What are the cases, when a company happens to be not a company? Probably, the great examples are Airbnb, TaskRabbit, Uber and Handy companies. All the organizations mentioned above seem to be more similar to the group of independent experts that prefer getting in touch with the clients by means of a common platform, in contrast to the typical businesses that tend to employ their personnel.
And the same story was relevant up till the moment, when the members of the Labor Commission of California practically ruined the sharing economy in June. The whole story got started the very moment it was declared that one of the Uber drivers was a company employee, though before that the individual was considered an independent contractor. The ruling argued that being far from the so-called “typical technological platform”, the organization was “engaged in each operational aspect” starting with the number of rides of every driver and ending with the way they had to communicate with the clientele. There are still two lawsuits pending against the companies Lyft and Uber.
What kind of consequences should we make out of this chaotic universe? On the one hand, each of the companies is highly interested in enforcing consistency to promote their brands. However, on the other hand, the models of their businesses are predicated on whether they are capable to empower experts in order to independently render services.
The key to getting the idea of this new universe is the word “control”, experts say. Uber may turn to have some great reasons for taking control over some parameters of the service, like the price. At the same time, it appears pretty flexible in some other fields. This places Uber in the middle between pure employers and pure platforms. Even though almost everyone agrees that the main defining feature is the extent of the control mentioned above, there’s no actual sense seen among the courts of where that dividing line between the employers and the platforms should be.
There is nothing new under the sun. Same with the business world. Many various businesses have been organized as “conglomerations of people”, in which the companies held control over communication between the client and provider of the service. Some of the beauty salons make sure to hire experts and give them a full pack of high quality equipment and products, as well as work on the advertising. At the same time, the other beauty salons simply co-work with the independent specialists by renting out chairs and providing them with an opportunity to work and hook new customers.
For a long period of time companies have had a tendency to provide the others with this kind of freedom. But the fact is that platform models are getting more prevalent nowadays since “techs enables business owners to create and expand marketplaces for services, as well as adjust the level of control that has been exerted over interactions between the provider of the service and the clients”. So, the key question for the service marketplaces are the following: when they should start working as a platform (providing the experts with an opportunity to communicate with the clients on their terms) and when they should begin to operate as a typical business structure (hiring experts and controlling them).
There is an economic model that can be used to investigate this question. The model involves two types of decisions that directly affect the company joint payoffs and the specialists: transferable and non-transferable. As for the latter, these decisions are usually under total control of the specialists or the company. Transferable decisions can be made by any side.
In case transferable decisions are under the company’s control, the firm is functioning as a traditional business. In case the transferable decisions are under the control of the experts, the company is functioning as a typical platform.
References:
- Juliet B. Schor, True Wealth: How and Why Millions of Americans Are Creating a Time-rich, Ecologically-light, Small-scale, High-satisfaction Economy (New York: The Penguin Press 2011).
- Edgar Cahn and Jonathan Rowe, Time Dollars (Emmaus, PA: Rodale Press, 1992).
- Emilie Dubois, Juliet Schor, and Lindsey Carfagna, “New Cultures of Connection in a Boston Time Bank,” in Practic-ing Plenitude, eds. Juliet B. Schor and Craig J. Thompson (New Haven: Yale University Press, 2014).
- Andrew Ross Sorkin, “Why Uber Might Well be Worth $18 Billion,” New York Times, June 9, 2014, available at http://dealbook.nytimes.com/2014/06/09/how-uber-pulls-in-billions-all-via-iphone/; Evelyn Rusli, Douglas MacMillan, and Mike Spector, “Airbnb Is in Advanced Talks to Raise Funds at a $10 Billion Valuation,” Wall Street Journal, March 21, 2014, http://online.wsj.com/news/articles/SB10001424052702303802104579451022670668410.
- Anny Fenton, “Making Markets Personal: Exploring Market Construction at the Micro Level in the Car-sharing and Time Bank Markets,” Unpublished paper, Harvard University, 2013.12. Dubois, Schor, and Carfagna, op. cit.
- Elliott W. Martin and Susan A. Shaheen, Greenhouse Gas Impacts of Car Sharing in North America, Mineta Transpor-tation Institute Report 09-11 (San Jose, CA: Mineta Transportation Institute, 2010).
- Juliet B. Schor et al., “Paradoxes of Openness and Distinction in the Sharing Economy,” Unpublished paper, Boston College, 2014