Truth, Transparency, and Trust: Uber
Important in the Sharing Economy
Jennifer Sawayda
Anderson School of Management
University of New Mexico
Albuquerque, NM
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What Is the Sharing Economy?
• An economic model that involves the sharing of underutilized
assets
– Person-to-person or peer-to-peer (P2P)
– Private individuals with an underutilized resource can “rent” this
resource, essentially becoming his or her own entrepreneur
– People rent rooms, cars, boats, beds, etc. directly from each
other
• Also known as collaborative consumption and piecemeal
labor
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Growth of the Sharing Economy
• Most of these “sharing” firms were founded between 2008 and
2010 during the Great Recession
– Economist article refers to it as “post-crisis antidote to materialism
and overconsumption”
• Even more traditional companies are investing in the sharing
economy
– Avis, GM, and Daimler all have stakes in sharing companies
– The sharing economy has become a $26 billion industry
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Examples
• Airbnb: Lodging
• Uber: Ride Sharing
• Lyft: Ride Sharing
– $333 million in venture financing
• TaskRabbit: Chore Marketplace
– Site matches client that requires a task to be done with someone who has
experience in that area
• Instacart: Grocery delivery
• Others include Zilok (power tools), HomeAway (houses), Feastly (eat in
dining rooms), DogVacay (dog watching), Boatbound (boats), Liquid
(bicycles), LendingClub (loans), Fon (Wi-Fi)
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Airbnb
• Airbnb website founded in 2008 to connect travelers to those wanting to
rent out their extra rooms
• Connects travelers to lodgings in 34,000 cities in 190 countries
• $1 billion in revenue; takes 3% commission for its services
• Popularized the sharing economy concept
• Advantage: Allows people to earn extra income from their lodgings,
beds, and couches
• Possible Disadvantage: Some critics claim it encourages owners of
multiple properties to rent in short-term rather than converting to longterm residences, causing disruptions in urban housing
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Uber
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Founded in 2009 as a ride sharing service
Uses a mobile app to connect drivers-for-hire with people who need a ride
Expanded operations to 250 cities in over 57 countries
$10 billion in revenue; $40 billion valuation
Offers different services to target different markets
– UberPop, UberPool, UberX (cheaper services), UberSUV, UberBlack and
UberLux (luxury), UberRush (package deliveries)
• Due to lack of regulation, some of Uber’s services are banned or
suspended in South Korea, Germany, France, Netherlands, Taiwan
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Advantages
• Private individuals can essentially become their own bosses and rent out
resources they are not using
– Became an important way of generating income during recent economic
uncertainty
– Flexibility and chance to be “one’s own boss”
• Ease of entry
– It is very easy to enter this market; in fact, competition is quickly heating up, both
globally and domestically
– e.g. Uber competitors include Lyft, Get Taxi (Israel), Didi Kuaidi (China)
• Convenience and cost savings for customers
• Interpersonal connections between user and seller
• Environmental benefits
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Ethics Issues in the Sharing Economy
• Regulatory Issues
– How should these companies be regulated? Should they be taxed like
incumbents such as hotels and taxi services?
• Employees or Independent Contractors?
• Control of companies over independent contractors
– Depending upon the company, it can dictate terms such as fees that the
contractors must abide by
– They have the ability to implement changes
– Policy changes can cause disruptions in demand
• Safety Issues
– Letting strangers use your stuff can be dangerous
– Rape allegations involving Uber
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Ethics Issues in the Sharing Economy
• Stability of customers can tend to fluctuate
• Culpability Issues
– Many of these companies have insurance, but there have been criticisms
that this insurance coverage and their terms are not enough
– Three states have passed laws related to ride-sharing services putting
liability on the car-sharing services and their insurers
• Could this disempower workers in the long-term?
– Labor activists claim these are not long-term jobs and puts employees too
much under the control of the sharing companies and technology
• Each sharing company comes with its own set of risks depending upon
the industry and the company model
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Ethics Issues with Uber
• Employment
– A California labor commissioner ruled that a driver was an employee because
Uber is involved in “every aspect of the operation”
– How flexible is Uber? It exerts certain controls over drivers that arguably could
place them in a condition of employment
– Uber may have to give up some of these controls
– New contracts force drivers into arbitration for disputes
• Surge pricing
– Pricing can go up to 6-8 percent higher during peak periods
– Uber claims it uses surge pricing to get more drivers out on the road during
shortages
– Criticized for using surge pricing during Australian hostage crisis
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Ethical Issues with Uber cont.
