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The Uberisation of the Economy

• In order to be prepared for this topic, I would recommend to make a list of the
advantages and the drawbacks of the uberisation of the economy. Start with a
brainstorming, with your own ideas. Write what you know about this topic. Where
does “uberisation” come from? Why is it called like this? What does it consist in?
And then, ask yourself if you are in favour or against it. Why?
• After this initial process, read the texts, watch the videos, and prepare a synthesis of
the advantages and drawbacks of the uberisation of the economy. Don’t take all the
arguments at face value. Engage with them. Criticize them. Why is it right or wrong
according to you? Use your critical mind, this is what is expected from N5 students.
• As regards the cartoons, always try to perceive what is ironical in them.

Possible essay questions:

After studying this dossier, and from your own experience, would you say you are in favour
or against the uberisation of the economy? Why?

In Text 2, the journalist refers to “a genuine market economy of individuals engaging in

commerce with one another”? According to you, is this type of economy preferable? What
are the advantages and the drawbacks of such an economy, according to the journalist

TEXTS:

TEXT 1: Uberworld

Sep 3rd 2016 | From the Economist

“LET’S Uber.” Few companies offer something so popular that their name becomes a verb. But
that is one of the many achievements of Uber, a company founded in 2009 which is now the world’s
most valuable startup, worth around $70 billion. Its app can summon a car in moments in more
than 425 cities around the world, to the fury of taxi drivers everywhere. But Uber’s ambitions, and
the expectations underpinning its valuation, extend much further: using self-driving vehicles, it
wants to make ride-hailing so cheap and convenient that people forgo car ownership altogether.
Not satisfied with shaking up the $100-billion-a-year taxi business, it has its eye on the far bigger
market for personal transport, worth as much as $10 trillion a year globally.

Uber is not alone in this ambition. Companies big and small have recognised the transformative
potential of electric, self-driving cars, summoned on demand. Technology firms including Apple,
Google and Tesla are investing heavily in autonomous vehicles; from Ford to Volvo, incumbent
carmakers are racing to catch up. An epic struggle looms. It will transform daily life as profoundly
as cars did in the 20th century: reinventing transport and reshaping cities, while also dramatically

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reducing road deaths and pollution.

In the short term Uber is in pole position to lead the revolution because of its dominance of
chauffeured ride- hailing, a part of the transport market that will see some of the fastest growth.
Today ride-hailing accounts for less than 4% of all kilometres driven globally, but that will rise to
more than 25% by 2030, according to Morgan Stanley, a bank. The ability to summon a car using
a smartphone does not just make it easy for individuals to book a cheaper taxi. Ride-sharing
services like UberPool, which put travellers heading in the same direction into one vehicle, blur
the boundaries between private and public transport. Helsinki and other cities have been
experimenting with on-demand bus services and apps that enable customers to plan and book
journeys combining trains and buses with walking and private ride-sharing services. Get it right,
and public-transport networks will be extended to cover the “last mile” that takes people right to
their doorsteps. This will extend the market for ride- hailing well beyond the wealthy urbanites
who are its main users today.

But in the longer term autonomous vehicles will drive the reinvention of transport. The first
examples have already hit the road. Google is testing autonomous cars on streets near its
headquarters in Mountain View. A startup called nuTonomy recently launched a self-driving taxi
service in Singapore. Tesla’s electric cars are packed full of driver-assistance technology. And
within the next few weeks Uber itself will offer riders in Pittsburgh the chance to hail an
autonomous car (though a human will be on hand to take back the wheel if needed).

Self-driving cars will reinforce trends unleashed by ride-hailing, making it cheaper and more
accessible. The disabled, the old and the young will find it easier to go where they want. Many
more people will opt out of car ownership altogether. An OECD study that modelled the use of
self-driving cars in Lisbon found that shared autonomous vehicles could reduce the number of cars
needed by 80-90%. As car ownership declines, the enormous amount of space devoted to parking—
as much as a quarter of the area of some American cities—will be available for parks and housing
instead.

