CLARIN

Uber And Friends: Old Math Of The New Economy

The digital economy promised to create markets that were fluid by definition. But even in the so-called "sharing" economy of mobile applications, there are bound to be winners and losers.

The new smartphone economy
The new smartphone economy
Pablo Maas

BUENOS AIRES — The new digital economy had among its many claims the promise of removing the middleman on the way to building more efficient societies.

In practice, a new class of middlemen and intermediate agents is busy emerging to take their share of the pie. Two months ago in response to complaints by the hotel industry, the city of New York imposed restrictions on renting out flats and rooms through the website Airbnb, an online accomodation agency.

Last week, taxi drivers protested around Europe against Uber, an Internet car rental service between private individuals, operating in 130 cities including several in Latin America such as Rio de Janiero, Bogota and Santiago.

The new firms of the "sharing economy" share several traits.

All were created no more than five years ago when the use of applications on smartphones began to multiply.

They break into regulated markets like hotels or passenger transport without paying the costs (taxes, municipal fees, insurance) that raise the price of their established competitors' services.

They have emerged from Sillicon Valley, where a concentration of investment funds gives them enormous financial leverage. Even before being floated on the capital markets, such firms can attain colossal pricetags, $10 billion in the case of Airbnb and $18 billion for Uber.

But the most important shared trait is that they exploit what economists call the web's externalities, also called Metcalfe's Law, which link the returns and utility of a service to its number of users.

The more people use Windows for example, the more software is developed for it, which will lead to even more people using it.

Google constantly improves its search algorithms to locate information every time it is used by millions of viewers, which attracts more users who are all "working" to improve Google's worth (latest figure, $375 billion).

The problem is that Metcalfe's Law often leads to de facto monopolies. In 1996, the United States broke AT&T's monopoly of the telephone network, dividing it among several firms; and in 2001, Washington accused Microsoft of violating antitrust laws by abusing its dominant market position.

Google has recently been sliding toward a similar fate as Microsoft for dominating the Android operating system for smartphones and facing monopoly-related suits in the United States and Europe, where it constrols 90% of the online search market.

But in some ways, the taxi war erupting in Europe and beyond is a new type of conflict between technology and society. Two dimensions are moving at different speeds and fighting a battle to determine which will change the other.

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Ideas

How Facebook Knowingly Undermines The World's Largest Democracy

Facebook whistleblower Sophie Zhang says that the tech giant knowingly facilitates undermining democracy in India. Fair voting cannot be guaranteed if real people's voices are drowned out by armies of fake online commentators.

The Tek Fog app is allegedly used by online operatives to hijack social media

Sophie Zhang

-OpEd-

NEW DELHI — Earlier this month, The Wire published an exposé on Tek Fog, an app allegedly used by India's ruling, right-wing Bharatiya Janata Party (BJP) to make social engineering easier. The app is allegedly used by online operatives to hijack social media and amplify right-wing propaganda in the country.

The investigation immediately grabbed the attention of the Indian public. For the first time, everyday Indians were given insight into the inner workings of a major political party's Information Technology Cell (IT cell). Indians were forced to confront the possibility that their everyday reality was shaped not by the Indian public but the whims of shadowy political operatives.

They also discovered that their own ruling party would seek to phish their phones with spyware for the purpose of sending party-line propaganda impersonating them to friends and family. Such serious allegations more closely resemble an authoritarian dictatorship like the People’s Republic of China (PRC) and their hired online commentators, the 50 Cent Army (五毛党), than the world’s largest democracy.

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