With big growth for the sharing economy, has it become selfish?

The idealism of the sharing economy is coming up against profit-driven tendencies, and firms like Uber and Airbnb are encountering backlash. Now, a discussion is taking place about what the industry’s moral underpinnings should be.

A couple from Manchester, England (below wall), chat with their hosts, whom they found through Airbnb, in Los Angeles.
Research: Andrew Simeone, Graphic: Rich Clabaugh/Staff

When it began, the so-called sharing economy was all about the idealistic use of technology to connect people with other people’s underused stuff – everything from cars to spare bedrooms to even LEGOs.

But lately, critics of the industry – not even a decade old but already claiming some 10,000 companies – have begun to frame the peer-to-peer economy in terms much less lofty. They are using words such as the new “selfish,” “stealing,” or – as economist Robert Reich put it in a Salon column – “share-the-scraps” economy.

The controversy over some parking applications illustrates the shift. After it became clear such apps would enable users to profit from auctioning off open parking spaces on city streets, a number of municipalities banned the apps. “They are taking a public asset and effectively privatizing it,” said Los Angeles Council Member Mike Bonin, according to the Los Angeles Times.

This not-as-noble side of the sharing economy has called into question the priorities of such businesses. And in some circles, it’s generating a discussion of what the industry’s moral underpinnings should be.

“It’s ironic that we call the new concept the ‘sharing economy,’ when in fact, we are creating the purest form of ferocious, self-empowering capitalism – a ‘perfect’ marketplace where every asset or service has a calculable, precise value between an individual seller and buyer,” says Brooklyn Law School professor Jonathan Askin via e-mail.

“This doesn’t sound like the ‘sharing’ economy, it sounds like the ‘selfish’ economy,” he adds.

In the Salon column, Mr. Reich sees a challenge in “allocating ... the gains from work more decently.” He says the sharing economy’s “on-demand” workers (think Uber drivers or Airbnb hosts) are essentially operating in conditions akin to “the nineteenth century – when workers had no power and no legal rights, took all the risks, and worked all hours for almost nothing.”

“The big money goes to the corporations that own the software. The scraps go to the on-demand workers,” he writes.

Many of the companies have grown in part by staying under the radar of regulators who might govern their activities. This is particularly true of two of the movement’s biggest names, ride-sharing Uber and home-sharing Airbnb, both of which now have market valuations in the billions of dollars. In the case of Airbnb, many of its listings are not actually by homeowners but by professional landlords taking advantage of the higher rents they can charge for daily rentals – something they have been prohibited from doing under most existing regulations in municipalities.

“There is something fundamentally wrong with a business model that encourages people to breach their obligations and responsibilities,” says real estate attorney Phyllis Weisberg, chair of the Cooperative & Condominium Law Committee of the New York City Bar. “This is a selfish kind of economy where people will just do this to make as much money as they can until they get caught.”

In response to such criticism, Airbnb spokesman Nick Papas writes in an e-mail that the company asks hosts to follow local rules and includes “substantial information about the rules” on its website. New Yorkers, as well as others, “have been sharing their homes for centuries, but today, technology is making home sharing more transparent and millions of people have used Airbnb and the sharing economy,” he says.

Numerous proposals have surfaced to address the concerns of Ms. Weisberg and others. These include requiring Airbnb hosts to collect city taxes and increasing penalties on “unscrupulous” landlords who take advantage of the Airbnb home-sharing model to run mini-hotels.

The growing criticism of the sharing economy arises against a backdrop of high-profile legal troubles and public-relations gaffes for both Uber and Airbnb. The district attorneys for Los Angeles and San Francisco are suing Uber for fraud, saying the company is deliberately misleading consumers about the level of background checks it conducts on potential drivers. Uber and Lyft, another ride-sharing service, are also dealing with litigation over whether their drivers in California are employees or contract workers – with the verdict potentially having consequences for the entire on-demand economy.

Moreover, this past November a senior Uber executive was overheard suggesting that the firm hire researchers to dig up dirt on its critics, in particular on a female journalist. The executive later expressed regret for the remarks.

Such negative publicity, in turn, has led to efforts to reclaim the roots of the movement, as the developments have turned off some young devotees of the sharing economy. Some Uber users, for instance, publicly deleted their phone apps for the company in the wake of the comments about journalists.

“The bad press around Uber makes me like them less,” says 20-something Seattle resident Luke Lappala, who doesn’t own a car and uses ride-sharing services almost daily. After two “terrible” experiences with Uber, “I actively avoid using them,” he says.

