Uber and Airbnb are Not the Digital Economy

When is disruption a bad thing? According to the London black cab driver I had recently, it is when Uber comes to town. A rival taxi company using an app for hailing and a GPS for finding its way around and charging less than black cabs is bad disruption.

There is no doubt that Uber is a threat to traditional taxi firms, which is why it is often held up as a shining example of digital disruption. We hear a lot about it being the largest taxi company in the world that does not own a single car. Airbnb is another one widely cited as a digital disruptor; being the largest room rental company that does not own a single piece of property.

But I wonder if they are really good examples of digital disruptors. They are not actually disrupting the business models themselves, those have not really changed. And, surprisingly, unlike other disruptors – such as Amazon or Google - they are not contributing much to the Gross Domestic Product (GDP) of the countries in which they operate.

At a recent conference in NYC, Fed economist Laurence H Meyer caused a stir when he said that the digital economy contributes nothing to GDP. The theory is that digital disrupters do not require the manufacture of additional goods – a key ingredient to the GDP calculation. 

My cabbie was complaining that Uber drivers, as opposed to black cab drivers in London for example, do not need to have specially built cars with disabled access. They do not need training, so there is no need for teachers or The Knowledge. Many Uber drivers do not even own a car – they borrow them or “rent” from other Uber drivers.

Airbnb hosts do not need to build hotels. They don’t need to buy new mattresses or food for guests. They don’t need to hire staff to manage bookings. They simply offer the use of an existing room/apartment/house in return for money.

Are these so-called digital disrupters bad for the economy? Or is it that GDP is no longer an effective measurement for economic growth?

GDP was developed during the industrial age, says the Harvard Business Review and “struggles to account for today’s intangible assets—services, insights, and networks.”

This may be true, but if you look at some of the true digital economy participants – Google, for example, or Amazon – they are providing jobs, building offices, buying computer hardware and software, offering training courses. All of these things contribute to GDP. In the UK, for example, the digital economy contributed 10% of GDP in 2015. According to Accenture, digital technology could power $2 trillion of global economic output by 2020.

Existing companies trying to become digital enterprises are just starting to embark on their digital journeys. Just a year ago, Cap Gemini said that only 7% of companies had “successfully allied digital technology capabilities with the ability to quickly self-organize and forge partnerships to drive digital initiatives.”

Once these organizations arrive at their initial goalposts, they will start to look like truly digital companies, using technology to better engage with their customers and to design entirely new revenue-making business models.  At this stage we will begin to see them add more jobs, more new business – i.e. goods and services contributing to GDP.

We need to find some real, shining examples of digital pioneers that not only actually disrupt a traditional business model but also contribute to the greater economic good. Because I don’t think the Ubers and Airbnbs of this world will hold up as true disruptors, and they are not really good examples of the digital economy.

Disclosure:

I work for a software company that specializes in helping companies with their digital transformation journeys, so obviously I have a bias. But I am also a former journalist, so I will always be as balanced as possible in my writing. Rational comments are welcome.