The “Sharing Economy” Is the Problem
geo.coop
geo.coop
Uber and Homejoy, while also having aspects of efficiency increases, also are tightly coupled with labor, which has always acted as a counterbalance to unfettered capitalism due to the human element involved and the need for people to make a living. However, the authors of this article miss the bigger picture here. The dynamic playing out with these companies is act one of a larger play, where the final act is the complete removal of human labor from the process. The logistics infrastructure being built here is the end being sought, not the profit margin on the labor being sold nor the network of "entrepreneurs." With the logistics in place and the data needed to properly run these services at scale, switching out humans for robots as is cost effective will be a natural transition.
All the more reason we as a society need to come up with a better solution to "unskilled people need to eat" beyond blaming the greed of silicon valley companies.
1) Silicon Valley may envision a future where human labor is not needed and society adapts. But ordinary people aren't futurists. They don't envision that coming about particularly soon. Neither the technology not the social change to deal with it. All they see is the short-term effect of automation driving down wages.
2) Silicon Valley has adopted this world view that embraces futurism and automation, but that future doesn't have a well-defined place for unskilled and moderately skilled people nor have its proponents elucidated how those people will be more prosperous in that future than in the present. People in Silicon Valley talk about "bullshit jobs" but have no answers for what those secretaries or HR staffers are going to do when those jobs cease to exist.
And Silicon Valley can't hide behind the "we just make the technology, we don't give you answers to social problems" trope because there is a strong social and political component to the current Silicon Valley mindset. Uber isn't just building logistics technology. It's disrupting an outdated industry and breaking down obsolete regulations. They're not just building technologies for the world we live in, they're trying to change the social and political rules that govern that world.
It's not unique to Silicon Valley. The company behind automated elevators with buttons did not have a plan for the elevator operators, and Henry Ford did not have a plan for horse stable operators.
how so?
Ford declared: "My ambition is to employ still more men, to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes. To do this we are putting the greatest share of our profits back in the business."
Now, how much of that was genuine belief and how much was him trying to win a lawsuit is anyone's guess. Nonetheless, he had a public message that offered people a path forward, a better path, even as his technology closed other paths.
Kalanick declared: "In 2015 alone, Uber will generate over 1mm jobs in cities around the world and with that millions of people may decide that they no longer need to own a car because using Uber will be cheaper than owning one. Parking could become less strained in our biggest cities, and city congestion may actually start to ease due to uberPOOL’s expansion and success."
Now, how much of that was genuine belief and how much was him trying to win public favor with regulators is anyone's guess. Nonetheless, he had a public message that offered people a path forward, a better path, even as his technology closed other paths.
;-)
I get your point though, and I don't think you're entirely wrong. I just don't think Ford was really any different from Kalanick. They're both capitalist looking to make themselves rich and powerful. They just lived in different times with different technological and social forces at work. Ford marshaled whatever rhetoric he could to combat those who were against him. Kalanick is doing the same.
Whatever problems with inequality the world faces aren't, in my opinion, due to a relatively small number of people in Silicon Valley but due to global forces trends that have been at work for decades.
Ford's process allowed him to reduce the headcount, and gain competitive advantage even with the added expense of specialized training and higher wages to retain the specialized labor. Therefore the total value of human labor should include the workers who would've been previously hired but were no longer needed under new process.
Which is not that much different from Silicon Valley's "do more with less" mentality.
I think part of the reason you see so many people blaming the greed of Silicon Valley companies is that so many "Silicon Valley" people (wealthy and upper-income people associated with Silicon Valley) seem to be ignoring the "unskilled people need to eat" problem or, worse, blaming the "unskilled people" for failing to guess which career paths would be lucrative in the future or for lacking aptitude in those careers.
When a non-negligible portion of the conversation actually turns on people who are effectively (or literally, in some extreme cases) calling for a dictatorship of tech companies, you have to expect people to wonder how much Silicon Valley cares about the rest of the world.
But, in post-ownership, only those who own capital have income. We end up with two classes: the monied capital owners (who rent out homes/cars/kitchens/software) and the poor people needing to rent from the capital owners (or work from them at an hourly, non-guaranteed rate).
