I’ve been reading Anton Howes from time to time, he writes Capitalism’s Cradle and it is an interesting spot for information and ideas. Most of what I have read so far has been more of historical interest but the one point history does make is that few ideas are totally original. That is, it’s be dome before in one manner or another. We seem to believe that we can call to mind an original method or invention without reference to the past is often based on poor research. Yes, you say, but what about this or that? Information transfer is independent of time and space since the information remains the same. But its usefulness or relevance is changed by distance and by time. Well, what does this have to do with the Sharing Revolution and the glorious call for a new economy based on sharing as the next big app?
Back in June of 2000 I attended a conference in Amsterdam given by European Network Group. The topic was Voice Over Internet Protocol. This was a hot topic since Blackberry had one of the few “Smart Phones” and Apple wasn’t even a contender. We heard from a number of experts in the field and I gave the keynote speech, my modest contribution to the world of high tech.The conference lasted three days and after each day a few of us would gather to discuss the days offerings and share the few success stories and the numerous horror tales that new technologies always leave in their wake. The use of VOIP was not going very smoothly and it would take a few more years before Applications like Skype would actually work. The one group that was not represented was, strangely enough, Cable Television. I think I was the only one in the group who actually read the documentation on DOCSIS or Data Over Cable Service Interface Specifications. As some of you know one may have a telephone land line service when subscribing to cable TV. The last mile to the house uses an ADSL technology, just another way of saying that engineers figured out how to send high speed data, or ones and zeros, over an improved telephone line or a cable. Everything was simple back in the days of analog transmissions, or maybe not.
But a “Sharing Economy” is not about technology. At the conference an EVP from British Telecom, I have forgotten his name, came the last day to give his speech, which was more of a spiel for his company’s service. He talked about the killer apt. Back then everyone talked about “The Killer Apt”, the one that would make the company billions in revenues. That may seem strange to this young generation who are surrounded by applications they can download for free or pay a small fee to acquire. And many businesses give away their own apts. My bank wants me to download its apts to make my life easier. Except I don’t have a smart phone or pc tablet to which my eyes are always glued, Hell, I rarely use any cell phone device and certainly don’t text nor want to do so. Some activities are simply a waste of time and keep the mind in stupid mode far too long. Well, his killer apt was one that could find for the user that nearby restaurant in London with a good rating, or the hottest play. It did not sell at all. The killer apt just happened to be ring tones demanded by Japanese youths for their mobile phones. They demanded the rings tones and someone other than the Japanese Telephone company sold them millions of ring tones. I think there were about twenty or so that could be downloaded to their handsets. The companies that made the handsets sold the ringtones, which were actually stored in the handsets. Billions were made on such sales. Now one buys a handset, be it the old fashioned model or the supercharged smart phone and it comes with many free apts. Well, the apts aren’t really free, one has to buy the phone.
When we hear of the Sharing Revolution and the Sharing Economy we often call to mind that to share is to involve oneself in a non commercial exchange. Uber is the one that actually charges for that ridesharing commercial exchange of services tended and provided. Yes, and one needs a smart phone to use that service. So you might think that I am doing good in the world, doing m part to make the world a little greener. Uber will match my need for transportation from point A to point B with someone who needs the money and has a decent automobile. Besides, it’s suppose to be cheaper than a Taxi Service. Except that there are many times when it far exceeds the cost of a taxi. But more than Uber simply creating and using its software program to connect a private person to person exchange, Uber is actually involved in the Taxi business. Its drives are not independent contractors as they insist. A software program that controls almost every aspect of the business makes he driver an employee. So when someone like Mike Munger compares the Sharing Revolution with that of the Neolithic Revolution in agriculture and that of the Industrial Revolution, I must challenge such an assertion.
Essentially the argument is that the ubiquity of the internet drives software platforms that can help individuals share in their needs. Why buy an electric drill, corded or cordless,when one can share one, have it delivered in minutes by drone. A real nightmare for the FAA and the public in general. The one thing the Neolithic and industrial revolution did was to create specific uniform unit sizes. The number of wheat kernels may vary from one bushel to another but the weight and volume stay approximate. Yarn from spinning machines is uniform in quality from one spool to the next. Cloth woven by a loom will have the same thread count from one bolt to the next until the controls of that loom are for a different thread count. What these revolutions did was to enable individuals to go from accepting irregular productions to regular productions. Doors become uniform in size as do their hinge and lock sizes. Interchangeable parts are the result of uniformed unit size manufacture. The seamstress of the turn of last century can thank Herbert Hoover, when he was Commerce Secretary, for spending public money to survey, measure, and create uniform clothing sizes. One manufacture’s size 5 was another’s size 7. Not only did women need to try on the clothing but very often that dress or blouse needed alteration if the fit was close enough. The universal clothing size cost many a seamstress he job. But that is what technology does, it dislocates employment.
