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Raw Deals: Challenging the Sharing Economy

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The growth of the tech sector has been heralded by Silicon Valley nouveau riche and the business press as a blessing for the U.S. economy. As with past booms in which some get rich while many more don’t, the cheerleaders for the tech surge argue that a rising tide will lift all boats. The message to those not on board a luxury yacht boils down to become your own entrepreneur if you want to avoid drowning. Anyone can become rich and powerful, unless they are losers, as the hero of the free-market libertarians Ayn Rand taught us all years ago.

Two new books take issue with that world view. In fact, thanks to old fashioned diligent research and number crunching, they eviscerate it. For anyone driven crazy by the faux warm and fuzzy PR of the so-called sharing economy, Tom Slee’s What’s Yours is Mine: Against the Sharing Economy and Steven Hill’s Raw Deal: How the “Uber Economy” and Runaway Capitalism Are Screwing American Workers should be required reading.

Both Slee and Hill look at a variety of online companies that avoid providing benefits or a minimum wage to independent contractors. A slew of such outfits exist, including TaskRabbit, which epmploys unfortunate part-timers to make small amounts of money doing mindless errands for lazy people with too much disposable income. But the two biggest of the app-based giants which Slee and Hill describe are Uber and Airbnb.

Airbnb was preceded by a non-monetized version of actual sharing activity called couchsurfing.com. Before it became a for-profit corporation in 2011, that site connected travelers with friendly accommodations, with the understanding that the couch surfers would in turn open their doors to hosts who went on vacation. The key aspect of this setup was that money did not change hands.

Fast forward a few years and enter the fledgling Airbnb entrepreneurs, who added the profit motive while promoting a touch-feely mission statement. Airbnb’s billionaire co-founder Brian Chesky told the Financial Times, “we really, really care about this deeper idea of bringing the world together.” As Slee concedes, it is possible that Chesky is sincere in professing humanitarian impulses, and certainly he is not unique among Silicon Valley bigwigs in presenting himself as a savior of humanity. But Slee writes, “I do believe it is possible – even essential – to be skeptical about what I think of as Inspirational Technology Tales. When coupled to an agenda with a lot of money behind it, we owe it to ourselves to ask what it is we are being sold.”

In Response to Airbnb’s corporate messaging about struggling people who are able to make ends meet by renting out rooms through the company’s app, Slee cites a San Francisco Chronicle piece about a man who lost his home so that his landlord could make more money renting out apartments on Airbnb. Further, writes Slee, “Airbnb erodes the commons by gentrification of its biggest markets, which are the world’s major tourist attractions.”

Hill gives further examples of Airbnb’s role in displacing urban residents. He talks to a woman who lives in San Francisco’s North Beach, a traditionally Italian community of tight-knit neighbors who had lived there for generations. But then came the real estate speculators: Hill’s source points to five buildings in a single block where all the tenants, many of them elderly, have received eviction notices. Nearby buildings which have gone through similar transitions now serve to house Airbnb travelers, turning the neighborhood into a nest of tourist hotels.

Based on a San Francisco Rent Board study showing 2,000 units evicted in 2013, it is estimated that at least 5,000 San Franciscans were evicted that year. Hill enumerates various bogus charges by which landlords have forced out tenants for nuisance violations. Airbnb’s opportunistic exploitation of this climate includes violating a law (similar to one in New York) prohibiting the rental of domiciles for less than 30 days: a May 2014 article listed 4,798 entries on the Airbnb website, a massive collection of illegal rentals.

Airbnb, like other Silicon Valley corporations, has tenaciously resisted government regulation of any sort, including hotel and occupancy taxes levied on their legitimate competitors. In San Francisco, this translated into $25 million Airbnb owed the city in back taxes. In a heartening victory for populist outrage, the company was eventually forced to pay its fair share of taxes, but couldn’t resist running a hilariously offensive and tone-deaf ad campaign bragging about doing what every other law-abiding business is required to do routinely.

Though Airbnb’s PR presents its “hosts” as struggling people who rent out rooms to get by and insists “our community is made up of thousands of amazing people with kind hearts,” the New York state attorney general found that almost half of the company’s New York revenue came from individuals with three or more listings. Six percent of the hosts looked at in that study made 37 percent of the revenue – $168 million. So much for little people trying to make ends meet. One big league real estate operator renting out units via Airbnb claimed, “I had no idea that the landlords were evicting all of their tenants to give me the space,” echoing Claude Rains’s shock that there was gambling in Casablanca.

