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The Sharing Economy

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David Fabiani, 59, a retired Navy vet in suburban Chicago, boards dogs in his home through Rover.com. Susan Jones, a baby boomer from the Midwest, rents out spare rooms for short stays through Airbnb. Harry Campbell, a 28-year-old former aerospace engineer in Orange County, California, uses his car to earn money through the ride-sharing services Uber and Lyft. All three are participants in the “sharing economy.” From business pages to social media, the phrase seems to be everywhere, a focal point of both utopian praise and dystopian criticism. But what exactly do these companies and an army of whimsically named startups — Instacart, Fluc, Vayable — have in common?

It comes down to a smartphone app. Each company offers its own, but the principle is the same: You, the customer, need a delivery, a place to stay, a place for your pet to stay, some carpentry work. Somebody is interested in supplying it. You connect through the app — or through your home computer. While customers potentially save time and money, the people who provide the various services get to set their own hours, working as little or as much as their schedule allows and their budget demands. For both customer and service provider, it is argued, there is also an intangible benefit: When ordinary people open previously private spheres of their lives to the public — homes, cars, skiing equipment — they connect with others in a different, more intimate way than conventional business relationships allow.

For a customer, the biggest selling point is the on-demand convenience. Need a ride? A taxi usually requires a call to a dispatcher, an uncertain wait, and tip calculation plus an awkward fumble with cash at the end. But with Uber and Lyft, you simply tap a button on your phone and a driver shows up in minutes. When your request for a ride is accepted, you see the driver’s picture, name, and rating, up to five stars (the driver sees yours, too, a safeguard). While you’re waiting, you can trace the progress of the car on a map. The cars are clean, the drivers are friendly, and everything is paid automatically through your credit card. The whole experience is seamless, and — when the companies’ notorious “surge pricing” is not in effect — substantially cheaper than a cab. It’s a boon for the car-less. In my home city of Los Angeles, “Uber” has become a well-established verb — not just for non-drivers, but also for those who expect to spend the night drinking. Getting home is no longer a worry.

The model has proved so appealing that new services are routinely pitched as “the Uber of X.” Uber itself is now an international phenomenon, available in American towns from Akron to Yuma — and in 58 countries overall. Lyft, the closest competitor, is in more than 60 locations nationwide. While Uber and Lyft are shaking up transportation, Airbnb (in more than 34,000 cities and 190 countries) is transforming the hospitality business. To a lesser extent, TaskRabbit (19 cities) and Handy (37 locations) are doing the same for home repair and house cleaning.

The road has not always been smooth, though. Despite the often idealistic marketing language — and the promise of something fundamentally new — the commercial vanguard of the sharing economy has familiar capitalist features: vast infusions of venture funding, ferocious competition, and rapid expansion amid an ongoing struggle to keep regulators at bay. For customers, questions may arise about reliability and even safety. For service providers, flexibility can be a double-edged sword: You can work whenever you want — but without benefits or a guaranteed paycheck. And if you continually need to chase down the next gig to make ends meet, you may find yourself “on call” for more hours than the traditional workweek, with less truly free time than ever. “The sharing economy is more a symptom of the economic strain that the middle class is experiencing than an effective long-term strategy for relieving it,” argues Professor Maurie Cohen of the New Jersey Institute of Technology, in Newark, whose critique will appear in The Future of Consumer Society: Prospects for Sustainability in the New Economy, due out next year from Oxford University Press. The risk of a widening class division between the assigners and performers of chores such as grocery shopping and laundry has even led some to rebrand the new labor model as the “servant economy.”

