Diane talks with David Winston, president of The Winston Group and a strategic advisor to Senate and House Republican leadership for the past 10 years.
“The Sharing Economy” may be a misnomer. According to expert Arun Sundararajan, this model — from Airbnb and Uber to Etsy and Taskrabbit — is more like “crowd-based capitalism.” And it’s changing our country’s economy and how we think about employment. Sundararajan and The Washington Post’s Emily Badger on the so-called Sharing Economy of today and tomorrow, and what it could mean for the future of work.
- Arun Sundararajan Professor of information, operations and management sciences, NYU Stern School of Business; author, "The Sharing Economy: the End of Employment and the Rise of Crowd-Based Capitalism"
- Emily Badger Reporter covering urban policy, The Washington Post's Wonkblog
MS. CECILIA KANGThanks for joining us. I'm Cecilia Kang of the New York Times sitting in for Diane Rehm. If you've ever used Uber for a ride across town or an Airbnb instead of a hotel, you're part of a growing percentage of the U.S. population participating in the so-called sharing economy. With this continued growth comes a wave of new questions about the future of business and work in America.
MS. CECILIA KANGHere with me to talk about how these companies are changing our economy and what it means to be employed, Arun Sundararajan of the NYU Stern School of Business. His new book is titled, "The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism." And from the studios from KQED in San Francisco, Emily Badger of the Washington Post who covers urban policy.
MS. CECILIA KANGShe's been observing and writing about the sharing economy for years. We'll be taking your comments, questions throughout the hour. Call us at 800-433-8850. Send us your email at email@example.com. Join us on Facebook or Twitter. Thanks for joining us.
MR. ARUN SUNDARARAJANThank you for having me. I'm delighted to be here.
MS. EMILY BADGERIt's great to be here.
KANGHi, Emily. And we will start with you. We talk about how much the sharing economy's part of life these days and yet, surveys say many Americans still don't know what that term means. It is kind of a lousy term. It's difficult to get one's head around it. Can you lay out for us what is the sharing economy?
BADGERSure. So there's no one single definition of the sharing economy that everyone agrees on, which makes, you know, defining it particularly difficult. The other thing that makes this really difficult is that, you know, quite a lot of what's happening in the sharing economy is not sharing as we would traditionally think of it. You know, where I loan you my care, Cecilia, and I just do that out of the goodness of my heart and I don't expect anything back from you in return.
BADGERLike, in fact, a lot of what's happening here is that vast quantities of money are changing hands between people. You know, people aren't just sort of sharing things, you know, because they want to do that, but because it's profitable to them. So you know, sharing is very much a misnomer in this case. But I think one of the things that really unifies a lot of the activities that we're talking about is that the sharing economy has enabled a lot of people to tap into all kinds of excess capacity in the world around us.
BADGERSo, you know, your car sits unused 20 to 22 hours a day. Your home sits unused when you go on vacation. You have all kinds of pockets of time throughout your day that are unused or even, you know, money sitting in your savings account that's unused. And the sharing economy is enabling people to tap into that. So it's says, you know, why not let other people use your car while you're not using it or why not let other people rent out your home when you're on vacation so that, you know, we can leverage all the sort of slack in the world around us and people can start making money off of it.
BADGERAnd, you know, in some ways, what I'm talking about is not a new idea. You know, people have been renting rooms to boarders in their homes for a long time.
BADGERRight. And coworkers have been carpooling together and exchanging gas money for a long time. But the thing that's really sort of new over the last five years is that people are doing this on a scale that is vastly, vastly larger than has ever happened before because the Internet and smartphones an other kinds of technology are saying, you know, now you can not just exchange things with the people who you know around you, but with this vast circle of complete strangers.
KANGAnd Arun, this is what you've emphasized in your book that this is a huge transition. It's the scale. The common thread here is the excess capacity, perhaps, but what's happening and something -- some of these things have been going on for a long time, but this is going on at a time -- this is a moment where there's a huge economic transition taking place. What are your thoughts on her definition of the sharing economy and do you think that actually that's the right way to describe also what's happening?
SUNDARARAJANWell, I'm pretty wedded to the term, the sharing economy now, now that I've called my book "The Sharing Economy." I called it "The Sharing Economy" because it maximized the number of people who know what I'm talking about. They, you know, it's sort of points to a particular phenomenon where, you know, there are lots of different labels that might be placed on it, but at this point in time, sharing economy, although there is a lot of stuff that you may not consider sharing, it seems to be the one that evokes the phenomenon that I'm trying to describe in the book.
