No doubt about it. The rise of the sharing economy has been one of the great technology success stories in recent years. The Internet and mobile technologies have enabled a new breed of company to emerge. These companies empower owners of idle resources as diverse as cars, spare bedrooms and free time to connect with buyers who can make great use of those very resources.
In 2014, the sharing economy was valued at around $15 billion. It is expected to rise to $335 billion worldwide by 2015. Now, here’s the rub: sharing economy services don’t create new industries, they disrupt existing ones. Ones that are entrenched and highly regulated.
If there is one thing that has been proven time and again, it’s that people in power don’t like outsiders muscling in on their territory. The sharing economy has spawned backlash from existing industry and political operatives alike. Claiming unfair practices and legal violations among others, war has been quietly declared against sharing services.
This is no small matter. A multibillion-dollar industry is hanging in the balance. For all the egalitarian imagery that the term ‘sharing economy’ evokes, the its rise has been driven by one simple factor. Price. That advantage is defined by a razor thin margin.
Uber does not pay payroll taxes for their drivers. Nor do they worry about vehicle maintenance or insurance. Airbnb does not have to manage hotel licenses for their hosts. Nor do they have ensure cleanliness before a guest arrives.
All these un-incurred costs add up to savings both for the businesses and their participants. They ultimately translate into cost savings for the customer. This, more than anything, is what has driven the success of sharing economy companies. The growth has truly been meteoric, to the tune of a $50 billion dollar valuation for the 6-year-old Uber.
While this economic advantage is the greatest strength of Sharing Economy it is also its Achilles Heel. Political winds can shift quickly. If recent trends hold, the tide may be shifting against companies such as Uber and Airbnb
Recently the California Labor Commission ruled that an Uber driver was an employee, not a contractor. While Uber argues that the ruling only applies to this one case, the truth is, it is a bad omen for the company.
It wouldn’t take much for this idea to spread among political circles, making Uber and competitors such as Lyft, responsible for a host of employment issues, taxes and benefits. There have already been incidences that argue for greater oversight. Once drivers are deemed employees, it would only strengthen the case for licensure by local taxi commissions.
Other examples abound. AirBnB has been publicly attacked and prosecuted by the State of New York. Even going so far as to pursue AirBnB hosts themselves to discourage participation.
Bureaucracy moves slowly, but relentlessly. It’s like the zombie in an old movie. You can outrun it for awhile, but you’ll eventually find yourself trapped in the old farm house with nowhere to flee. Our public institutions seem to have turned against the sharing economy. While they may not have been successful so far, there are no signs they are giving up.
Without a shift in attitude at the political level in our States and municipalities, it may be only a matter of time before they disrupt the growth of the industry. Regulation and oversight will transform future-forward sharing economy companies into something more closely resembling their staid industry competitors. That’s bad news for companies like Uber. There isn’t any way to justify a $50 billion valuation for the world’s biggest cab company.
About Me: I write and speak about Technology, Entrepreneurship and the people and companies that are leading the way. I'm an evangelist for user-centered design and an entrepreneur. I practice what I preach at Smashing Boxes, a leading technology design firm out of Durham, NC.
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