Responding to Coppage and Gobry on the sharing economy

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This morning in the American Conservative, Jonathan Coppage writes about “The Sharing Economy’s Undead Capital, and Its Discontents,” commenting on my essay in The Ümlaut last week, as well as Pascal-Emmanuel Gobry’s excellent Forbes post on the possible distributional effects of the sharing economy.

To a large degree, the discussion about the “sharing economy” has been marred by imprecise terminology — most notably, the term “sharing economy” itself. As Coppage points out, this term has more to do with the political leanings of many of the early movers in the industry than it does with accurately characterizing the economic phenomena we are seeing. Sharing, of course, implies the non-remunerative joint use of resources, based on certain norms of reciprocity within a highly personal economy. That’s all fine and well, but it’s inimical to the idea of the larger, extended order which is an absolutely necessary feature of economic growth. Perhaps that was the sharing economy founders’ point.

I’ve been using the term “peer production economy” in lieu of “sharing economy” for a couple of reasons. First, I think it’s a less normative way to describe and categorize what we are seeing — which, though it may dismay the sharing economy vanguard, has very little to do with sharing and a re-establishment of exchange based on personal or tribal relationships. (This should be self-evident: an economy based on “gifts” and “sharing” is one that does not need smartphone apps to connect heretofore-unknown buyers and sellers, or “recipients” and “givers.”) Second, the term “peer production” highlights the larger and, to me, more interesting trend: a technology-enabled movement from big firms, big bureaucracy and big capital to connecting individual buyers and sellers. In other words, it’s a deepening of markets and the number and type of transactions that may occur within them.

PEG’s post on the distributional effects of the peer production economy is a very useful and well-grounded exercise in thinking through what an Uberfied economy might look like distributionally. I’d like to offer a couple of critiques.

For one, PEG’s UberForBabysitters actually seems to highlight the limits of the peer production economy rather than illustrate the likely next steps. Babysitting markets are one area where the personal economy seems to trump the impersonal economy, and even were such a service to be introduced, it’s hard to see how it would generate robust network effects. It seems  unlikely that many parents would actually want more than a handful of babysitters to choose from (as Gobry says); here, personal knowledge of the people we are entrusting with our sprogs is a feature not a bug. That market, and many others like it, largely remains thin and personal, and that’s just fine. (Though DogVacay is, at least on the margin, a refutation of my hypothesis.)

So it seems unlikely that the full Uberization of the economy is nigh, at least for services where there is value in buyers and sellers having at least a limited personal relationship. Even Hayek argued that an extended order doesn’t preclude personal exchange, altruism and solidarity; rather, the two can be mutually supportive.

The bigger point that I think PEG misses is that an Uberized economy isn’t just about more capital and labor — it’s about who owns the capital. For better or worse, labor in our economy today has long been commoditized. This has been the progressive dream for the last century: turning people into interchangeable parts within bureaucracies that sought to efficiently administer either capital (big business) or power (big government). The civil service system, labor unions and human resources departments were all agents in this effort. Simultaneously, capital allocation has become increasingly efficient (another word for this is “ruthless”).

The peer production economy brings individually owned capital back into the equation, and this capital is tied to the labor of its owners. In the medieval guild system and the proto-industrialized workshop system, workers owned their tools and work spaces; industrialization turned laborers into mere factors of production where skill was the only determinant of value. (This radical shift in economic life not only significantly changed conceptions of class but eventually spawned an entire counter-movement.)

With firms like Uber, Lyft, Sidecar, Airbnb, Etsy, and RelayRides, sellers are putting their capital back into play — and these sellers, not the owners of the firms running the marketplaces — will bear the benefits of the returns to capital.

In other words, Gobry is wrong to assume that the owners of the firms of the peer production economy will take an outsize portion of the growth of this section of the economy, because by and large, they don’t own the capital; rather, they own the marketplace. Lyft is the New York Stock Exchange of the car-sharing movement — it’s not the General Electric.

One final note: Whatever the distributional impacts and the effects on community of the peer production economy — and it’s important to think about them and their larger effects, and kudos to Gobry for raising the subject — it’s important to not lose sight of what’s really at stake. In many of these areas, there’s a battle going on against captured regulators protecting entrenched interests that are do little either for market efficiency or for communitarian values. The status quo is neither efficient, nor is it conducive to building community.

  • http://pegobry.tumblr.com/ Pascal-Emmanuel Gobry

    Hey,

    Thank you very much for an excellent post, worth thinking about. Some preliminary thoughts, worth expanding upon later…

    1) I absolutely agree that things like taxi cartels are awful and inhumane and that Uber et al are doing God’s work by undermining them;

    2) Where I part with you is your idea that the peer-to-peer economy (I agree “sharing economy” is a problematic phrase) turns us all into capitalists, and that the benefits of the “liberated” capital will accrue principally to the peers and not the platform.

    Let’s take the Lyft/Uber for example. Let’s say I’m on my platform. Well, sure, I own my tools. But “owning a car” is not really an amazing economic “moat.” I’m not sure how much more protected you are from problems than the industrial worker you mention. To take the car example further: let’s say we’re pre-Uber and I built a black car company and I’m selling it. The most valuable asset of the company, BY FAR, will be the client list. And this is true in most other service businesses. Second will be the brand. Third, the employees, if I’ve selected them and trained them and so forth to provide an excellent service. And a distant fourth, the actual cars, which every other black car company on the market has.

    Now, take a service like Uber. I’m on Uber, and I have a car. But it’s impossible for me to build a client list–exchanging business cards is no-no (you can do it on the gray, but there are punishments for it). It’s also impossible for me to build a brand–everything in the Uber user experience is made so that, from the user’s perspective, every Uber black car is indistinguishable from every other black car. Sure, I can differentiate a little bit by earning high ratings, but I’ve used Uber a fair amount, and everyone has between 4 and 5 stars out of 5. So how am I to build a meaningful and valuable asset? Yep, I have a car. I can make a living from it. But am I an entrepreneur who’s built a valuable asset, and not just living off my labor?

    Every aspect of the Uber experience and design is made to make sure that as much value as possible accrues to the Uber platform. It owns the customer relationship. It owns the branding. It owns the pricing. It owns the payment system. And so forth.

    Let’s say I’m a Uber driver and I want to build my own client list so that I can be independent from Uber. After a few times, I’m booted off the system. Now, what do I do with my car? Put up a website where people can hire me? Who would do that, given Uber’s convenience and network effects?

    Uber is not exactly GE, but it’s very, very far from the NYSE. If anything, it’s more like a big fast food franchise: I’m technically, legally and economically independent, but really, all of my value comes from the franchise agreement and the franchiser wants to suck as much as possible about it. Except that even then franchisees have assets that Uber drivers don’t, namely real estate/location (quite valuable in many cases) and the “last meter” of the consumer relationship.

    You say I go wrong, because Uber et al don’t own the capital. But, in fact, it does! It owns the brand, it owns the consumer relationship, it owns the software, it owns the network…..that’s where the value is, not cars.

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