If Airbnb sells itself as the kinder, gentler app-based company, the global ride share giant Uber is more like the brash frat boy that could not care less about public opinion. Uber’s CEO Travis Kalanick describes his company’s rivalry with traditional cab companies by comparing it to an electoral contest in which “Uber is the candidate and [its opponent] is an asshole called Taxi … we have to bring out the truth of how evil Taxi is.”

Kalanick refers to “our opponent – the Big Taxi cartel,” but Slee points out that cab companies are only city wide. Like other Silicon Valley honchos keen on “disruption,” Kalanick loves to paint Uber as a revolutionary underdog going up against establishment big-wigs (a fairly comic argument given that Uber is valued at around $51 billion). Part and parcel of that rebellion is challenging the need for onerous burdens like taxes and regulations.

While Uber glibly claims that their background checks are superior to those of “the Big Taxi Cartel,” one veteran cab driver who has also used Uber’s service called that assertion “an outright lie.” The cabbie told a journalist, “I’ve been a taxi driver in Massachusetts, Florida, and California. You have to provide a 10 year driving history from the DMV dated within 30 days, pass a drug and alcohol test, go to the police department and get fingerprinted. Uber requires none of this.” Uber’s disinterest in standards which apply to taxi companies was also made clear when a Guardian whistleblower using the Uber app submitted a bogus car insurance policy from a non-existent company and it was accepted by the company.

The litany of charges lodged against Uber drivers includes rape, assault, and vehicular homicide. But since Uber treats its drivers as independent contractors, not employees, the company disavows any responsibility for such criminal behavior. It has gone so far as to blame the customers for their bad luck. “There is a responsibility for the rider to make sure that when they get into an Uber that they’re checking the license plate and they’re checking the driver’s face and making sure all that matches up,” an Uber spokeswoman explained, apparently with a straight face.

Shoring up their reputation as one of the nastiest tech outfits on the planet, an Uber senior executive brainstormed at a private dinner about spending “a million dollars” on researchers to come up with material to smear journalists critical of the company. When this incident was reported, Uber disavowed the claim while refusing to fire the executive.

Though the new app-based tech giants are keen on playing up their positive impact on the less wealthy, Hill writes, “Like its sharing economy brethren Airbnb, a major part of the Uber business model ‘disruption’ is one that all Americans wish they could enjoy: tax avoidance.” It does this through a network of foreign subsidiaries and tax havens. All that money not paid to the IRS could be going to social services that those displaced from their jobs and/or housing by the high tech business model desperately need. Instead, it is padding the pockets of millionaire and billionaire entrepreneurs.

Nor is that cash trickling down to Uber drivers. Kalanick’s corporation routinely exaggerates the money made by the men and women it calls its “partners.” In describing the impressive income it claims Uber driver/partners can make, the company neglects to factor in gas, vehicle maintenance, tolls, insurance, and other costs incurred by drivers. One Uber driver wrote, “Uber is great, according to studies commissioned by Uber … my study says I make less than minimum wage.” The company makes a point of undercutting cab companies to increase market share, and it has increasingly been undercutting its drivers. When it began, Uber’s take from each fare was 5 percent; by 2014, in some places it had increased that cut to between 25 and 28 percent. And as the company continues to grow, its business model depends on ever more Uber drivers on the street, thereby increasing competition for existing passengers (and increasing traffic and pollution from emissions).

Though What’s Yours is Mine is the shorter of the two books, Slee’s work doesn’t shortchange the reader or settle for perfunctory analysis. Like Hill, Slee is an extremely well-informed skeptic who presents a satisfyingly blistering critique of high tech’s disingenuous equating of sharing with profiteering.

While Slee does not delve into policy recommendations, Hill, on the other hand, includes two chapters listing potential solutions for the crises facing U.S. workers. Although Hill’s detailed suggestions for reforms (including profit sharing, expanded social security, and an Individual Security Account) make sense in the spirit of the New Deal, his evoking great reformist presidents of yore calls for a large pinch of salt. To his credit, elsewhere Hill does stress the need for movement organizing to create a safety net strong enough to save the millions of workers currently being shafted in venture capital’s brave new world.

Battle lines are emerging in that struggle. In December, Seattle became the first city in the U.S. to allow Uber drivers and other app-based car services to unionize over pay and working conditions; in response, Uber released a characteristically upbeat statement that it is “creating new opportunities for many people to earn a better living on their own time and their own terms.” Uber is also facing a class action lawsuit in federal court in California over the company’s classifying its drivers as (benefit-free) independent contractors rather than employees.

These changes are an important a beginning. Slee and Hill have done an excellent job of providing arguments for the need to keep such pressure growing, and their books should be close at hand for activists fighting the blind greed of Silicon Valley’s self-entitled profiteers.

Ben Terrall is a writer living in the Bay Area. He can be reached at: bterrall@gmail.com

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