Yet it’s clear that for some people — like David Fabiani, the Navy vet — a sharing-economy gig can provide all the things that boosters tout: flexibility, extra income, and personal satisfaction. Fabiani’s experience began in the summer of 2012, when, scanning Craigslist for a way to supplement his pension, he came upon Rover.com — a company that links dog owners with providers of in-home pet boarding. Though business was slow for the first half-year, it picked up when the Seattle-based company boosted its advertising budget in the Chicago area. Now, charging between $25 and $30 a day per dog, and taking in seven dogs per week, he makes roughly $700 a month — though he says that, if he pushed himself, he could stretch that to $1,500 or $2,000. Rover.com takes a 15 percent commission, but Fabiani points out that the advertising and brand name have brought him business that he wouldn’t have been able to get on his own. Without the Rover.com platform, he notes, people might ask, “Who is this guy?”

“It’s not just about the money,” adds Fabiani, who describes himself as “a big dog lover, who knows how to take care of them.” He appreciates the opportunity to work at home, set his own hours, and do something he enjoys. (Aside from his customers’ dogs, he has two golden retrievers of his own.) His wife and two sons, ages 31 and 33, who live with him, have full-time jobs but help out with walking and feeding the dogs on weekends, often Fabiani’s busiest time. To develop return clientele, on which his current business depends, he says, “You have to have patience, credibility, honesty.”

Can someone earn a living as a Rover.com dog-sitter? “You’re not going to get rich,” Fabiani says. “But you could support yourself.”

Many find that money is not the only attraction of the sharing economy. “Part of the draw is that people want to have genuine connections,” says Susan Jones, the Midwestern baby boomer who rents rooms in her home through Airbnb. “There’s a meaningful and personal experience on both sides.” (Living in a suburb of a midsize Midwestern city that does not permit bed-and-breakfasts, she asked not to be identified by her real name.) Some of her guests are looking for a home in the area, and she likes “getting them excited about living here.” She recalls with particular fondness a Japanese family who stayed with her for a month while looking for a place to rent. The husband spoke English, but the wife knew only a few words. “Even though it wasn’t easy to communicate, somehow we became friends,” Jones says. The family ended up moving nearby, and the wife made a habit of biking over with Japanese dishes she had cooked. Now that the family is back in Japan, the women stay in touch, exchanging pictures of the seasons. For Airbnb hosting, it helps to be a people person. “I’m an extrovert,” Jones says, “so I find the experience very enjoyable. My guests are the nicest people.”

David Fabiani and his sons pose with their dogs

Woof! David Fabiani, center, boards dogs in his home with help from his two sons.
Courtesy David Fabiani

Renting out a room through Airbnb is not simply a pleasant social experience, however. “It’s not just like free money; it’s a business,” Jones notes. “It takes your attention like a business. When the guests are here, there’s setting up and cleaning up, and interaction time. We like it when we don’t have guests, too.”

Once Jones discovered, in a Google search, that a would-be guest was under indictment on drug charges. The visitor claimed in her application that she was a grandmother and did research for a law firm — but she was evidently coming to town to prepare for her trial. “We found a way not to accept her,” Jones wryly notes.

Though she does not think Airbnb would ever work as a full-time job (“unless you’re renting six places”), Jones points out that it can make home ownership, or continued home ownership, possible. The service has also benefited a friend of hers with extra space, who “makes so much more than she would with a traditional roommate.” Thanks to Airbnb, the friend, who had been temporarily laid off, was able to get out of debt and keep paying her mortgage. Retired people who find themselves house-rich and cash poor, or simply with an abundance of space, offer another natural constituency for the Airbnb platform.

The human element is a key selling point for Campbell, the former aerospace engineer in Orange County, California. Before leaving his engineering job in March, he found driving for Uber and Lyft to be a great use of his spare time — something, he says with a laugh, that he’s had a lot of since his wife entered medical school. “I like talking to people, and I love to drive my car,” he says. “It’s almost like being paid for something I would do anyway.”

