Never Mind the Sharing Economy: Here’s Platform Capitalism

1. A Backlash Against Sharing?
Lately, the so-called “sharing economy” has been all over the news. Under flashy headlines such as “Sharing is the New Owning” it is heralded as the solution to the current financial crisis, the path toward a more sustainable economy or even the harbinger of a post-capitalist society. And while the “sharing economy” is supposed to be all these wonderful things at once, it also generates such disruptive and fantastically profitable businesses  like AirBnB, Uber or TaskRabbit. No wonder then, that policy makers are getting increasingly excited about this ‘force for good’. Just a few weeks ago, the British government announced its intention to “make the UK the global centre for the sharing economy.” As Business and Enterprise minister Matthew Hancock rejoiced: “By backing the sharing economy… we’re making sure that Britain is at the forefront of progress and by future proofing our economy we’re helping to protect the next generation.”

Yet, while policy makers and their advisers can hardly contain their enthusiasm, over the course of the last few months there has been a veritable surge of critical comments on the “sharing economy.” Mainstream media as well as the blogosphere are brimming with furious articles, warning us to not buy into the “sharing hype” or even attacking the supposed “sharing lie.” The American business magazine Forbes even talks about a “backlash against the sharing economy.”

After years of almost unequivocal enthusiasm for the innovative wonders of the “sharing economy,” a real debate finally seems to be emerging. In this short essay, I am going to follow this debate while trying to find an answer to the question of what the “sharing economy” in fact is.

2. To Share or Not to Share
Not unlike other contemporary policy fashions such as the creative industries or social innovation, the “sharing economy” throws together a variety of diverse and often unrelated phenomena; from massively funded technology start-ups like Uber and AirBnB to fair trade cooperatives, borrowing shops and hippie communes. It would be wrong, however, to understand this confusion as a result of the intellectual incompetence on the side of trend watchers and innovation consultants. While it is true that the growing army of these professional would-be clairvoyants depends on the regular construction of the “next big thing” for their own economic survival – the vaguer, the better – the confusion that comes with the “sharing economy” is the intended result of a smart marketing strategy. But I am getting ahead of myself…

The first thing we need to understand about the “sharing economy” is that it has absolutely nothing to do with sharing in the sense you and I might think about it. The essence of sharing – if it has any meaning at all – is of course that it does not involve the exchange of money. Sharing only happens in the absence of market transactions. With regard to the poster boys and girls of the “sharing economy,” the very opposite is the case. These are digital platforms that roughly do two things: either making the old practice of re- and multi-using durable goods more efficient or expanding market exchange into economically uncharted territory of society.

If we look at internet marketplaces such as Ebay, Etsy and their many variations, it is clear that what they offer are digitally modernized versions of the good old second hand shop. What’s new about them is that thanks to the internet, the supply of used goods (and in the case of Etsy, also handicraft) finds its demand much more effectively and efficiently than ever before. There can be no doubt that his leads to a more efficient (re-)use of durable goods, thus contributing to a more sustainable allocation of resources. The same applies to rentals, particularly cars or bikes but also to lots of other goods. Thanks to the internet and mobile digital technology, the centralized stockpiling of goods to be rented has become unnecessary which, again, saves resources. Their dispersion is not a problem any more but often rather adds to the convenience of the rental process – think of a car that you can pick up around the corner rather than having to travel to the nearest agent. However, none of this has anything to do with sharing! Matthew Yglesias, writing for the US business blog, illustrates this fact as follows:

“My neighbor and I share a snow shovel because we share some stairs that need to be shovelled when it snows and we share responsibility for doing the work. If I owned the stairs and charged him a small fee every time he walked in or out of the house, that would be the opposite of sharing.”

