Adam Chandler is a former staff writer at The Atlantic. He is the author of Drive-Thru Dreams: A Journey Through the Heart of America's Fast-Food Kingdom.
Many people aren’t familiar with the term that encompasses businesses like Uber and Airbnb, while others argue that the phrase may be deceptive.
Among the surprises in last week’s Pew Research Center survey on the new digital economy was the revelation that the phrase “the sharing economy”—the collective and most broadly accepted term for some of the on-demand apps and platforms that have seemingly seized the world of commerce—is overwhelmingly unknown to most Americans. In other words, while Airbnb may have Super Bowl commercials and Uber may have graduated to being used as a verb, 73 percent of Americans are unfamiliar with the banner under which they operate.
More curiously, those who had heard of “the sharing economy” (or at least claimed to have) frequently defined it as an altruistic endeavor. “The most common description of the sharing economy emphasizes the ‘sharing’ component of the phrase while ignoring the ‘economy’ aspect,” Pew analysts wrote, noting that 40 percent of Americans polled expressed this view.
So how has a ballyhooed economic trend managed to elude mainstream detection? One possibility is that the trend might not be nearly as big as headlines make it out to be, but it could also be a problem with the trend’s name itself. “It may be a consequence of the fact that the label is being used to describe a pretty broad range of things that don’t necessarily all look like each other,” said Arun Sundararajan, a professor at New York University and the author of the forthcoming book The Sharing Economy. Airbnb, for example, is an online apartment-rental platform, Uber is an on-demand car service, and TaskRabbit is an online labor marketplace. “The sharing economy” often also includes peer-to-peer lending platforms and crowdfunding sites with varying profit models.
Conceding that the term “sharing economy” has stuck best (hence his book title), Sundararajan also points to the relative newness of these platforms. “My guess is that the fraction of people who are familiar with these services that we put under the label of the ‘sharing economy’ is probably greater than the fraction of people who have heard the term ‘sharing economy.’ In a sense there’s still an education going on,” he says. He points to the early days of Facebook and Twitter and LinkedIn, prior to when they were lumped into the catch-all of “social media”—a term that has its own shortcomings, given the varying degrees of social distance between users across these platforms.
Not everyone feels the term “sharing economy” fails. “It is a kind of awkward label, but it does get the idea across: building a new or sub-economy around sharing under-utilized assets,” Michael Cusumano, a professor at MIT’s Sloan School of Management, wrote in an email. “The sum of many of such ‘platforms’ is what creates the sub-economy.”
But the question of what these business models should be called is not some philosophical thought exercise. For some, the idea that the industry is motivated by compassion or goodwill is objectionable; Uber has inspired transcontinental protests and even been likened to ISIS, while Airbnb has been targeted by legislators in dozens of states. “Obviously ‘the sharing economy’ is a misnomer, which the industry no doubt likes a lot,” said Dean Baker, an economist and the co-director of the Center for Economic and Policy Research. “It’s got nothing to do with sharing. They’re profit-making companies.”
Baker argues that many of the new businesses use a halo of positive branding to avoid the discussion of what regulatory structures need to be modernized to deal with these platforms. One example is the ongoing debate over whether a driver for Uber or Lyft should qualify as an employee of the company with a right to protections and benefits or should simply be considered an independent contractor.
As these businesses remain in their early stages, it’s important to consider how the label affixed to them affects their public perception. So, if the term “the sharing economy” is inaccurate at best and pernicious at worst, what would be a better name? In his book, Sundararajan suggests “crowd-based capitalism.”
“To me, what these sharing economy platforms represent is early examples of a different way of organizing economic activity, which sits somewhere between the 20th-century organization and even the 18th-century one-person shop selling to an individual market,” he said. “It’s not a pure sort of marketplace... It’s not a traditional organization like a hotel or a train company, but it’s somewhere in between.”
The think thank JPMorgan Chase Institute has settled on a different term. Its researchers have been referring to these businesses as being part of “the platform economy”—a term that is useful because it allows for neat distinctions between “labor platforms” (like Uber) and “capital platforms” (like Airbnb).
Baker offered another option. “It’s not terribly catchy, but ‘Internet-Based Service Providers,’ in a nerdy economist sort of way, captures what they’re doing.” Accurate? Maybe. But will it stick? Probably not.
In the short run, it matters which term journalists, economists, and academics settle on, because it clearly can shape consumers’ perceptions of these businesses as they take shape. “But after a point they become labels for something that is well understood,” Sundararajan says, “They become part of the cultural dialogue.” For better or worse.
This post originally appeared on The Atlantic.