Is the sharing economy always a net good?

November 15, 2014
November 15, 2014 Chris Riddell

Is the sharing economy always a net good?

While the sharing economy is changing conventional models, downsides can loom, including quality control and effective protection of workers’ rights.

The sharing economy is crashing down on conventional company models. It’s slicing through conventional work models with contract work that enlists the Web and other technologies to draw on communities of interest and expertise.

Known as the sharing economy, the model enables companies to lease people’s services from anywhere around the globe and promises more efficient use of resources, where companies can gain near-instant access to skilled application programmers or writers and expand and contract as business needs require. Traditional companies hire full-time employees for the long term; the collaborative economy bids out jobs, often on a short-term contract basis.

Enlisting the Web, the cloud and the crowd, companies gain access to geographically dispersed talent they might not previously have been able to tap. Companies like Sidecar have taken on the model with gusto, developing ride-sharing that can be ordered through mobile devices, which are giving traditional taxis a run for their money.

“The primary form of communication is now social; all other channels are in decline,” said Dion Hinchcliffe, chief strategy officer at Adjuv LLC. Hinchcliffe participated in the session “Innovation and the Sharing Economy” at Dreamforce 2014 in San Francisco last week. “The world [has] realized that we can move beyond just sharing just information and ideas and share products and services with each other.”

The sharing economy is also generating real dollars. According to March 2014 data from CB Insights and Deloitte, the sharing economy is now big business. Since 2012, venture capital firms have invested $2 billion-plus in more than 500 collaborative economy ventures globally, and, according to Marketingcharts, 40% of North American adults used a collaborative commerce service in 2013.

The model poses some downsides, though, in terms of quality control, company governance and effective protection of workers’ rights. While proponents of collaborative economies say they get a better quality-product from contract workers, this may not be the case over time. And while collaborative economies allow workers flexibility, this crowdsourcing approach may also challenge the benefits of full-time models in providing benefits, such as vacation, healthcare and recognition of worth based on tenure and experience.

On-demand skilled labor has no bounds

Ryan Buckley, a co-founder of Scripted Inc., a service that matches vetted writers with projects requiring original content, said that focusing on quality is core to making the collaborative economy work.

Buckley’s company is ruthless about ensuring the quality of his freelance writers. “We decided we were going to crack down hard on quality from the beginning,” Buckley said. The company has instituted an extensive process for vetting writers, including having its own pool of writers read new prospects’ content. Scripted doesn’t hesitate to turn writers loose whose work fails to rise to its quality standards over time. “We fire/blacklist writers if they aren’t performing,” he said. A tagline on the site is “Only 18% of writers accepted.”

Mike Morris, the general manager of Appirio’s TopCoder, a community and platform for application development, agreed that skill is central to what the company brings to the table, but he also emphasized the company’s ability to tap global talent quickly: “The No. 1 feedback we get from customers is the speed with which we can help them bring a product to market,” Morris said.

But drawing a hard line on quality invites a paradox. While companies need standards and internal policies to uphold those standards, using communities as the backbone of the workforce model forces companies to cede control, Morris said. The company’s end product is now in the hands of a global community that extends beyond the four walls of the business.

“It’s important to let go, because now it’s the community that provides value,” he said.

The downsides of the sharing economy

If the collaborative economy centers on quality and integrity, as Buckley and Morris argue, there are downsides of the model that may discourage the integrity of the system

The sharing economy does raise the prospect of unfair labor practices, where employers can drive down living wages or turn to contract work and displace more traditional models of employment that provide benefits. These benefits are part of what workers want in employment and part of what secures their work ethic and loyalty to a company.

“As we celebrate the disruption of old industries, we also must inquire into the structural effects of the sharing economy on equality and basic working conditions,” Evgeny Morozov wrote in an online column.

So while proponents of sharing economies sing the virtues of a new model where workers aren’t tethered to their desks, where innovation is sparked from common conversation on a community blog and where talent can be mined from anywhere, erosion of workers’ rights and benefits may undercut the ample pros of collaborative economy models.

Proponents of the collaborative economy also emphasize the model’s impact on employee loyalty. They say that engagement with work and community activity can spur employee affinity. “We love seeing such brand loyalty in the community with the customers that work for us,” TopCoder’s Morris said. “It goes beyond a badge that says you work with this company. It’s a loyalty that we provide.”

But while some tout the collaborative model as a boon for worker loyalty, workplace affinity can cut both ways. Collaborative-economy contract workers may not, in fact, have the same investment in a company that a full-time employee with many years of service, healthcare and other benefits may have.

“If these marketplaces are gaining traction with workers, labor economists say,” wrote Natasha Singer in an August 2014 New York Times piece, “it is because many people who can’t find stable employment feel compelled to take on ad hoc tasks.”


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