It is not clear which companies will dominate this world or how profitable it will be. Uber will not
win in its current form: a ride-hailing business which depends on human drivers cannot compete
on roads full of self-driving cars. But this existential threat is spurring the firm’s innovation. With
its strong brand and large customer base, Uber aims to establish itself as the leading provider of
transport services in a self-driving world. It is also branching out into new areas, such as food
delivery and long-distance cargo haulage using autonomous trucks. There is logic in this ambition.
Carmakers lack Uber’s experience as a service provider, or its deep knowledge of demand patterns
and customer behaviour.

But firms that pioneer new technological trends do not always manage to stay on top. Think of
Nokia and BlackBerry in smartphones, Kodak in digital cameras or MySpace in social networking.

(...) For now Uber is the firm to beat in the race to transform the future of personal transport. (...)
Its vision of the future is plausible and compelling. It could yet prove a Moses company, never
reaching its promised land—it might end up like Hoover, lending its name to a new product
category without actually dominating it. But whether Uber itself wins or loses, we are all on the
road to Uberworld.

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TEXT 2: The ‘gig economy’ is coming. What will it mean for work?
The new working model offers greater freedom – and a fresh chance for the rich to exploit
the poor
Arun Sundararajan
Sunday 26 July 2015

Not so long ago, the only people who looked for “gigs” were musicians. For the rest of us, once
we outgrew our school dreams of rock stardom, we found “real” jobs that paid us a fixed salary
every month, allowed us to take paid holidays and formed the basis for planning a stable future.
Today, more and more of us choose, instead, to make our living working gigs rather than full time.
To the optimists, it promises a future of empowered entrepreneurs and boundless innovation. To
the naysayers, it portends a dystopian future of disenfranchised workers hunting for their next
wedge of piecework.

In the US, the “gig economy” is now so salient that the phrase and issues have entered the early
exchanges of the presidential race. Earlier this month, as one frontrunner, Jeb Bush, took a well-
publicised Uber ride to signal solidarity with the company, another, Hillary Clinton, was more
cautious in her support. In a speech laying out her economic plan, she said: “This on-demand, or
so-called gig, economy is creating exciting economies and unleashing innovation. But it is also
raising hard questions about workplace protections and what a good job will look like in the future.”

Today’s digitally enabled gig economy was preceded by marketplaces such as ELance and oDesk,
through which computer programmers and designers could make a living competing for short-term
work assignments. But the gig economy isn’t just creating a new digital channel for freelance work.
It is spawning a host of new economic activity. More than a million “makers” sell jewellery,
clothing and accessories through the online marketplace Etsy. The short-term accommodation
platforms Airbnb, Love Home Swap and onefinestay collectively have close to a million “hosts”.

This explosion of small-scale entrepreneurship might make one wonder whether we are returning
to the economy of the 18th century, described by the economist Adam Smith in his book An Inquiry
Into the Nature and Causes of the Wealth of Nations. The economy Smith described was a genuine
market economy of individuals engaging in commerce with one another.

Over the following two centuries, however, the emergence of mass production and distribution
yielded modern corporations. The entrepreneurs of Smith’s time gave way to the salaried
employees of the 20th century.

A different technological revolution – the digital revolution – is partially responsible for the recent
return to peer-to-peer exchange. Most of the new on-demand services rely on a population equipped
with computers or GPS-enabled smartphones. Furthermore, the social capital we’ve digitised on
Facebook and LinkedIn makes it easier to trust that semi-anonymous peer.

Does this suggest a shift towards a textbook market economy? Granted, Uber, Airbnb, Etsy and
TaskRabbit are quite different from organisations such as Apple, BP or Sainsbury’s. Because you
aren’t actually renting a space from Airbnb, taking a ride in a car owned by Uber or buying a

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product made by Etsy. The platform simply connects you with a provider of space, a driver of a
vehicle or a seller who runs a virtual shop.

