Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19
Gold Price Gann Angle Update - 10th July 19
Crude Oil Prices and the 2019 Hurricane Season - 10th July 19
Can Gold Recover from Friday’s Strong Payrolls Hit? - 10th July 19
Netflix’s Worst Nightmare Has Come True - 10th July 19
LIMITLESS - Improving Cognitive Function and Fighting Brain Ageing Right Now! - 10th July 19
US Dollar Strength Will Drive Markets Higher - 10th July 19
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis - 10th July 19
Stock Market SPX 3000 Dream is Pushed Away: Pullback of 5-10% is Coming - 10th July 19
July 2019 GBPUSD Market Update and Outlook - 10th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

The New "Sharing Economy" May Not Be the Profit Bonanza Everyone's Expecting

Companies / Internet Jun 29, 2015 - 05:21 PM GMT

By: ...

Companies

MoneyMorning.com Shah Gilani writes: Plenty of analysts, market-watchers, and thought leaders are excited about Uber, Airbnb, and the advent of the so-called "sharing economy."

Here's the thing: The sharing economy isn't for everybody.

Why not? Because, as we learned in the sandbox, not everyone wants to share.


I'm not talking about the people who want to share what belongs to others. Such as to ride in someone's car, rent a room in an apartment, or share a meal at a stranger's table. They are actually more akin to borrowers, or purchasers, in a traditional sense.

Although they are certainly part of the equation, the question is whether the real sharers and their financial backers are willing to back the notion of a vast array of industries whose regulatory landscape is just taking shape…

Entrenched Industries Are On the Offensive

Interestingly, those who are not necessarily fond of sharing are driving this segment of the economy. They're what I'll call the "what's mine is yours… for a fee" sharers. Translated to business terms, it's those companies who control access to sharing who will primarily decide its success.

Let's take an obvious example.

Uber, the $50 billion valuation ride-sharing service (for a fee) is at the forefront in disrupting the taxi industry, one with roots extending well past the century mark.

From the perspective of users of the service, Uber is genius. I use it and I love it. Uber cars are better and bigger than most taxi cabs. They're cleaner. The drivers are nicer; they're being rated by their passengers, which makes a difference. They get you to your location quickly. They're cheaper than regular cabs. There's no money exchanged, although I always give drivers a cash tip, which isn't required.

What's playing out in the courtrooms concerning Uber is decidedly less comfortable.

Most of the San Francisco-based company's drivers consider themselves akin to freelance contractors, and Uber gladly considers them the same.

That simple relationship is about to change. Barbara Ann Berwick, a contractor for Uber in its home state, sued the company for expenses. After paying her own expenses and calculating how many hours she worked and what she got paid, Berwick determined she was clearing less than minimum wage.

For the minimum wage to come into play, Berwick sued Uber, claiming she was an employee. Under California law, as an employee, Berwick would be entitled to reimbursement of the $4,152 in expenses she laid out.

She won. The California Labor Commissioner's Office effectively labeled Uber an employer. There are other cases pending against Uber in California, including a case seeking class-action status. Uber is being sued in many other states.

Wired's Julia Greenberg stated in her March 2015 article, There Are Good Reasons People Love to Sue Uber, that, "Earlier this month, a Memphis transportation company sued Uber and Lyft for operating without proper licensing and insurance. Similar suits have been filed in Miami, Philadelphia, Atlanta, and Houston." The number has since grown.

Uber is appealing the Berwick decision – it has to – and for it to continue to amass venture capital at its current prolific rate, it probably has to win.

The decision will have a massive impact on its income model and prove a bellwether for other companies predicated on similar models.

Airbnb, which dubs itself a worldwide accommodations leader, is coming under litigious pressure from hotel and apartment owners alike. Although not strictly an apples-to-apples analogy, it is an apt enough proxy for what Uber is experiencing.

What if Airbnb must consider all within its network who rent space their employees or if its spaces are subject to the same safety requirements as, say, Marriott?

Regulatory Pressures Are Following Suit

Uber works and is hugely profitable because it facilitates ride-sharing between its contractors and service users. Uber's profitability depends on the company not having to pay wages, withhold taxes, pay unemployment insurance, or offer healthcare, benefits, or any kind of retirement.

All of those costs don't apply in a 1099 economy. A 1099 form is sent to contract workers by paying entities. The compensation earned for the calendar tax year is indicated, and the contractor uses it to calculate taxes. Many freelance business models are structured this way.

On the so-called contractor end, costs are another issue. Contractors, whether they are Uber drivers or house or apartment owners or renters (see again, Airbnb) who offer properties into the sharing economy, want to be considered simply private, individual entities at best – contractors at worst – and entitled to offer their services for fee payment.

Their ability to unseat entrenched industries hinges upon their ability to operate in the narrow netherworld of online business not subject to collecting and paying taxes, licensing requirements, regulations, and costs associated with sharing what's rightfully (mostly) theirs to share as they see fit.

The licensing bureaus, and the local, city, state, and federal taxing authorities, all want their piece and see themselves as being increasingly bypassed in the sharing economy.

The Bottom Line

Ultimately, if the sharing economy is going to move ahead, it's going to have to address all the same societal issues typical employer-employee businesses face. If it can't, its time in the sun may be nearing twilight.

Issues like:

Who pays into workers' compensation pools and who's entitled to protection under what safety nets?

How are labor laws going to be applied, and to whom?

Who will be responsible for healthcare and retirement plans?

How and where will anti-discrimination laws be applied and enforced?

Who will or won't have to pay taxes?

And a host of others.

From the service users' perspective, questions abound as well. Who will monitor how services are rendered? How will they be regulated? How will users be protected from bad contract actors? How will service issues be resolved, and by whom?

These are just a few questions on a very significant list that will have to be answered appropriately if the sharing economy is going to continue to spread globally. Venture capitalists, take note.

It's not unreasonable to expect reasonable people to share what they have for fees that other reasonable people are willing to pay to not have to own assets they may not want or can't afford.

But it is unreasonable to believe that all or even most people will be "reasonable" when it comes to making money or paying out money for services, protection, safety, their health and retirement prospects, or to the taxman.

Source :http://moneymorning.com/2015/06/29/the-new-sharing-economy-may-not-be-the-profit-bonanza-everyones-expecting/

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules