Speed bumps on the road to Sharing Economy Paradise

The 'sharing economy' has always been an unfunny joke of a term.
In my view it's never been anything more than either 1) a moonlighting job or 2) scabs undermining working people trying to make a living.

Fortunately, the whole "sharing economy" isn't working very well.
Consider Uber - recently valued at $66 Billion - is losing money hand-over-fist.

In the first quarter of this year, Uber lost about $520 million before interest, taxes, depreciation and amortization, according to people familiar with the matter. In the second quarter the losses significantly exceeded $750 million, including a roughly $100 million shortfall in the U.S., those people said. That means Uber's losses in the first half of 2016 totaled at least $1.27 billion.
"You won't find too many technology companies that could lose this much money, this quickly," said Aswath Damodaran, a business professor at New York University who has written skeptically of Uber's astronomical valuation on his blog. "For a private business to raise as much capital as Uber has been able to is unprecedented."

So investors are losing tonnes on Uber, but the real victims are working people.

Before Uber and Lyft drove into town in 2013, there were 1,576 cabbies registered through the Orange County Taxi Administration Program. The number has since dropped to fewer than 800 drivers, the lowest count locally in a decade.
In early April, Hossein Nabati closed A Taxi Cab, a Santa Ana company he founded some 30 years ago. Roughly 300 employees lost their jobs.

Uber drivers are threatening to unionize over their low pay, which is ironic considering that they sometimes destroyed unionized jobs.

Airbnb - valued at $30 Billion - is another example. Airbnb investors lost $250 million in 2014 and 2015, but it may turn a profit this year.
Renting out a room has been around forever, but the commodification of it is new, and that has led to complications.

Room-rental services such as Airbnb Inc. are blurring the line between residential and commercial property. That is causing problems for some homeowners looking to refinance mortgages.
Big banks including Bank of America Corp. and Wells Fargo & Co. are subjecting some refinance customers who rent rooms to additional scrutiny. Some borrowers have been told they were no longer eligible for certain kinds of loans or would have to pay higher interest rates, according to the customers...
A house usually was either a principal residence or an investment property. Mortgages on the latter are often viewed as riskier because owners had less of a personal connection to the house and rental income isn’t always reliable.
Now, the distinction isn’t so clear-cut.

Airbnb people don't have to pay a lodgers tax, which gives them an unfair edge over hoteliers.
Like Uber, Airbnb undercuts hoteliers, which in turn costs thousands of jobs. Once again, unionized workers are getting hit first.

But Mike Casey, the longtime president of the hotel workers’ union UNITE HERE Local 2, sees something very different when he looks at Airbnb and comparable websites: an existential threat.
“There’s probably several hundred jobs a year that are lost as a result of people selecting Airbnb over a unionized hotel,” he said. “But probably of even greater impact than that is the impact it’s having on affordable housing.”
Casey cited a March 2015 report from left-leaning advocacy group the Los Angeles Alliance for a New Economy (LAANE), which says the prevalence of Airbnb units in Los Angeles gives landlords and homeowners an opportunity to seek tourism dollars where they would have otherwise rented housing to city residents. As a result, the report’s authors say, Airbnb is helping constrict housing supply and drive up rental costs. LAANE also alleges the growing popularity of Airbnb could kill hotel jobs and replace them with a handful of lower-paying domestic worker gigs.

My final example is WeWork - valued at $15 Billion. It's business model involves divvying up office space.
Like Uber and Airbnb, WeWork has lots of unfulfilled profits promise.

WeWork Cos., one of the most valuable venture-backed private companies, cut forecasts earlier this year and told employees it has to change its “spending culture” to continue to thrive, according to a company document and video recordings obtained by Bloomberg.
Founded in 2010 in New York, WeWork has raised more than $1.4 billion to build and run a network of co-working offices that spans 23 cities in seven countries. After securing more than $400 million at a $16 billion valuation in its most recent financing in March, WeWork produced in late April an internal financial review document that slashed a 2016 profit forecast by 78 percent, cut its revenue estimate by 14 percent and disclosed a 63 percent surge in projected negative cash flow.

Unlike Uber and Airbnb, I don't believe WeWork is destroying unionized jobs. However, I also don't believe that WeWork will survive the next recession.

But how can an infrastructure-dependent real estate venture scale like a low-overhead software startup? How can a company that signs 15-year leases — but sells monthly memberships — expect to survive a downturn? How can an entity that doesn’t own its own real estate be “worth” more than three times as much as the New York Yankees? Why does WeWork’s future look so bright when it sits smack in the middle of two bubbling markets (that is, tech and commercial real estate)? Why would a business model that drove one high-profile dot-com darling promising “the office of the future” into bankruptcy succeed this time around?
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and this caused Uber to stop all its service in Austin. Uber also has been lobbying the Texas legislature to keep localities from setting reasonable standards and go with a Republican free-for-all-no-holds-barred system.

I think New York City still requires a Medallion to operate as a cab driver.

Having standards for a commercial enterprise, particularly one where a passenger is at the mercy of the driver, is prudent. Not having standards allows an entity like Uber to exploit workers and consumers.

Sharing my ass.

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"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"

Raggedy Ann's picture

independent contractor. No benefits. No real employment. I know it's more involved than that, but it's a big part of it. Also, I agree with the hotel workers union - jobs disappear. Not very sharing. What's the answer, though? The 1% will undercut the 99% to the point they have no choice than to rent out rooms (boarding houses anyone?), drive people to their destinations, etc.

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“It is dangerous to be right in matters on which the established authorities are wrong.”

