Airbnb and crowd-based capitalism

Airbnb has been instrumental in the rise of the “sharing economy”, or the idea of providing services to a stranger for money. A key aspect of the sharing economy is a more even resource distribution  among consumers, and fairer competition in the quality of services and goods which are exchanged, as service providers have an incentive to provide quality. The sharing economy may offer a solution to unequal distribution of resources, as it makes goods and services more affordable to a wider range of people. Take Airbnb, a company which makes accommodation in almost any geographical area affordable. Before Airbnb, it wasn’t financially viable for many people to travel to certain places.

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So what is crowd based capitalism?

An expert on the sharing economy, Sundarajan provides his analysis of  this new concept  in The Sharing Economy: The End of Employment and Rise of Crowd-Based Capitalism (Airbnb). He describes the innovation of  “crowd-based capitalism”, a new way of structuring economic activity which could replace the corporate based model. He sees the sharing economy as market-based, allowing capital to be utilised more fully, based on crowd-based networks, and constituting a blur between the personal and professional. What is this going to mean for our jobs, and how will government regulation accommodate it?  This remains to be seen, but the author offers some preliminary ideas in the book, as he discusses the claims brought against Uber.

Sundarajan explains crowd-based capitalism in simple terms as involving transactions with a mix of ‘gift’ and ‘market’. Using real world-examples, he also explains new blockchain technologies, and looks at the rise of on-demand services, and discusses how this new set-up could alter the structure of the economy and employment

SevenStays, the premium Airbnb host management service, take a look at some highlights from the book.

Chapter 1 - The Sharing Economy, Market Economies, and Gift Economies

Sundarajan discusses his participation at OuiShare Fest in Paris, a conference about the future of capitalism, attended by many sharing-economy enthusiasts. He describes it as “part TED, part Burning Man, and part Woodstock”.

Chapter 2 - Laying the Tracks: Digital and Socioeconomic Foundations

This chapter examines the development of the Internet over the past thirty years or so. Sundarajan reminds us that, in the mid to late 1990s, the Internet divided opinion; there was great excitement but also apprehension and paranoia. While there were enthusiasts, others were concerned about pornography and fraud.

Chapter 3 - Under the Hood

Sundarajan looks back at how experts thought about digital technologies and electronic markets back in the 1980s.  In a 1987 article, MIT professors Tom Malone, Joanne Yates and Robert Benjamin made what was then a bold prediction: that digital technologies would drive a shift away from hierarchies, the corporate-centred economy, and a move towards ‘markets’. In the 1980s, electronic markets were rudimentary and not widely known. Fast forward forty years, and we see Uber, Lyft and Airbnb….

Chapter 4 - Blockchain Economies: The Crowd as the Market Marker

Sunarajan discusses company OB1, who had hopes of “helping make trade free….”. In June 2015, a venture capital firm, Union Square Ventures (USV), an early lead investor in Twitter and Tumblr, announced a $3.4 investment in the new company, OB1. There was little public knowledge about OB1 when USV announced their investment, beyond the company’s very bare website.

Chapter 5 - The Economic impacts of Crowd-Based Capitalism

This chapter looks at an interesting example of the sharing economy in practice – the story of small island Gigha, located off the Scottish coast. The island collectively bought itself out for £4 million. In decline since the industrial revolution, the island’s residents grouped together to co-own their island through a development trust. Since then, the island has begun to look more prosperous; others have started to move there. In 2003, California baseball player Don Dennis moved to the Gigha.

Chapter 6 - The Shifting Landscape of Regulation and Consumer

Sunarajan talks about the founding and success of Airbnb. When the accommodation platform was first being developed, its founders gave little thought to hotel regulations. The platform grew rapidly, their host numbers more than doubling in 2013. At this point, New York state attorney general Eric T. Schneiderman begins to scrutinise platforms like Airbnb.

Chapter 7 - The Future of Work: Challenges and Controversies

Sharing platforms are not without their controversies. In 2014 US labour lawyer Shannon Liss-Riordan defended Uber drivers, who she argued were incorrectly being classified as contractors rather than employees. 

The Uber workers argued that the platform wanted the cost advantages of working with contractors, as well as the control of having employees. Liss-Riordan said that Uber drivers’ performance is “managed” based on user ratings, and that they receive guidelines from city managers….characteristics suggestive of  an employer-employee relationship.

Chapter 8 - The Future of Work: What Needs To Be Done

We are undoubtedly seeing a major shift in the way our economy is structured, possibly as significant as the Industrial Revolution. Sundarajan is interested in what the consequences of this shift will be – will this change to a less hierarchical economy create a better working environment? Can we do anything to make this change a positive one?

The author ponders whether the sharing economy will ultimately lead to a culture of self-employed workers, who work when, where and how they want to. It seems that this already exists, although not to the extent that Sunjaran is imaging.

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9 Concluding Thoughts

Sundarajan ends his book by reminding us of the difficulty of summarising a complex topic in one book. He wanted to balance practicality and prophesy; he says that he’s focused on the immediate future of crowd-based capitalism, rather than further into the future, perhaps because the former is easier to predict with more conviction. 

The freelance labour, transport and accommodation sectors have been the first to see the changes entrained by crowd-based capitalism. Sundarajan thinks that commercial real estate, health care provision, and energy production will soon follow.

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