• Liability
– After a girl was killed, Uber claimed it was not responsible because the driver was not en route
or transporting a passenger before the accident
• Safety
– Rape charge in India
• Ignoring bans
– Despite bans in Queensland, Australia; New Delhi, India; Cape Town; and Taiwan, Uber
services are still in operation there
• Truthfulness of advertising
– Uber ads have made it seem that rides are safe
– There is the impression that fees for Uber rides are cheaper than taxis
– While these can be true, critics claim that Uber does not have enough controls for safety, and
rides are not always cheaper; hence, its advertising is misleading
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Controls to Deal with Ethical Issues
• Lyft: Allows drivers to rate riders so they can be on the lookout for
“dangerous” characters
• Airbnb: 24/7 hotline, trust and safety division, $1 million host
guarantee
• RelayRides: Check users’ driver records for violations but tends to rely
more on user reviews
• Uber: Refund money for surge pricing during emergencies, added a
“safe ride” checklist, and created a team of safety and fraud experts
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Conclusions
• There is no doubt that the sharing economy depends on trust
– Users must trust independent contractors to get the job done efficiently,
safely, and effectively
– Consumer distrust would have devastating impact on these firms
• Are companies transparent enough about potential risks? Are they
transparent with independent contractors about income potential and
company involvement?
– Past mishaps demonstrate that these companies could improve their
transparency among consumers and drivers
• As the sharing economy continues to evolve, companies are putting in
more controls to mitigate risks and increase transparency
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Sources
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Airbnb, “About Us,” https://www.airbnb.com/about/about-us
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“All Eyes on the Sharing Economy,” Economist, March 7, 2013, http://www.economist.com/news/technology-quarterly/21572914-collaborative-consumption-technology-makes-iteasier-people-rent-items
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Rachel Botsman presentation, “The Shared Economy Lacks a Shared Definition,” Fast Company, November 21, 2013, http://www.fastcoexist.com/3022028/the-sharing-economy-lacks-ashared-definition
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Case developed by Noushin Laila Ansari, Lecia Weber, Sederick Hood, Christian Otto, and Jennifer Sawayda, “Uber Technologies Inc: Managing Opportunities and Challenges,” UNM
Daniels Fund Ethics Initiative, http://danielsethics.mgt.unm.edu/pdf/uber-case-study.pdf
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Marco della Cava, “Airbnb Pushes Itself Further and Farther,” USA Today, August 20, 2015, 3B
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Tomio Geron, “Airbnband the Unstoppable Rise of the Share Economy,” Forbes, January 23, 2013, http://www.forbes.com/sites/tomiogeron/2013/01/23/airbnb-and-the-unstoppablerise-of-the-share-economy/
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Eva GrantSimran Khosla, “Here’s everywhere Uber is banned around the world,” Business Insider, April 8, 2015, http://www.businessinsider.com/heres-everywhere-uber-is-bannedaround-the-world-2015-4
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John Harvey and Marcus Costello, “Sharing Not Always Caring: Problems with the ‘Sharing Economy’,” Ethics Centre, http://www.ethics.org.au/On-Ethics/Our-articles/April-2015%281%29/Sharing-not-always-caring-problems-with-the-%E2%80%98shari
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Christine Lagorio-Chafkin, “Brian Chesky, Joe Gebbia, and Nathan Blecharczyk, Founders of Airbnb,” Inc., July 19, 2010, http://www.inc.com/30under30/2010/profile-brian-chesky-joegebbia-nathan-blecharczyk-airbnb.html
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Eric Newcomer, “Airbnb Overhauls Service for Business Travelers,” Bloomberg, July 20, 2015, http://www.bloomberg.com/news/articles/2015-07-20/airbnb-overhauls-service-forbusiness-travelers
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“Pioneers of the Shared Economy,” Forbes, http://www.forbes.com/pictures/eeji45emgkh/airbnb-snapgoods-and-12-more-pioneers-of-the-share-economy/
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“The Rise of the Sharing Economy,” The Economist, May 9, 2013, http://www.economist.com/news/leaders/21573104-internet-everything-hire-rise-sharing-economy
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Natasha Singer, “In the Sharing Economy, Workers Find Both Freedom and Uncertainty,” The New York Times, August 16, 2014, http://www.nytimes.com/2014/08/17/technology/inthe-sharing-economy-workers-find-both-freedom-and-uncertainty.html?_r=1
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Jason Tanz, “How Airbnb and Lyft Finally Got Americans to Trust Each Other,” Wired, April 23, 2014, http://www.wired.com/2014/04/trust-in-the-share-economy/
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