4AAVC101 - week 9

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These are my notes from November 21 for 4AAVC101 at King's College London for the 2017-2018 school year. The lecturer, Nick Srnicek, is the author of two excellent books at the intersection of technology and leftist politics: Inventing the Future (with Alex Williams), and Platform Capitalism.

The usual disclaimer: all notes are my personal impressions and do not necessarily reflect the view of the lecturer.

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The sharing economy

Reading

The Sharing Economy by Arun Sundararajan (chapter 2)

Haven’t been able to get my hands on a copy of this yet. Going to try to read it for my dissertation, though.

What’s Yours Is Mine by Tom Slee (chapter 4)

Same.

Lecture

• mostly uber and uber, plus a bunch of others (Lyft, Gett, TaskRabbit, HomeJoy is mentioned even though it’s shut down now)
• AirPNP for renting out toilets which should be a public service >_>
• at least in priciple, acc to their own values, it’s about empowering individuals
  • on a peer-to-peer exchange level
  • allowing a more sustainable/efficient use of resources
• the term “sharing economy” itself is fairly vacuous, seems to be more of a self-moniker than anything else
  • not actually about sharing (freely) since it’s built on commercial transactions
  • the gig economy isn’t the best term either since there are many firms (not in this space) that also rely on “gigs”
  • better characterisation: use of platform technology (multi-sided marketplace)
  • these companies also tend to be lean (at least for now)
    • though Uber now owns more cars (links) and Airbnb is considering branding hotels
  • thus the best way of thinking of the sharing economy: “lean platforms”
• economic history starting from the 1970s, three major crises
  • profitability of Anglo firms, primarily due to competition from the rising manufacturing powerhouses in Japan/Germany
  • OPEC oil crisis, as a result of the Yom Kippur war in 1973; oil prices quadrupled in a few months
  • Bretton Woods falling apart, mostly because the US fucked up (partly due to budgetary pressures from Vietnam War)
• first factor: corporations’ response: blame the unions (thus began their downfall)
  • wages started to stagnate, jobs increasingly outsourced to lower pay further (at least for tradeable goods)
  • otoh, non-tradeable goods were not outsourced
  • during 90s, technology allows companies to outsource impersonal services, using a lean/just-in-time model (using disposable workers)
    • which, of course, applies equally well to the lean platforms of today—they’re just continuing this trend
• second factor: now, of course, the financial crisis
  • no (or few) mentions of the “sharing economy” until afterwards—recall Uber founded 2009, Deliveroo 2013
    • some older ones founded earlier (like Seamless, etc) but didn’t really take off until after
  • unemployment doubled in the span of about 2 years in the US from 2008-2009, thus creating a pool of people desperate to take any job
  • stats on workforce composition: typically highly educated (70% of TaskRabbit workers have bachelors, 5% have PhDs)
• third factor: central banks slashing interest rates, hence people looking for riskier investments for higher returns
  • plus ofc the role of QE in creating all this excess capital in the first place
  • since 2009, so much VC sloshing around (not just established VC firms but also tech giants)
    • e.g., not just established VC firms but also tech giants’ venture arms
    • though I would argue that in the last case, it’s less about getting a return and more about getting in early in case it turns out to be a competitor/acquisition
• the state of the sharing economy today
  • firms are huge, huge valuations and revenues (even if not profitable)
    • smaller companies are dying or consolidating, think Grubhub/Seamless merging, or IKEA buying TaskRabbit
  • becoming increasingly commercial places, facilitating corporation revenues instead of “individual entrepeneurs”
    • Tom Slee, researching airbnb listings in NYC
      • 13% of listings take up 43% of all visits (how did he get this number??)
      • 60% of rentals are for entire homes (which could still be individuals, but also likely to be managed rentals)
    • NY attorney general report: 38% of revenues from properties rented out more than half the year—commercialised rentals, against state regulations
  • exploitation of workers, due to “independent contractor”/1099 status
  • reputation systems as a mechanism for disciplining workers/providers, as an alternative to actually training employees (which is not allowed for contractors)
    • obviously these reputation systems are affected by societal biases, which can affect livelihoods
• what now? will the sharing economy still be around 5 years from now
  • his theory: it will vanish
  • low profit margins, which is okay if services are used frequently enough (ridesharing, maybe food delivery) but what if that goes down
  • also relies on cheap labour force
    • in the case of AMT, this workforce can be global, and so that’s harder to solve
    • but in the case of face-to-face services, like ridesharing/delivery/cleaning, you rely on a local excess of workers (which isn’t necessarily here to stay, esp with employment regulation changes)
  • infrequent services, CAC/CLV ratio bad (esp in a saturated field where lots of competitors means you have to spend tons on marketing)
  • if the company’s cut is too high, and the tech isn’t that special, employees may decide that they can make more money off-platform (like HomeJoy which died for basically this reason)
  • growth-before-profits model
    • Uber losing so much money, partly to try to defeat Didi Chuxing in China (which failed), partly to defeat competitors & establish market hegemony
  • this era of cheap money may be coming to an end
    • central banks are starting to raise interest rates (find date/link), though srnicek thinks it was a bit premature
    • so the bubble in VC may be starting to deflate
    • which could spell the end of Uber’s growth-before-profits model because that relies on finding more funding to fuel growth
    • you can see this in tech startups cutting back on their stupid workplace perks (link) or even doing layoffs (Twitter, link)
  • regulators starting to catch up
    • airbnb: links to shutting down in paris, etc
    • uber: temporarily banned in london (as a negotiating tactic most likely), impinging on profitability
  • workers also responding to their exploitation: organising (unions-link to callum’s post), workers compensation lawsuits
    • link to uber $100mil settlement + other lawsuits (uber admitted $429m), lyft ($20m), postmates ($800m)
    • but ofc paying workers minimum wage doesn’t work with their assetless balance sheet strategy or business model in general
• student Q about uber trying to do advertising in-ride
  • srnicek thinks they can’t adapt to that quickly enough cus they dont have the data, they’d have to partner with someone else but then their margins are not enough
• student Q: do you think Uber and TFL could merge in the long-run
  • srnicek: TFL should incorporate these apps into theirs, so they could regulate them better

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