The Cult of Sharing

The sharing economy’s marquee startup Airbnb recently unveiled a new brand identity and positioning to help propel its international expansion. Airbnb’s new wordmark and logo nicknamed “the Bélo” is said to have been the culmination of a year-long process, including a cross-cultural analysis to ensure their identity would be understood around the world.

Exhaustive branding efforts are unusual among pre-IPO Silicon Valley companies. For years they’ve leaned on primary colors, gradients and rounded fonts, default signifiers of fun and friendliness that negate the staid formality of the more conventionally-minded business world, attempting no greater meaning than “this is not your father’s corporation.” Even Google only starting taking its brand semi-seriously in 2010, six years after it went public.

In keeping with their self-identity as midwives of emancipation and utopia, the industry has historically relied on the form of the manifesto over the logo as its preferred vehicle for communicating with the public. In works like A Declaration of the Independence of Cyberspace, The Cluetrain Manifesto, The Wealth of Networks and Here Comes Everybody, writers have found success marketing Silicon Valley in populist terms. By conflating political action and market transaction, they are able to claim that their products are no mere trifling gadgets or mundane information processors, but serve a higher purpose.

Apple’s classic ad 1984 from the same year exemplifies this strategy. Its competitor IBM is represented as a repressive authoritarian government against whom we could strike a blow by purchasing Apple products. This idea has been endlessly imitated with only minor changes required to support the industry’s later reliance on user-generated content and ad-supported business models. Instead of purchasing, the new demand that we participate carries even stronger political sounding connotations.

Whatever the benefits to these companies’ bottom lines, such a framing directs us away from politics. It misrepresents consumer choice as a form of empowerment, and turns the market into a field for social change. It tells us that public, democratic decision-making is clumsy, slow, a boondoggle, incapable of innovation, or an intractable deadlock that is best ignored while tech entrepreneurs get on with the business of changing the world through capitalism.

Believing that their work is more significant and important than the work of government allows software developers to feel a profound sense of agency exceeding that of the president. One software developer at Facebook declined to hear Obama speak at his workplace, reportedly saying “I’m making more of a difference than anybody in government could possibly make.”

But in the last few years, the tide has shifted. Tech companies have taken a new interest in advocating for their policy preferences in Washington, forming lobbying organizations like FWD.us and The Internet Association. The latter bills itself as “the unified voice of the Internet economy” and claims to represent both the industry—counting Google, Amazon, eBay, Facebook and many others among its membership—and their “global community of users.” Few trade associations are so bold as to claim to have unified the pursuit of their financial interests with the values and beliefs of its customers. Silicon Valley’s unique marketing strategy linking their products with a higher purpose makes it sound plausible.

One such higher purpose often invoked by technology marketing is the promise of community. We’re told that technology can restore a sense of community that modern people have lost, and this can be achieved through greater connectivity, collaboration, communication and participation brought by digital networks. Such dreams predate the internet. Half a century ago, Marshall McLuhan declared that the expansion of communication networks would overcome the fragmentation of our world and remove the obstacles of time and space that separate people from each other. His term global village suggests a sense of connection, belonging and intimacy that we presume to be abundant in village life but absent in the anonymous modern city or suburb.

Despite an apparently exhaustive branding exercise, Airbnb’s new brand positioning doesn’t stray far from this basic formula. CEO Brian Chesky’s announcement of their new strategy carries a clear influence from McLuhan:

Cities used to be villages. Everyone knew each other, and everyone knew they had a place to call home. But after the mechanization and Industrial Revolution of the last century, those feelings of trust and belonging were displaced by mass-produced and impersonal travel experiences. We also stopped trusting each other. And in doing so, we lost something essential about what it means to be a community. […] At a time when new technologies have made it easier to keep each other at a distance, [Airbnb users are] using them to bring people together. And you’re tapping into the universal human yearning to belong—the desire to feel welcomed, respected, and appreciated for who you are, no matter where you might be.

Chesky claims that these communitarian values define Airbnb. That may well be true, but they also define a large number of other sharing economy startups. TaskRabbit says it’s about neighbors helping neighbors, not just providing temporary labor, and Lyft wants us to think their drivers are just a friend with a car.

