The sharing economy doesn’t work. It was never meant to.
The Failed Promise of the Sharing Economy
The so-called “sharing economy” emerged about a decade ago, promising to transform business and daily life. Advocates pitched utopian visions of empowered entrepreneurs making extra cash by renting out spare rooms, cars, and other unused assets. Magazine covers trumpeted “The Shared Economy” as an innovative new business model that would transform the world. Venture capitalists poured billions into trendy startups like Airbnb, Uber, and WeWork.
But years later, the lofty rhetoric around the sharing economy rings hollow. The promised benefits for workers and consumers have failed to materialize in many cases, while tech investors have made a killing. Behind the feel-good sheen of “sharing,” the sharing economy looks more and more like a circus trick to enrich Silicon Valley.
The Hype Machine
Like any good circus act, the sharing economy depends on razzle-dazzle to distract the audience from peering behind the curtain. Tech boosters have deployed sophisticated PR strategies to sell rosy visions of progress and convenience.
Rhetoric about “empowerment” features prominently. We’re told that individuals can become micro-entrepreneurs by renting belongings or providing rides through platforms like Airbnb and Uber. Workers enjoy “independence,” “flexibility,” and “freedom.” Supposedly, anyone with a spare room or car can now control their economic destiny.
This empowerment narrative taps into deep-seated cultural myths about autonomy, individualism, and upward mobility. But tellingly, we hear far less about the people providing the rooms, cars, and other “shared” assets. That’s because the empowerment being sold is largely an illusion. Most workers earn very little, lack basic protections, and have almost no control over the platforms that connect them with customers.
Behind the empowerment smokescreen lies a traditional corporate business model. A small group of founders and investors own and control these platforms. They focus ruthlessly on growth at all costs to appeal to financial markets. They aim to monopolize markets by driving out existing businesses, using tactics like artificially low prices subsidized by VC money. In other words, sharing platforms exhibit the same extractive tendencies and power imbalances as the rest of Big Tech.
So are these services actually “shared”? Adam Ozimek, chief economist at Upwork, puts it bluntly:
“Calling Uber or TaskRabbit ‘sharing’ companies makes as much sense as calling a restaurant a sharing company.”
The only thing being shared is revenue between the platform and the worker.
Even “sharing economy” as a moniker seems intentionally ambiguous. Does it refer to sharing assets or sharing revenues? Its proponents deftly equivocate between feel-good connotations of generosity and hard-nosed business strategy. As marketing, this works brilliantly to cast platforms in a progressive light while distracting from their impacts.
The Numbers Game
How have the economic benefits of the sharing economy panned out? The data reveals a huge gap between hype and reality.
For workers, earnings and financial security are generally poor. A JPMorgan Chase study found that half of U.S. adults had somehow participated in the sharing economy. But very few made significant income this way. Only 4% of adults earned more than $5,000 annually through online platforms. Most earned less than $1,000.
Sporadic side gigs are the norm, not extra cash, to empower micro-entrepreneurs. Nearly half of Airbnb hosts offer their property for less than two weeks yearly. A similar pattern holds for drivers. In 2019 about two-thirds of Uber drivers worked less than 10 hours weekly. Their rider apps often remained turned off for days or weeks when driving seemed unattractive.
Low wages and intermittent work means workers struggle to make ends meet. An analysis by Bernstein and Mishel found the median pre-tax profit of self-employed Uber drivers to be just $8.55 per hour after deducting vehicle expenses. Others have calculated figures as low as $3.50 per hour. This skimpy pay often fails to cover basic needs, much less empower workers.
For consumers, lower costs are touted as a big perk of the sharing economy. But these savings partially stem from avoiding regulations that exist to protect customers, like hotel safety standards and driver background checks. Just ask the Airbnb guests who have arrived at filthy rental units or had their stays creepily recorded. Saving a few bucks is hardly worth the loss of oversight.
There are also hidden costs that don’t appear on your receipt but hurt communities. Uber and Lyft increase traffic congestion and emissions while strangling public transit revenue. Airbnb Staylords drive up rents and hollow out neighborhoods as apartments morph into de facto hotels. Oversight and regulation could curb these adverse impacts, but that cuts against the interest of Big Tech investors.
Winner Take All
If workers and communities aren’t realizing major benefits, who is? The answer is clear: A small cohort of founders and early investors has reaped massive windfalls. Just look at the frenzied growth of sharing startups. By 2017, Airbnb housed over 200 million guests in homes across 65,000 cities worldwide. Uber went from a startup to the world’s most highly valued private company in under a decade. And the folks who put in their money and time early? Well, they made bank.
With high capital expenditure and low-interest rates that unlock easy access to further capital, asset-light, software-based businesses could scale at warp speed while relying on the Greater Fool theory to keep bringing new investors to the table, even as profits remained elusive. Uber raised over $24 billion by 2019 despite operating its own fleet of only 350 cars. The asset-light model converts revenue into a higher valuation far more efficiently than traditional rental or taxi businesses that own hard assets.