The joy of that model is it's so much easier for a wealthy person with a little capital (renting 5 apartments in a city) to take that income and buy more capital (buy 5 new apartments to rent out each year), which restricts the ability for "normal" people to participate in the market by eating the fixed supply. Then, snowballing, your return-on-capital income lets you buy more units faster and faster. You get to remove even more capacity from the public market and you get to turn a scarce housing market into a private money spigot.
The age of attracting a 50,000 person factory to your town and filling it with uneducated workers is over. There aren't any future mass-employement systems for unskilled labor that aren't essentially servitude.
Very honest.
> Our society is moving towards post-ownership.
Now how a bit more honesty?
What you really mean to say is our society is moving towards an ownership by the few (shareholders, CEOs, boards) who will indenture everyone else through blah-as-a-Service. The code is owned, the capital is owned, the apartments are owned. It's a joyous model... so long as you're on the right side of the ownership line.
It's going to be a rough half century or two until we get our cornucopia machines working.
The solution is basic income. That doesn't seem realistic in the United States, though.
Yeah, basic income coming from where? Oh wait, the machines doing all the work, right. Let's talk again when we reach singularity. If ever.
The idea would be to increase taxes on companies hoarding profits due to increased automation (i.e. "tax the robots and give the money back to displaced humans"). Then you redistribute those profits back to the public by slowly (or quickly) adjusting the social security age down to birth (or age of majority) as revenue from taxing automation increases.
Not going to happen in our current political climate though.
Alaska has a variable annual payout, and while $1,900 a year is better than $0 a year, it has not led to economic/artistic/scientific revolutions described by basic income proponents.
Initially? Probably not for those in developed countries.
The median per-capita household income (per http://www.gallup.com/poll/166211/worldwide-median-household..., as of 2013) is about $3k/yr. For half the people on the planet, $100/yr would make an appreciable difference in their purchasing power (more than 1/3 their monthly income).
Is that a practical amount? $100/yr for every person on the planet is less than 5% of the GDP of the US, and less than 1% of the global GDP (GWP). If the US was going to foot the bill alone (it shouldn't), it would be about a quarter of our tax revenues. Steep, but doesn't sound financially impossible (political and infrastructural issues may well be another matter).
Coming from taxing capital income like other income, rather than giving it preferential tax treatment that favors the already rich.
Scott Sumner explaining how all capital income taxes are additive w.r.t labor income tax: http://www.themoneyillusion.com/?p=28842
Also just do the arithmetic; 1-(1-corporate income tax)(1-cap gains tax) >income tax for pretty much any bracket.
Yes, it does.
> The combined taxes on income + corporate tax + capital gains greatly exceed the tax rate on labor income.
It makes no sense to combine those things, especially since not all capital holdings which recieve the benefit of favorable capital taxation are investment in entities that are even theoretically subject to corporate income taxes.
> Scott Sumner explaining how all capital income taxes are additive w.r.t labor income tax
He certainly asserts that income tax "doubles [sic] taxes the money saved, once as wages, and again as capital income." But this is a ludicrous assertion, since the part taxed as labor income is not taxed as capital income.
> Also just do the arithmetic; 1-(1-corporate income tax)(1-cap gains tax) >income tax for pretty much any bracket.
Even for the things where that might be relevant, that's probably only true if you look at the nominal corporate income tax rate rather than the effective corporate income tax rate.
Could you do some arithmetic? I'm not really sure what you are talking about.
But this is a ludicrous assertion, since the part taxed as labor income is not taxed as capital income.
This is simple arithmetic. Suppose I'm paid $100, taxed $20 on labor income. Then I invest the remaining $80, cash out at $90 and pay $2.50 in cap gains. I've then paid another 2.8% (adjusted for NPV).
Taxes on capital income always come after labor income, except for certain special tax deferred investment vehicles which treat capital income as equal to labor income.
Its not a matter of arithmetic. Its a matter of understanding that the kind of arithmetic you suggest doesn't make sense, because an asset doesn't have to be subject to corporate income tax on the process by which it increases in value for the proceeds derived from it to be subject to favorable capital gains taxes rather than normal income taxes. E.g., among other things, real estate investments.
> This is simple arithmetic.
The issue isn't with arithmetic, its about the justification for ascribing menaing to the arithmetic you are choosing to do.
> Suppose I'm paid $100, taxed $20 on labor income. Then I invest the remaining $80, cash out at $90 and pay $2.50 in cap gains. I've then paid another 2.8% (adjusted for NPV).
