The Mock Trial of the Collaborative Economy
THE QUEST FOR NEW VALUE(S) (1/3)
This is the first part of the series titled “The quest for new value(s)”, where I aim at drawing a critical analysis of the collaborative economy with the objective to identify the key points where our action is needed now.
After two years of one-sided praise of the collaborative economy, it is being put under merciless scrutiny. Accused of increasing inequalities while capturing the value created by communities, the various models gathered under this umbrella term are depicted as the most savage version of capitalism. What if this ruthless critics are focusing too much on the most visible flaws, while overlooking the real issues we have to start solving now? Shall we abandon these models and practices all together or is there still hope that they could help us navigate toward a system that ensures a fair distribution of opportunities among all?
The reasons for delusion
The collaborative economy is going through dark times. It is being blamed from all sides for failing to put forward a more sustainable set of principles or models than the one inherited from our industrial and hierarchical past. Critics say that we were naive to put our hopes on the collaborative economy, because it’s nothing but a more hyped and less regulated version of capitalism. The list of its sins are endless: digital labour, tenuous contracts with sharing service “providers”, exclusion of the most fragile, threatening existing markets and jobs, monetization of everything and the dangers of “free” and “open”. Said “sharing” economy platforms, deemed to be the best representatives of a perfect collaborative model, are cursed for their arrogance and unfair competition.
After nearly two years of uninterrupted praise to the values of “sharing” and “collaboration”, this shift may seem unsettling. Yet given that some of the collaborative economy’s most visible representatives woke up one morning with a massive amount of cash provided by very traditional and not so collaborative investors, one can rightly ask the question whether these new practices and projects truly comprise this “paradigmatic change” we have been bragging about for the past two years.
Such disappointment (aka “mild hangover”) feels dreadful in a time when hopes to cure our system plagued by economic stagnation, inequalities and unemployment loop are rapidly thinning. When the crisis struck in 2008, analysts would blame our system failure on banks, states, speculators, hedge funds, depending on the news of the day, while anticipating a counter-cycle which, combined with virtuous policies and natural cooling, should put the system back on track.
What seemed like a temporary storm at the time turned out to be permanent turmoil: the system now appears to be flawed in its core and it was widely accepted that new forms of economy and thinking “outside the box” were needed to cure the system. But technology, the Internet or any new form of new economy (sharing, collaborative, circular, etc.) have successively failed to become the long-awaited saviour we all prayed for. And the collaborative economy, once a sacred cow, has suddenly become the poisoned apple accused of reinforcing our monopolistic and capital based system while undermining the system’s last barriers against terminal social misery.
Of course, as with technology, the problem is not the collaborative economy itself but, at least partly, the way we have been thinking about it and the unlimited hopes we were putting into it.
How did we come to believe that the dozens of collaborative models designed by hundreds of different people with different intentions and strategies would pursue the same goals and have the same economic and social consequences? It’s time to sit down and reassess its premises with a sober gaze.
Please change the bloody record
It’s now necessary to debunk some of the much-heard statements which are, at best, inexact.
All collaborative models are like Uber and Airbnb
The main issue with some of the recent critics is that they tend to consider Uber and Airbnb as perfect archetypes of a collaborative model, with all their benefits and drawbacks. Therefore they conclude that such a model breaks laws, uses unfair competition as its main weapon, barely guarantees decent quality standards and fiercely lobbies with governments. The investigations regarding accuracy of such claims regarding Uber and Airbnb are way beyond the scope of this article.
If there is one idea in this article you should remember, it’s this one: Whatever Uber does, it’s not a collaborative service, nor is it a sharing service, nor is it a P2P platform, at least in the sense where “peer” means “not professional”.