Peers bills itself as a member-driven organization dedicated to “promoting and defending the sharing economy” and adorns itself in similar slogans and stories from its members about the social benefits of the services it represents.

These services need to be defended because some of the activities they facilitate are regulated by city governments, who quite sensibly require proper licensing, insurance and permits to run a taxi service or hotel. Peers addresses this problem by mobilizing its network of consumers and workers to attend city council meetings, sign petitions and write to local government officials in support of regulatory changes.

Peers represents itself as a grassroots organization, but given its close ties to startups with billion dollar valuations, its worth considering whether it is an astroturf organization. According to its executive director, the idea and initial funding for Peers came from Airbnb and has received money from other “mission-aligned” executives and investors. But on the other hand, real people are signing petitions and contacting their elected officials—by all accounts acting like citizens. Are we to suppose that all these people have been manipulated to act as corporate stooges? If Peers was manipulating its supporters, how would it do it? How would it mobilize a global community to dedicate itself to this corporate cause?

What role does marketing play in the construction of communities around a business? For a new breed of advertisers like Chuck Brymer, CEO of leading agency DDB Worldwide, the answer is a great deal. Brymer believes that with the rise of the internet, advertising is moving away from the traditional propaganda model of influenced rooted in broadcast media, and becoming a dialogue with consumers and among consumers. Generating buzz, facilitating interactions among consumers, reaching influencers and turning them into brand ambassadors becomes key to successful marketing. Their Twitter bio says it all: “Connecting people with people, not just people with brands.“ In the end, says Brymer, the Chief Marketing Officer role will evolve into Chief Community Officer.

Aligning with this philosophy is a book published in 2004 titled The Culting of Brands: Turn Your Customers Into True Believers. It was written by a former advertising executive who studied cult brands like Apple, Saturn, Harley-Davidson and jetBlue with fanatical followers, and real cults like the Unification Church and the Hare Krishna movement. His goal is to understand how cults recruit and maintain members, hoping to teach the tricks to marketers to inspire the same kind of fierce loyalty, religious devotion and vibrant community around their brands. The book is a manual for achieving corporate goals by exploiting consumers’ emotions and need for belonging, meaning and purpose.

It achieved only modest reach, but the book is important to understanding sharing economy marketing strategies because the author is Douglas Atkin. Since 2013, Atkin has been Global Head of Community and Mobilization at Airbnb, and Co-Founder and Board Chairman at Peers. Already in 2009, Atkin began to apply his cult-branding techniques to the political problems facing his clients, co-founding Purpose, a consultancy which uses the viral tools of digital marketing to launch social and political movements on behalf of paying clients.

If we want to understand the ideas and strategy behind Airbnb’s and Peers’ marketing, there’s no better place to start than by reading the book written by the mastermind behind it all. And it is vital that we do understand it, because Atkin’s method is a dangerous new tool that can be used by elites to undermine democracy and manufacture public support for their interests.

The book begins in a defense posture. Atkin, well aware that his premise is highly contentious and potentially unethical, asks “Aren’t cults manipulative, evil organizations intent on exploiting the gullible? Should they be a source of insight for commercial gain?”

His book aims to show that brands satisfy important human desires in the same way that cults and religions do, meeting needs of belonging, making meaning and making sense of the world. But he sidesteps the ethical question in troubling ways. His position is that cults are a good thing. They’re normal, people join for good reasons, and we should suspend our prejudice. The popular stereotype of cults as manipulative, dangerous and even suicidal is true to a certain extent, says Atkin, but that’s only because only the dangerous ones get all the press. All religions began as cults, and contrary to popular belief, most cult members are normal, psychologically healthy, intelligent well-educated and socially well-adjusted individuals.

This is the full extent of Atkin’s confrontation with the ethics of applying cult techniques, breezing past the most troubling aspects of his thesis in less than two pages. His point, such that it is, is well-taken. Mainstream society unfairly stigmatizes former and current cult members, treating them as damaged goods. But the truth of this insight obscures a subtle deflection of our concerns about cults. We worry about authoritarian tendencies, manipulation and exploitation by the cult leader, his ability to persuade his members to act against their best interests. Atkin reframes this as a prejudice against cult members, waving away legitimate ethical concerns as if they are all simply narrow-mindedness about how unorthodox people choose to live their lives.