But these platforms are by no means merely the purveyors of Smith’s invisible hand. Rather, the
hand they play in facilitating exchange is decidedly visible. Uber, not individual drivers, sets prices.
Airbnb trains its hosts to be better providers of hospitality. Etsy facilitates seller community
building. All of them provide user-generated feedback systems, creating a high-quality consumer
experience. Much like an organisation building a brand might.

So it seems like we’ve invented a new institutional form – the peer-to-peer platform – a digitally
powered hybrid between organising economic activity through the market and within the
organisation. And because these platforms provide layers of trust, brand and expertise on demand,
the need for specialising before you’re qualified to become a provider is reduced. Almost anyone
with talent can become a part-time hotelier through Airbnb or an artisan retailer on the side through
Etsy. Any reasonably competent driver can morph into a provider of commercial transportation by
plugging into Uber or BlaBlaCar.

And providers don’t have to commit to full days of work. You can pick up your kids from school
(and then switch to being an Uber driver). In the gig economy, the lines between personal and
professional become increasingly blurred.

There’s certainly something empowering about being your own boss. With the right mindset, you
can achieve a better work-life balance. But there’s also something empowering about a steady pay
cheque, fixed work hours and company-provided benefits. It’s harder to plan your life longer term
when you don’t know how much money you’re going to be making next year.
On the other hand, starting a new business has generally been an all-or-nothing proposition,
requiring a significant appetite for risk. There are benefits to dipping your toes into the
entrepreneurial waters by experimenting with a few gigs on the side. Perhaps this lowering of
barriers to entrepreneurship will spur innovation across the economy.

Economist Thomas Piketty tells us that the main driver of sustained economic inequality over the
past two centuries has been the concentration of wealth-producing “capital” in the hands of a few.
This seems less likely if the economy is powered by millions of micro-entrepreneurs who own their
businesses, rather than a small number of giant corporations.

But the latest generation of specialised labour platforms also raises the spectre of greater social
inequality. We’ve now got apps through which providers will park your car (Luxe), buy and deliver
your groceries (Instacart), and get you your drinks (Drizly). There’s a risk we might devolve into
a society in which the on-demand many end up serving the privileged few.

In many countries, key slices of the social safety net are tied to full-time employment with a
company or the government. Although the broader socioeconomic effects of the gig economy are
as yet unclear, it is clear we must rethink the provision of our safety net, decoupling it from salaried
jobs and making it more readily available to independent workers.

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TEXT 3: Airbnb and Uber’s sharing economy is one route to dotcommunism

Paul Mason
Peer-to-peer platforms have changed the game. Make them cheap or free, and it would be
way of reinventing the economy to deliver participation and choice alongside social justice
Friday 28 October 2016 The Guardian

The key will be under a milk bottle, said the email, and it had better be. I had flown to Sydney for
a month-long stay in an apartment, booked via Airbnb, and I would have been in disarray if there
had been something wrong. But the key was there, and, eventually, so was a line in my credit-card
bill commensurate with staying for four weeks on the seafront at Bondi beach. The elderly couple
who owned the apartment block were shocked when I told them how much their tenant had sublet
for: several times the rent he was paying.

It was my first experience of the so-called “sharing economy”, and it was good. The platform –
Airbnb – worked, and I built up some of the vital capital of the peer-to-peer economy: trust. The
place was a lot more like it said it was than most hotels are. And, unlike most hotels, the Wi-Fi
worked.

But consider the economics of what happened: the elderly couple owned an asset that was
generating rent. The tenant then – informally – leased out his own rights to be there, generating yet
more rent. And the owners of Airbnb were generating economic rent out of their asset – the peer-
to-peer booking and payment platform that has a near-monopoly of the market.

It’s similar to what happens with Uber: people who are lease-purchasing a car use it to generate
extra informal income, while other revenue goes to the platform operating the market.