And, so? You paid taxes at the rate applicable to labor on the $100 of labor income, and taxes at the rate applicable to capital on the $10 of capital income. This isn't "double taxation" -- the portion of the income on which you pay taxes at the rate applicable to labor income isn't taxed as capital income, and vice versa.
> Taxes on capital income always come after labor income
First, so what? "After" is irrelevant to the discussion, its still separate taxes on separate buckets of income. Chronological sequence isn't relevant to the discussion of Summers claims that there is a double taxation that comes from a combination of labor income taxes and capital income taxes.
Second, in any case, as well as being irrelevant, that's untrue in the general case. While capital assets may be purchased with after-tax labor income so that there is a sense in which the capital-income-generating event and associated taxes follow after a labor-income-generating event and associated taxes, capital assets may be created or generated by events other than purchases from the proceeds of labor income, in which case the capital income, and associated taxes, are not after some kind of even loosely-connected labor income and associated taxes.
And so if I consume immediately, I get $80 worth of consumption for every $100 I earn, whereas if I invest I consume only $77.2 of consumption for every $100 I earn. That's the core of Sumner's argument.
Do you have any argument beyond playing with definitions and arbitrary divisions of wealth as to why a person who invests should consume only $77.2 while a person who consumes immediately should consume $80.0?
With the numbers you gave, the first number was correct ($80 of consumption on $100 in pre-tax labor income), but with investment the actual number is $88.75 on $110 of pre-tax labor and capital income, or $80.68 per $100 of income.
consuming immediately gives you 80% of income
assuming you invested all of it, 80$ and made back 10$ which was then taxed at 25%, you're left with 87.5$ out of 110$ in total income.
consuming after a year gives you 87.5/110 = 79.5% of income, 1 year in the future. After discounting at 2.8%, you're left with only 77.38% of income.
In that case, you'd rather splurge than invest.
Comparing dollar values of money in the future to dollar values of money in the present is simply incorrect.
After that the market reprices accordingly.
Addressing the "need to eat" problem though, the government would have a much better leverage withholding the money to buy up food in bulk than let individual buyers with no leverage negotiate their own prices.
Is that really true? My limited experience with AirBnB seemed to be that providers were in it full time. That wasn't an apartment they used themselves, they are literally acting as alternatives to hotels.
To this article's point, shouldn't parent companies be optimized out as well if we're innovating on marketplaces?
This is my biggest fear. When my family lived in Bangladesh, we had a cook, maids, and a full time nanny for me even though my mom didn't work. My dad once sent the nanny out with some money to buy a pack of cigarettes, and he came home empty handed because he couldn't bear to pay a whole day's wage for a pack of cigarettes (my dad went through two packs a day at the time). The value of human labor is just incredibly low over there (or at least was 25 years ago).
That kind of society is a travesty. You don't want that here. Maybe it won't come to pass. I hope it doesn't. But matter how gung-ho you are about the sharing economy or how much faith you have in the market, you should at least fear that potential outcome.
I agree that poverty is a travesty, but luckily we've found the solution to it (trade). I don't see a reason to believe that more efficient trade will do anything but help.
"Productive individuals" is a crock excuse. We lived in that house with those servants because we won the genetic lottery. Society exists to maximize the prosperity of the greatest number of the population, not reward a few at the top for their good choice of parents.
And maybe trade and technological is the best way to maximize the prosperity of the median individual. I don't have the answers to that. In just talking about what I don't want America to look like 30 years from now.
Note that I've never been to Bangladesh, so my only point of reference is domestic labor in India. I never felt that my maid lacked dignity.
I'm pretty sure it's not income equality you are talking about, since India (33.6) and Bangladesh (32.1) have lower inequality than the US (41.1) or UK (38.8). https://en.wikipedia.org/wiki/List_of_countries_by_income_eq...
Somehow I'm just not understanding your post at all - I think I'm missing a premise or core definition. Maybe if you could back up to first principles I'd be able to follow?
1) Desirable societies are ones where everyone has equal dignity. That is desirable not just for the lower classes, but also for the upper classes, because even the wealthy should feel ashamed interacting with another person other than as equals.
2) Equal dignity is hard to define precisely, but its component parts include economic opportunity and social stature. People have equal dignity, notwithstanding an employer-employee relationship, when, among other things: a) the work is a choice, not a consequence of desperation; b) when the interactions between people are not defined by their work; and c) when nobody internalizes the feeling that someone is better than them, or that they are better than someone else because of their work, education, upbringing, or social class.