This might sound trivial but given the confused usage of the notion of sharing, it seems appropriate to remind ourselves that helping each other out by sharing our resources is one thing while commodifying these resources by charging a fee for their use is quite another. And this gets us to the more innovative dimension of the “sharing economy.” Today, the “sharing economy” entails much more than just digital updates of second-hand exchange and rentals. What companies like Uber, AirBnB, TaskRabbit or Postmates have in common is that they are platforms coordinating supply and demand of products and services that in their present form were previously unavailable on the market. Uber is a platform where people looking for a cab quickly find their non-, semi-, and real professional taxi driver. AirBnB allows people to sublet their houses, TaskRabbit connects supply and demand for chores,  Postmates for deliveries, Instacart for grocery shopping. While it might be convenient to make use of these services, they have absolutely nothing to do with sharing. They stand for a digitally enabled expansion of the market economy, which, again, is the opposite of sharing. If someone does my shopping or drops me at the airport in exchange for a financial fee, how is this sharing? This situation doesn’t change if instead of money, one receives credits to be used at the issuing platform (a mistake that for the last few years has led to a rather annoying hype around “alternative currencies” based on the belief that the ‘evils’ of capitalism could be cured by replacing real money by a less efficient substitute).

3. Enter Platform Capitalism
In an attempt to overcome this confusion, Sascha Lobo, a German technology blogger for Der Spiegel, has recently suggested to drop the obscure notion of “sharing” altogether. “What is called sharing economy,” he argues, “is merely one aspect of a more general development, i.e., a new quality of the the digital economy: platform capitalism.” As Lobo emphasizes, platforms like Uber and AirBnB are more than just internet marketplaces. While marketplaces connect supply and demand between customers and companies, digital platforms connect customers to whatever. The platform is a generic ‘ecosystem’ able to link potential customers to anything and anyone, from private individuals to multinational corporations. Everyone can become a supplier for all sorts of products and services at the click of a button. This is the real innovation that companies of the platform capitalism variety have introduced. Again, this is miles away from sharing but instead represents an interesting mutation of the economic system due to the application of digital technology.

It should be clear that understanding the “sharing economy” in terms of platform capitalism is by no means a matter of linguistic nitpicking. Calling this crucial development by its proper name is an important step towards a more sober assessment of the claims made by the proponents of “sharing.” Take, for instance, the notion that everyone benefits from the disruptive force of the “sharing economy” because it cuts out the middleman. Sharing models, the argument goes, facilitate a more direct exchange between economic agents, thus eliminating the inefficient middle layers and making market exchange simpler and fairer. While it is absolutely true that internet marketplaces and digital platforms can reduce transaction costs, the claim that they cut out the middleman is pure fantasy. As one blogger puts it: “Sure, many of the old middlemen and retailers disappear but only to be replaced by much more powerful gatekeepers.”

In fact, the argument is quite an obscene one, particularly if it is made by the stakeholders of platform capitalism themselves. As globally operating digital platforms, these companies have the unique ability to cut across many regional markets and reconfigure traditionally specific markets for goods and services as generic customer-to-whatever ‘ecosystems’. It seems fairly obvious that the entire purpose of the platform business model is to reach a monopoly position, as this enables the respective platform to set and control the (considerably lower) standards upon which someone (preferably anyone) could become a supplier in the respective market. Instead of cutting out the middleman, digital platforms have the inherent tendency to become veritable Über-middlemen, i.e., monopolies with an unprecedented control over the markets they themselves create. In fact, calling these customer-to-whatever ecosystems “markets” often turns out to be a bit of a joke. For the clients of Uber & Co., price is not the result of the free play of supply and demand but of specific algorithms supposedly simulating the market mechanism. The effect of such algorithmic tampering with the market is demonstrated for instance by Uber’s surge pricing during periods of peak demand. It is not very difficult to see where this might be leading. Taking a cab to the hospital in, say, New York City during a snow storm might become unaffordable for some under conditions of mature platform capitalism. For those who believe this to be overly pessimistic and a bit of an exaggeration, just ask your local taxi driver what percentage of her work is already coming from one of the digital platforms.

