The sharing economy

GLOBAL INVESTOR 2.15 — 54
What kinds of tasks or activities are likely
to be shared given increased online
population, faster networks and so forth?
Carl Benedikt Frey Work is being shared
when transaction costs are low. In particular,
work activities that can be delivered
electronically over long distances with no
big reduction in quality are most suitable for
being shared as they can be undertaken
from any remote location. Examples of such
tasks include translation, market research
and high-end science jobs. But many worksharing
platforms now also focus on personally
delivered services. TaskRabbit, for
example, offers services including cleaning
someone’s house, building someone’s IKEA
furniture or running someone’s errands.
Difficulties tend to arise when a work task
is difficult to define and when an activity
cannot be divided into specific tasks. For
example, work that requires complex physical
interactions, such as collaborative science
and other skilled teamwork, is difficult to
share. But most other work is now suitable
for delivery through online platforms.
Your research focuses on automation. How
is that likely to affect the sharing economy?
Carl Benedikt Frey That is a good question.
The relationship between automation
and the sharing economy is not well understood.
But arguably it is best analyzed
through the lens of Ronald Coase’s theory
of transaction cost economics, which says
that the higher the costs of producing
something internally, the better to replace
employees with external contractors. Because
automation drives down companies’
costs of producing something internally, it
may reduce the demand for work sharing.
So in that way, automation may be bad
news for the sharing economy?
Carl Benedikt Frey Possibly, but at the
same time digitalization has perhaps even
more significantly cut costs for companies
since it allows them to contract with workers
abroad, often at cheap locations, to
do very specific tasks. Entire supply chains
have been reorganized around that.
When a task is outsourced …
Carl Benedikt Frey … it’s made more
routine. And once something is routine, it
also becomes increasingly automatable. So
the sharing economy and all the data it
generates about tasks people do may help
drive automation. By the same token, while
an Uber driver could be displaced by an
autonomous vehicle, there are also cases
in which outsourcing work may reduce
“If one looks
at the drivers
of the sharing
economy,
there are good
reasons to
believe that it
will endure.”
Carl Benedikt Frey
Carl Benedikt Frey
is Oxford Martin Citi Fellow and Co-
Director of the Oxford Martin Programme
on Technology at the University of
Oxford. His research focuses on
the transition of industrial nations to
digital economies and challenges
for economic growth, labor markets
and urban development.
incentives to automate in the sense that it
drives down costs and makes automation
less economically feasible.
A blog post in the “Financial Times”
suggested that the sharing economy
creates a “risk of digital serfdom.” Are we
reinventing feudalism?
Carl Benedikt Frey Feudalism was a
system in which people worked and fought
for nobles who gave them protection and
the right to use land in return. The sharing
economy, by contrast, contains few obligations,
but also little protection. So it’s quite
the opposite of feudalism. At the end of
the day, how workers will fare as a result of
the sharing economy depends on how governments
respond. They need to maximize
the benefits for consumers, while mitigating
the risks for workers. One way of doing
so would be to create a national e-market.
A national e-market?
Carl Benedikt Frey We live in an era
of big data, but much of its potential is not
being realized. Right now, if I want to do
some work, I can turn to TaskRabbit or
Upwork or Mechanical Turk. If I want to rent
an apartment, I go on Airbnb. If I want to
share a car, I go to RelayRides. But they are
separate platforms. Say I’m sitting in my
apartment at four o’clock on Tuesday afternoon,
and I desperately want to make some
extra income. It would help to have a central
platform that tells me these are jobs that
you can do within this neighborhood, these
are the types of skills you would need to do
all these different types of jobs, this is what
they would pay, and to do this, you would
need this certificate: you can get that here.
National e-markets would also give policymakers
better access to relevant information
to monitor trends in the labor market.
Is the sharing economy here to stay?
Carl Benedikt Frey If one looks at the
drivers of the sharing economy, there are
good reasons to believe that it will endure.
Wage inequality is likely to increase further
in coming decades, and people on low
incomes will want access to even cheaper
goods and services. People are also seemingly
becoming more concerned about
climate change. Through digitalization and
globalization we are becoming more connected,
and work can be shared across
the globe more easily. So I see no sign of
this slowing down, although there will
no doubt be regulatory pressure in some
domains. But how that plays out is very
difficult to predict.