Domestic servitude has a unique capacity to create unequal dignity because: a) it's often undertaken because someone has no better opportunities; b) because of the unique master/servant relationship that arises out of one human purchasing the services of another in his individual capacity (rather than, e.g. both of them working for a larger organization); and c) because working with the sole purpose of making another human comfortable has a unique way of cementing pre-existing economic, education, or social divides.
I do not know anything about India besides what I've read. But in Bangladesh, there is a deeply ingrained class structure. The domestic servant does not think himself the equal of his employer, and employers usually don't think of servants as their equals.
In first world countries domestic service suffers from these problems less because people have alternatives and so human labor is very expensive. Plus, the culture is just better. People in small town Iowa don't think that venture capitalists in San Francisco are better than them, and it would be an egregious social violation for the venture capitalists to think so out loud. None of that is true in Bangladesh, where social interactions are strongly dictated by one's class, work, and education, with domestic servants being near the bottom of the pile.
But from what you write, it seems as if the real issue here is the class structure and looking down on domestic labor, rather than the labor itself.
As such, it seems like the way forward would be for us to encourage Uber/Homejoy/etc to create a liquid market in labor (which ensures that neither buyers nor sellers have any real power over others) and to adopt Ayn-Rand style ethics about work over our current left-wing "anyone who isn't a knowledge worker at a non-profit or bank is an exploited victim" mentality.
For most of the last century, Bangladesh was a basket case, unable to even feed its own people, and faced multiple terribly violent conflicts. It seems to have finally gotten moving over the last decade, and hopefully will keep on track.
We should definitely not "fear" such an impossible outcome.
Sounds uncomfortably close to slavery.
Granted, that's a pretty rosy way of viewing the arrangement, but, as usual, some income is better than none.
"what exactly are the capitalists at Uber contributing to the company? [...] The capital owners maintain the phone app, but app technology isn’t the major cost, and it’s getting cheaper and easier by the day"
If true, it should be straightforward for other companies and cooperatives to form and compete with Uber. And that's capitalism at its finest.
They'll lack an essential capability that comes with economic scale and connections, raw political power:
Hiring software engineers to churn out software apps and maintain highly available servers should be the easy part then.
I think if you read the link in my prior post, then I think you might agree that the taxi companies are out of their league facing Uber, their $40 billion, and their massive lobbying effort.
Anyway, I don't think the conversation was about taxis in particular, but about any Uber-like startups.
I haven't seen yet some lobbying effort where Uber would try to lock up the market for itself (like car dealerships), but maybe I wasn't looking close enough.
Why is it that coops never grow up to be something like Apple or Google? I hear about small examples here and there, but they are so rare and insignificant to privately owned organizations.
Only "successful" massive coops I see are governments. And they all exist with unparalleled power within that geographic area. I think that's not a coincidence. In order for coops to become successful, it must be enforced on its members with massive power, or else, it'll remain very small like an extended family or something.
First, your comparison is inapt, as co-ops are privately owned.
Second, there are a number of large cooperative organizations. You've probably heard of REI, for instance. Agricultural cooperatives are a bit of a different beast, but there are a lot of big names there as well - including, off the top of my head, Florida Natural & Tillamook cheese.
Mondragon Corporation?
As I pointed out in the thread on Google's RideWidth, instead of (or in addition to) rideshare companies why can't my municpality license any individual who applies to pickup people on the street who want a ride, and charge them. People wanting a ride could use a special hand signal, with their arm outstretched and thumb pointing up. What do the commercial vendors add or at least, why freeze out individuals doing the same thing?
(I'm not implying they add nothing, I'm asking what it is and whether it's worth the extra cost.)
If nothing else, Uber's disruption of traditional taxi services has started a conversation. It begs us to rethink how we hire private transportation, how businesses that facilitate these services operate, and how workers who provide these services are compensated. That's a good thing.
On this point, I'm not sure I agree. My water is clean, my roads are safe, my airplanes don't crash, robots drive around Mars and fly to Pluto -- the government seems particularly good at quality control.
How does that change the relevant dynamics, though? If the market would be efficient, then the "FOSS-Uber" drivers would still get paid roughly the same as Uber pays them now. Sure, the drivers might not be creating a profit "to billionaires", but their situation would at most improve marginally.