Campbell also appreciates the flexibility. As he puts it, “There’s no 9-to-5 schedule. When I want to work, I can work. And when I don’t want to work, I don’t. The nice thing is that you can take off months at a time, and as soon as you’re ready to come back, your job is still right there waiting for you.” Having learned the ins and outs of driving for Uber and others, Campbell decided to turn his insights — and sometimes critical thoughts about the companies — into a blog and a podcast at TheRideShareGuy.com, a clearinghouse of information to help drivers make more money and have a better overall experience amid the vicissitudes of pricing and policy.

Before his recent career transition, Campbell fit a common sharing-economy profile: a person with a full-time job who wants to make a little extra money on the side. In a survey of 250 ride sharers, released in December 2013, 41 percent said they had a separate full-time job for the whole year, another 28 percent for part of the year. In the survey, undertaken by Sherpa — a company whose analytics tool helps individual contractors in the sharing economy gain insight into earnings and expenses — 44 percent of respondents said they drive fewer than 20 hours a week. “We’re seeing people who work three to four hours each evening to get an extra bump,” says Sherpa co-founder Ryder Pearce. They do it, he explains, to pay off loans or, generally, gain more financial security. The flexibility is what makes this sort of work an option for people with day jobs, and as a temporary measure it can do much good — though, as a new normal, a 55- or 60-hour week raises concerns. As labor researcher Veena Dubal said, speaking of sharing-economy companies at the Share conference in San Francisco in May 2014, “They advertise that you can earn ‘extra cash’ — but the underlying issue is, why do you have to do this?”

Harry Campbell in his car.

Courtesy Harry Campbell

To an extent, the companies of the sharing economy benefit from the idealism associated with the phrase — and the genuine movement behind it. The Peers Foundation, a recent spin-off of an advocacy group co-founded in 2013 by Douglas Atkin, Airbnb’s head of community, declares that the sharing economy “is helping us pay the bills, work flexible hours, meet new people and spend more time with our families.” Moreover, it’s not just a social good; “it’s how the 21st-century economy should work.”

The companies have made effective use of this idealistic framing, as well as the upbeat experiences of some of their users. Lyft is not just a business but “your friend with a car.” In a promotional video for Airbnb, we hear guests leave with “a new sense of self.” One young man proclaims that the Airbnb experience has done nothing less than give him “a new faith in humanity.” Even Uber — with the most service-oriented self-presentation (“Your ride, on demand”) — portrays itself as a revolutionary force. It’s the underdog battling “big taxi” on behalf of passengers while creating economic opportunity for anyone with a post-2000 car.

At the same time, nobody enjoys becoming obsolete —whether it’s a taxi driver, a hotel worker, or the proprietor of a long-established, fully licensed bed-and-breakfast. From February to April this year, the number of taxi cab trips reported to the Los Angeles Department of Transportation was down nearly 28 percent from a comparable period in 2013; in San Francisco the drop was 65 percent between March 2012 and July 2014, according to the city’s Municipal Transportation Agency. As for the general public, neighbors of Airbnb hosts may be less than enthusiastic about the pop-up B&B across the street — or even down the hall.

State and local governments, like Jones’ suburban town, have been skeptical, too, taking action to stop or at least regulate the new companies. Last fall, the New York state attorney general reported that nearly three-quarters of Airbnb listings in New York City were illegal — and that more than a third of the units were run by commercial operators, not individual residents. In December 2014, district attorneys in Los Angeles and San Francisco counties sued Uber for illegally operating at airports and “making untrue or misleading representations regarding the quality of background checks it performs on drivers.”

Despite the legal wrangling and occasional, well-publicized horror story, it is up for debate whether the services provided by these companies are less safe than what traditional competitors offer. The two-way rating system is, arguably, a powerful tool for keeping bad actors out of the system — and may explain why my dozens of rides on Uber and Lyft have been more pleasant than the taxi rides I’ve taken through the years in Los Angeles. Fingerprinting drivers may be an important screen for a criminal background, but it does not prevent them from being rude or driving recklessly — behavior I have encountered on occasion with the city’s licensed taxi drivers. At the same time, the combination of government prodding and public concern has led the major companies to shore up their safety profiles — Airbnb, TaskRabbit, and Lyft all offer insurance amounting to $1 million in protection for their service providers. Lyft’s procedures include background and DMV checks, vehicle inspections, and zero tolerance for alcohol and drugs.

