Millennials will not be regulated

Can you hear that new California sound? It's the "sharing economy" marching relentlessly forward. You can't stop it

Published September 20, 2013 11:45AM (EDT)

         (<a href=''>mezzotint</a> via <a href=''>Shutterstock</a>/Salon)
(mezzotint via Shutterstock/Salon)

On Thursday in San Francisco, the California Public Utilities Commission set a national precedent by voting unanimously in favor of new regulations legitimizing ride-sharing companies in the news. When the vote was announced "huge hipster applause" broke out, according to one tweet. "I have never seen so many young people inside the CPUC auditorium," reported another attendee.

Even though the city's taxicab companies are already threatening to sue, the news was a big win for the so-called sharing economy -- a phenomenon that seems increasingly propelled by smartphone-wielding millennials used to getting what they want when they want it. Yes, the rules do add a layer of bureaucracy that will make it more of a hassle for people to offer rides under the auspices of companies such as Lyft and Sidecar and Uber. A new class of businesses called "transportation network companies" must now carry commercial liability insurance, and their drivers must pass driver training programs and background checks and get their vehicles regularly inspected. But the rules also legitimize those companies at a critical moment: a point in their evolution when they have been coming under increasing attack from existing taxicab companies and other critics. And where California leads ...

The vote was also the second big show of force in the last couple of weeks for Peers, a nonprofit sharing economy advocacy outfit that is rapidly proving it can mobilize the troops. Two weeks ago, in Silver Lake, an upscale hipster neighborhood in Los Angeles, Peers encouraged local residents to attend a neighborhood council meeting held to discuss a proposed ban forbidding residents from renting out their homes for periods of less then 30 days. Such a ban would be a disaster for another sharing economy standard bearer, the popular room-sharing service Airbnb. But Peers' action alert proved potent. According to witnesses, supporters of Airbnb far outnumbered supporters of the ban.

Millennial people power for the sharing economy!

Or wait -- make that people power in the service of flush-with-cash Silicon Valley start-ups that stand to profit immensely from new sharing-economy-friendly regulatory regimes. Lyft raised $60 million earlier this spring in a round led by Netscape founder Marc Andreessen. Airbnb, after a $150 million infusion spearheaded by early Facebook investor Peter Thiel, has been valued at upward of $2.5 billion. And after similarly huge influxes of capital from a private equity giant and Google, Uber is considered worth around $3.5 billion.

There is a distinctly quizzical aspect to the spectacle of profit-motivated Silicon Valley sharks draping themselves in the communitarian, post-hippie rhetoric of the sharing economy. Do the shareholders of Uber and Airbnb really share the same values as the young people who see Internet-enabled cooperation as a way to make the world a better place by reducing our overall consumption of resources and building stronger community ties? And are we really sure that the long-term impacts of the growth of the sharing economy will be positive for consumers, workers and the overall economy?

Or are those questions irrelevant? We've seen this time and again over the past 20 years: Irresistible momentum accrues when consumer demand intersects with new technologically enabled possibilities and ample investment capital. We've got our networked supercomputers in our pockets and we're going to use them. So love it or hate it, the sharing economy won't be stopped.

* * *

But maybe, first, we should stop calling what's happening the "sharing economy." What Silicon Valley and its media lapdogs call the "sharing economy" does not correspond to what any 2-year-old would understand as "sharing." Airbnb is a platform for facilitating short-term subletting. Uber and Lyft are platforms for hiring taxi drivers, or some pink-moustachioed simulacrum thereof. The connections made between individuals are perhaps more horizontal -- more "peer-to-peer" -- than the traditional Holiday Inn or Yellow Cab arrangement, but they are still fundamentally transactional relationships. We aren't "sharing." We are purchasing services from each other.

This is not to say that there aren't a lot of very cool things facilitated by the Internet that do feel like sharing. But the longer you stare closely at it, the more repellent the flood of rhetorical bilge pouring out of Silicon Valley pushing billion-dollar start-ups as avatars of "sharing" becomes. Marc Andreessen and Peter Thiel and Google are going to make a killing while the rest of us drive each other around town for rock-bottom fees? Wonderful!

People who have long been associated with the more legitimately idealistic side of the "sharing economy" are beginning to look a little askance at the role traditional capitalism is playing in the scene. Earlier this week, Neal Gorenflo, the founder of and someone whom I regard as an entirely sincere believer that Internet sharing apps point the way to a better way of life for everyone, alerted me that his organization was circulating a new report co-produced with the Sustainable Economies Law Center titled "Policies for Shareable Cities: A Sharing Economy Policy Primer for Urban Leaders."

