Sharing economy companies like Uber and Airbnb aren’t helping local economies — they’re just helping themselves.
Tom Slee reports on the dubious PR maneuvers of the Uber and Airbnb. Head on over to Jacobinmag for the full scoop.
Silicon Valley “sharing economy” darlings Uber and Airbnb raised mad money in 2015. Dwarfing other “unicorns” (startups whose valuation reaches a billion dollars), Airbnb is now valued at $25 billion — rivaling the largest US hotel chains — while the market puts Uber’s value at $65 billion, similar to major car companies. Last year alone Airbnb raised $1.6 billion to push its total funding over the $2 billion mark, and Uber raised almost $5 billion, for a total of more than $6.5 billion.
The two companies were busy with more than raising cash however. In 2015 they intensified their lobbying, PR, and customer mobilization efforts to create a regulatory landscape that embraces their business needs. One of the most potent arrows in the companies’ lobbying quiver is that legislators and the public can be swayed by the apparent inevitability of a technology-driven future: “Don’t be left behind!” is a clarion call that few can resist.
In just two examples: last July Uber quashed Mayor Bill de Blasio’s plan to cap the number of cars on New York City streets, and in October, Airbnb fought off Proposition F (an initiative to restrict short-term housing rentals) in San Francisco, out-advertising its opponents by a ratio of 100 to 1.
Mobilizing cash and mobilizing votes go hand in hand: investors only profit if the regulatory landscape is changed, not just to be tech friendly, but to support the specific business models that companies like Uber and Airbnb have put in place.
But the sharing economy also exemplifies another corporate maneuvering tactic: both Uber and Airbnb remain private companies, and neither is in a rush to go public. By postponing their initial public offerings (IPOs), the companies give themselves maximum flexibility: they don’t have to please shareholders or report short-term profits. They publish no prospectus, there is no independent audit, and we can’t see their accounts.
This tactic isn’t new, but in today’s financialized economy it creates a perfect storm of bad incentives. Investors are looking for an “exit” (a successful IPO) so they can cash in; fortunes will be made or lost depending on rewriting laws around the world; and at the same time, the companies operate as what Frank Pasquale calls “black boxes” because they don’t have to submit public, auditable business reports.
Staying private is particularly appealing in technology sectors where competition is intense and expectations are high. Take a company like Theranos, a privately held health care company. It gained investment based on its innovative blood-testing technology, but was immediately under the gun to prove that it was a game changer.
When its new technology ran into problems it simply covered them up, resorting to traditional methods of blood testing instead to sustain the image of success. Ashley Madison is another example; it created thousands of fake accounts to make it seem like men were meeting women on their site. And in hindsight, companies like WorldCom and Enron were just early examples of a common practice.
Simply put, there are huge rewards for companies that can fake it until they make it, and bankruptcy for those who air their dirty laundry honestly. And tech start-ups are the biggest fakers of all.
Read the full article at Jacobin Magazine.
Image: “Toronto traffic” by Katrin Shumakov