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By Oren Laurent
President, Banc De Binary
New technologies have made it possible to find either a quick ride, or a place to sleep for the night, in totally new ways. While some say these services are making the world a better place, these trends also have a downside. As Uber and Airbnb face a new wave of lawsuits, they will have to adapt their business model to match society’s needs.
The sharing economy is based on a very simple premise. People have things to share, such as a ride ‘from A to B’, or an empty room in their apartment. The new “sharing” apps allow them to get the word out, while empowering strangers to easily make contact, and pay for the service, with ease.
Airbnb’s founder, Brian Chesky, wisely notes that the system is based off of trust. Strangers must be willing to open up their apartments to people they’ve never met before. Tourists, in the meantime, must trust that their host will deliver what they advertise. While Airbnb is creating a new wave of entrepreneurs who can make some side-cash by renting out vacant space, the effects are not all positive.
In San Francisco, landlords have been evicting formerly long-term residents, hoping to make more money from short-term Airbnb visitors looking for a place to stay for a night or two. Meanwhile, due to the decrease in apartments available for those who live and work in the area, the price of long-term rent has been increasing.
Uber is facing similar criticism from their drivers. The service allows people to find a taxi, or car service, by simply clicking a button on their smartphone. When a driver connects with a passenger via the app, Uber typically charges the driver between 20 and 25% of the transaction fee. As taxi drivers compete to find passengers, the Uber service has empowered them to find new customers faster. That being said, sharing a piece of the pie with Uber is becoming a real strain for drivers.
In a recent labour ruling in California, the state decided that Uber drivers should be entitled to more rights. The heart of the California Labour Commission’s decision stated that Uber drivers should be treated as employees, and not merely as independent contractors. While Uber has stated that the Commission’s ruling could significantly hurt its business model, the company still seems to be expanding rapidly into China.
Reuel Schiller, a law professor at UC Hastings, believes Uber’s legal troubles could intensify should their drivers unite.
“Does Uber mind paying out $4,000 a couple of times a month to the drivers who have the resources and time to bring these individual cases?” asked Schiller. “I don’t know, but we both know they have that kind of money… The class-action mechanism is a more potent mechanism to generate a response.”
If Uber and Airbnb want to face this backlash of criticisms, and continue growing successful enterprises, it seems that they will have no choice but to adapt and accommodate the needs of all the players in the sharing economy.