So Uber figured that people needed a cheaper alternative to the city taxicab services. And yes, taxicab rides are expensive. Well, young man or woman, you have an automobile that is no more than two or three years old, in good condition, you have insurance (but not as a common carrier, so watch out), and you have both GPS and a smart phone. Sigh up with Uber and start making money. Only you are cutting some poor slob of a taxicab driver out of the business. I mean if enough of you do this, pretty soon the taxi companies start losing fares and income. then they have to lay off drivers. And the cities aren’t happy either. You are stealing tax money. But more than that, should you be involved in a traffic accident with a passenger in you vehicle, the law will look at you much differently. Where is your chauffeur’s license? It’s a legal requirement that you have one. Where is your common carrier’s insurance? Your present automobile insurance was just invalidated because you were engaged in a commercial operation as governed by the US Transportation Agency. And where are the inspection papers that a commercial vehicle needs along with the commercial vehicle license and registration? Man, you’ve cheated a lot of government agencies out of money. They are getting their “share”. So much for the revolution. Unfortunately for Uber, court rulings in a few states, and these rulings will follow to the others, is that your private contractor is an employee. Why? Because you control all aspects of the business. He does not set the fare and he does not make any of the business decisions other than to sign up for your services. The fact is, the cities and states and federal governments take a little while to get their rearends in motion, but when they do they will crush that ride sharing service and Uber will be another footnote in the failures of many business ideas that were poorly executed.
Well, what about sharing DIY tools? You can go to Home Depot and rent them when you need them. Yes it cost a pretty penny and one may actually be better off buying a few of them. But one of the problems is tool maintenance. Who does the maintenance on the tool. I mean you are going to pay a rental fee, I mean a sharing fee. What happens when that tool stops working in the middle of the job you are doing? And was to tool properly maintained or did you misuse it? How about the previous user? What was his part in the wear and tear of the tool? Did the tool go back to the owner so that owner could inspect it before sending it out again? And who is liable for not only the misuse of the tool and its replacement but for any property damage and personal damage (broken bones, missing eye, death)? You buy your own tool and you buy your own liability. You buy the tool and lend it out and you keep the liability. That is simple law. One can’t share liability the way the sharing economy shares tools.
All right then, but what about sharing books? Ah, that is what libraries used to do very well. So you actually had to obtain a library card and physically travel to the library in order to check out the book you wanted. And if they didn’t have the book they might be able to borrow in from another library. True, you would have to wait a week or two but it was far cheaper than buying your own books. Now I go into libraries and the selection is dreadful and very limited. Digital screens and search engines are replacing the original functions of a public library. So pick another wining idea. So much of the software that purports to support sharing businesses is really aimed at circumventing legal expenses. You want to rent out a room for a month and use the apt for that? Be my guest, but don’t be surprised if down the road many problems crop up. No rental agreement? then you are in the hotel/motel business and the governments want their money. All they have to do is demand the files from the software company that did the matching and you now owe both fees and penalties. You will find that ignorance of the law is not a legal defence.
So just what is this thing called the Sharing Revolution? It’s a software joke on the gullible. Program an apt, start signing up users , and collect the fees. Then you do the big Initial Public Offering for stock purchase because your venture capitalists want their money back. So one makes up fake revenue predictions (and believe me, almost every IPO in the past 10 years has does just that) and the public stock holders and many some investment banks and hedge funds are left holding the bag. The Sharing Revolution and Economy is a farce. It’s a con game that only benefits the owners of the company. Alright, so you got a ride from point A to point B cheaper that if you had taken a taxicab. Maybe you’ve done this a dozen times a month. So what is your yearly savings? A hundred, maybe two hundred dollars? What did the owners of UBER take home last year? One of my favorite films The Lady Killers, illustrates this problem. Five criminals rent a room from the proverbial little old lady to plan the robbery of a Royal Mail money transport truck. They pull the job off and involve her in the robbery. She is most innocent, of course. She finds out about the loot and her part and wants to at least give the money back. The five men try to explain that the return of the money would cause all manner of bother for the insurance companies and besides, it only costs a penny per policy for the insurance company to recover the lost funds on their balance sheets. Yes, you benefitted in what you thought was an innocent manner.and UBER has benefitted most grandly is a less innocent manner. But the public has seen that penny per policy added to their taxes. This revolution is not really a revolution, it does nothing but changes the name of commercial transaction to “sharing”. It’s still a commercial transaction and thus it is not a revolution. And it’s not even a separate economy. I am amazed that so many economists and business professors and leaders can’t see the fraud for what it is, fraud. But the world is full of very intelligent but stupid people. Maybe that is why Hillary has a chance to be elected president.