SUNDARARAJANThe main sort of thrust of and the reason why I wrote the book is because, you know, what I was seeing as sort of labeled the sharing economy through, you know, getting rides on Uber, sort of getting a place to stay on Airbnb, buying stuff made by other people on Etsy, lending money to someone, to a commercial business through Funding Circle, all of these seem to be early examples of a broader transition in the economy, sort of early experiments of a sort of a third way of organizing economic activity that sort of has its roots in the 18th century market economies that we lived in, where individuals sold stuff to other individuals.
SUNDARARAJANThere are also sort of related to, like, what dominates the economy today. If you think about it, most of what you -- the goods and services that you get, you get from a large institution, you get from sort of a branded corporation. I mean, there are some activities that you try to do locally. You might go to a farmer's market. You might occasionally look to rent a home from someone in the Caribbean. A few years ago, people might occasionally sort of take a taxi to go home, like, you know, sort of after a long night of having fun, but those were very sort of fringe activities.
SUNDARARAJANMy book is motivated by the fact that this kind of peer-to-peer activity that leverages shared resources and that blurs the lines between sort of what used to be personal and what used to be professional is now becoming mainstream. It's defining a third way of organizing our everyday economic activities. And it's sort of, you know, it's going to redefine what it means to have a job.
SUNDARARAJANIt's going to redefine, like, you know, how we make a living. It's redefining sort of how we trust each other. It's reshaping how we might regulate business. And so this seemed like a changed that was sort of far more expansive that the label and so the book was motivated by let's sort of delve a little deep into it and try to explain to people exactly what's going on, get past the labels and sort of think about how you prepare yourself for this sort of oncoming economy of crowd-based capitalism that, in a few years, is going to set aside the 20th century managerial capitalism as sort of being pretty mainstream.
KANGEmily, Arun says that this is becoming mainstream and it is a big transformation. It's hard -- it's always been hard for me to get my arms around sort of the quantity of this, how many people are participating in this. Can you give us a sense of when we talk about scale, what kind of scale specifically?
BADGERSure. So this is a tricky question to answer because, you know, when the Bureau Labor Statistics releases jobs data at the beginning of every month, you know, there's not a number embedded in that data that says, you know, three million people are participating on collaborative consumption or the sharing the economy or making income off of the sharing economy in some ways. And, you know, in part, that's because this is a really tricky thing to measure. You know, a lot of people are sort of doing something in this activity four or five hours a week or they have a full-time job and they do this on the side or, you know, people on Etsy who are making crafts and selling them and making money by, you know, selling them to people across the country, may not even consider that a job or work.
BADGERThey may just think of that as making a little bit of money off of their hobby. So it's difficult to quantify and the government doesn’t quantify it in any reliable way that we can count on. But, you know, there are a handful of really big sort of behemoth companies in this space who have given us some data points. So Uber, for instance, you know, the company that's connecting people in cars driving all over a lot of big cities, said at the end of 2015 that it had about 360,000 active drivers in the United States.
BADGERAnd that's double the number of drivers it had just a year prior to that so this is a company that's growing incredibly rapidly.
BADGERIt's expanding to a lot of new cities.
KANGThis is globally, right?
BADGERThis is just in the United States.
BADGERYou know, to take a global example, you know, Airbnb, which is in cities all over the world, says that it has about 2 million active listings so there are about 2 million properties in the world right now that are being listed on Airbnb. You know, that's not quite the same as saying 2 million people are doing this because there are some people on Airbnb who are listing multiple properties. But, you know, 2 million is a pretty big number. On Etsy, in the United States, they have about 1.5 million sellers.
BADGERSo, you know, you can add up all of these, but you have to sort of recognize that, like, we're not talking about, you know, 360,000 full-time jobs on Uber or 1.5 million full-time jobs on Etsy. And, you know, the fact that people are doing this in, you know, completely different ways where for some people it's just a little side activity, for some people, it's their primary source of income, you know, that makes all of this really hard to quantify.
BADGERBut one of the things...
SUNDARARAJANIt's interesting, Emily, that we'd be talking about this 'cause I remember a few years ago, the first release or a detailed conversation that you and I had was about the difficulties in measuring, you know, I think what you termed invisible work. And it's a term I use. I borrowed from you in the book, that, you know, we're sort of transitioning into this economy where things aren't quantified well as full-time jobs, but there's all this productive economic activity going on.
SUNDARARAJANTo your question, Cecilia, it's -- you know, Emily is right. I mean, it's still a relatively small fraction of any economy. I would guess that it is probably a largest fraction of China's economy, of any country that is sort of, like, you know, what fraction of my economy is a sharing economy? I'd guess China would be number one. But the interesting thing is the pace of growth here and the rate at which these behaviors are becoming mainstream 'cause we're sort of moving towards a future where rather than buying cars, more and more people will be, you know, "sharing" them or paying for them by getting something on demand.