We don’t need to claim that all cults are bad to ask if it is wise to use them as a model for corporate marketing. Cults may be harmless in many cases, but when they aren’t, the results can be catastrophic. They seem to be uniquely vulnerable to corrupt and exploitative people who put themselves in leadership positions.

But Atkin treats this almost as a desirable outcome. He is fascinated by why people join cults and what inspires their intense loyalty. “Why do they throw time, money, sometimes their careers, the regard of their peers, and even their families on the cult of belonging?” he asks. He interviews a fanatical Apple fan who often couldn’t afford lunch but always upgraded to their latest computer model because he wanted to support the company.

In the popular imagination, cult members are believed to be mindless conformists, but according to Atkin, nothing could be further from the truth. The real key to creating a cult (and a cult brand) begins with individuals who feel a sense of alienation. The feeling that they don’t fit in with society leads potential cult recruits to seek a place that they can truly call home, until they stumble upon a welcoming group that understands them, supports them and celebrates their difference instead of rejecting it. This sets the stage for the cult member’s self-actualization. Interviewing cult members and brand devotees alike, Atkin found they express the same feeling of becoming more coherent and whole as individuals, true to who they really are and more in touch with themselves. He says,

Cults will flatter you. They will make you feel special and individual in a way that you are unlikely to have felt before. They will celebrate the very things that make you feel different from everyone else; the members will get to know you deep down, and they will love you for what they find you. And you will love them.

So the key to attracting cult-like devotion is healing potential recruits’ sense of alienation. Although cults are often perceived to be taking from their members while giving little in return, cult members do receive something of value from the cult, meeting some of their deepest desires to become their authentic selves.

Having determined what motivates cult members, Atkin delivers a strategy for brand managers. To attract people who feel different, cult brands also have to be different. It’s a four step process.

First, determine your brand’s sense of difference. The motorcycle brand Harley Davidson cultivates an image of individualism, rebelliousness, adventure and a willingness to throw off the constraints of conventional suburban life. The brand’s official guidelines state: “Harley Truth#1: Harley is not for everyone.”

Second, declare your difference—the belief system that set you apart. “Framing a clear system of ideas that depart from cultural norms provides the sharpest delineation between the organization and the rest of the world. And it provides a beacon for the disenfranchised,” says Atkin. At the same time, cult members must feel a sense of ownership over the ideology, it can’t just come from the top down.

Third, demarcate the cult from the status quo by creating symbols, rituals, jargon, texts, clothing—a tangible way for cult members to live their difference, to mark themselves as apart from the mainstream. For Harley Davidson, there is the uniform of the riders, the leather jacker; slang; the brand’s and Hell’s Angels logos; and so on. Similarly, Hare Krishnas feel a sense of separateness through avoiding eating meat and chanting mantras, and Mormons gain exclusive access to parts of their temple and wear spiritual garments underneath their clothes.

The final step is demonize the other. For Steve Jobs and the Apple cult, it was Microsoft and IBM. For Richard Branson’s Virgin Airlines, it was British Airways and American Airlines.

But according to Atkin, establishing a cult brand’s beliefs and sensibility are not enough because people don’t really buy into the ideology anyway. As much as conventional brand managers think that projecting a compelling system of values to consumers, human interaction is what really gets people in the door and makes them stick around. One cult brand, JetBlue, obsesses over every interaction that customers have with gate agents, check-in personnel, telephone agents and flight attendants, ensuring that the brand values of bringing humanity, caring and fun back into air travel are reinforced at every point of contact.

Academic studies support his point of view. Atkin cites sociologists who study the Unification Church. They discovered that most people were brought into the church by forming relationships with individuals in the church. New recruits first buy into those relationships—the ideology comes later. Research into the Mormon church confirms this pattern, showing that individuals with more in-group ties to individual church members become more devoted to the church and its belief system.

If a cult is first a community and then an ideology, it follows that fostering social interactions and the formation of ties among members of a cult brands is crucial. To build cult brands, businesses should build community, and Atkin thinks businesses are well-suited to building just the kinds of communities that modern people want: looser, more ad hoc communities that require less commitment and where members are bound together less because of a shared geography, and more because of common interests and ideas.