Such disaffected Millennials have sent up a red flag for industry veterans. The sharing economy was, after all, launched as an idea as much as a business, one intended to appeal to the heart and soul of younger America, as much as to its pocketbook.

“My generation wants to feel like it’s contributing to the world being a better place,” Mr. Lappala says.

Chicago Millennial Anna Sprague voices similar sentiments, saying that a company’s “level of respect for the world” is an important characteristic. “Millennials are coming to expect more sharing economy behavior even from regular businesses,” adds Ms. Sprague, who herself works at a sharing economy company, Brideside.

Indeed, companies can’t ignore the fact that the rising generation wants to be part of something more than just making money, says former Wall Street banker Ranan Lachman, founder of Pley, which rents LEGO toys to families. Companies that want to reach Millennials, he adds, would be wise to pay attention to what matters to them.

Defining the heart of the movement

Mr. Lachman is behind an effort to stem the backlash. He spearheaded a coalition of self-designated thought leaders, financial analysts, and bankers to define just what a sharing economy business is – and what it is not.

On Dec. 11, executives from 15 or so top sharing economy companies took part in a conference call to begin creating industry guidelines for those that wish to be identified as sharing economy companies.

The first order of business was to formally designate the group as a sharing economy movement, favoring a single designation over the myriad names that have popped up, ranging from the mesh economy to the collaborative consumption movement.

Next on the agenda was to define the heart of such a company. While technology may be the modus operandi, the soul of a true sharing economy company lies in its morality, Lachman maintains. His group has set out to create a sort of Better Business Bureau to determine membership in the sharing economy club.

“We want to make sure we are doing good,” he says, adding that this goal has several components. “They can’t just be doing good for the company; it has to be for the user and the environment as well,” he says.

Every company, he notes, has to have a mission statement that includes a positive effect on the larger environment and community. “If you are not presenting that, then from our perspective, you are not part of the sharing economy movement,” he says.

The movement is in its infancy, says Noah Karesh, founder of Feastly, a site connecting aspiring home chefs with adventurous eaters willing to pay for a home-cooked meal in a strange city. He has joined Lachman’s group in hopes of crafting guidelines for the movement as it grows.

“There are many unanswered questions about this movement,” he says. “We are trying to establish a rubric for talking about that.”

Mr. Karesh, who sees “a paradigm shift about consumption and services,” describes his company mission as both social and financial. “It’s not separate for us; it’s built into who we are,” he says.

Whether a manifesto such as Lachman’s will make a difference remains to be seen, however. “I think it’s more of a coat of paint than anything else,” says tech strategist Himanshu Sareen, chief executive officer of Icreon Tech, a Web and mobile software development firm.

Putting a company’s principles forward is important mainly from a perspective of customer sentiment, he says. Two of the largest technology firms in history – Apple and Google – have so-called emotional and socially conscious appeal that binds customers to their products, he notes.

But even though Millennials are committed to their ideology, Mr. Sareen says, they are also committed to outsourcing many things in their lives. If an alternative is available, he says, they will switch loyalties.

Sareen also says of the social mission promoted by sharing economy businesses: “At the end of the day, you will see very public examples where this mantra is preached but not practiced.”

As sharing economy companies have encountered backlash, many of them are recognizing the issues involved and trying to get in front of them, suggests Robbie Kellman Baxter, an industry consultant and author of “The Membership Economy.”

“For some of them, the timing is good. For others, it’s a little late,” she says.

‘Behaving like grown-ups’

These businesses have the same problems as any other start-up that begins to take off, Ms. Baxter notes. “They all hit a point where they have to start behaving like grown-ups.”

Start-ups can take a page from the lessons learned even by big firms. Sareen recalls a highly publicized incident in which Facebook did psychological testing, manipulating what people saw in news feeds. The pushback was ferocious. “They were looking at it from the perspective of being a data company versus a network and relationship company” and didn’t realize the power of these experiments to turn people off, he says.

Over the next few years, we’ll continue to see tech companies push the envelope, says Jared Staver, an attorney who specializes in technology issues and is founder of Staver Law Group in Chicago.

“Tech, over the last few years, has very much been a ‘do now, ask questions later’ kind of deal,” he says via e-mail. “I don’t doubt that we’ll see quite a few enterprises ask for forgiveness rather than permission.”

In the end, Sareen says, companies learn as much from failures as successes – and the sharing economy movement is no exception.

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