SUNDARARAJANRather than buying their electricity through a traditional power company, people will be sort of tying into these local grids and becoming energy suppliers.
SUNDARARAJANAnd so it's completely sort of...
SUNDARARAJAN...reshapes what it means to have a job.
KANGComing up, more of our conversation with Arun Sundararajan, professor of information at operations in management sciences at NYU Stern School of Business and Emily Badger who covers urban policy for the Washington Post.
KANGWelcome back. I'm Cecilia Kang of the New York Times, sitting in for Diane Rehm. In studio we have Arun Sundararajan, professor of information, operations and management sciences at NYU Stern School of Business. He is author of the new book "The Sharing Economy: the End of Employment and the Rise of Crowd-Based Capitalism." And from San Francisco at the studio at KQED studio is Emily Badger, who covers urban policy for The Washington Post's the Wonkblog.
KANGWe have a lot of interest from this already from listeners. A tweet from one listener. How about calling it the intimate economy? It's personal, close contact, intimate. Another tweet from Roderick, minorities and immigrants have championed the so-called sharing economy for hundreds of years. Now it's a mainstream business model. Also an email from George in Wilmington, North Carolina. Here in Wilmington, North Carolina, there is a battle between short-term rental people and permanent residents of the neighborhood. Basically the sharers are skirting the zoning laws and running a hotel in a residential neighborhood. Your comments? We'll get to that.
KANGLots of questions about regulation, I'm sure, and we already have a caller from Fairfax, Virginia, Zafar, who is an Uber driver. Hi Zafar, you are on the air.
ZAFARHi, thanks for taking my call. Actually I just dropped off somebody at the airport, and I turned my app off, and I said to call. I have a lot to say, so I don't want to say too much, but if the panel has any questions...
KANGWell, we're glad you joined us.
ZAFARYou know, I'll be happy to stick around. But I wanted to make two distinctions. I think it's very misleading to call it the sharing economy, at least for Uber. You know, it's one thing if I'm driving to Fairfax to work, you know, in Arlington, and on the way I pick up somebody who's going the same route, but that's not the case. Many times it's actually more or less a taxi, where I get up, you know, wait for somebody, and wherever they take me, I go there. it's not like I'm going to that place, and I never have any control over where I go, which again it's not really sharing because it doesn't fit the bill, in my definition, at least.
KANGThanks, Zafar, Arun, he brings up a good point. It doesn't feel so much like a sharing job from his perspective. He feels more like a taxi driver.
SUNDARARAJANI agree. I mean, it's not the best label. You know, many years ago, when social media came along, a lot of people felt that social wasn't the best label to describe what was going on on Twitter and LinkedIn, but the phrase social media has now sort of taken on a distinct meaning that is sort of separate from its constituent words. I think what's important to focus on here is that as platforms, like Uber and Lyft and Didi in China expand, we're going to reshape how we get from one to another. We're going to reshape mobility.
SUNDARARAJANAnd this is going to sort of have a very -- you know, it's going to have a sort of tremendously disruptive effect on the automobile industry. And so it's that kind of change. You know, we're moving away from buying things to sort of getting them in a quote-unquote shared way, on demand. That's the kind of transition that I think is sort of like, you know, a more important focal point than the labels themselves.
KANGCertainly it will definitely disrupt the companies, as you mentioned the auto industry. It's also disrupting jobs and the notion of employment. And I want you, Emily, if you can jump in here and talk a little bit about what does this kind of life offer for somebody. Why would somebody want to become part of this economy?
BADGERWell, if you've ever been a freelancer or knows someone who's a freelancer, you know, we're talking about a lot of the benefits that are similar to that type of work. So, you know, you don't have a boss, you can set your own hours, you have a lot more control over your work. You know, and Uber in particular always says, you know, people are drawn to our platform because they appreciate the flexibility that it offers.
BADGERSo, you know, for instance if you are a parent, you are available to drop your kid off at work in the morning, you can go work for a couple of hours, and then you can pick your kid up from school and take the afternoon off and spend time with them. You know, we give people the flexibility to do that, and that's what people are drawn to.
BADGERBut the flipside of flexibility is also instability. So, you know, people who are doing this kind of work, who are, you know, contractors, who are essentially sort of like freelancers, you don't get the benefits of fulltime employment and things like having paid time off or having health care provided by your employer. You know, anyone who's done this type of work in the economy knows that if you take time off from work, or you want to go on a vacation, like, you're not drawing a paycheck when that happens.
BADGERSo for a lot of people, you know, the downside of all of this is, you know, tremendous instability in sort of benefits and your ability to have paid time off, to have paid family leave, you know, things that have traditionally been coupled...
KANGAnd that can be very stressful.