Once platforms take off, network effects kick in — more drivers attract riders, and vice versa. The tendency toward monopoly in tech drives out competitors, allowing victors to raise prices while slashing pay for providers. Locked-in users and workers have little leverage against these global juggernauts. And as the gears of growth grind to a halt and the practicalities of the broken business models emerge, the founders and early investors cash out.
On a vast scale, these platforms found a way to commoditize and extract profits from everyday resources (cars, rooms, tools). For a startup to insert itself as a middleman between individuals who already share assets peer-to-peer was a stroke of genius. The innovation was not technology — it was using tech to concentrate economic control while avoiding material costs.
Reality Bites Back
In the last few years, some consequences of unchecked sharing economy growth have become harder to ignore. A backlash has begun as workers, customers, and communities see firsthand the toll of Big Tech advancement without guardrails.
One impact is residential housing disruption. Removing housing stock for short-term rentals leaves less rental supply for long-term residents, hiking prices. From Boston to Nashville to Amsterdam, Airbnb has faced new restrictions to limit these impacts. But their incentive is to boost bookings, however possible, not enact self-regulation.
Ride-hailing platforms have also faced regulation to address harm. After years of flouting labor laws, California recently ordered Uber and Lyft to classify drivers as employees. Mass protests across the world demanded fare transparency and higher wages. Uber and Lyft spent over $200 million fighting the California law to preserve their business model. Their incentives directly oppose those of workers and society.
Safety issues plague the sharing economy despite claims of digital trust and accountability. Airbnb has faced lawsuits over guest deaths and injuries, thefts, privacy violations, and discrimination recurring despite its rhetoric. Uber has seen drivers sexually assault passengers after passing superficial background checks. Digital ratings are not enough when safety is at stake.
Congestion and environmental damage become visible externalities too. Studies show ride-hailing unequivocally increases urban traffic with dire economic impacts. It also enables sprawl by obviating the need for public transit investment. Though touted as green, the overall footprint reveals the opposite.
These downsides are not flukes; they are baked into the DNA of Big Tech sharing firms. Their priority to maximize growth and returns inevitably overrides social benefits. Regulation curbs their expansion, so they fiercely fight it. Yet some guardrails and accountability seem to be the only path to meld technological innovation with public welfare.
Seeing the Sharing Economy as a Failed Experiment is Obtuse
In truth, it seems obtuse to view the sharing economy as a failed experiment when the setup almost guaranteed the observed results. As business scholars Giana Eckhardt and Fleura Bardhi persuasively argue, these platforms never facilitated much actual sharing in the first place. They provided efficient access to assets and services for money, not social connections or reciprocity among peers.
Given this transactional nature, the sector delivered predictable outcomes right from the start. Companies valued growth and revenue over equitable impact. Providers became on-demand gig workers, not empowered micro-entrepreneurs. Platforms followed the typical trajectory of Big Tech by concentrating power and resisting regulation. The only thing “shared” was a cut of the profits with workers.
In this light, the sector’s evolution appears less a botched experiment than a canny scam. The branding of startups like Airbnb and Uber as based on “sharing” provided ideal cover to avoid scrutiny. It imbued them with a sense of innocence and idealism divorced from the profit motive. Claiming the mantle of sharing was a brilliant strategy to enable business as usual behind a smoke screen.
But a clear-eyed view reveals little true sharing or innovation underpinning unicorns like Uber, which inserted themselves as rent-seeking middlemen. The secret sauce was not novel tech but applying tech to concentrate control over dispersed assets via digital platforms. With hindsight, the sector was always destined to enrich a small few at the broader expense. Its failure was never contingent but baked fully into the recipe. What looks like failure may have been the most cynical brand of success.
Where Now?
Our economies are undoubtedly transforming through the massive adoption of online platforms and marketplaces. However, it seems we have allowed hope and hype to blind us to the real-world outcomes shaping up. The evidence suggests the sharing economy’s problems stem less from bad execution and more from chasing the wrong goals entirely.
Fixating solely on ease of transactions, network ubiquity, and returns on capital will not spur broad prosperity. It incentivizes companies to hide costs from users and regulators wherever possible. It leads to anticompetitive behavior and regulatory arbitrage.
Lasting solutions must realign incentives around shared goals. People desire affordable, trusted services that sustain their communities. Workers desire safety, fairness, and dignity. Platforms should expand access through innovation, not by sidestepping protections. Regulation, done properly in the public interest, need not preclude technological progress.
There are better paths forward: Platform cooperatives like Fairmondo give workers, and users shared ownership. Non-profit models like Wikipedia harness collective intelligence and passion without extractive motives. Open-source protocols like Mastodon allow networked communication without centralized control.
The ethos of Big Tech has plateaued: consolidate power for the few, ignore broader impacts, and resist oversight. But technology could create more value for all. Moving past the sharing economy circus act will require public investment, aligned incentives, and a spirit of true cooperation. The doors are open for those ready to step through.
Transgender. Tech writer. Solopreneur. Founded studio self, a marketing agency, community, and product lab.