Uber is a private taxi company that relies on the Internet, mobile technology, and, as some claim, savage tricks they use against their competitors, to be more efficient than taxis. As a matter of fact, a French court recently condemned Uber to pay a €100k fine because it misused the term carsharing for what the court deemed to be a private transportation company. As for Airbnb, the other beloved target of sharing economy haters, it demonstrates in its communication and, seemingly, in its actions, to stay as close as possible to a P2P renting platform. There is actually a difference between Uber and Airbnb. And there is a much bigger difference between Airbnb and other collaborative companies, not the least because Airbnb has incommensurably more cash to run its operations and expansion than any other one (collaborative or not).
As a matter of fact, there is no such thing as one single collaborative economy. I understand OuiShare may be suspected to consider “the collaborative economy” as a monolith. However, OuiShare has always clearly stated that this term is used in a purely descriptive fashion as an umbrella term for various “models and practices” based on P2P relationships and the contributions of a community. OuiShare’s mission is “to build and nurture a collaborative society”, which is very different from promoting the collaborative economy and asserting what it is and should be.
Although these various projects have one very strong common basis which I will explore in the second part of this series – a new way to create value – they are no less varied that non collaborative ones. Let’s think, for example, about The Food Assembly, which enables people to unite to order local food in a sustainable way for both farmers and consumers, or Yerdle, a gift economy platform.
One could argue that they are both VC-backed companies. But this much-used and slightly hypocritical argument misses the point, because it raises the much broader question of corporate and startup financing.
Collaborative models create monopolies and destroy entire industries
First, the monopolistic tendency is not a distinctive feature of collaborative models only. It is the case for a great deal of platforms in an informational network era.
Despite the stunning growth of some of them, these platforms are far from having achieved a monopoly in any single industry. This question in fact depends on what we mean by industry: Airbnb is the prevalent platform in the “P2P apartment rental” industry but it is only one player among others in the “tourism industry” and it is literally inexistent in the “real estate” industry. Blablacar is undoubtedly the main player in the European carpooling industry but it is far from putting down the entire “mobility” industry.
Actually, even the biggest ones have an impact on the economy that is second to none. Recent research has shown that even Airbnb has a negligible impact on the hotel industry’s turnover. Of course, the mental transposition of their threat to other industries – especially insurance, banking and politics – undoubtedly suggests that no company or industry can now feel safe. But the war has yet to happen and the smart strategy pivots taken on by some traditional players suggest that the war might actually never happen.
The collaborative economy kills our social model and reinforces capitalism
The collaborative economy is not an organism that has a single will of its own. It is not capitalist or anti-capitalistic, social or anti-social, moral and immoral and, above all, it is not fair or unfair. It is a set of models, tools and practices that have externalities and side effects, which in turn have various economic and non-economic consequences on our societies. Of course these consequences are sometimes good and sometimes bad, sometimes they are visible and sometimes they are yet to be explored.
As I will explain in part two of this article series, collaborative models’ externalities are at least as important as their internal economic structure. They are nevertheless closely linked to what we do with them as consumers, producers, entrepreneurs, institutions, etc. Although the economy has proven to have a critical impact on our societies’ social organisation, it is plain determinism, at best, and bad faith, at worst, to claim that our societies are economy’s slaves.
The collaborative economy destroys our jobs
The true impact of the collaborative economy on work and labour goes way beyond the “job creation versus job destruction” dichotomy
It is a swift generalization of points 1 and 3 to assert that collaborative models are destroying jobs. And the basis of such generalization is, in most cases, Uber (please see point 1). A good example is this piece, subject to a certain number of cognitive biases: using concepts without defining them (“sharing” economy, monopoly), conveying paranoia against an organized new “totalitarian” order ruled by the Big Five (the tech’s Big Four + Uber), considering the reader is a jerk unable to grasp this new order’s dangers, mixing up forward-guessing and fact-based analysis, taking agents’ will or intentions for our future reality. This plain technophobic populism will not lead to any better decision-making framework than tech-utopia.
Our current jobs will be most probably killed anyway, by robots. Because it all depends on the path we’ll decide take in the near future, I cautiously avoid any presumptous claim regarding the collaborative economy’s job creation or destruction potential. Yet I suspect Nao and Wordsmith to be the true world-class candidates for the job to killing our jobs.