The introduction provides a manifesto of sorts for sharing economy idealism:

We believe ... that the sharing economy can democratize access to goods, services, and capital – in fact all the essentials that make for vibrant markets, commons, and neighborhoods. It’s an epoch shaping opportunity for sustainable urban development that can complement the legacy economy. Resource sharing, peer production, and the free market can empower people to self-provision locally much of what they need to thrive.

Yet we’ve learned that current U.S. policies often block resource sharing and peer production. For example, in many cities, laws do not allow the sale of home- grown vegetables to neighbors, donation-based ridesharing services, or short-term room rentals. Even when legacy institutions are failing to serve, which is increasingly the case, citizens are not free to share with or produce for each other. New policies are needed to unlock the 21st Century power of cities as engines of freedom, innovation and shared prosperity.

In Gorenflo's view, "the regulatory playing field does significantly disadvantage enterprises where power, decision making, ownership and/or value creation is shared." To reach his goals of a better, more equitable society, something's got to shift.

The ride-sharing regulations passed by the CPUC on Thursday, at first glance, might seem to be an example of the kind of sharing economy-friendly policies pushed in the Shareable Cities report. But making life easier for Silicon Valley isn't  the focus of the report. The authors are much more intent on encouraging urban policies that will nurture small-scale, cooperatively organized peer-to-peer initiatives. The authors would like to see more cooperatively run residences, food-sharing exchanges and affordable housing. They're big on bike-sharing, and rezoning in favor of urban agriculture. The explicit goal is to reduce resource consumption, lower the overall cost of living, and enhance the quality of life by relaxing regulations that impede neighborly human-to-human economic activity.

Notably, the word "Uber" does not appear in the report. "Airbnb" only shows up in a footnote.

I've been talking with Gorenflo about the sharing economy for two years. He solicited my comments on the report, and I told him that the thing that currently concerned me the most about the sharing economy was how his goals and idealism had been turned into marketing material for start-ups whose primary purpose was to make huge sums of money for a relatively small group of people.

Gorenflo believes that even if money is exchanged, we are still engaging in a phenomenon that facilitates shared "access" to resources, and, ideally, reduces overall consumption of those resources through more efficient allocation. But he acknowledged that there are " some contradictions in a company pumping the social good of their platform while founders and investors stand to make huge fortunes" as well as "questions raised about fairness/protection of their often vulnerable workforces."

And he pointed me to a recent article by one of the founders of the Sustainable Economies Law Center, Janelle Orsi, that he said had just "gone viral": "The Sharing Economy Just Got Real."

Taking as her cue the recent filing of class action suits against Lyft and Uber alleging unfair labor practices, Orsi writes that the lawsuits "call attention to the potential harms arising from the non-sharing parts of the sharing economy."

For Orsi, the term "sharing economy" "encompasses a broad range of activities, including worker cooperatives, neighborhood car-sharing programs, housing cooperatives, community gardens, food cooperatives, and renewable energy cooperatives."

These activities are tied together by a common means (harnessing the existing resources of a community) and a common end (growing the wealth of that community). The sharing economy is the response to the legacy economy where we tend to be reliant on resources from outside of our communities, and where the work we do and the purchases we make mostly generate wealth for people outside of our communities. The rich are still getting richer, and the sharing economy can reverse that...

But the "sharing economy" we usually hear about in the media is built upon a business-as-usual foundation. If the high-profile companies like Airbnb, Lyft, Über, Sidecar, and TaskRabbit are to fulfill the dream and promise of the sharing economy, they need a new business model. For now, these companies are privately owned, venture-capital funded corporations. That’s a problem for both economic and legal reasons...

You can’t truly remedy today’s economic problems by using the same business structures that created the economic problems. Because of their current ownership structure, Airbnb, Lyft, Über, and TaskRabbit could be bought out by ever larger and more centralized companies that won’t necessarily care about the well-being of people using the services, or about the overall abundance of jobs in our economy. There is only one way to ensure that a company will make decisions in the interests of the people it serves: Put those people in control of the company.

The rest of Orsi's piece describes mechanisms by which Airbnb or Uber could be converted into worker-owned cooperatives. This is laudable, but completely unrealistic. Peter Thiel did not put hundreds of millions of dollars into Airbnb in order for it to be transformed into a cooperative that elevates worker welfare above maximizing profits. Uber hasn't loaded up with lobbyists to push for regulatory change across the U.S. -- and the world -- in order to remedy class inequities. That's not how the Silicon Valley engine of capitalism works. And that's where the embrace of idealistic rhetoric by these companies becomes so obnoxious. We are being played by these companies, made to feel like we are doing a good thing by reducing greenhouse gas emissions when we eschew buying a car in favor of relying on car-sharing, or help someone struggling to pay the mortgage by renting their spare bedroom through Airbnb. But what we are really doing via our penny-pinching is helping to concentrate even more wealth in the hands of a smaller and smaller group of investors.

