The Exchanges

Q Right. Well, let's spend a few minutes talking about the economic effects of the sharing economy, because, you know, for better or worse, you, you are an economist by training. You've done a lot of research on the sharing economy in traditional economic terms. What, how do you think about the impact of what it brings?

A So, um, I have, I categorize the traditional economic impacts of the sharing economy or crowd-based capitalism into four key impacts. Um, the first is how we are Increasing capital of assets of money through more efficient use of it. So you might think of this as leading in the long run to an increase in productivity because you're using stuff more efficiently, and so that's one impact. A second impact has to do with an increase in consumption that comes from greater variety. So let's contrast, for example, the level of variety that you have on Airbnb With the level of variety you have in the hotel industry. There's just so much more choice of so many different configurations and kinds of accommodation on a platform like Airbnb. Economists disagree about most things, but there are two things that economists agree about. I mean, one is that when you increase efficiency and you increase productivity, this leads to long run economic growth. And the second thing they agree about is that when you increase variety, You increase the amount that people consume, and increased consumption also leads to economic growth. So those two factors, increased capital impact and increased variety, have a decidedly positive prognosis for how crowd-based capital is going to alter the economy.

AI assessment note: “I categorize the traditional economic impacts of the sharing economy or crowd-based capitalism into four”

Q because it's a topic that comes up a lot, and whether you agree with the academic nature of the discussion or not, it does impact Where people put funding, how people allocate resources, how they think about policy and everything related to the topic of the future of work, just at a very basic level, like what's the main problem with GDP as a measure for software in the world?

A I think we can break down the trouble with GDP into at least three buckets. Um, the first is that there's a lot of value that's created by technological progress. Like, you know, the value you get from Google searches, the value you get from sort of connecting with other people on Facebook. There's sort of the surplus that, you know, consumers enjoy that aren't captured. This, this isn't captured by GDP. And so if that's relatively small, it doesn't matter. But, Technological progress, especially progress with digital technologies, seems to make this consumer surplus piece pretty big, and GDP is not measuring that. It's just measuring the flows. It's measuring the prices that we pay and the revenues that firms get. So that's one problem. A second problem has to do with distribution. GDP is a total measure, meaning it's adding up all of the dollars, and it's not giving us a sense for how equally or unequally they're distributed. So, for example, um, about 80% of India now has access to a mobile phone. Um, a couple of decades ago that was just 10%, and so we've not just seen an increase in consumer surplus here, but we've seen, like, a tremendous reduction in inequality of access that just doesn't get picked up by GDP.

AI assessment note: “I think we can break down the trouble with GDP into at least three buckets.”

Q because it's a topic that comes up a lot, and whether you agree with the academic nature of the discussion or not, it does impact Where people put funding, how people allocate resources, how they think about policy and everything related to the topic of the future of work, just at a very basic level, like what's the main problem with GDP as a measure for software in the world?

A I think we can break down the trouble with GDP into at least three buckets. Um, the first is that there's a lot of value that's created by technological progress. Like, you know, the value you get from Google searches, the value you get from sort of connecting with other people on Facebook. There's sort of the surplus that, you know, consumers enjoy that aren't captured. This, this isn't captured by GDP. And so if that's relatively small, it doesn't matter. But, Technological progress, especially progress with digital technologies, seems to make this consumer surplus piece pretty big, and GDP is not measuring that. It's just measuring the flows. It's measuring the prices that we pay and the revenues that firms get. So that's one problem. A second problem has to do with distribution. GDP is a total measure, meaning it's adding up all of the dollars, and it's not giving us a sense for how equally or unequally they're distributed. So, for example, um, about 80% of India now has access to a mobile phone. Um, a couple of decades ago that was just 10%, and so we've not just seen an increase in consumer surplus here, but we've seen, like, a tremendous reduction in inequality of access that just doesn't get picked up by GDP.

AI assessment note: “I think we can break down the trouble with GDP into at least three buckets.”

Q how democratizing it really is, because one of the common prevailing complaints that I've heard is that, well, okay, come on, is that, are the benefits really accruing to the producers now, or have we just shifted that it's now just going to the platform owners? And they're the ones who are really extracting all the value and that no one else is. How would you respond to those critics?

