Freedom with Benefits: Uber's Drivers as Employees

You probably won’t recognize the name Barbara Ann Berwick, but the self-employed investor and former phone-sex entrepreneur could become a key figure in the history of the sharing economy.

This is due to a California labor commission ruling, which earlier this month ordered Uber “to reimburse Barbara Ann Berwick $4,152.20 in expenses and other costs for the roughly eight weeks she worked as an Uber driver last year.”

To be more specific, this is due to one sentence in this ruling: “In light of the above, Plaintiff was Defendants’ employee.” The meaning is that the commission decided that Berwick should be classified as an employee, not an independent contractor, which is how most if not all the people providing services in the sharing economy are classified.

The news about the ruling generated an interesting discussion about its possible impact on the business model and valuation of Uber and other sharing economy companies. It also brought to mind the ongoing debate of whether the sharing economy creates good jobs as well as the pros and cons of the gig economy (aka 1099 economy).

I, however, think that this ruling could have a greater importance if we frame it in a larger context, which is the vision we have for the sharing economy, or in other words what the sharing economy should be all about.

The sharing economy reflects a growing tension between two main approaches, one focusing on value and the other on values. The approach focusing on value addresses the sharing economy as a disruptive force providing attractive opportunities to create and deliver value. Uber is probably the best example of this approach.

The second approach is maybe best described by Rachel Botsman:

“I tend to look at the space through the benefits to the user community. I would describe the core values as ‘empowerment,’ ‘collaboration,' ‘openness’ and ‘humanness,' and in terms of the underlying philosophy, it’s about putting these values above the end goal of profit maximization.”

This approach sees the sharing economy as a disruptive force as well, but this time mainly in terms of disrupting the economic system – some in this group see the sharing economy as playing a role of a catalyst in “the transition to a post-capitalist, sustainable economy.” Examples for this approach include time banks, barter platforms, tool-lending libraries, a cooperative version of eBay, and even Couchsurfing and Yerdle.

The question is if these two approaches are mutually exclusive. To answer this question, I go back to the thought-provoking talk of Aral Balkan from Ind.ie at OuiShare Fest last month. Balkan talked about differences between the Silicon Valley model and the free open-source movement, which correspond with the two approaches I presented here (value and values, respectively). He described a dichotomy – the Silicon Valley model produces delightful user experiences that pay very little attention to people’s freedom and human rights, while free open-source solutions care a great deal about human rights, but are not so good in creating delightful user experiences.

Balkan believes that what we need to move to the next iteration, which will be based on ethical design and won’t have any trade-offs between delightful and highly functional solutions and people’s human rights. We need products that are built for the people, not on the back of people, he said, framing the future we’d like to see as “independently-funded, sustainable, designed for the whole term, and distributed in topology.”

I agree with Balkan that it’s better to have a clear vision of what the future should look like, and I agree that we see clear strengths and weaknesses in each model. I don’t think, however, that the funding source (i.e. silicon valley vs. independent, or venture capital vs. community capital) should be the defining element making the difference between ‘good’ and ‘bad’ sharing economy platforms.

I believe the defining element should be the relationship between the different components of the platform, i.e. company/founders, service providers and customers. A good sharing economy platform will create and sustain mutually respectful relationships between these parties. A bad company will fail to do so.

These relationships should be based on four pillars – first, although these parties are not equal in their power they’re interdependent. Second, this is not a zero-sum game. Third, sharing economy platforms are similar to entrepreneurial ecosystems, and the secret sauce of successful ecosystems is a collaborative mindset, according to Gordon Jones, managing director of the Harvard Innovation Lab. Fourth, it’s no longer a shareholder, but a stakeholder world.

What does it mean? Mainly that we’re going to see evolution in the sharing economy. Brad Burnham, partner at Union Square Ventures, suggests for example that we’ll see “a broader distribution of wealth, and a greater level of agency and empowerment for the people who are participating in the economy.” I agree with him and believe it will be even a broader change, reflecting the need to create relationships between all parties involved that are truly based on respect, responsibility and fairness.

Can it really be done in a for-profit platform? I believe the answer is yes. We have already seen thousands of companies exercising meaningful corporate social responsibility (CSR) that could attest to that. Second, abusive or semi-abusive relationships are just not sustainable, no matter how successful they look for a while.

The final question is who will drive this evolution. I believe that it will be stakeholders like Barbara Ann Berwick, who will decide to take action and drive change, following a path President Barack Obama described in his remarks on Supreme Court ruling on same-sex marriage: “Progress on this journey often comes in small increments. Sometimes two steps forward, one step back, compelled by the persistent effort of dedicated citizens.”

Image credit: Derek Clark, Flickr Creative Commons