Is the Sharing Economy a SHAM?

Many of the billion dollar tech companies we use every day still haven't figured out how to make money... what's the deal?

sources:

Two Cents is hosted by Philip Olson, CFP® and Julia Lorenz-Olson, AFC®
Directors: Katie Graham & Andrew Matthews
Written by: Andrew Matthews
Executive Producer: Amanda Fox
Produced by: Katie Graham
Edited & Animated by: Dano Johnson
Fact checker: Yvonne McGreevy
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Music by: APM

[of]

Remember the meme:
1990: don't get in stranger's cars
2000: don't trust people you meet on the internet
2010: literally summon a stranger from the internet to get into their car.

[TomMcMorrow]

"If you're too young to remember the start of ride sharing apps"

I've never felt older at 33.

[jasonmacland]

All of these gig-work companies have the same business model: a middle man that takes a huge cut while others provide the actual service. Artificially low prices, shifting their operating costs onto the workers, drive existing services out of business, then jack up rates once they have their monopoly.

[draheim]

Last week I paid $60 for an easy 20 minute Uber ride from an international airport to my hotel at noon on a Thursday. If that's not profitable for them, something is really messed up.

[feynstein]

Isn't that just predatory pricing? When a business deliberately lowers prices even at a loss to itself, to wipe out the competition and establish a monopoly? How is this any different?

[cheyenneharmon]

I remember when you could get a ride for less than $10 across town.

The rideshares, this was always their plan, to get people hooked with low prices and price out the established taxis. Then once they had the majority market share, to raise prices.

[VarsVerum]

I think the biggest problem with businesses nowadays is that being in massive amounts of investor debt is the rule, not the exception anymore. Debt can be leveraged very well to grow your business, but only in small margins, not businesses that are operating permanently in the red but getting carried by investors.

[joeschmo]

Gig “work” is a blight upon distressed workers and people will continue getting hurt until we demand career dignity (because simply asking for “safety” doesn’t get the job done).

[Pandrogas]

The race to the bottom in prices for lots of these companies tend to permanently damage industry perceptions. Small businesses that innovate still can't compete due to commoditization of services and customer expectations en masse. All that ever mattered to these tech companies was their stock price which isn't strictly governed by reality on the market.

Anti-trust law in the country is just plain broken.

On the bright side, some of these apps have been the inspiration for the occasional city-wide co-op for restaurant delivery or even ride-sharing.

[micahbush]

Going into this video, my answer was a resounding "yes"; I'm not paying someone else to do work I can do myself, and most of these gig jobs are probably under-paid anyway. Coming out of this video, my answer is an even louder "yes."

[ziksy]

I heard a great bear thesis for ride sharing companies:

"Being a taxi driver were never known for being a high paying job. Meanwhile, you've got people in Silicon Valley trying to earn 6 figure salaries by skimming off taxi drivers' earnings. That doesn't sound like a very good business model."

[joeb]

Amazon didn't make a profit for about 20 years. They charged cheap prices and got away with not collecting sales tax, making it much easier to compete with Walmart and other retailers. Once they got huge market share, they raised prices, started charging sales tax (due to a supreme court case), and now they make a profit.

[ScrapPalletMan]

It saddens me that Wall Street corporations are removing money from small towns when it's us individuals, in our own communities giving each other rides.

[WhenYoureAlexa]

The last couple of minutes were very important: sometimes the industry doesn’t need changing. *Sometimes things can’t be made cheaper.*

I think the entire point is that people are trying to make something cheaper that can’t be outsourced (with exploitation). You can’t be profitable and offer a service cheaper than a taxi unless you start taking away worker protections.

[ShaunakDe]

Uber's (artifically) low priced have also been used as justification in many cities across the US to cut back on mass transit investments, or worse treat them as "alternate mass transit". While US urban planers have never been the most visionary, an increase in pricing will hit these policies the most.

[Oxazepam]

Great video. I came to the same conclusion and I think the analogy of selling 1 dollar for 75 cents is the best so far. Food delivery company will have a hard time making a profit. If they ever try to charge the real price, customers will go get the food themselves.

[thomasnewton]

In a way this seems similar to truckers shifting the cost of actual trucks to the employees, rather than supplying them. There was an excellent planet money episode on this practice that ends up leaving truckers indebted and receiving heavily sliced paychecks. Companies are shifting risk to those at the lowest social rung and it leads to incredible abuse.

[Thessalin]

"A store giving away dollars for 75 cents."
Me: Oh! Oh! I've seen that episode of Sledgehammer!
"How do you make money giving two dollars for people giving you one dollar?"
"We make it up in volume."
🤣😂🤣😂

[jkbrk]

Couldn't agree with you more on these creative accounting companies. I will day though that part of the reason these companies are unprofitable is because they are focused on growth and reinvesting any profit that comes in the door.

[starcherry]

Blitzscaling sounds like a capitalist nightmare