SUNDARARAJANIt can be, but I -- you know, the -- I think a point that a lot of people miss about this transition is that, you know, at the heart of it, the relationship between the individual and the institution that sort of used to be -- that is sort of contained in fulltime employment has the individual as a provider of labor, right. I mean, the new relationship between the individual and the institution sort of under the sharing economy and crowd-based capitalism models has the individual as some semblance of an owner of the means of production.
SUNDARARAJANAnd this is a really important transition. The reason why we see sort of the instability that Emily points to and the sort of -- the -- in some ways, like, you know, feeling that these independent contractor jobs, these provide a sort of work that is being created by the sharing economy isn't as good as fulltime employment is because it's relatively new.
SUNDARARAJANAnd we've spent the last 100 years sort of wrapping all this protection around the fulltime employment model, and the real task isn't to sort of try and take these -- this kind of work back into that fulltime employment box but to sort of start to wrap a new sort of safety net or a new set of protections around this new way of providing if you're sort of a small business owner who's driving through Uber or providing through Airbnb or selling on Etsy or lending on Funding Circle.
SUNDARARAJANWe have to sort of define as an individual government, sort of institution partnership, a way of funding all these things, the stability of income, the paid vacations, the health insurance, the worker's compensation insurance that we've come up with a good funding model for when people are employed fulltime.
KANGWell it certainly is a hard transition, Arun, and in fact the idea of the employee becoming an owner of some sort sounds good, but when you hear from folks like the Uber driver who called who said he faces pay cuts, and he's tried to organize a strike, he couldn't. We also have an email from Gary, who says, please talk about the issue that most of these jobs are enabled -- that most of these jobs are enabled by large companies that extract a large tax on their contractors. Without job protections and benefits, this can be considered to be exploitation.
KANGIn fact this is a transition, Arun, you're right. There's something to say, though, about the social contract that an employer has for many decades had with their employees or workers, be they contractors part-time or not even fulltime workers. Talk about that, and what can come -- what can replace that social contract.
SUNDARARAJANWell, I mean, this is going to be a difficult adjustment because that's a well-defined sort of contract that has evolved over many decades.
SUNDARARAJANIt is, and, you know, beyond that, like, you know, actually the organizations that we work for are often sort of a primary source of community, as well. They keep us connected with other people. I've seen a little bit of this sort of emerge, a substitute for that emerge in Airbnb host communities and Etsy host communities and even in Uber driver communities, but the -- you know, we're going to have to face up to the reality that, you know, life in the future, work life in the future, is going to be more individual based and less sort of fulltime employment based, and that contract is not going to be with any one institution, with any one company, but it's going to sort of decentralize more of that responsibility to the individual.
SUNDARARAJANAnd we're going to have to sort of forge, like, you know, the government is going to have to forge space in which somehow that individual is able to sort of reclaim some of these protections that they got as a fulltime employee. It's not that hard, actually, if you think about it because, you know, your fulltime employer in some ways is insuring you. Like, you know, they pay you a certain amount of money for the time you put in, they spend a little bit more money on sort of funding, you know, steady income, funding your paid vacations, funding a bunch of your benefits, and then they keep the rest of your product as their profits.
SUNDARARAJANWhat we have to do is to think about ways in which a large, decentralized group of individuals is getting the same kind of insurance not from one company but from a market-based solution combined with some sort of government program. And so it's -- you know, I'm not saying I have all the answers, but, you know, I -- I do feel it's really important to underscore the fact that, you know, we shouldn't get distracted by the superiority of fulltime employment relative to many sharing economy providing jobs because of the benefits because we've had a lot of time to make those jobs better.
SUNDARARAJANA hundred years ago, fulltime employment didn't look very good. And we've done a lot of work over the last 100 years to sort of wrap...
KANGMake it attractive.
SUNDARARAJANSo make it attractive, yes.
KANGWe have an email from Jeff, who says -- who wrote, writes, keep in mind that part of the reason that the instability associated with these new jobs is attractive is because the old model is, in itself, not as stable as it used to be. My father's world of having a job for 30-plus years has gone away. Emily?
BADGERYeah, I think that's exactly right. I mean, it's not just that people are being pulled toward this new alternative of, you know, work where you can be your own boss and have more flexibility and, you know, maybe even patch together multiple different jobs to create your income, but, you know, people are also being sort of pushed away from a model that is no longer accessible to a lot of people.
BADGERI mean, most of us are not going to have, you know, one job where we work for the same company for 30 years, and they give us a pension, and we retire on that. You know, we can't count on that anymore. And so it's not just that a new model is arising but that the model that has existed for quite a long time in America is no longer available to a lot of us.
