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1 PRE-RELEASE VERSION Uber and the Ethics of Sharing: Exploring the Societal Promises and Responsibilities of the Sharing Economy 04/2016-6209-E This case was written by Erin McCormick, Case Writer, under the supervision of N. Craig Smith, the INSEAD Chaired Professor of Ethics and Social Responsibility. It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Additional material about INSEAD case studies ( , videos, spreadsheets, links) can be accessed at Copyright 2016 INSEAD This pre-release version may be used for teaching purposes but it has not yet received an official case number by The Case Centre. No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the permission of the copyright owner.

2 PRE-RELEASE VERSION In San Francisco, a six-year-old girl was run over by a driver for the ride-hailing service Uber, as the driver drove around waiting for the company s mobile app to direct him to his next passenger. In Paris, taxi drivers rioted in the streets, protesting that a subsidiary of Uber, the fastest growing company in the so-called sharing economy , was stealing their business without respecting the rules and regulations of the trade. In London, Uber drivers sued the company, insisting it pay the minimum wage and follow the same safety regulations as other employers. In Australia, the tax office cracked down, demanding that Uber drivers pay the national business tax on each fare. In each case, Uber has argued that it is not the primary responsible party.

3 In questions of safety, transportation regulation, labour rights and business taxes, Uber often defers responsibility to its driver-partners many of whom are ordinary people picking up passengers in their personal cars. The company maintains that it only provides an online platform to connect customers with independent contractors drivers in business for themselves. It's a technology platform that connects riders and drivers, said Travis Kalanick, co-founder and CEO of So you want a ride, we are going to connect you to all the transportation providers that are available in a market, and we're going to get you the quickest pick-up time, highest quality ride, and get it to you at the lowest cost that's possible. With operations in 300 cities worldwide and more than $8 billion in equity funding, Uber is quickly becoming one of the world s most highly-valued companies, at the forefront of a growing breed of tech-based companies leveraging the powerful economic engine dubbed the sharing economy.

4 The company, and thousands of other start-ups like it, provide ways for people to share their underutilized possessions cars, bedrooms, parking spaces and even clothing. In the meantime, they are turning basic norms about consumption, work and regulations on their heads. The whole nature of what it means to do business is being redefined by companies like Uber, Airbnb, which rents out space in people s homes, and Taskrabbit, which lines up workers to help customers with odd jobs. But while sharing economy companies hold out a promise of increased sustainability and democratization of the workplace, they raise questions about how such changes affect societal safety nets. Are they merely technological platforms , facilitating transactions for individual business people?

5 Or are they real-world companies, with the same responsibilities as transport companies, hotels and employment agencies? In some cases, their very survival depends on the answer to these questions. 1 Laurie Segall, Uber CEO: Our Growth is Unprecedented CNNM oney, June 12, 2014 Copyright INSEAD 1 PRE-RELEASE VERSION The Economist cover illustrates some facets of the sharing economy An Economy Built on Technology and Trust If you own a power drill, that drill will be used for 12 to 15 minutes in its entire life time, Rachel Botsman, one of the early proponents of the sharing economy, told a Ted Talk audience in 2010. It s kind of ridiculous, isn t it? Because what you need is the hole, not the drill.

6 Why don t you rent the drill? Or rent out your own drill to other people and make some money from it? 2 Launched with this vision of cooperation amongst a broad internet community, the sharing economy was described by Botsman as an economic model based on sharing underutilized assets from spaces to skills to stuff for monetary or non-monetary benefits. 3 The term used interchangeably with the peer-to-peer economy or the collaborative economy depicts an enterprise platform in which regular people do business with their neighbours rather than relying on big companies. The sharing economy was made possible by the ease of sharing data brought on by the internet age. Be it a person s Facebook profile or their location as tracked by the GPS on their smartphone, free-flowing information has made it possible to make transactions to share goods and services which once might have gone unused.

7 In the past it was so hard for people 2 Rachel Botsman, The Case for Collaborative Consumption, TedxSidney, May 2010 #t-945236 3 Rachel Botsman, The Sharing Economy Lacks A Shared Definition, Fast Company, November 21, 2013 Copyright INSEAD 2 PRE-RELEASE VERSION to find others with whom to share goods like unused tools and extra bedspace, that it wasn t worth the trouble. But the internet and the availability of data have dramatically reduced the transaction costs , ushering in an era of collaborative consumption in which underutilized goods can easily be turned into cash. A new sense of trust in the online community, based on feedback, is another key building block of the new economy.

8 Where consumers might once have been afraid to catch a ride or share a house with a stranger, they now can check out a person s trustworthiness based on ratings from previous passengers or reviews from former houseguests. The sharing economy gives access to all kinds of products and services without having to commit to ownership or hiring. Why own a car, when in minutes you can borrow one? Supporters extol the benefits for the environment: if commuters share rides, there are fewer cars on the road; if people share their rollerblades instead of buying new ones, it reduces the use of raw materials and the pollution of production. Yet as it has grown, the sharing economy hasn t always lived up to the early vision of sharing among peers.

9 Sharing as Big Business A host of creative technology start-ups emerged to develop the intricate internet platforms and smartphone applications needed to make these peer-to-peer transactions easy. Uber, Lyft and BlaBlaCar connect drivers to people who need rides. Airbnb helps people rent out their extra beds. Parkatmyhouse connects drivers to parking spaces. TaskRabbit in the US and TaskPandas in the UK line up workers for people needing help with small jobs. NeighborGoods helps people share tools. But as the sharing economy has grown from a fringe concept to a huge industry, some of these companies have acquired the scale and characteristics of the big businesses they were supposed to replace. Unlike traditional brick and mortar businesses, these new firms can sell rides or rentals without having to invest capital to buy cars or build hotel rooms.

10 Whereas it took the world s biggest hotel chain, InterContinental Hotels, 65 years to build a chain of 650,000 rooms in 100 countries, Airbnb did it in four Uber wasn t founded until 2009, but it is already valued at more than $60 billion twice the estimated value of Hertz Car Rental5 without owning a single taxi. Many of these companies and their users appear to have none of the altruistic motivations connoted by the term sharing . Proponents of the sharing economy, including Rachel Botsman, who co-founded Zipcar, one of the first companies to emerge under the umbrella term, have proposed an alternative terminology: they suggest that companies giving consumers instant online access to other people s goods and services should be called the on-demand economy or the access economy.