Responsible Leadership Development

Responsible Leadership Development (MGMT5590)

Final Paper

Prahlad Agarwal (20453837)

Irresponsibility of “Sharing Economy!

Sharing economy is a new economic system developed in 21st century in which assets or services are shared between private individuals, either free or for a fee, typically by means of the internet. The world has hailed this form of economic system as accessible to masses, which makes goods and services affordable. Also, it provides everyone to save resources by sharing the vacant or excess capacity, by matching prospects with suppliers.

This sounds great only if it was true!

The real fact about sharing economy is that it hides behind the guise of technology and innovation to avoid regulations and operate as just another company. The private individuals are as a matter of fact running a business model on these platforms, and I will explain in detail on that later. By avoiding regulations, the sharing economy is making the world unsafe and unsustainable by its irresponsible leadership. The unicorns of sharing economy in today’s date are Airbnb, Uber and WeWork.

Below are some of the sharing economy companies valued over USD1B:

[pic 1](Source: VentureBeats)

Airbnb[pic 2]

An excellent idea to let-out vacant or excess spaces to travellers, where both parties seek to win. However, as per SLEE, Airbnb derives only 1% of revenues from shared listings in New York City and most of its revenues comes from full-time Airbnb listings. This is also the trend elsewhere, if you go to Airbnb.com and check for listings for any city be it Tokyo or Hong Kong you would see a large section of the listings are done by common owners. Hence, Airbnb has become a great platform for people to start a hotel/accommodation business, without registering the business! This has multiple problems:

1. Owners listing the space do not need to comply with hotel regulations with respect to safety, environmental sustainability, etc. Several incidences of people suffering lethal injuries in apartments in Texas (https://goo.gl/zwqEAE) or getting murdered in Melbourne (https://goo.gl/CSXyWG).
2. Owners pay income tax instead of corporate tax for the profits made on these listings, thereby reducing Government spending on social welfare of the countries.
3. These listings have been notorious to create noise and chaos in quiet neighbourhoods and nearby hospitals.
4. Owners have very low responsibility to provide the service which they promise. I understand that rating mechanism is a powerful method to affect/promote businesses, however research has found that people are more often likely to give a better rating even if they faced a poor service. Also, many a times, owners and their friends provide misleading reviews/ratings.
5. Personal Example – During Christmas, I was in Ho Chi Minh City and rented an apartment on Airbnb. To my surprise I found that the person who had listed the property is not an owner himself. He rents out 12-15 good apartments from locals in Vietnam on a contractual and lower monthly rate and puts Airbnb listing at higher daily price. This reduces or in fact eliminates the responsibility as a tenant to maintain the property in the right manner.
6. Airbnb has been conveniently keeping itself away from all these safety breaches, environmental degradation and public rights by claiming it is a platform and cannot influence the service outcomes. Any kind of dissent on sharing economy, is easily dismissed by these unicorns by advocating that the dissent is a threat to technological innovation and start-up ecosystem. However, these unicorns are said to have at least a third more lobbyists than Wal-Mart!

Uber[pic 3]

Another example of modern day revolution and changing the way people travel. Uber’s mission is to bring transportation – for everyone, everywhere. Several times its founder Travis Kalanick has said his vision is to create a world of no-car ownership, where an Uber is available any moment anywhere. However, turns out the actual model is quite different.

1. Uber is very careful to classify the drivers as driver partners simply to avoid them being viewed as employees. This derives the drivers from several employee benefits such as providing social security, pension, annual leaves, weekly work hour limits, etc. Uber sends notifications to its drivers that if they complete few more rides they will be eligible for a bonus, little realizing that the driver has already been on road for over 8-10 hours and need a rest.
2. Since Uber does not classify its drivers as employees it conveniently excuses itself from the passenger safety:

1. Rapes – Uber’s not so robust onboarding process allows criminals to obtain Uber driver partnership and have resulted in hundreds on rapes world-wide. Uber has acknowledged to respond to 32 rapes in just London and that is just for last one year (https://goo.gl/S6R8Dp).
2. Accidents – Several passengers have died due to negligent driving by Uber drivers, very recently the Quantico actress (https://goo.gl/s5vAmg). Imagine you took a bus ride on StageCoach in from Los Angeles to California and met with an accident (I sincerely wish nobody does) and StageCoach takes its hands off – it simply cannot.

1. Uber claims it matches excess capacities with riders. So, after 9 years of Uber’s operations the total number of cars on roads must not be growing – however as per Ward’s car ownership has been growing annually at 10%. Uber has been encouraging individuals to purchase cars on bank loans and offer it under Uber. In fact, Uber has ‘Driver Vehicle Solutions’ which allows easy car purchase with attractive terms. This has significantly increased number of cars on the road. Why do you think the traffic condition in major world cities has worsened in last decade?
2. Uber does not use green or electric cars in most markets, thereby creating unprecedented pollution and since it does not own those cars, it conveniently escapes its carbon responsibilities.
3. Personal example – When I booked an Uber in Mumbai few months back, my driver was a young engineering graduate. When I asked why did not chose a more constructive employment in an engineering company, his answer was Uber pays him much more! Uber has been utilizing his cash piles funded by Private Equity players to cause disruptions. I agree it creates a healthy competition however providing extremely cheap rides to push out traditional business and then imposing surge pricing does not at all sounds healthy.
4. Self-regulation has been the buzzword by many technology evangelists however statistics suggest only 1% of Uber drivers receive lower than 3 stars – quite ironical!

I have selected Airbnb and Uber as my examples, however they are not the only ones to be blames. Lyft operates exactly like Uber and is guilty of every irresponsibility Uber is. WeWork has more corporate accounts than start-up tie-ups, who is it serving? Each of these companies under sharing economy tries to gain a scale and size only to abuse it for its own economic gains!