‘open letter’ format. The pretense that you are writing directly to someone but in fact writing about them to a different audience has always struck me as hypocritical. Interestingly, in this case, Tom’s letter concerned some issues of regulating innovations in the emerging sharing economy. What is at issue there is of course the power of property rights. Questions of what is private and what is public and where government regualtions vs free market opportunities overlap with those domains are exactly what is at issue. So it is doubly strange, or else quite appropriate given Tom’s conservative views, that he is in fact seeking to gain profile advantage from a purportedly private communiqué to a fellow investor. Of course all readers are aware that this is not really a private communication and can make the interpretive adjustments necessary without government stipulations for example – though perhaps if Tom was consistent in his argument he would recommend that all such ‘open letters’ come with regulatory warnings about their non-private-domain-ness despite appearances. Rest assured, I will not be ‘mistakenly’ posting this letter to some under-utilized blog. I am only a bumbling academic after all, actually forbidden by the not-for-profit nature of my university to make private capital gains from my work.

Tom’s ‘letter’ is a response to a short NYTimes opinion piece by Tim Wu about the need for regulation of emerging digital-platform-enabled resource-sharing activities, such as ride-sharing or short-term room leasing. Note that Tim’s piece was indeed calling for regulation of these innovative practices in the name of consumer protection. His proposal – though admittedly somewhat buried in the conclusion – was for what he called data-driven regulation. The piece seemed to be arguing that only such a novel way of regulating would be able to pick up the fine-grained activity that is these peer-to-peer economies. An added advantage is that such regulation could be agile enough to not squash these innovations and preserve the less resource productive incumbents.

Given the tone of Tim’s opinion piece, Tom’s response strikes you at first as excessively forceful. You immediately suspect that there is something to this topic that is strongly affecting him, something bigger than what Tim Wu has written about. Tom is not just suggesting that Tim’s analysis is incorrect, but that it is dangerous, something that demands a personal letter of appeal for Tim to prevent “a disaster waiting to happen” by “retracting [his] support for AirBnB and Uber.”

At one point Tom does seem to make explicit his real wider target:

“And I hope that, if you reflect, you’ll agree that the new peer-to-peer companies are a blight on the landscape of egalitarian thinking.”

So why does Tom think this?

It can’t be that he thinks that this peer-to-peer world will be an unregulated state of war. On the one hand, he admits that incidents of consumer harm will always be infrequent, or no more frequent than those occurring within currently well-regulated markets. They happen more often than the “anecdotal” descriptor Tim uses; and they will happen in greater number (though not proportion) as these ‘collaborative consumption’ ventures scale up to a wider market. But they will remain “rare,” by his own admission – though, to his credit he does note that this rarity does not mitigate the “severe consequences” of each incident.

(There is a fair bit of sleight of hand in this ‘letter’ by the way. For instance, AirBnB’s two widely reported incidents – the trashing of one apartment and the use of another as a brothel are not listed side-by-side in Tom’s letter as the total number of [to date reported major] wrong-doings by ‘guests’, but rather used at different points in the ‘letter’ as hyperlinked asides to make it seem like they are just one amongst many such examples the author could have chosen. Perhaps a more significant argumentative sleight of hand is the argument used at one point that the damage users can do to each other through Wikipedia, eBay or Yelp is less than is possible through AirBnB and Uber. Whilst it is true that the latter involves physical proximity between users, it is still the case that one’s whole livelihood can be undermined through the former. We will see shortly that Tom’s prejudice against what he categorizes as peer-to-peer companies (because Wikipedia, eBay and even Yelp count as sharing economy peer-to-peer companies in some people’s reckoning), blind him to the fact that all these companies are on a continuum, a continuum that extends ‘upwards’ to Kinkos and Starbucks and ‘downwards’ to me borrowing my neighbors ladder.)

On the other hand, Tom also knows that we are not at risk of peer-to-peer civil war because, thanks to supporters like him, government regulation is not going to be thrown overboard by a modern day Tea Party any time soon. Tom is no neoliberal. He likes his regulatory regimes. And so do I. (When academia is made redundant by MOOCs, I’m starting a service design company called “I [heart] Government.”) But perhaps Tom is too much of a government fan-boy. He totally discounts that regulations might be, if not created by inertial self-protecting incumbents, then at least exploited by them. Again, the argument uses hyperbole in ways that we constantly criticize in our students:

“why is it that every town and city I’ve ever been to has licensing requirements for people offering taxi services or overnight accommodations? Is there a global taxi cartel or a multinational bed-and-breakfast conglomerate enforcing its will on municipalities from Aberystwyth to Yellowknife? …of course there isn’t, because taxi and B&B operations are usually local and small-scale operations…”

Yes, there is no global taxi cartel. But that does not mean that there is not a New York or London or Nairobi taxi cartel. And there may be no global B&B cartel, but there is a formidable global hotel industry. Perhaps B&Bs are just the smaller (and so in fact very difficult to regulate without a team of field officers) freeloaders off the lobbying efforts (and propagandistic film-funding projects) of monopolistic multinationals.

The important point here is that regulation is always over-determined – you know, that academic term we use for when something requires multiple rationale to exist, and having been brought into existence, becomes the rationale for many others. The whole political machine does not construct and police regulations that have only one good reason to exist – we know that from how many very reasonable regulations never make it through the system. So regulations might exist to protect consumers, but they also exist because they are implementable, because they fit with the laws of other countries, and match current technologies and everyday lifestyles, and so on; and they exist because they organize a market in ways that allow certain kinds of organizations to profitable service. Unfortunately, this same over-determination also makes regulations very hard to change: multiple stakeholders have to be convinced that it is worth changing how things are done. We also know this from how many really stupid regulations remain on the books.