That’s how the official economics work. But there’s an unofficial economic force at work in these
sites: the network effect. Bell Telephone boss Theodore Vail described the principle behind the
network effect in 1908 when he pointed out that the more users there are on a telephone network,
the more useful it is to each of them.

Economists came to describe this benefit of collaboration as a “positive externality”. And the clue
is in the name. It’s good, but it comes from somewhere outside the strict market relationship
between two parties in a contract. The next problem is how to quantify the benefit – and decide
who should own it. In Vail’s day, the answer was easy: he had a monopoly, so any commercial
upside – made from each telephone being more useful as the network grew – would go to the
company.

It was not until the advent of networked computing that economists had to get their heads around
the biggest problem, which haunts our modern corporate existence: it may not be possible to
capture or measure all the benefits of networks inside a market system.

Consider the ethernet port. You still find them in hotels, or on old computers, but, in the 1980s,
they were avant garde: your own personal rubbery link to the internet. Robert Metcalfe, who
invented the ethernet, came up with a highly optimistic “law” to measure the benefits. The cost of

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building an ethernet network, he said, grew in a straight line; the value of the network would grow
by the number of users squared: it produced an exponential curve. “I was a little vague about what
‘value’ was, but in those days it had something to do with sharing expensive disks and printers,
exchanging electronic mail within buildings,” he admitted 25 years later.

In fact, the true value of the positive externalities is a thing deeply troubling to economics: it is a
mixture. It is part extra usefulness and part commercial gain. And economics – from Adam Smith
to Marx to Milton Friedman – is founded on the strict separation of the two. A thing’s usefulness
and its value are linked, but separate, concepts.

For Metcalfe, the assumption was that, by linking everybody’s desktop, there would be much more
value generated out of the things attached to it: the hard drive, the printer, etc. But the dotcom
revolution fostered a different approach. Corporations such as Apple, Amazon, Facebook or eBay
are effectively capturing the usefulness generated by many people interacting – buying, selling,
recommending – as monetary value. You buy advertising per click, and the number of clicks rises
if people are feeling the intangible buzz of sharing their information.

So, if early telecoms companies were effectively saying: “Hey, we have this extra thing – the
network effect – to add to our profitability”, the internet giants of the 2000s said: “The network
effect is the business model.” But the internet giants were built as monopolies, jealously guarding
their ownership of the information generated by our sharing activities. The stock-market valuation
of each of them implies that, long term, they have to take over and destroy much of the rest of the
capitalist market.

What has emerged now, in the form of Uber, Airbnb and the other sharing platforms, is a different
model. The utility is transparent and the benefits distributed more transparently. I know what I am
paying per week to rent my Bondi flat (a lot); I know what I am paying Airbnb to handle the
transaction and provide assurance (likewise, a lot). But I can be a producer in this business as well
as a consumer. I can rent my own flat or register my own car to provide cab rides.

So, while the “old” monopoly models of the 2000s only distrupted dinosaur businesses – such as
print publishers or booksellers – the new sharing businesses can actually disrupt society. Barcelona,
which has banned Uber and hit Airbnb with heavy fines, was responding to protests by cab drivers
anxious to protect their trade, and the tourist industry, which wanted people renting out their flats
to pay for registration, as non-air B&Bs actually do.

The sharing model is in its infancy, and there are plenty of me-too businesses trying to make it
work in other sectors (cars, bikes, high-end cameras, etc). And, beyond the issues of consent – as
in Barcelona – it poses two challenges. First, however brilliant these new models are, they cannot
produce exponential growth. It is technology in the service of squeezing out the final drops of value
from something, rather than infinite expansion.

Second, who owns the upside? Once the platforms to rent out things, services or time are stable,
textbook economics states that the cost of using them should fall. So, what if you applied the
sharing principle without seeking a profit at all? What if these very platforms could be taken over
by society and repurposed so that all the benefit went to the consumer or to society itself? The
socialists of the early 20th century eyed monopolies like Vail’s with optimism: take them over and

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their highly organised and unitary status means you can use them to run the economy. Today, if
you wanted to re-order the economy to deliver participation and choice alongside social justice,
it’s the sharing models you would start from.

