Economics
The Problem with REITs
February 7, 2025
How the Sharing Economy Looks Like ?
Anybody who has hired an Uber cab or a cab from any other ride-hailing and app-based company would know something about how this new paradigm of capitalism works. For instance, when you book an Uber, you do so in the knowledge that you need it do through an app which then “connects” you with the driver who in all probability is a freelancer who owns his cab and where Uber does not have any ownership of the cab or the driver.
Further, if you have stayed in one of the premises that are offered for short stays or vacant rooms in houses that are put up on the websites or apps of companies such as AirBnB, you would be aware that the company neither owns the premises in the manner in which a traditional hotel or motel would nor that the hosts of the premises that you have chosen for your stays can at any point pause letting out their rooms or even drop out of the listings for sharing.
Lastly, if you have ever hired a freelancer for your writing, web design, and assorted tasks through Upwork or hired a temporary plumber or lawn mower through Task Rabbit, you would be aware that these companies are just platforms that bring together potential customers and freelancers who can bid and set rates accordingly and in the process charge a fee from both for the convenience and the ease of operations that they provide on their platforms.
How the Sharing Economy Works ?
This in short is how the sharing economy works wherein hosts on AirBnB “share” their premises, drivers on Uber use their spare time to drive and ferry passengers for money, and where freelancers make use of such platforms to earn money.
The sharing economy works by collaboration and cooperation between a legion of freelancers on one side and the army of customers on the other side who theoretically at least stand to gain (both sides) from this emerging model of collaborative capitalism wherein the mediation is done by companies using the power of platforms and the operation of digital networks. Considering the fact that most of these companies are now valued in excess of a Billion Dollars, this new platform based economy or the sharing economy or sometimes called the gig economy since the freelancers are primarily performing gigs on a part-time basis seems to be booming.
What does the Sharing Economy Mean for Customers ?
So, what does the new model of the sharing economy hold for the clients, the freelancers, and the companies themselves? To start with, the clients or people like you and me stand to gain from competition between the freelancers results in each of them bidding in a competitive manner thereby driving down prices and rates.
This is especially the case with sites such as Upwork and Task Rabbit wherein one can find bids at rock bottom rates from the many or some would say too many freelancers competing for the same task.
Of course, this is not always the case for all companies where competition is a good thing. For instance, Uber is known for practices such as Surge Pricing wherein during times of peak demand; they are known to jack up the rates even when the drivers are willing to settle for lower rates. Having said that, it is also the case that the customers do benefit though the fact that who is answerable for any sloppy work or who is accountable for any mishaps or incidents of harassments by the freelancers has led to a vigorous debate among the policymakers and the activists.
What Does the Sharing Economy Mean for the Freelancers ?
As for the freelancers, the results of the new world of work are somewhat mixed. While this new paradigm means that theoretically anyone can participate in the sharing economy, the fact remains that this type of employment is purely temporary or on a freelance basis which means that the freelancers neither receive medical benefits nor have access to social security and other pension and longer term benefits.
Having said that, it is also the case that given the economic downturn and the gloomy outlook for the economies in the West, the Sharing Economy provides good opportunities to “ride the recession” (literally as well as metaphorically) in addition to providing them with the means to work at their own pace as well as choose the tasks or the customers that they would serve.
On the other hand, there are concerns in some quarters that the freelancers are being short changed in this business model as more the number of them, the more that they bid lower and get even lower earnings. Thus, the sharing economy can indeed do better where freelancers are concerned.
What Does the Sharing Economy Mean for the Companies Themselves ?
Lastly, for the companies themselves, the good times just keep coming in since for an initial investment to set up a bare bones infrastructure and some investment into the app though the marketing and administrative costs are substantial, the fact remains that the returns are indeed way above all these costs and this is the reason why many investors are flocking to this sector.
This has reached a point where angel investors and venture capitalists are ready to fund just about any start-up that seems to have a decent business model based on this emerging paradigm of the sharing economy.
However, there is some disquiet among the thoughtful investors about the longer term sustainability of this business model. Some feel that just like the dotcom boom and subsequent bust that similarly raised expectations about eCommerce and eventually went bust, this new model would also meet the same fate.
Whatever be the eventual outcome, it is undeniable that the Sharing Economy is indeed a new paradigm and a new world of work with implications for not only business but also for the wider society.