There is no reason Uber should be a for-profit corporation

In many gig economy companies, workers own everything needed for the company to run. Time to make them into co-ops

By Keith A. Spencer

Senior Editor

Published July 2, 2017 4:30PM (EDT)


Imagine a factory that produces widgets. In this particular factory, the workers bring the raw material needed to make widgets from their home every day; moreover, the brick and mortar that comprise the factory are also owned by the people who toil inside. In this fictional factory, the workers even sell the widgets themselves when they’re done making them. Indeed, the workers own everything within the factory — except, oddly, the punch clock. But it just so happens that their paychecks can’t be distributed without the punch clock — and so, the "owner" of the punch clock, and therefore the factory, takes all the money that the workers make, takes a cut, and then distributes it to investors, debtors, stock-owners, and finally workers.

If you worked at this factory, you might be inclined to wonder why — given that you and your co-workers own nearly everything — even bother with having an owner at all? And what are the lazy investors even doing in the equation? With a bit of moxie, you and your fellow co-workers could just rip the boss’s punch clock off the wall and design your own.

This imaginary factory is essentially the model that many “sharing economy” companies are built on, including Uber, Lyft, TaskRabbit, and Postmates. Indeed, the term “sharing economy” came into vogue as a means of describing these companies' internet-mediated “peer-to-peer rental schemes,” as the Economist calls them. Now, the sharing economy is big business indeed: many sharing economy companies are, in Silicon Valley parlance, “unicorns” — startups valued at $1 billion or more, a list that includes Lyft, Uber, Airbnb, and Chinese ridesharing giant Didi Chuxing.

As the aspirational word “sharing” suggests, sharing economy companies like to perceive of themselves as having a higher social purpose. You can see this exemplified in vacation-rental company Airbnb’s 2017 Super Bowl commercial, which features an array of diverse faces accompanied by the words “We believe no matter who you are where you're from who you love or who you worship, we all belong. The world is more beautiful the more you accept.” (Evidently Airbnb's promise only runs skin-deep, as the company has come under fire for many documented instances of hosts rejecting guests on racist grounds.)

Yet the Economist's phrase, “peer-to-peer rental schemes,” is not fully accurate in describing sharing economy companies; they are more accurately middle-men, as they always take a cut from the peers’ labor on both ends. “Rentier economy” might be a more accurate description.

These sharing economy companies can hardly be said to exist in the traditional way that companies do: they own little in the way of property, and have few in the way of normal employees — outside of management and programmers, they are largely comprised of independent contractors who do the bulk of the money-earning for the company. In the sharing economy’s economic model, these independent contractors are at-will employees, with no guarantee of hours and no benefits, and who therefore must deal with taxes and health expenses themselves, thus reducing the burden on these corporations’ Human Resources departments. In all of these companies, the workers own the instruments with which they make their wage: cars in the case of Uber and Lyft, bikes and other vehicles in the case of Postmates and Taskrabbit.

Some of these companies do have divisions that more resemble traditional corporate ownership: Uber also has a financier wing that offers direct car loans to its drivers and automatically deducts payments from their wages as they drive, a practice that has been compared to indentured servitude; likewise, Uber has its tendrils in autonomous driving, which has yet to make money for the company, but serves as good PR. Yet these are new ventures for companies that started by renting things that other people own and do, then taking a cut of their labor.

So what, precisely, does Uber own that makes it valued around $70 billion? The answer is a platform — specifically, the app that manages ride requests, tells drivers where to go and routes them accordingly. That, and the sheer number of driver-contractors that it has, means that its value comes from its market dominance, not from its property, which it doesn't have. (It is still losing investors’ money by offering rides at steep discounts, a practice that is designed to position it in a place of market dominance such that it can later start to raise rates and reach profitability.)

All of these companies have the same weakness: apps are not that hard to build. A determined group of Uber drivers, once organized, could band together and easily program an app (or hire someone to) that would resemble Uber or Lyft outwardly, but inwardly send the fruits of their labors back to themselves — no middlemen taking a cut or bottomless investor maws to feed. This arrangement would be an excellent means of helping to turn these jobs into middle-class jobs: worker co-ops around the world are much better at evenly distributing income to their workers, with far less income inequality. Spain’s Mondragon corporation, an industrial worker-owned cooperative that employs more than 70,000 people, has a 1:8 ratio between the lowest-paid and highest-paid employee's’ salary. In contrast, America’s top CEOs take home around 340 times their average worker’s salary.

If a co-op model sounds unfeasible, note that there is a precedent for worker-owned companies: the aforementioned Mondragon Corporation is a very large example of a worker-owned enterprise. Digital stock photography start-up Stocksy is organized on a co-op model, where photographers are also co-owners and share in the company’s profits. Stocksy in particular embodies a digital movement toward what is called “platform cooperativism” — the campaign to shift these kinds of digital platforms to worker-owned enterprises.

New School professor Trebor Scholz has argued in favor of making so-called sharing economy companies into platform cooperatives in this mold. “An app with the basic functionality of UberX can be duplicated and improved upon by independent developers who are working in tandem with cooperatives,” Scholz writes. “From the very beginning, the development process would have to be steered by workers and developers.”

It would be hard for a cooperative version of Uber or TaskRabbit to compete with their capitalist counterparts in some regards. After all, cooperatives don’t have unlimited piles of investor cash to throw into advertising, discounts, and PR stunts. Yet the benefits of these models are too rich to ignore: vertical, top-down management hierarchies like Uber’s are breeding grounds for the type of sexist scandals the company has become known for. A co-op’s horizontal management structure makes discrimination and power imbalances more difficult to exploit.

Yet the biggest benefit of platform cooperativism is that attrition rates would undoubtedly be far lower, if only because wages would be higher. Sharing economy companies like Uber and Lyft struggle with turnover: half of Uber’s drivers quit within six months. If workers owned the company, the Uber platform would function with driver's interests and concerns at heart — rather than investors'. 

No one knows exactly what it would take to build a movement to create a platform-cooperative version of any of these sharing economy giants. Building solidarity among workers is the first problem; as co-workers are digitally isolated, face-to-face interactions between Taskrabbit or Lyft employees are rare, making organizing a struggle. But as the economic trend of full-time work evaporating into contract labor is set to continue, we may have no choice but to work toward such goals if we wish to keep the middle class intact.

By Keith A. Spencer

Keith A. Spencer is a social critic and author. Previously a senior editor at Salon, he writes about capitalism, science, labor and culture, and published a book on how Silicon Valley is destroying the world. Keep up with his writing on TwitterFacebook, or Substack.

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