The arrival of sharing changes the game when it comes to the social potential of technology. It was
hard to see a route from Apple and Google to “dotcommunism”. It is quite easy to see it, though,
if you began with the sharing sites, and made them cheap or free.

TEXT 4: John McDonnell: We must stop 'Uberisation' of the workplace

Shadow chancellor says Labour government would set up banks to fund startups to take on
giants of gig econmony
Jessica Elgot
Sunday 7 May 2017 The Guardian

A new network of banks should fund “co-operatively owned Ubers and Airbnbs” to take on the
giants of the gig economy and stop the “Uberisation” of the workplace, the shadow chancellor,
John McDonnell, has said.

McDonnell said a Labour government would provide incentives to co-operatively owned startups
via a new national investment bank and a network of regional development banks.
He said the banks would have a remit to loan funds explicitly to co-operative enterprises, especially
tech companies seeking to reduce the costs of transport, accommodation and culture for the average
citizen.

In a speech to the Open 2017 conference at Goldsmiths, University of London, on Friday,

McDonnell argued that companies such as Uber posed an “age-old threat” to workers’ rights.
More than 7m Britons now in precarious employment.

As part of the Guardian series on the UK’s increasingly uncertain world of work, analysis of official
figures reveals more than one in five workers could lose their jobs at short or no notice

He said Labour must tackle a pattern whereby employment contracts and benefits are replaced by
insecure self-employment in the name of flexibility.

“The discussion of the challenges for the modern world of work posed by the so-called gig
economy are nothing new,” he said. “They represent an age-old threat to diminish the hard-won
workplace rights, terms and conditions offered by full-time employment.”

The shadow chancellor said old arguments on the importance of workers’ rights had to adapt to the
“new world of work” created by technology.

“Rather than running away from innovation and technological advances, we need to see where we
can use them to adapt to the challenges they may present to full-time work,” he said.

“The power that these changes in technology give us all is the ability to pool our collective talents
and skills and produce wealth not just for the benefit of a tiny handful at the top, but for all of us.

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It can help us mitigate the potential growth in the ‘Uberisation’ of the workplace.”

“Digital technology means there is no longer a convincing reason to allow the wealth of society to
be taken by a tiny elite, instead of shared for the many,” he said. “The old rules about the supposed
efficiency of the free market and the private firm are being rewritten right in front of us.”

Last week, Uber drivers told the Commons work and pensions select committee that some had been
forced to work more than 60 hours a week just to pay Uber’s commission, insurance and the costs
of their vehicle.

Syed Khalil, who drives for Uber in London, said it was usual practice for drivers to work 100
hours a week and said, after paying about £500 a month on insurance and towards the purchase of
his car, he was on such a low income that he needed to claim housing benefit.

A former driver for delivery firm Hermes also told the committee he did not earn the equivalent of
the national living wage and had “no sick benefit, no holiday entitlement”.

Labour MP Frank Field, chairman of the committee, has called for the government to guarantee
the minimum wage for self-employed workers for companies such as Uber and Hermes.

Field’s submission to the government’s labour market review led by Matthew Taylor, a former
adviser to Tony Blair, said his committee had found there were 900,000 more self-employed
positions in the UK workforce than in 2010.

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TEXT 5:
GIG ECONOMY WORKERS NEED BENEFITS AND JOB PROTECTIONS. NOW.
Jessi Hempel / 01/04/16 / Wired

IN THE US, we lump workers into two categories, employee or independent contractor, neither of
which were designed for Fasil Teka. Teka, 41, joined Uber five years ago in Seattle. He drives
roughly 40 hours a week as an independent contractor. He’s also a party planner and sometimes
shuttles guests for a local hotel. Teka loves the flexibility of having multiple gigs and driving only
when he wants. When one income source wanes, another waxes. But the risks are mounting. He
missed the 2014 deadline to sign up for Obamacare and had to do without health insurance. And
last New Year’s Eve his car got totaled, knocking him off of Uber for three weeks until he leased
a new one. Most frustrating for Teka, Uber changes his fare rates frequently and with little warning.
“Uber treats us as employees,” Teka says—except, of course, with none of the benefits and
protections of a traditional job, like the ability to negotiate fare prices through union representation
or collect unemployment if Uber drops him.