One fair statement: it is unlikely that the collaborative economy may create a fair society all by itself
To be honest, I considered dedicating my paper to dismantling this belief. But soon I realised that I should either write a whole book that could be titled “To save everything, collaborate: the folly of P2P solutionism” or return to arguments that have already been extensively explored regarding technology and the Internet. To sum it up in one sentence: as we learned to avoid techno-utopia, let’s not fall into a coll-utopia.
First and foremost, the rise of inequalities in the distribution of wealth and opportunities, together with the environmental future of our planet, are the most important challenges we will have to solve in the next decades. It’s obvious that the collaborative economy is no wand, although it seems to be rather beneficial to increase the purchase power and the standard of living of the middle class (again, in the absence of in-depth research and data, we cannot do more at this point than second-guessing). As a new value creation system, the collaborative economy sure has decent assets to be part of our toolbox.
Yet value creation and value distribution are all but the same concept: nothing guarantees that a system successfully generating economic value allows for its fair distribution. A platform could still capture the greatest part of value created by peers and remain unpunished because the community does not have a word to say in the platform’s governance. It may lead to aggressive price wars, which are known to be lose-lose scenarios for both consumers and producers in the long term. As a matter of fact, the worry that some platforms will end up capturing value instead of distributing it to the peers is totally justified. After all, for all the fuss around the distinctive features of collaborative models, they are still financed in a very traditional way by VCs and other kind of investors whose final objective is to get a return on their investment, and therefore to capture a part of the value that has been created.
I believe the initial assumption – that some economic models will be naturally fairer than others – is utterly flawed.
As if our growing inequalities were due to the economy alone and that economic “innovation” would suffice to make our world better. As seductive as this wishful thinking is, it is simply wrong. For inequalities and poverty are deeply rooted into non economic factors, the most important being in my opinion the shortcomings and weakness of human government.
Collaborative models are not governments (yet)
The mission to solve global political and social problems remains in the hands of governments and institutions, at least in democracies.
This point is extremely important and has already been explored by Arthur De Grave’s in his piece “The Sharing Economy: Capitalism’s Last Stand”. Let’s say it again: it is a genuinely bad idea to hope that some economic models will be totally “autoregulated”, as it is a bad idea to assume that one day the techno-realm will work ethically without human intervention. No economic system will ever be able to control its own externalities and failures, collaborative or not. The economic history of the past century could be summed up as an endless search for such an invisible hand, in vain. Perfect markets, economic rationality, independent monetary policy, rational anticipations, fiscal policy, the Welfare State, the new economy, technology, Silicon Valley, all have failed. If we hope that the collaborative economy will do better, we will be but disappointed.
Why? A great number of challenges we are facing today are not economic. There are two of them that I believe are critical: the future of work and the distribution of value created. As I will argue in the second part of this series, collaborative practices and models could not properly solve these challenges all by themselves, at least not in a way that our societies would deem sustainable and fair. For sustainability and fairness are the result of a choice and are based on values. The collaborative economy may be still a convenient term to describe practices and models, but it does not say anything about our values and principles, which should be considered from political, social, cultural and philosophical standpoints.
This critical shift in our perception of collaborative models is psychological and cultural. Now that the novelty has faded away, a feeling of fear that the impact they will have on our societies is irreversible overshadows our enthusiasm. Although a great deal of entrepreneurs (collaborative or not) play an important political and social role today by distributing economic power to people, the mission to solve global issues remains in the hands of governments and institutions, at least in democracies.
If we are to admit that the questions of social justice and fairness are of chief importance, we shall therefore start to think about how governments and institutions can benefit from these practices and models, for instance by considering them as laboratories where experiments regarding new socio-economic organisation are conducted.
Featured image: “Salem witch2” by Baker, Joseph E., ca. 1837-1914, artist. – This image is available from the United States Library of Congress’s Prints and Photographs division under the digital ID ppmsca.09402.