By the way, I am very sympathetic to Tom’s critique of the founders of and investors in these companies who seem to be very late in coming to think about regulatory change in their entrepreneurship. These companies are very at risk of replacing the Segway as the case study about the importance of regulation in Roger’s Diffusion of Innovation. (If you remember, the Segway was going change the world, except that it proved illegal to ride on both the road and the sidewalk, so has been relegated to ‘private roads,’ moving security personnel around large complexes like airports and corporate parks.) Entrepreneurship is an alliance-building process as both Fernando Flores and Bruno Latour have taught us. Non-commercial Sharing Economy people knew this from the start. The leadership being shown by Janelle Orsi and her Sustainable Economies Law Center is exemplary. The Collaborative Consumption outfits are typically forming a lobby group – too little too late.

It is just that I don’t think that the ineptitude of certain #collcons CEOs and/or their backers warrants unqualified endorsement of current regulatory regimes and wholesale trashing of peer-to-peer companies.

So what behind Tom’s aggressive ‘open letter?’ If the world is not going to deregulate into tooth-and-claw peer-to-peer transactions, then what does Tom fear?

At times, he seems to be an impassioned defender of communitarianism.

“While they invoke the communitarian traditions of the informal economy, these new peer-to-peer companies are more likely to erode that economy than enhance it.”

In a moment that made me chuckle remembering the “not that there’s anything wrong with that” Seinfeld episode, Tom tells us

“We all know the informal economy. I used to hitchhike to university, my neighbours have yard sales, friends help each other move house.”

But Tom has a confused sense of when these communitarian activities formalize. At first he implies that it is money that makes the difference, even though his second example of the ‘good’ type of informal economy, is money-making. So instead he says that it is when an activity stops being “at the most minimally commercial… for little or no money is OK.” His line in fact has more to do with frequency: it is when you do these activities often, “every weekend,” that “a level of accountability is needed.”

So now we are at last getting somewhere. Though Tom says he supports these activities, he doesn’t actually seem to want these communitarian activities to become regular. When they are regular, regular enough to make a living from for example, then they must be regulated, and being regulated means being “commercial… play[ing] by different rules.” You see, Tom has very clear lines in his head about the world: there is the social and there is the economy; as Polanyi argued all those years ago, the latter only exists by disembedding itself from the former; heaven forbid the two should be contaminated.

Now this is where things get tricky, which is in fact the real reason for my writing to you about my evaluation of Tom. I need some help nuancing this.

Because you see, in one way, I wholeheartedly agree with Tom. His primary annoyance is with the mixed-messages AirBnB uses in its marketing, and which Tom implies it is now using to promote deregulation (though again, this is the deceitful coupling in his article of Chesky with Kalanick – I’ve not seen evidence that Chesky is seeking a Randian “I don’t need permission” free market). I also am on record for being appalled at the way AirBnB and most #collcons startups inmix rhetoric about ‘sharing’ with rhetoric about ‘profiting.’ Apart from anything else, it is poor Lakoffian framing.

But the reason I am interested in the sharing economy is because it can be an ‘economy.’ It can scale in breadth, without, I utopianly believe, allowing itself to be commoditized in delocalizing ways. Whilst it is a source of more sustainably efficient resource usage, it is socially inefficient: it has the frictionfulness of people dealing with people as people (as opposed to customers dealing with employees following McDonaldized service scripts).

Of course there is something unethical about hoping that peer-to-peer platforms can be as commoditizable as spam. But in fact these interactions are uncommoditizable which is why they must be encouraged to scale, and must be made to confront the regulations that make only commoditized offerings scalable. Regulations in turn might just be innovated to be less commoditized as well – wasn’t that Tim’s argument?

Anyway, it is very much a point of emphasis. I am just very worried that this student is using poor critical thinking skills to foreclose on one of the more interesting opportunities around at the moment, using absurd oppositions (“callous selfishness [masquerading] as community-mindedness”) to reinstate absurd oppositions (the communitarian and the commercial). Things are always more complex, just as they are more dangerous.

There is a fair amount of Capital from nasty sources washing around in this domain. But there are also large numbers of people playing new kinds of roles in these systems – far from employees, not quite members, all those people opening their homes and cars to strangers, using a mixture of platform-based reputation indicators, community-based everyday intuitions and managed risk escalation. All those ‘users’ are participating for a wide variety of reasons, some ecoleft, some fiscal, every now and then one evil. That to me is very interesting, something where Big Corporate investors seems to be biting off more than they can chew.

Do please let me know how I should proceed with this student.

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1 Comment

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One response to “Defending the Value of the Sharing Economy

  1. I think we’re not that far apart. You say “I also am on record for being appalled at the way AirBnB and most #collcons startups inmix rhetoric about ‘sharing’ with rhetoric about ‘profiting.’ ” and to me that’s the issue I was trying to get at. I have no problem with, to take a local example, Car Share co-operatives, and the evolution of bike sharing in cities across the globe is a great example of how cities can learn from each other and improve systems as they go.

    But then you get Steve Case telling us that the sharing economy has come of age, and to me there is no connection between what he is doing and any communitarian impulse. I’ve seen people disappointed about the Avis buyout of Zipcar saying that it’s a sellout (I hope you write what you were going to about that) and I kind of want to shake them: it’s not a sellout because that was the whole point all the way along.

    So you are right that my dividing line may be inconsistent and fuzzy, but I do know that Steve Case and Community Car Share are on opposite sides of it. It’s a rhetorical tactic as cheap as the open letter, by the way, to shift the discussion between the spectrum and binary representations of a problem. J’accuse!

    Your links are interesting by the way. I’m off to read them.

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