The Sharing Economy and how it will Impact Jobs
15th Episode of the Automated Podcast. Check out the podcast episodes at https://automatedpodcast.org/
So I wanted to start off by continuing off of a news article from last week, that being the retirement of Lee Sedol, the world’s GO grandmaster, 18 time world champion, and the best player of the last several decades. As I mentioned he retired as a professional Go player a few weeks ago because he deemed the AI systems are now unbeatable. This past Friday me and a friend went and actually played our first Go match. If you’ve never played it is similar to chess in the intense focus and amount of strategy and calculations that are needed for every single move. We actually played for 3–4 hours and weren’t even able to finish our first match, as we were becoming mentally exhausted, and started making a number of basic mistakes. But we both began to understand just how powerful an AI system actually is, based on how much we had to concentrate and understanding that Lee Sedol could absolutely destroy either of us, but an AI system can now beat even him every time. So for anyone interested I recommend you play a game of GO or even chess if you haven’t before, against an evenly matched opponent and after an intense match of focusing and calculating as much as you can, sit back and think about how easily a modern AI system could beat you, it’s pretty humbling.
One final point on this topic. Another friend recommended a good documentary called Alpha Go, which is a great exploration of the 5 match set between Alpha Go and Lee Sedol in 2016. I’ll have the link in the shownotes if you’re interested in seeing a bit of how the system was developed, and more importantly Lee’s reaction to playing against the system. I wanted to bring this up because in a very short clip Lee describes the value that he got from the matches. Even though he was the best in the world and has been practicing intensely on the game since he was 9 years old, he said that even he learned something profound about Go from his match with Alpha Go. This was an interesting thing to hear as it might be a small signal about how we might benefit from AI systems in the future. Even though we probably won’t be able to compete on most tasks, we might still find profound value and insights from our digital counterparts. It’ll be interesting to see how things play out.
But let’s move on to today’s topic.. the sharing economy.
What is it?
Most people by now have already used services like Uber or AirBnb which are the two big names within the sharing economy. The Sharing economies allow individuals and groups to make money from underused assets, Idle assets such as parked cars and spare bedrooms can be rented out when not in use. In this way, physical assets are shared as services. Typically these assets are publicized on online platforms specific to the asset type, and because the owners are making use of something already owned, most rates are typically cheaper which has really propelled the sharing economy over the last decade.
For a bit of perspective the sharing economy only had a few platforms back in 2009, like Blabla car and Couchsurfing. In 2014 it was estimated to be around 15 billion USD, and is predicted to be over 300 billion by 2025.
So Uber and Airbnb are the big names of the industry, where both rides and apartments are shared in a peer to peer interaction, but what about some other examples?
Over the past 2 years most cities have seen a boom of electric scooters. There are now sharing schemes in hundreds of cities across the world. Just one company, Bird and Lime, itself has sharing schemes in over 100 cities. But of course, there are still shared bike systems across the world’s cities and this in fact started all the way back in 1965 in Amsterdam, though within less than a month the unlocked bikes had either been stolen or destroyed. Today however these bike sharing systems are massive and the biggest one in Wuhan China has around 90,000 bikes. Looking at more innovative approaches however, we can see that there is further support for implemented shared systems. In the Netherlands, not too far from Amsterdam, the city of Rotterdam is moving forward with a new housing project that will have 4 shared vehicles that come with new housing complexes. So a shared transportation model is built into the living arrangements of people living there.
Though transportation is perhaps the most visible system to anyone living in urban areas, there are also co-working spaces that have grown with the boom of the startup and freelance industry, where multiple startups or digital nomads share one large office space. Even platforms that focus on fashion and clothing exist where individuals can sell or even rent their clothes. This has grown with the fast fashion trend and one company, Rent the Runway, has over 6 million members that can choose from 200,000 pieces of clothing, jewelry, and accessories that they can use for 4 days for free before returning…without even requiring to do dry cleaning. Though Rent the Runway has some 800 million USD in turnover, one of the original platforms, eBay still dwarfs this with some 36.8 billion.
Another interesting area where the sharing economy has moved into is in peer-to-peer lending platforms, where individuals can lend money to entrepreneurs or other companies with typically cheaper rates than the traditional banking system has. The most well known crowdfunding platform is Kickstarter, which has raised over 4.5 billion dollars for some 175,000 projects, with over 400 raising over 1 million dollars.
