Venture capitalist Marc Andreessen went on a tweetstorm on Wednesday night about how the sharing economy reduces income inequality.
It was interesting, but fundamentally flawed.
For ease of reading, I’ve post the whole soliloquy in a series of screenshots. The original twitter version is here.
The idea in this tweetstorm is that anyone who owns anything (or inhabits it, in the case of some AirBnBs which are, in fact, rental units), can “share” it by renting it out when they aren’t using it, thereby increasing their income and reducing income inequality.
And that’s just not true.
AirBnB may be transferring some wealth from hoteliers to homeowners, but the basic requirement of the service is that a person has extra space to rent out — either extra rooms or a second apartment or house. On the margin, perhaps some income inequality is reduced, but for the most part it’s just a transfer from corporate America to moderately wealthy individuals, plus a healthy chunk to AirBnB (a corporation!).
There’s also very little sharing going on in the sharing economy.
For example, when my mother comes to visit me in New York City from California, she has a favourite AirBnB she likes to stay at. The service has helped her a lot, since I live in a part of Brooklyn where there are very few traditional hotel options. But the AirBnB she stays in is run by someone who owns a whole house in Brooklyn, and has rebuilt the ground floor into several small studios, which are always rented out.
Rather than “sharing” his home, he basically runs a small inn. And the alternative to doing that is not leaving that space empty, but renting it out to a full-time Brooklyn resident at a (likely) lower rate.
My mum likes it better than other places she has stayed because it feels like a hotel. It’s private. It’s regularly cleaned. The closet is empty and she can put her clothes in it.
And, honestly, the alternative here is not her staying in a hotel. It’s her staying on the fold-out couch in my cramped studio. It’s a choice that she makes because she has the discretionary income to do so. She gives her money to a man who owns a home worth millions in Brooklyn. Convenient? Yes. Reducing inequality? Not so much.
Beyond the income inequality argument, there’s a real question as to whether the sharing economy can continue to exist as it is now.
In the case of Uber, Lyft, and Instacart, the companies are literally under siege from the people Andreessen purports to be benefiting from reduced income inequality. They are all being sued by their “drivers” or “shoppers” for being misclassified as contract workers rather than employers. Rather than reducing income inequality, these companies are increasing the burden on individual workers in the economy by denying them the benefits of being employees.
Any moral outrage aside, if the workers win these lawsuits, the companies in the “sharing economy” are going to have to seriously rethink their business models.
It’s likely not a coincidence that these companies proliferated during a time of high unemployment and depressed wages.
I was in an Uber in Washington, D.C. a few weeks ago and asked my driver how he liked his job. He said it was ok. He had really liked it, until Uber recently lowered fares (presumably to be more competitive in the market). As a result, he was no longer making enough to making driving full-time worth it. He was looking for a new job.
At the same time, traditional retailers are feeling the pressure to increase wages. This is going to catch up with these companies. They aren’t immune to the markets they are disrupting.
Disclosure: Marc Andreessen is an investor in Business Insider.
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