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The Sharing Economy : Disruption’s Tragic Flaw

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Opposition everywhere: Taxi drivers in Brussels take action against Uber in early March. Bild: AFP

The case of Uber shows why European companies should not follow the example of their American competitors too closely. It pays to take the needs of customers and contractors into account.

          I. Digital Disruption

          Are Germany and Europe behind the curve in digital disruption? Earlier this year Volkmar Denner, the CEO of Bosch, told the Financial Times:  “Uber is not a revolutionary technology, it’s a business model innovation — and there we are not good enough yet…That’s where I see the biggest threat.” There’s also been quite a lot of material coming out of the European Commission and other sources on the need for more digital disruption in Europe. Is Mr. Denner correct?  Should Germany and Europe imitate the Uber model? Is it a model that will drive economic history?  Will it make our societies more prosperous?  More democratic?

          (German translation: „Die Vorteile der Nachzügler“ von Shoshana Zuboff)

          What does the U.S. experience suggest about the answers to these questions and the wider prospects of the so-called “sharing economy?” Just exactly who is sharing what with whom and who benefits?  Let’s start by examining the key forces driving this disruption.

          First among equals are fundamental changes in consumption that represent a shift from the mass to the individual. We live in a new society of individuals whose needs and demands have been frustrated for decades.  This is no mere cohort effect. Today most of us share an expectation of psychological self determination—the sense that we create ourselves.  Across generations we take for granted that we will design our own lives: family life, work life, religion, sexuality, community, what we eat, how we dress…the list is long.  We no longer simply take these things for granted as handed down from traditions or dictated by conventions. When we are thwarted in these expectations, we smolder and suffer. We yearn for trustworthy channels to these resources, but we are typically disappointed.

          A second driving force is the entire assembly of new digital capabilities. Only these technologies finally make it possible to create new market forms that can effectively respond to individuals’ needs at an affordable price.

          Third, most people are looking for convenient access  to the resources they need for effective life. In the U.S. many people are living deeply stressful hectic lives. Two income families are the norm. Most families struggle with childcare, healthcare, and employment security.

          Fourth is the demand for affordability due to stagnating incomes and a retrenchment of consumer credit.  The real wages of U.S. workers have been flat since 1979. Sharp decreases in union representation, the shift to disaggregated global production, the reduction of the labor share — these factors have each contributed to this stagnation.

          Fifth, there is an on-demand labor pool. In US 37% of the working age population, 92 million people, are not permanently employed and appear to have given up seeking full time jobs.  There are many others for whom one paycheck is not enough.

          II. Mutation

          The credo of digital disruption has been conducted under the flag of “creative destruction,” Joseph Schumpeter’s famous fateful phrase!  The destruction rhetoric has been used to legitimate what I think of as the “boys and their toys” theory of history—as if the winning hand in capitalism is about blowing things up with new technology. Schumpeter’s analysis was, in fact, far more nuanced and complex than the current rhetoric suggests.  What did Schumpeter actually say about this process?

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