And you can bet your bottom dollar that the regulatory changes that we see in municipalities will be primarily designed to suit the needs of corporate interests and not worker-owned cooperatives.

But here's the ultimate irony. Even as we see that the naked economic interest of the sharing economy start-ups doesn't necessarily line up with our long-term interests, or share any true idealistic common ground with those who really do want to use the Internet to make the world a better place, we are unlikely to mobilize en masse to stop it, because as consumers there is no doubt that we actually do want and appreciate the services offered by Airbnb and Uber and others. We cherish their convenience and their flexibility. They make total sense for how we live today. Why should we have to wait in the rain for a taxi when we can click an icon on our smartphone and get one instantly? How insane is it that New York would pass laws explicitly forbidding people from hiring cars that would arrive to pick them up in under 30 minutes from original contact? Why should we pay through the nose for a sterile, overpriced hotel room in Manhattan when we can find a room at a tenth the price that feels as if someone real actually lives there?

* * *

On Wednesday morning, I talked to a couple of staffers in the office of New York state Sen. Liz Krueger, who represents a big swath of Manhattan. I wanted to understand why Krueger had sponsored a law passed in 2010 that banned New Yorkers from renting out their residences for periods of under 28 days -- essentially the same kind of ban currently under consideration in Silver Lake.

Kreuger's staffers offered a compelling list of arguments. Sleazy landlords in New York had been taking advantage of the Internet to advertise rock-bottom prices for rentals in apartment buildings that didn't adhere to any of the regulations designed to ensure that legitimate hotels were clean or fire-safe. Airbnb, they said, had become a de facto marketing arm for these "illegal hotels." Residents in apartment buildings had been besieging Krueger's office with complaints about strangers coming into their buildings at all hours. And even without the law, the service was technically illegal to use for most renters. Subletting apartments via Airbnb invariably broke the standard terms of the apartment leases.

I wondered if there was some middle ground. I sent over some suggestions included in the Shareable Cities report:

We recommend that cities adopt more nuanced permitting policies and fee structures to allow short-term guests. To prevent residential units from becoming too hotel-like, cities could adopt policies that limit the number of paid houseguests per year, limit the number of guest nights, or cap each household’s gross income from short-term rentals at, for example, no more than 50 percent of the monthly costs associated with the unit.

The problem with such suggestions, suggested a Krueger staffer, was that they would be effectively unenforceable. How would the city know how many paid houseguests a household had hosted? What if a landlord arbitrarily raised the monthly costs of the unit so as to increase potential revenue? And in any case, even the new rules would still violate the majority of the city's lease terms or condo bylaws. And so on.

Krueger's staffers didn't sound to me like tools of New York's hotel industry, determined to keep out any threats to the entrenched commercial power structure. The abuses they described are real. I have no doubt whatsoever that unscrupulous operators are manipulating platforms like Airbnb to escape taxes and regulatory costs that protect consumer safety.

But listening to them make their arguments about why it would be near impossible to carve out a regulatory regime that would allow operations like Airbnb to flourish in New York, I had a distinct sense of déjà vu. I felt like I was talking about MP3 piracy with a music industry lawyer in 1998. Yeah, the piracy was totally illegal, yeah it threatened the established industry business models in a profound way, and yeah it was very hard to imagine mechanisms for allowing people to share music freely and fairly under the current status quo constraints.

Even so, I was baffled. The logic of digital music seemed so obvious. It clearly satisfied a deep consumer desire. Fighting it seemed irredeemably quixotic. The status quo was doomed.

Whatever we end up calling the sharing economy, and however it ends up warping our current economic circumstances, attempting to quash it utterly seems just as doomed. New York may be something of a special case -- it's hard to think of a place where the entrenched interests are more, uh, entrenched, but there are a lot of young people out there with smartphones loaded with Airbnb apps who want to find a cheap place to stay in the big city, and one way or another, someone will surely provide them with what they seek.

That's the lesson sent by the cheering crowds at the California Public Utilities Commission Thursday morning. That happy sound was the tune of millennials getting what they want. We'd better get used to it, because it's a song we're going to be hearing a lot more of, as this century rolls along.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Airbnb Collaborative Consumption Lyft Peers Regulation Sharing Economy Sidecar Uber