4. Disruption and Regulation
This is not meant as an excuse to engage in the increasingly popular pastime of algorithm bashing. There is neither an algorithmic conspiracy here, nor are these companies selling out the ‘true spirit of the sharing economy’. They simply follow the logic of platform capitalism which at the moment is the logic of a digital gold rush, unhampered by any kind of government regulation. In a way, what we are seeing here is social innovation in its purest form, i.e., the creation of something that from a business perspective is even better than the so-called “blue ocean” (a competition-free market). And it is causing the famous disruption – so much so that cities like Amsterdam are raising the white flag as entire streets are turning into exclusive AirBnB zones. It should be clear that this doesn’t help an already overstrained housing market, let alone the local population’s quality of life. While taxi drivers’ protests against Uber and Lyft have been be laughed away as collateral innovation damage, the transformation of our cities into tax-free, urban versions of “Center Parcs” might be more difficult to stomach.

At the moment, platform capitalism is allowed to run wild because it is simply running too fast for politicians and regulators. Nothing expresses the political impotence in the face of this new kind of digital capitalism better than the painfully ignorant techno-gibberish frequently emitted by Neelie Kroes, outgoing EU-Commissioner for Digital Development. There are, however, also signs of a turning tide such as the recent exchange between Goolge’s Eric Schmidt and the German Minister of Economic Affairs, Sigmar Gabriel in which the latter responded to the former’s assertion that “all we do is follow the law” by saying: “I understand this as a request for regulation.” The question is, of course, whether this will to regulate is going to persist against the enormous lobbying power of platform capitalism.

Regulation is important not only in order to prevent monopolies, fund the state and keep our cities liveable for their actual inhabitants but also to insure fair treatment of those we haven’t considered yet: the suppliers and vendors who sell their products and services on the digital platforms. If we are to believe the proponents of the “sharing economy,” then the opportunities are pretty amazing. As Brian Chesky, CEO and co-founder of Airbnb, puts it in Wall Street Journal:

“I want to live in a world where people can become entrepreneurs or micro-entrepreneurs and if we can lower the friction and inspire them to do that, especially in an economy like today, this is the promise of the sharing economy.”

According to Chesky, digital platforms are simply a reflection of our contemporary entrepreneurial lifestyle and anyway, they provide people with an extra opportunity for income in these times of economic crisis. Similarly, New York Magazine sees the “sharing economy” as an answer to our current economic predicament as well but is slightly less euphoric as to the potency of the sharing antidote:

“Tools that help people trust in the kindness of strangers might be the thing pushing hesitant sharing-economy participants over the threshold to adoption. But what’s getting them to the threshold in the first place is a damaged economy, and harmful public policy that has forced millions of people to look to odd jobs for sustenance.”

So which one is it then: inspired micro-entrepreneurs or odd jobs for sustenance?

5. Revolutionizing the World’s Labour Force
At the moment, it is still difficult to reach a fair conclusion on this question as the reports from the field are only starting to come in. Their is a fairly clear tendency though. Business magazine Fast Company, a publication known for its enthusiasm for everything innovative and digital, sent one of its writers for one month into the “sharing economy” to test the waters of entrepreneurial inspiration. The conclusion of her very interesting and extensive report is rather devastating:

“For one month, I became the “micro-entrepreneur” touted by companies like TaskRabbit, Postmates, and Airbnb. Instead of the labor revolution I had been promised, all I found was hard work, low pay, and a system that puts workers at a disadvantage.”

In fact, Sarah Kessler (that’s the name of the writer turned sharing Guinea pig) never made enough to get by at all despite being young, flexible and urban, i.e., part of the social cohort that is supposed to fare particularly well in the “sharing economy.” Similar concerns have been raised by the New York Times’ rather comprehensive journalistic analysis of the phenomenon. Yes, there is freedom to be found in platform capitalism but it is the precarious freedom of what the newspaper calls the “gig economy:”

“Many gigs may seem to offer decent pay. But they may not look that great after factoring in the time spent, expenses, insurance costs and taxes on self-employment earnings. ‘If you did the calculations, many of these people would be earning less than minimum wage,’ says Dean Baker, an economist who is the co-director of the Center for Economic and Policy Research in Washington. ‘You are getting people to self-exploit in ways we have regulations in place to prevent.’”