KANGAnd do we have a good sense whether people want to be fulltime workers or not? We talked a lot about the flexibility that this model allows for, say, if you're a -- you know, a stay-at-home parent who wants to work a little bit and earn some money on the side. But do people, do Uber drivers say that they actually want to be fulltime? What's the sort of polling or stat on that, Arun?
SUNDARARAJANWell, it's a tough question to answer because often when people say they want to be a fulltime employee, they don't want that work structure, but they want the good things that go with it. They want the stability, they want the benefits, they want the paid vacations. That's the stuff that's attractive. So I think once we figure out a way to attach those and fund those for an independent contractor, for a sharing economy provider, things are going to change.
SUNDARARAJANBut the numbers that I've seen suggest that in the United States, across the board, and this is from, like, you know, the GAO, like, you know, which sort of consults for -- it's like a government entity...
KANGThe Government Accountability Office, right.
SUNDARARAJANYes. That eight out of nine people who are independent contractors or sort of business of one owners would not prefer an alternative work structure. So the idea that -- so people who are providing on their own and who feel a sense of ownership of it don't want a different work structure. Now people who are attached to large companies and who work as independent contractors for those large companies would prefer to be fulltime employees because they're essentially doing the same thing, but they're just not getting the benefits.
SUNDARARAJANSo I think the answer sort of depends on what population you're asking, and I generalize more from the population of owners, of small business owners, of, like, you know, people who have chosen, like, you know, to be independent because I think that there's a growing trend. Like Senator Mark Warner, when he wrote this op-ed last year for the Washington Post, talked about how his -- you know, when he asks -- when he listens to his daughters, who are in their early 20s, talking about work, the phrase that they use isn't who are you working for, but the phrase they use is what are you working on.
KANGWhat are you working on, interesting. I'm Cecilia Kang. You're listening to "The Diane Rehm Show." If you'd like to -- if you'd like to join us, call 1-800-433-8850. Or send an email to firstname.lastname@example.org. Find us on Facebook, or send us a tweet. Along those lines, Arun and Emily, we have an email from Denise, who says in fact it was not a choice for her. One of our -- one of the guests just claimed that people chose this kind of life.
KANGWe're still coming out of a major recession. The only reason I went back to having my own business is because I had no choice. I could not get a job again, and I can't make as much in this new economy. I know work close to seven days a week and am seldom off. There are no benefits, no vacations, no net beneath you unless you happen to be married to someone with a traditional job. This is part of the reason why we're losing the middle class. Arun, is it sort of like, you know, no matter what, this is going to happen, you've got to prepare? Is that one of the messages in your book?
SUNDARARAJANI think it is that, you know, we've got to prepare for it, but we also have to think of it as the early stages of constructing something that is eventually going to be good. This model of, like, being married to someone who has a fulltime job in order to get their benefits, this is a common model for independent contractors. And, you know, I'm -- you know, I'm sympathetic to, you know, I know that there are a lot of people who would rather have fulltime jobs, who are now sort of finding that the work that is available is through these independent arrangements.
SUNDARARAJANBut to me the focus shouldn't be on saying, well, how do we reclaim this world of fulltime jobs. It's to sort of embrace the reality that a lot of the provision of economic activity is going to be through these independent work arrangements, and how do we make them as good as, how do we bring back the paid vacations, how do we bring back the stability, how do we attach the benefits to this new form of work.
SUNDARARAJANI also wanted to go back to sort of a point in one of the early tweets that you pointed to, which sort of spoke to the sharing economy having this intimacy associated with it.
KANGYes, that was interesting.
SUNDARARAJANBecause this is something that I've noticed a lot of people bring up, and, you know, it sort of goes back to that idea of the lines between the personal and the professional blurring. You know, I mean, we've always given people rides, had them stay at our homes, lent people money, had people over for meals, but, you know, we did them as personal activities, and then you had sort of the commercial providers like the taxi drivers, the restaurant owners, the bed and breakfasts, you know, the banks.
SUNDARARAJANAnd now these lines are blurring through platforms like Airbnb, and what I've noticed is that, you know, we may have sort of gotten to a point by the end of the 20th century where we had sort of taken out the personal too much from our everyday commercial exchange, that there was a sort of a social aspect to economic exchange in the 18th and 19th century, and, you know, through the sort of the evolution of industrial and managerial capitalism and the creation of these huge hierarchies, we've made economic exchange excessively impersonal.
SUNDARARAJANAnd loneliness is an epidemic in many sort of, like, you know, large, developed economies now, and it has to do with sort of the systematic cutting out of community and connection from our everyday activities. And so, you know, when you stay in someone's home, even if they're not there, like, you know, you sort of get to know them. There's a little bit of intimacy associated with this activity, and so this -- this reintegration of connection into everyday economic activities I think is an important part of what the sharing economy is going to bring back.