A growing number of people like Teka are turning to software platforms to find flexible work. Five
years after Uber launched, it now supports 400,000 drivers. That’s a tiny number compared with
the total 157 million workers in the US. But these kinds of companies are popping up across every
industry, from housecleaning (Handy) to short-term rentals (Airbnb) to drafting legal contracts
(UpCounsel). The gig economy is a bellwether for a broader shift to an Internet-powered
workforce. “Vast sectors of our economy could change quickly,” says Michelle Miller, who
cofounded the worker advocacy platform Coworker.org. “You could imagine that 25 years from
now, whole industries are managed on a software platform.”

In short, work is changing; the protections we offer workers must change as well. And while some
of that change is being hashed out in the courts as workers file lawsuits seeking to be reclassified
as employees, it’s not enough to help the US economy prepare for the future. Regardless of how
these suits are resolved, they still group workers into categories designed for a 20th-century
workforce, in which most people spent their careers employed by one large company. Increasingly,
work doesn’t work that way. We need smart regulation that will define new categories for
workers—or at least offer better protection within existing categories. It’s as critical to startups,
which need to ensure a healthy labor supply, as it is to people like Teka.

In Seattle, the city council has proposed legislation that would allow drivers like Teka to bargain
collectively. Independent contractors are not covered by the federal National Labor Relations Act,
which enables employees to negotiate directly with companies. However, there is precedent for
states to let them organize. “Farmworkers in California are not employees and couldn’t legally be
represented, but the state passed a law so they could be covered,” says Teamsters organizer Dawn
Gearhart, who is leading the Seattle effort—the first of its kind in the country to target gig-economy
workers. While Uber would likely sue if the reform is passed, legal experts believe there’s a good
chance the courts would let the law stand, providing a model for the rest of the country.

“A growing number of people are turning to software platforms to find flexible work.”

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Some, including US senator Mark Warner (D-Virginia), have suggested piloting an “hour bank,” a
program used in construction to administer benefits like health care and disability for members
who work for multiple contractors. However, gig-economy companies have so far shied away from
any moves that could be construed as providing traditional benefits to contractors out of fear they
will be sued.

Other reformers hold up the Affordable Care Act, which provides independent workers with a path
to decently priced health care, as a model for other types of benefits. The ACA has resulted in a
surge in the number of insured. (According to MBO Partners, which provides back-office support
for independent contractors, a survey of those professionals showed that 82 percent had health care
in 2015, up from 64 percent in 2013.) Indeed, Teka says he will sign up this year.

Meanwhile, some legal experts advocate a third regulatory category for workers in which they’d
be responsible for some costs (like, say, making payments into a workers’ compensation fund) but
not others (like health care contributions). “An intermediate category could be part of the solution,”
says New York University law professor Cynthia Estlund. In Canada, for example, some
individuals who rely only on a single employer are called dependent contractors. They can be
eligible for reasonable notice of termination or compensation to make up for it.

None of these suggestions is the solution on its own, but together they represent the most forward-
thinking approaches to ensuring the next century’s workers and businesses are protected. Eighty
years ago, the New Deal was intended to establish economic security for both, giving rise to the
American middle class. We must act quickly and thoughtfully to create our century’s version of
this legislation, for the future of Teka—and Uber.

VIDEOS:

https://www.youtube.com/watch?v=OxBD7imsepw

https://www.youtube.com/watch?v=lFnZTlFDB_Y

https://www.youtube.com/watch?v=gKtuBedlMG0

CARTOONS:

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