If one adds protesting Uber drivers and the fact that on top of miserable pay and lack of safety net one also misses the the social (!) aspect of sharing one’s work experience with coworkers, there isn’t really much awesomeness left for the sharing micro-entrepreneur. TaskRabbit’s CEO Leah Busque once said that the goal of her company was to “revolutionize the world’s labor force.” Unfortunately, it looks as though Mrs. Busque and her investors could accomplish what they set out to do. One might not agree with CUNY Professor Stanley Aronowitz, who refers to the ‘gigs’ offered the by “sharing economy” as “wage slavery in which all the cards are held, mediated by technology, by the employer, whether it is the intermediary company or the customer.” What does become increasingly obvious, though, is that platform capitalism is mounting an attack on the achievements of the labour movement – which for very good reasons we consider to be a pillar of modern, democratic civilization – and a very effective one at that. And here again, it is not that the “sharing economy” has gone off the the rails, it is simply the logic of platform capitalism. As Sacha Lobo puts it succinctly:

“By controlling their ecosystems, platforms create a stage on which every economic transaction can be turned into an auction. Nothing minimizes cost better than an auction – including the cost of labour. That’s why labour is the crucial societal aspect of platform capitalism. It is exactly here that we will have to decide whether to harness the enormous advantages of platform capitalism and the sharing economy or to create a ‘dumping market’ where the exploited amateurs only have the function to push professional prices down.”

I agree. The basis for such a decision needs to be a proper understanding of the reality of platform capitalism. The anger we have seen over the last few months directed against the “sharing economy” has a lot to do with the utterly unsubstantial claims and stories that are constantly churned out by the marketing machine of platform capitalism. Take John Zimmer, co-founder of Lyft, who told Wired earlier this year that the sharing economy bestows on us the gift of a revived community spirit. Referring to his visit to the Oglala Sioux reservation, he writes: “Their sense of community, of connection to each other and to their land, made me feel more happy and alive than I’ve ever felt. We now have the opportunity to use technology to help us get there.” No question, the pompous impertinence of this comparison is truly breathtaking. And yet, neither is this kind of rhetorical gymnastics the exception in the sharing-scene nor does it come unmotivated. Noam Scheiber of the New Republic explains the rationale behind the obscenities of Zimmer (and his kind) with great lucidity :

“For-profit “sharing” represents by far the fastest-growing source of un- and under-regulated commercial activity in the country. Calling it the modern equivalent of an ancient tribal custom is a rather ingenious rationale for keeping it that way. After all, if you’re a regulator, it’s easy to crack down on the commercial use of improperly zoned and insured property. But what kind of knuckle-dragger would crack down on making friends?”

6. The Sharing Economy: A Dumb Term that Deserves to Die!
The truth of the matter, though, as Nathan Schneider writes on Al-Jazeera America, is that “the sharing sector of the conventional economy built on venture capital and exploited labor is a multibillion dollar business, while the idea of a real sharing economy based on cooperatives, worker solidarity and democratic governance remains too much of an afterthought. If the sharing movement really wants to disrupt economic injustice, these should be its first priorities.”

I hope that it has become clear over the course of this little essay that it is in no way the intention of the “sharing economy” to “disrupt economic injustice.” The “sharing economy” does not exist. Or, in the words of the business writer Matthew Yglesias: “This is a dumb term, and it deserves to die.” One of the reasons why it doesn’t is that Silicon Valley’s powerful marketing machine that drives platform capitalism is beautifully adjusted to a global network of willing volunteers; from the one size fits all TED format to more thematically specific publications and conferences. Even well-meaning activist networks such as Shareable or the P2P-Foundation play a rather questionable role in keeping the myth of the “sharing-economy” alive.

This is not to say that there are no great initiatives and indeed businesses that are trying to use the power of digital technology or simply their imagination to practice forms of exchange that could actually be called sharing. They do exist and it is wonderful that they do. However, their value in the “sharing economy” as it is currently staged by the stakeholders of platform capitalism is that of providing an illegitimate ethical charge, a fig leave for an alarming mutation of our economy. I think they deserve better! Yet, in order to even have a chance at turning this development into something that might be legitimately called “sharing economy,” we need to be absolutely clear about the fact that platform capitalism does not even remotely resemble it.