KANGWell, that would certainly be a positive aspect of this. Coming up, your calls and questions for Arun Sundararajan and Emily Badger. We'll be right back.
KANGWelcome back. I'm Cecilia Kang of the New York Times, sitting in for Diane Rehm. I'm here with Professor Arun Sundararajan, who has written the book -- the new book, "The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism." From San Francisco, my former colleague and a wonderful reporter and person, Emily Badger, who is at the KQED Studio in San Francisco. She covers urban policy for The Washington Post Wonkblog.
KANGWe have a caller, Tara, from Durham, N.C., who is also an Airbnb host. Hi, Tara. You're on the air.
TARAHi, how are you? I have been a host for five years. Starting off first in San Francisco, now in downtown Durham, N.C. We have hosted people from all over the world. Ate dinner with folks that were night before gonna have a lung transplant. And our homes are being opened up. And Americans typically -- we love our privacy. What is the larger societal impact, do you think, this is on our country, as our common link of humanity is rekindled in our super-connected world? What are your thoughts on that?
KANGThanks, Tara. Arun, this is so interesting, this idea of intimacy, again, that you were starting to talk about earlier.
SUNDARARAJANI really think that, you know, one of the gifts of the sharing economy may eventually be that it reintegrates some form of connectedness into our everyday economic activities. You know, the narrative that's normally associated with progress and digital technologies is that it sort of takes us further apart.
SUNDARARAJANBut, you know, a lot of people who I talk to who are drawn to services like Airbnb, services like Lift, services like Etsy, services like La Ruche qui dit Oui -- which is a sharing economy way of connecting with farmers and getting your groceries in France -- is that they're sort of drawn to it initially for the quality or for the variety or for the prices, but what keeps them coming back is exactly what this caller sort of points to.
SUNDARARAJANThat there's connectedness that's missing in society today, and, you know, it's hard to make time to go and find it as a dedicated activity, to say, I'm going to go and connect with people. And so when a way of getting your everyday needs fulfilled or fulfilling your everyday economic activities, comes associated with some form of connection, however sort of like superficial it is.
SUNDARARAJANHowever, sort of, you know, sitting next to someone and fist-bumping them before you get out of a car, instead of having that, you know, that sort of -- either driving alone or having that sort of window with the credit card machine. Which is sort of like, you know, what the taxi driver, you know, taxi passenger relationship is.
SUNDARARAJANJust sort of integrating that feeling of connectedness. And, you know, I also think that it starts to change how much we trust each other. I've been following the, you know, the general social survey studies sort of measures the level of trust in American society. And has been doing that for the last 40 years. And this has been on a steady downward slope. And even more so for people under the age of 35. So I think it's 20 percent of people under the age of 35 today, the millennials, feel that people are trustworthy.
SUNDARARAJANIt's down from 40 percent about 40 years ago. And I think of -- part of it has to do with sort of rejecting the old structures that sort of facilitated trust. And this is a generation that is really embracing the sharing economy. Because trust is created through these familiar cues. We've grown up looking at Yelp reviews, they've grown up sort of, you know, being sort of digital natives.
SUNDARARAJANAnd so the idea that someone can be trusted because you've got sort of a good sort of digital profile wrapped around them, makes you willing to take a chance to sort of connect with someone to get a ride or to get a place to stay. And then once you have many experiences like this, where you are like, you know, interacting with a stranger, but the experience is good, I think that that starts to rebuild some of the trust that we're losing in society. Because you start to realize that you can in fact rely on the kindness of strangers.
KANGOne thing that I frankly worry about, looking forward with the growth of the sharing economy, whatever -- however you'd like to call it -- is the -- is what does this mean for careers? What does this mean for professional expertise, the ladder? It's sort of growth as an individual in your working life. Jeff, from Lansing, Mich., you're on the air. I think you have something similar on the mind. Hi, Jeff.
JEFFYeah, thank you very -- hi. Thank you for taking my call. And yes, I did. I was interested in the author's thoughts on -- in those job economy where you increase the quanta and -- and it makes a lot of sense to me, what you're saying. You know, you're going to increase individual opportunity so that people can apply themselves to greater spaces and more spaces. What happens when you get a reduction in specialization? You know, if one person is spending time doing many things, then their ability to do well in those many things is reduced. An inch deep, mile wide is used in my industry.
JEFFHow does that play into your analysis level? Thank you.