A I, I think we should look at the data. I've done some research on my own. I've seen research done by others. Fundamentally, we should realize that the nature of the relationship between the individual and the institution shifts from the 20th century industrial model of you are a provider of labor to one in which you are a small business owner. And so, however much wealth is created by the platforms, This is something that is empowering for the individuals, and maybe later in the conversation we can talk about policy challenges that come up around labor protection, but that's, that's an important starting point, that this is fundamentally empowering for the individual. Alongside each tech billionaire that the sharing economy creates, it also creates millions of small entrepreneurs, and this distinguishes the sharing economy from some of the technological advances that preceded it. It's not just the software engineers and the people with Google stock who are benefiting financially. It's also the millions of entrepreneurs who are providing through the platform. My own research has shown that if you project what the sharing economy is doing forward, a significant fraction of the value creation is captured by people below median income. In fact, the rate of growth of the value creation for people below median income is significantly higher.

AI assessment note: “a significant fraction of the value creation is captured by people below median income”

Q Right. Well, let's spend a few minutes talking about the economic effects of the sharing economy, because, you know, for better or worse, you, you are an economist by training. You've done a lot of research on the sharing economy in traditional economic terms. What, how do you think about the impact of what it brings?

A So, um, I have, I categorize the traditional economic impacts of the sharing economy or crowd-based capitalism into four key impacts. Um, the first is how we are Increasing capital of assets of money through more efficient use of it. So you might think of this as leading in the long run to an increase in productivity because you're using stuff more efficiently, and so that's one impact. A second impact has to do with an increase in consumption that comes from greater variety. So let's contrast, for example, the level of variety that you have on Airbnb With the level of variety you have in the hotel industry. There's just so much more choice of so many different configurations and kinds of accommodation on a platform like Airbnb. Economists disagree about most things, but there are two things that economists agree about. I mean, one is that when you increase efficiency and you increase productivity, this leads to long run economic growth. And the second thing they agree about is that when you increase variety, You increase the amount that people consume, and increased consumption also leads to economic growth. So those two factors, increased capital impact and increased variety, have a decidedly positive prognosis for how crowd-based capital is going to alter the economy.

AI assessment note: “I categorize the traditional economic impacts of the sharing economy or crowd-based capitalism into four”

Q how democratizing it really is, because one of the common prevailing complaints that I've heard is that, well, okay, come on, is that, are the benefits really accruing to the producers now, or have we just shifted that it's now just going to the platform owners? And they're the ones who are really extracting all the value and that no one else is. How would you respond to those critics?

A I, I think we should look at the data. I've done some research on my own. I've seen research done by others. Fundamentally, we should realize that the nature of the relationship between the individual and the institution shifts from the 20th century industrial model of you are a provider of labor to one in which you are a small business owner. And so, however much wealth is created by the platforms, This is something that is empowering for the individuals, and maybe later in the conversation we can talk about policy challenges that come up around labor protection, but that's, that's an important starting point, that this is fundamentally empowering for the individual. Alongside each tech billionaire that the sharing economy creates, it also creates millions of small entrepreneurs, and this distinguishes the sharing economy from some of the technological advances that preceded it. It's not just the software engineers and the people with Google stock who are benefiting financially. It's also the millions of entrepreneurs who are providing through the platform. My own research has shown that if you project what the sharing economy is doing forward, a significant fraction of the value creation is captured by people below median income. In fact, the rate of growth of the value creation for people below median income is significantly higher.

AI assessment note: “a significant fraction of the value creation is captured by people below median income”

Q Just a quick question then, what does this mean for regulation and the government's role in this? What you're really talking about, Arun, is a shift to the new future of work. What do you see as the key challenges of that shift?

A Well, um, like, you know, let me start with some of the benefits of that shift because, um, you know, we, we, we can tie what's happening here to offshoring Which dominated the conversation about the future of work about a decade ago, and automation, which is dominating the conversation about the future of work today. The conversation is often dominated by work going to other countries, and by work being taken over by robots. The point I'm trying to make here is that there's a contemporaneous change in how we organize work, the extent to which work is organized through marketplaces, the extent to which we're becoming generalists, And the immediacy with which you can tap into resources and labor, that's equally important for the future of work.

AI assessment note: “let me start with some of the benefits of that shift”

Q Just a quick question then, what does this mean for regulation and the government's role in this? What you're really talking about, Arun, is a shift to the new future of work. What do you see as the key challenges of that shift?

A Well, um, like, you know, let me start with some of the benefits of that shift because, um, you know, we, we, we can tie what's happening here to offshoring Which dominated the conversation about the future of work about a decade ago, and automation, which is dominating the conversation about the future of work today. The conversation is often dominated by work going to other countries, and by work being taken over by robots. The point I'm trying to make here is that there's a contemporaneous change in how we organize work, the extent to which work is organized through marketplaces, the extent to which we're becoming generalists, And the immediacy with which you can tap into resources and labor, that's equally important for the future of work.

AI assessment note: “let me start with some of the benefits of that shift”