How to make the sharing economy work

BOOK REVIEW: From Airbnb to Uber, The Sharing Economy is a comprehensive and scholarly analysis of a phenomenon that's still in its infancy.

by Alex Stephany
Last Updated: 13 Jul 2016

Long before the ripples of the sharing economy rolled almost daily across the pages of The New York Times and the Guardian, NYU professor Arun Sundararajan knew there was a tidal wave coming. He has become the sharing economy's most visible public intellectual. So it was with excitement that I picked up his debut book on the subject.

Sundararajan opens with a superb overview of the sharing economy's intellectual backdrop, roaming through the ideas of the likes of Yochai Benkler and Lawrence Lessig. His observations around the 'reintegration of gift economies into a system that has become inefficiently impersonal and commercial' are especially sharp. Sundararajan discusses the bottles of wine that many Airbnb hosts (including me) give guests and the more gift-like platforms like Kickstarter where people can back projects for no material reward.

While Sundararajan's background is in academia, he does not want for commercial astuteness. For example, he notes the greater stickiness of Airbnb hosts rather than Uber drivers because Airbnb sources its demand internationally rather than locally. Indeed, his focus on supply is the same as most strong marketplace entrepreneurs. When I was last in New York, I found new Uber competitor, Juno, trying to win by paying drivers more and treating them better. Whether Juno succeeds or not, it's right to focus on supply.

Like other writers, he grapples with the imprecision of the term 'sharing economy'. I opted for 'WEconomy' in The Business of Sharing and he drafts in a similar term in 'crowd-based capitalism'. Sometimes, he plucks a juicy anecdote of crowd-based capitalism (I wish there were more). My favourite is the tale of Californian Don Dennis who moved to a Scottish isle and funded a business producing flower essences from orchids through peer-to-peer lender Funding Circle.

When it comes to regulating the sharing economy, Sundararajan knows that current frameworks must evolve. His exposition on regulation is exemplary, walking the reader through its three variants. First, 'peer regulation', created largely by platforms' review systems. Second, 'self-regulatory organisations', comparable to the various Bar associations today, which aim to prevent bad actors discrediting their sector. Third, 'data-driven delegation' which will allow platforms to use data to prevent market failure, similar to how banks use machine learning to prevent fraud.

He also devotes two chapters to the future of work and the status of sharing economy workers. This is the battleground of Uber drivers and Postmates couriers, among others, fighting to be reclassified from contractors to employees to benefit from rights such as sick pay, maternity and insurance cover. He explains how the lack of clarification can prevent platforms from providing employee-like benefits for fear of class-action lawsuits that would decree all of their workers as employees. Instead, he advocates a 'safe harbour' for platforms as a stepping stone to new labour policy.

He challenges the simplistic binary that the sharing economy means either high-fiving micro-entrepreneurship or slave labour. He wonders whether higher-skilled workers might be more threatened by platforms like HourlyNerd than lower-skilled ones are by platforms that have to source labour locally. This future will matter. He quotes research that there are three million 'on-demand workers' in the US today, a number predicted to rise to seven million by 2020.

Sundararajan is a standard-bearer for the sharing economy, as he open-heartedly admits. He advocates requiring platforms to hand data to regulators only in a digestible form akin to public companies on an audit. But he is not overly soft, suggesting forcing platforms to punish their users' discriminatory behaviour, just as employers strive to weed out workplace racism. This perspective places him well to counsel the public sector.

The sharing economy canon is reaching maturity. If The Business of Sharing is the entrepreneur's view on this topic, The Sharing Economy is the academic's. Painstakingly researched, it should become the go-to text for readers looking for academic rigour when too often sharing economy writing has suffered from a lack of it. This foundational text should serve the subject's many future economists, sociologists and regulators well, for as Sundararajan puts it: 'Crowd-based capitalism is still in its infancy'.

The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism by Arun Sundararajan is published by MIT Press, £19.95

Alex Stephany is the author of The Business of Sharing and a board adviser at JustPark. Follow him on Twitter: @AlexStephany

Photo credit: Carlos Maya/Flickr


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