My personal favourite example is the sharing of resources. This is similar to the library model where you can borrow certain resources from a centralised space. I supported the setting up of Montreal’s first tool library 5 years ago, where typical power tools could be rented for certain projects or home repair for a few days or weeks and returned, enabling others to use the tools rather than buying a specific tool for a specific job and then just have it collect dust in a garage for several years, if not forever. It was inspired by a Paris art library where you could rent a painting for a few weeks before returning it and getting a new one. There are now several platforms that enable this across North America, Europe, and parts of Asia.
Though the sharing economy is a powerful tool it is not without its fair share of criticism. Regulatory uncertainty is perhaps the largest criticism as unlicensed individuals that offer services may not be following already in place regulations and avoiding the associated costs. Here in Barcelona we have had a number of day or weekend long taxi strikes which has essential shut uber out from entering the city, due to the unfair nature platform. Here and elsewhere, taxi drivers need to pay for an expensive license before they are able to take rides. Whereas Uber drivers do not and the on-boarding experience to become a driver is relatively simple in comparison. This puts the Uber driver at a financial advantage, while many also argue that they provide a better service due to the ability to hail a ride from a smartphone.
Additionally no government oversight leads to precarious situations. With the rating system in place on most platforms, for example, a driver is incentivised to be more pleasant and offer better service as the rating is linked to the individual, whereas taxi drivers are anonymous and can easily get away with being rude or unfriendly or even cheat a customer by adding extra distance or price without any real repercussions. However, there are loads of crazy AirBnB stories, where apartments get completely trashed or flooded, hidden cameras are found in rooms, to even the guest being killed, so the review system certainly isn’t perfect.
There is also a fear that the greater amount of information shared on an online platform can create racial and/or gender bias among users. This can happen when users are allowed to choose who they will share their homes or vehicles with, or because of implicit statistical discrimination by algorithms that select users with characteristics such as poor credit history or criminal records.
For example, Airbnb had to face racial discrimination complaints from African-American and Latino would-be renters due to widespread user preference not to rent to these customers
With limited government oversight there is also the issue of the platforms being able to take advantage of those using it. Uber has specifically been in the news as their drivers are considered ‘self employed’ or contractors, enabling the company to essentially have no drivers as employees, enabling Uber to avoid paying wages, insurance, and health costs, and simultaneously putting the burden and risk on those individuals using their cars. Many full time drivers have gone on strike this year proclaiming they aren’t able to make a living wage. In the UK at least, Uber now has to pay drivers a national living wage.
Impact on jobs
According to a 2018 study it was found that the hotel industry accounts for more than 1 in 25 jobs in the US. Though the industry is growing and more job openings exist every year, the combination of Airbnb and other new platforms offering the same sharing services have been taking potential customers, some 150 million room nights in 2019. This along with the growing automation within hotels, to the point of fully automated hotels, like the one that opened in China in 2018, will impact the large job supplying industry.
The issue is even more profound within transportation. For industrialised nations this accounts for nearly 10% of all jobs. The jobs connected to the production of vehicles in particular will be put under pressure with both the sharing economy and autonomous vehicle technology, which when combined enables access for more people with fewer required vehicles (most vehicles spend 95% of their lifetime in parking lots). It is known that vehicle manufacturers across the world are concerned about the future diminishing need for individual ownership of the vehicles they produce now.
This mindset generally encapsulates the future thinking of the shared economy, in that as it becomes more and more prevalent, there will be less need or demand to actually own the things we use day to day. I think we are starting to see the shift towards an access based economy rather than an ownership based economy. Though it might be overall a slow shift, there are disruptions that happen rapidly, think of media streaming services and specifically Netflix that only started to stream media in 2010, and the level of dominance that it attained in only a few short years with it’s now 7000+ employees. In contrast, blockbuster at its peak in 2004 employed over 84,000 people worldwide and only 6 years later filed for bankruptcy. This is a theme that has come up in the podcast a number of times so far, in that new displacing industries require fewer people to perform better services, and is a theme that will be interesting to follow as the sharing economy continues to grow to support an access economy.
As the holidays are coming up I’ll be going back to Canada for almost a month, next week’s episode will be the last for a few weeks but I hope to have maybe 1 Xmas special episode during the holidays but definitely will be back in Mid January, where the episodes will transition away from specific technologies and more into the core of the impacts and solutions of the automation trend.
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