SUNDARARAJANOkay. That's a great question, Jeff. I'm offered -- I'm often referred to as the author, instead of as Arun Sundararajan. It's a good point. I mean, I think that one of the things that, you know, there are many sort of economic benefits that we're gonna see from this transition to crowd-based capitalism. We use assets more efficiently, which sort of often increases productivity. We create a great variety of choice, which also increases the amount we buy and sell because, you know, contrast the two million listings on Airbnb with, you know, the relatively limited choice of hotels.
SUNDARARAJANBut one risk is that as people start to do multiple things that we may see a decline in sort of learning by doing or gains from specialization. I'm starting to see some of this being compensated for by what the platforms are doing themselves. You know, in many ways I think of a platform like Airbnb or Uber or Etsy as being akin to a new generation franchising operation. You know, there are certain sort of -- there's certain specialized knowledge about, you know, if you think about it, if you wanted to be a bed and breakfast provider 10 years ago, there were huge barriers to like actually figuring out how you're going to be doing this.
SUNDARARAJANNow, if you want to host on Airbnb, which is essentially you sort of providing short-term accommodation for money for someone else in your home, those barriers have gone down because some of the specialization that was needed is now provided by the platform, in the same way that a franchising operation might provide it to a business.
SUNDARARAJANAnd so while I worry a little bit about the losses from specialized -- less specialization, I think some of it will be compensated for by the technologies and the know how provided by the platforms themselves.
KANGSo, Arun, what would you -- we were talking during the break about how you have a 12-year-old daughter. What would you recommend she do to prepare for this economy and this economy that's only growing, the sharing economy, and to be best situated to benefit from it?
SUNDARARAJANOkay. Well, the first thing that I told her to do was to make sure that she had a dad who has written a book called "The Sharing Economy."
KANGThat would be convenient.
SUNDARARAJANThat's definitely sort of like, you know, a good thing to aspire to. But more seriously, you know, I'm really sort of trying to get her to invest in creative thinking, in design and in sort of project management. Capabilities that prepare her for a world of work in which there isn't a well-defined set of things that someone else assigns you to. I mean, the world that we live in -- lived in at the end of the 20th century, a vast majority of our jobs had work that was well-defined by someone else and that you sort of plugged into.
SUNDARARAJANAnd in some sense are sort of renewed emphasis on STEM sort of reflect, like, you know, preparing people for that reality. I mean, I think some of the strengths of the US, sort of, middle school and high school systems of, like, you know, preparing people to be broader thinkers and preparing people to sort of design their own realities is going to sort of service well as the world's economy transitions away from structured to unstructured work.
SUNDARARAJANAnd so I tell my daughter, Mya (sp?), to sort of encourage that creative sort of thread in her to, you know, I really feel that it would be wonderful if we taught middle and high school kids design thinking. You know, I think that's sort of a critical skill for the future.
KANGWe have an email from a listener in Silver Spring, who writes, "You can't pay off college loans, raise a child or pay a mortgage on a freelance income. Unless you have one of the very few specialties for which we'll be paid be bucks. I'm freelance, not by choice, and I wish I could make you feel the terror of approaching the end of the month without enough gigs to pay the rent." I've done freelance. I certainly understand this.
KANG"I sincerely hope that the sharing economy is not the future of employment. If that happens, we'll all be sharing poverty." We also have a caller, Beth, from Rockford, Ill., who talks about being a seller on Etsy and the role of the platform and what the platform takes, actually, from her cut of revenue. Hi, Beth. You're on the air.
BETHHi, thanks for having me.
BETHI have a question about Etsy and Etsy's platform. Once it went public, it became publicly traded, we saw massive changes in their basic mission statements. And I was wondering if you guys could elaborate on how you can see those kind of changes to the other, Etsy in the future, as well as the other Uber and Airbnb?
KANGWell, how did this change for you, Beth? How did the change in terms directly affect you as a seller on Etsy?
BETHWell, Etsy had a real mission statement about encouraging handmade, hand-produced products. And when they went public, they moved quite dramatically into including mass manufacturers. So that has changed a lot of Etsy's price points and basically our future goals within Etsy. We've been there for seven years. I've been full time for seven years. I have employees. We make all our products in America. But as most people understand, it's very hard to compete with Chinese products.
KANGWell, Emily, if you can respond to the Etsy question that's great. But more broadly I think she brings up a -- she raises an interesting point about the power of the platform and those who rely on these platforms as their means for sharing whatever service or goods they are doing in this sharing economy. Emily?
BADGERYeah, I mean, in every one of the companies and the types of work that we're talking about, you know, there is an intermediary standing in between the two people who are doing some kind of so-called sharing. So, you know, Uber is a company, it connects the driver and the passenger and takes a cut of that. Etsy is a platform, connects the seller and the buyer and takes a cut out of that.