-- Voltaire

Along with the demise of the Middle Class, the single-family home is headed to the museum to be displayed along side the Apatosaurus and the Edsel. I know many people sharing houses just on my street. I see several sharing vehicles. We will be sharing shelter, and likely food supplies. With the growing drought in much of the nation, water sharing will be added to the list. It isn't out of the realm of probability that clothing will eventually get there as well, for increasingly few people earn enough to support themselves and buy clothes when needed. And so on.

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Vowing To Oppose Everything Trump Attempts.

Raggedy Ann's picture

and other thrift stores for clothing. No need to purchase them new. My grandkids shop thrift stores, too. My grandson lives in a house and rents the couch for $250/mo. There are three bedrooms in the house already rented out. We are moving backwards! I realize that's the plan of the 1%. They must be thrilled it's working. Look! They are almost home free in electing their leader to finish us off! Dash 1

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“It is dangerous to be right in matters on which the established authorities are wrong.”

-- Voltaire

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I get to enjoy sleep deprivation because my household of five working-class adults with college degrees and part-time or temporary jobs never shuts down.

But have at it! What a life!

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Vowing To Oppose Everything Trump Attempts.

I did not make my intended meaning clear, though. Shopping at Goodwill and sharing living spaces are likely good for the planet. Also, different generations sharing experience and physical work, etc. can be good for all generations involved. I think it's healthier than having everyone isolated in different states, for example.

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If you can't send that job to China, or Bangladesh, or Haiti, where people have to work for a few pennies an hour, just rig it so that the underemployed and stressed-out 99% do the work here for free, then send your mega-profits to Ireland. No employees, no payroll, no benefits, no taxes, no problem!

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much affects the eagerness of Americans to work for low wages, to be paid "under the table," etc. A relative and his wife are currently working three part-time jobs and one full-time "under the table" job with no benefits, even a single paid sick day, to any of them. She works "under the table" in a laundry and cooks meals at home (probably illegally) for pick up her working friends and people they have referred. He works two part-time jobs in a clinic. They also rent out a furnished room in their basement. And they consider themselves lucky because, circa 2008-09, her cooking was their only income and losing their very modest, run down ranch home was imminent.

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karl pearson's picture

Doing genealogy, I examine a lot of censuses. For the 1920's and 1930's data, it is common to find "Boarder" listed as the last entry under a Family Residence. It looks like we're headed back to the same era before FDR's policies were implemented and the modern middle class was established.

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lotlizard's picture

thanks to the tireless efforts of such nobles as Jeffrey Lord Amazon, Mark Lord Facebook, and Peter Lord Palantir.

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or this one at TOP.

But if you wanted 100 diaries about how great Hillary is, and how horrible Trump is, plus 10,000 comments repeating those opinions, then you should go over there.

If you want to look at the dynamics of this economy, then stay here.

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Or wrong thread?
peace

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Ya got to be a Spirit, cain't be no Ghost. . .

American businesses love consolidation and the economies of scale and higher profits it brings. Acquisitions, mergers and franchising have been their m.o., making for monopolies, often worldwide monopolies; and monopolies make for high and higher prices. Conrad Hilton was multiplying locations by the 1920s; Howard Johnson was well into it by the 1930s. Now, Hilton Hotels is Hilton International and Wyndham International owns Howard Johnson's.

The price of U.S. hotel rooms and their taxes have become prohibitive, while purchasing power of consumers has remained largely stagnant, especially as to things we cannot import from places like Malaysia. http://www.statista.com/statistics/208133/us-hotel-revenue-per-available... Even reasonably- priced camping facilities, like state and national parks, are being allowed to deteriorate, along with the rest of the commons. So, where does a working stiff from da Bronx take her family for a week's vacation, or even an overnight? Besides, let's be real" most of the money Wyndham International rakes in from U.S. hotel rooms is not going to the union wages of Housekeeping. It's going to pay the folks in the board room and to profits.

As for unions, let's not forget that most of them endorsed Hillary in the primary, often to the apparently surprise of their members. So, Big Labor is not always the solution. In any event, unions have a great opportunity--I'd even say a duty--to put their efforts into unionizing workers in businesses like airbnb and uber. Perhaps unions should be doing that, instead of guilting people into staying at the Marriott. Unions won't even have a "runaway shop" problem unless Airbnb and uber voluntarily confine themselves to "right to work for lowest wages" states. So, this should be relatively easy pickings for unions, despite job scarcity in general. Perhaps workers also have to think about collectives, as did airline employees who bought the owners of the airline for which they worked out of bankruptcy. And, citizens need to push hard for a living minimum wage, even in "tipped" work--and not seven years from now, either.

In any case, we have to find ways to balance the interests of working people qua consumers against the interests of working people qua employees. The business models of the Guilded Age to the 1950s are no longer working for most Americans, if ever they did. We have to become more creative and flexible.

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Hawkfish's picture

This just came over the transom at work.

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We can’t save the world by playing by the rules, because the rules have to be changed.
- Greta Thunberg

But, is it really that different than an au pair?

No union, no benefits, no arbitration. I'm surprised the Uber and AirBnB folks haven't thought of farming out child-care online.

Oh wait. Too late, the old economy already did that...

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lotlizard's picture

breast milk to consume themselves. So, I guess the answer is: It's already here, at least in China.

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"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"

studentofearth's picture

need your supply connect up at Only The Best.

The ultimate new health drink at some gyms.

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Still yourself, deep water can absorb many disturbances with minimal reaction.
--When the opening appears release yourself.