The vetting and insurance policies signal a fundamental tension in the sharing economy over the status of its service providers — whether they are independent contractors (as the companies wish to see them) or, in fact, employees. The distinction — far from being just semantic — is the basis of ongoing litigation: If service providers are classified as employees (as the law requires when a certain level of corporate rule-making is found to govern their activities), they are entitled to protections and benefits that would otherwise be unavailable and that would make their labor far more costly. In June, the California Labor Commissioner’s Office ruled that one Uber driver was in fact an employee. Though Uber appealed, and the decision was limited to a single person, it cast considerable doubt on whether, in the long term, Uber would be able to continue classifying its drivers as independent contractors.

The dispute over employee status occurs against the backdrop of an extended price war between Uber and Lyft that has forced drivers to work longer hours to maintain a steady income. In October last year, there were coordinated protests against Uber in San Francisco, Los Angeles, and several other American cities. Though the discontent is by no means universal — Sherpa’s survey showed a robust 61 percent satisfaction rate among ride-sharing drivers — the rumblings of discontent may well grow louder if competition leads to ever lower fares.

Those without a car or a rentable living space may have an even tougher time in the sharing economy, since their income is based on an accumulation of individually gathered assignments. While exhorting the aspiring handyman, house cleaner, shopper, or deliverer to “become an entrepreneur on our platform,” TaskRabbit tacitly confirms the challenge for “Taskers” on its own website. Quoting Bloomberg BusinessWeek, a blurb notes that the company is “betting on a future where employment will seem much more like a series of small-scale agreements between businesses and labor than jobs in the traditional sense.” Putting together all those “small-scale” agreements can be difficult. As Cohen observes, service providers may “need to spend several hours each day searching out their next gig in order to make ends meet.”

In the sharing economy, a bargain for consumers is likely to mean less money for service providers. Low pay as well as insecurity for the people who are making life so much easier for others may be seen as part of a growing class divide captured in the notion of the “hourglass society.” Cohen explains this as the idea that “a relatively modest number of affluent households at the top call upon the labor of a largely disempowered working class on terms that are extremely unfavorable to workers with respect to compensation, benefits, and working conditions.”

For service providers, the great divide — the difference between satisfaction and brewing rebellion — may well be between those for whom gigs provide supplementary income and those who are forced to seek a living wage from the sharing economy alone.

Though champions and critics of the sharing economy may differ on the balance of benefits and harm, there is widespread agreement that “stagnating wages and reduced working hours for employees in the conventional economy,” as Cohen puts it, have caused middle-class comforts once taken for granted to drift out of reach for many. As a supplement, a filler of gaps, the sharing economy is clearly helpful — the ability to earn money from cars, homes, and otherwise untapped possessions and labor can be a blessing, bringing increased financial security, and an improved quality of life — and all this while consumers enjoy better, more affordable services.

Yet the question remains: Could the sharing economy end up aggravating in the long term the problems that it seems to be relieving in the short term? Could it in fact be, as Cohen suggests, “contributing to a shift away from jobs that offer some measure of protection against employer abuses”? If conventional jobs are replaced by ad hoc agreements, then the freedom to work whenever and as much as you want may prove a decidedly mixed blessing. In the midst of a growing concentration of wealth, the idealists, at least, hope that this new paradigm will somehow remain tethered to its lofty rhetoric, creating enriching opportunities and rewarding connections instead of leaving just a few people with an even larger share than they had before.

A Ph.D. candidate in classics at UCLA, Alex Press is a non-driving Angeleno who gets around town by public transportation as well as by Uber and Lyft.

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  • Very informative. Happy for the new “winners” and sorry for the losers.

  • G. I. Jackel

    Very interesting.