Executive Pay: The Curious Case of Carlos Ghosn’s Arrest
February 12, 2025
What is FDI (Foreign Direct Investment) ? FDI or Foreign Direct Investment is the practice of international businesses investing in countries other than their home country. In recent months, there has been much debate over whether opening up of economies to foreign direct investment is good for developing countries. Further, foreign direct investment is seen […]
In previous articles, we looked at the humungous benefits that the BPO phenomenon brings to the economies of the host and the target nations. Mainly, we focused on how cost savings for the companies outsourcing their back office work and increased revenues for the companies doing the outsourced work have been actualized leading to a […]
Now that we have the problem as well as the goal statement handy, it is time to ensure that these statements are well articulated in the business case. The management has to choose amongst several possible six sigma projects while granting its resources. The ones that do succeed in getting the resources from the management […]
Countries have long since realized the importance of furthering their interest by supporting the International Trade and Exports from in house and actively supporting the industries to become globally competitive. Besides this objective, many governments also aim to promote Foreign Direct Investment into the country and encourage Multi National Companies to set shop and manufacture […]
Types of Foreign Investment and its Implications for Developing Countries With the opening of the economies of the world, there has been a concomitant increase in the flow of investment from the west to the east. As capital from the west started flowing into the developing countries in search of better yields, these countries are […]
Companies like Uber and Airbnb have a lot in common. They are both startups that were started with relatively fewer resources. Both these companies started around the same time. Uber started in 2008 whereas Airbnb started in 2009. Today, both these corporations are worth billions of dollars. However, the similarities do not end there.
The biggest similarity that these companies have is that they are both the part of what is now called “the sharing economy”. The sharing economy has been somewhat of an economic revolution. Today, there are several multi-billion dollar corporations that propagate the sharing economy. In fact, traditional companies like Ford and General Electric are also trying to inculcate the sharing model in their business operations.
In this article, we will have a closer look at what the sharing economy is and how it is different from the traditional economy.
The sharing economy is a model which is based on the personal ownership of capital resources. For instance, companies like Hertz and Avis own all the cars that they rent out. On the other hand, User does not own any cars. The drivers own the cars driven by them. Hence, in companies like Hertz and Avis, there is centralized ownership of assets. On the other hand, in a sharing economy, there is decentralized ownership of assets.
The whole idea behind the sharing economy is that the distinction between production and consumption of goods is unnecessary and should be removed. For instance, in a sharing economy, a car which is used for personal purposes can also be used for providing services to others. The basic premise is to use capital goods in such a manner that maximum value can be derived from them. The sharing economy allows people to earn money from their assets when they are not using them. For instance, Airbnb lets people rent out the rooms in their houses when they are not being used.
On the other hand, Uber allows people to rent out their cars. Several other companies allow the sharing of everything from broadband internet to sports goods. The idea is to convert spare household items into capital that can be shared with others.
At the present moment, the sharing economy is not subject to a lot of regulation. This is important because the providers of capital in the sharing economy are small individuals. Big corporations have the time, money and the systems required to comply with regulation. Small businesses, on the other hand, cannot comply with regulations. However, the absence of regulation is also what is making this business lucrative. For instance, cab drivers have to procure licenses from the state in which they operate. These licenses are restricted to ensure that the cab drivers get enough profitable business. However, Uber drivers do not need any licenses. Hence they increase the supply of cabs in the market. This brings the price down for everybody. Lack of regulation is a controversial subject. Some people argue that the lack of regulation is a good thing whereas others argue against it.
The sharing economy is based on the concept of freely available information. For instance:
Operating a business based on the sharing economy is impossible in the absence of such information. This is the reason why sharing economy companies are basically technology companies even though the end products they sell may be cabs or accommodation services.
The sharing economy does not believe in the concept of an employee. Instead, sharing economy companies have created employee contractors. This means that they are the owner of their own assets. Also, they decide when they want to work. They can have flexible schedules and can take time off whenever they want. This flexible schedule is a boon for many people. For instance, some housewives or students can work only at certain hours. It is the sharing economy that gives them the flexibility to do so.
The only problem with the sharing economy is that it does not let workers set their own wage. For instance, Uber decides what price their drivers will take from the customers. This decision should also be decentralized. This will help companies avoid allegations that sharing economy is inherently exploitative in nature and exerts downward pressure on the wages.
At the present moment, the concept of sharing economy is relatively nascent. As the concept matures with the passage of time, it should be able to get rid of some more problems and inconveniences associated with it.
Your email address will not be published. Required fields are marked *