WHY GIG ECONOMY TURNS THE CLOCK BACK ON PROGRESS

The platform economy's benefits are overstated. We need not cheer a model that cannibalises existing markets, stymies capital creation, arbitrages between regulators and exploits service providers

- SATYAJIT DAS

THE ubiquity of platforms and the sharing economy is evidenced by the fact that brands like Uber and Airbnb are now used as verbs in everyday vocabulary.

Their products—taxis and rooms for hire—are established. The novelty is in the ‘platforms’ matching users and providers online using peer-to-peer systems. The sharing economy—the Orwellian term used to describe the phenomenon—is focused on transport (Uber, Lyft, DiDi), short-term accommodation (Airbnb) and food delivery (Uber Eats, DoorDash, Deliveroo). The concept is universal, allowing platform companies to operate globally to defray costs across a larger revenue stream.

The approach targets a regulated industry with decent margins, attacking incumbents and existing operating models. The suppliers are typically nontraditional. Instead of trained drivers, ordinary individuals use their own cars to ferry passengers to and from destinations. Surplus accommodation, such as empty homes or spare rooms, substitute for traditional hotels.

The platforms lower the cost, increasing access to consumers who may not traditionally use the services. This is achieved in several ways. It is theoretically ‘capital-lite’. The platform acts as a broker, avoiding investment in the assets needed to provide the service. Uber drivers must provide the vehicle. Airbnb hosts own the property. Delivery drivers mostly use their own transport. It minimises the need for fixed costs such as premises.