Rough Notes

A week ago I wrote about the the Small/Big Dualism of Networked, Decentralized Systems.

In there, I talked about some of the ‘gig economy platforms’ like Uber or AirBnB (I dubbed them aggregators in conformity with the article’s theme). Because I took a broad, systemic view in the piece I remained very neutral. I wrote:

If we take a more abstract, analytical look at it, all platforms from Uber to AirBnB, from Facebook to Google aggregate and thereby organize and coordinate autonomous entities. Every single driver on Uber, the smallest entity on its supply side, is an autonomous economic subject. But at the same time, by providing the relevant information — in the case of ride hailing that’s data like current location, vehicle type, availability, personal driver data etc. — the platform or aggregator is enabled to coordinate all the entities.

Nevertheless, of course I am aware that there is a lot of pushback against today’s aggregators. I want to briefly address the issue here.

Uber is being criticized, among other things, for exploiting drivers, ruining the cab industry and decreasing the safety of public transportation. AirBnB is facing criticism for ruining the business of hotels, putting guests and hosts alike at risk and for motivating hosts to illegally turn living space into commercial real estate. All aggregators are facing skepticism because they tend to create winner-takes-all dynamics which carry the danger of resulting in monopolies as well as nurturing precarious working conditions (the latter is implied in the term gig economy).

None of this is to be dismissed. But it shouldn’t blind us from the fact that those platforms also create many positive effects (externalities economists would call it): By turning under-utilized car capacity into a service, Uber allows for cities with less cars and less pollution. AirBnB enables more inter-cultural exchange and cities without aesthetically unpleasant, huge concrete buildings (in German we use the term Bettenbunker which translates as beds bunker). While it’s true that neither employs the actual service providers in the traditional sense, they do offer a means to create income for people in a rather self-determined manner¹.

So while there are real issues, none of them are due to the existence of the aggregated, decentralized systems I described in the original piece per se. Rather, the issues are a result of the platforms’ economic setup (for-profit businesses, most of them privately held), the regulatory environment and simply of them being new — which results in friction with whatever was before and is now being disrupted.

Thus, I argue, it’s necessary to take a differentiated position and not blame the entire system unanimously. Further, I think it is – at least for now – a good thing to see these systems emerge in the commercial sphere. The latter is dynamic enough to create them at all, mitigates most of the risk of failure to the companies and their investors and allows for the rapid experimentation that is necessary to test and learn how to set them up properly.

¹ At least in comparison to traditional employment contracts. Of course there is no total independence as there are now customers you must cater to. On a philosophical level I’d argue, that in a social environment such a thing as total independence cannot be achieved. More pragmatically, I’d say that there is a qualitative difference between the two. It represents a tradeoff and it’s yours to choose.  I’m not arguing that everybody should have to pick that model but I’m in favor of having the option.