(Or you mean that with open source, decentralized competition, there would be more drivers doing it and the revenue itself would drop?)
If the drivers think its bad now, wait until Google and Uber launch driverless car fleets! Then they will earn $0 a hour, and worse, they will be chasing even fewer unskilled jobs.
The lesson then is that if you are under 18 and not getting a university degree, you are doomed to subsidence living -- this is what the market is telling us -- you need to be an automator and not something that is automatable.
The B-Corp concept strikes a good balance but the jury is still out on whether "serving 2 masters" can work.
I think we'll have longer-term changes that won't necessarily take the shape of the most recent anti-capitalistic movements people were raised on. Patreon, for example, is incredibly empowering for niche communities of artists and otherwise unsustainable but culturally valuable projects.
I don't think we've yet realized all the transformative possibilities a connected world has for allowing a lives to be flexible to the individual. My generation missed the boat on a mortgage and a career until retirement. Maybe we can figure out new norms for the average jane's work and life goals. Ones that look less like running on a hamster wheel.
What Uber brings to the table is the funding to change (seemingly by any needs necessary) the regulation that made the taxi industry so crap in the first place. For better or for worse.
Is the exploitative structure of the taxi industry a result of regulation? Seems reasonably likely.
They're absolutely right that there's nothing "sharing economy" about Uber in particular. Nobody really believes that they're hitching a ride with a friendly person, just because that driver was "headed in that direction anyway".
AirBNB is more plausibly sharing (if, as the article points out, you think "sharing" means "getting paid for something"). In theory reducing underutilized housing units is a great thing.
Of course, it also drives up the value of that very housing (capital), which can exacerbate the rich/poor divide. Piketty would have a thing or two to say about this.
Beyond the efficiency of using a private auto as a livery, the service of Uber is often cleaner and more courteous than a yellow cab. A step toward Disney World, for sure.
And that's where "unskilled" labor comes in. You don't need an MBA, you don't need CS degree to make customers feel welcome and comfortable. Nor can you automate it (e.g. robot-phone-operators).
So The future is returning man's economic function back to the Host in the guest-host relationship, and moving away from a cog in a factory.
The drivers would keep all their money, and as a bonus, there would be no organization there that cities and other litigators could target. At best they could scour the cloud looking for server nodes to shut down, and send undercover cops to bust the drivers---a move that would make for very bad PR, because it would be adding up to harassment of the "little guy" by the state, bent on enforcing a taxi monopoly.
For example:
> under the guise of innovation and progress, companies are stripping away worker protections, pushing down wages, and flouting government regulations
Re: wages, when Uber shared this data (http://www.businessinsider.com/how-much-money-uber-drivers-r...) it looked like the average driver made more not less, though the data does come directly from Uber so it should be taken with a grain of salt.
Re: flouting government protections and worker protections (and ignoring that these are one and the same), I'd really like to know what specifically the assumed drawback is...
> you don’t become worth $40 billion by sharing and caring. You become worth $40 billion by ripping off the people who work for you.
This is obviously false -- the sheer number of startups and companies that die by ripping off (and hence pissing off) their employees and customers is staggering. In the case of Uber, the main source of complaints is not the drivers or customers... it's Uber's competition, such as the Taxi coops this article describes in glowing terms. (#include the french riots)
The only driver complaints I'm aware of basically stem from the interest misalignment caused by Uber's taking a 20% commission from drivers rather than X% after estimated driver expenses. This led to the recent price cuts looking a whole lot better to Uber (who directly profited from the increased usage) than it did to the drivers (who now have a much lower profit-per-faire)... but given that driver income is still effectively 2x the minimum wage I still have a hard time considering this "evil" in any traditional sense.
> The efficiency gains of connecting workers to customers via the internet applications will drive down prices and thus incomes, while the new profits created will all get sucked up by the small group of Silicon Valley companies that created the platforms, along with their shareholders.
AND consumers (who collectively are profiting the most here). For example, eBay did make the founders wealthy, but it's ludicrous to claim they somehow sucked all the wealth away from everyone else. Business isn't zero sum, and easy access to cheap used electronics (or access to ubiquitous high quality low cost rides) is being ignored in this analysis.
Okay, I think that's all I can take. I hope no one takes OP seriously.