BADGERAirbnb connects the host and the guest and takes a cut out of that. And, you know, this is how their business models work. And this is how all of these companies have been set up. I would suppose that, you know, what Etsy would probably say, is that even though we take a cut out of that, you know, the cut that we take, you know, is still smaller than what it would cost you to set up your own mass-marketing platform in order to, you know, set up a system that would connect you to potential buyers all over the country.
BADGERYou know, Uber takes it cut, but if it -- Uber weren't doing that, it would be virtually impossible for you as a driver to be able find all of the potential passengers out there. You know, that's not to say that I think the precise amount of money that all of these companies are sort of skimming off the income that you're earning is fair or is right or that the profit margin is exactly right.
BADGERBut this is, you know, this is how all of these companies have been set up. You know, they are making money off of helping connect people to each other and setting up all of the infrastructure of the digital marketplace. And, you know, I don't necessarily think that that's going to change.
KANGI'm Cecilia Kang. You're listening to "The Diane Rehm Show." Certainly these -- the platform operators, the companies are Uber, Airbnb, they're just getting bigger and bigger, Arun. And in a way you talked earlier about how branded companies are now being replaced by these sharing platforms and peer-to-peer. But, in fact, are we seeing actually the emergence of really big sort of sharing economy fortune, whatever, fortune dozen, if you will? Very powerful firms that in some ways look and feel very similar to the biggest employers of decades ago, but aren't actually treating their workers similarly?
SUNDARARAJANWell, I think that there are similarities. We are going to see the emergence of, you know, a sort of a series of large platforms like Uber and Airbnb. They -- we're going to see them in health care. We're going to see them in energy provision. There are going to be a wide variety of specialized labor markets that are going to take sort of work that is full-time work and convert it into sort of on-demand freelance work. But, you know, I see these platforms as sort of being a hybrid between a firm and a market.
SUNDARARAJANThey're not just sort of new versions of 20th century companies. The relationship between the providers and the platform is fundamentally different from the relationship between an employee and an employer in a 20th century corporation. I've looked at 100 different platforms and I talk about this a bit in the book. And I see a wide range of, like, you know, decentralization and empowerment that they give their providers.
SUNDARARAJANSo we don't have one model of, like, you know, this is what the relationship between the sharing economy provided and the platform looks like. It's a little different on Uber. It's a little different on Airbnb. It's a little different on Etsy. And what I think we're doing now is experimenting. We did similar experimenting sort of in the early days of the modern corporation. We tried lots of different relationships.
SUNDARARAJANAnd we converged on a few that worked and then we sort of built the safety net around that. So we're still in that experimentation phase. And I'm thinking about what one of the earlier callers said about the terror that you feel at the end of the month, like, you know, as a freelancer. You know, the biggest public policy challenge I think we have for the next 20 years in the United States is to take the freelance workforce, the independent provider workforce, the zero-employee business workforce and to move them to a point where they have the same sort of stability and security that full-time employees have.
SUNDARARAJANYou know, I talk about this in the last two chapters of the book at some length. It's not a difficult problem to sort of conceive of a solution to. The path to it is going to be sort of -- it's going to take a little time. There are probably going to be new label collectives that, like the unions of the '50s and the '60s sort of deepened the middle class. And we're going to see them emerge. I think the transition is going to happen faster over the next 20 years. It's not gonna take 100 years, but, you know, that's the solution to me.
SUNDARARAJANIt's not to look back and say, well, full-time employment is a great structure. It's to say, well, how do we make this new generation of work as attractive and as stable and as comforting as that old model of full-time employment?
KANGFinally, Emily, both you and Arun have been on this show before. Two years ago in fact. And people are still talking about how the share economy -- they describe it as emerging and booming. Has the model changed in the way that you thought it would, Emily?
BADGERYeah, I mean, it -- five years ago I thought the sharing economy was unambiguously a good thing. You know, it's creating ways for people to use assets much more efficiently. It's enabling a lot of consumers to move away from an ownership model so that, you know, if you -- you no longer have to own a car in order to be able to access a car. You no longer have to own a second home in order to be able to have a vacation property that you can go to.
BADGERYou know, cars are the most, like, incredibly wasted asset in this country. Worth, you know, trillions of dollars of wasted value because we just leave them parked on the side of the road most of the time. So, you know, to the extent that we could use them more efficiently, that's unambiguously a good thing, you know, if someone who lives in New York City can barely afford their rent, but, you know, can make a little bit of extra money doing this. That is a good thing. But over time, you know, especially because of all these labor questions, I think it has become much more clear that, you know, there are some really tricky questions that are raised by all of this as well.
KANGEmily Badger from The Washington Post, and Professor Arun Sundararajan from NYU thank you for joining us. I'm Cecilia Kang, of The New York Times, sitting in for Diane Rehm. Thanks for listening.
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