Atkin views the practices and structure of the Mormon religion as exemplifying important attributes of corporate brands. To bind the community together, church officials created a home visit program that ensures a high degree of interpersonal contact between members. This program is especially aimed at new recruits who are most at risk of leaving and the church maintains an extensive database of contact information to guarantee that no one is forgotten.

From the perspective of new recruits, these home visits are framed as fellow church members coming to see how you are, offering to help with any material needs, invite you to social events and to share a religious teaching once in awhile. Members are visited by fellow community members, not official agents of the church coming to preach the doctrine. But nonetheless, the church’s true motivation is to reinforce its members’ belief, knowing that ideological commitment comes not from being convinced of the truth of certain ideas, but through a sense of belonging to a community that we presume does believe.

Atkin advises brand managers to learn this lesson, and strengthen the community by instilling a sense of mutual dependence and responsibility among cult members. It’s the key to the success of religions like Christianity, with its emphasis on charity; the U.S. Marine Corps, with its doctrine of never leaving a man behind on the battlefield; and brands like the cosmetics company Mary Kay. These have all written the ideals of mutual love and caring into their founding texts. We often assume that business is driven from a sense of individual achievement and competition, but Mary Kay abstains from these values, stressing that support and helpfulness are its core. According to the founder, Mary Kay Ash:

everything anyone in our sales organization does to succeed is based upon helping others. As beauty consultants, we must help our customers; and as sales directors, we must help our people to succeed. The company structure requires each person to help others in order to succeed. The individual who thinks ‘What’s in it for me?’ will never make it in our company.

Community comes first in cult branding, but ideology follows close behind. The need to make meaning is part of human nature, says Atkin, and the profit motive demands that businesses turn this need into a source of profit. And this means creating “values-led” businesses.

Today’s most successful brands don’t just provide marks of distinction (identity) for products. Cult brands are beliefs. They have morals—embody values. Cult brands stand up for things. They work hard; they fight for what is right. Cult brands supply our modern metaphysics, imbuing the world with significance. We wear their meanings when we buy Benneton. We eat their meaning when we spoon Ben & Jerry’s into our mouths. We get inside a company’s worldview when we step onto a Virgin plane, we shop their meaning when we check out at Whole Foods. Driving a Mini is becoming as political as fighting gas-guzzling SUVs via the Sierra Club. Brands function as complete meaning systems. They are venues for the consumer (and employee) to publicly enact a distinctive set of beliefs and values.

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It’s a strange kind of logic that claims that we have nothing to fear from cult brands because they tap into consumers’ real desires for connection and community. In fact, that’s precisely why we should be afraid. Isn’t it terrifying to think that brands can reach us at such an intimate level?

What if a corporation went beyond merely providing a product, but tried to meet our deepest psychological needs for intimacy, self-esteem and love? What if a brand could heal our deepest wounds? Whatever they were charging, we’d probably be getting our money’s worth. But viewing the situation through the lens of consumer rights fails to consider what customers would be willing to do for an organization that could provide a product that met a need so fundamental.

In his book, Atkin profiles Anita Roddick, a pioneer of so-called ethical consumption. Her cosmetics company The Body Shop was one the first socially responsible companies, promising consumers that shopping in her stores was an effective way of protecting the environment and supporting fair trade labor practices, charity and human rights across the world. The company also has the dubious distinction of being one of the first companies to have the term greenwashing applied to it. In 1994, Business Ethics published an expose titled “Shattered Image: Is The Body Shop Too Good to Be True?”, revealing that virtually none of this marketing was true.

Atkin relates this story as a warning to those who might be tempted to deceive the public with feel good marketing slogans that lack any underlying commitment. After The Body Shop’s debacle, Atkin claims that consumers became wise to these tricks. He says, “In today’s world, the faintest smell of hypocrisy from a commitment-based organization will surely become a PR debacle overnight.” And now with access to the internet, he believes it’s impossible for consumers to be taken in by deceptive marketing.

But Jon Entine, the author of the controversial report, found that many progressives and environmental activists defended Roddick despite knowing the truth. Many knew it even before he published his article. Entine says “they had willfully overlooked the hypocrisy… because they believed her message of social justice was inspiring.” This logic should strike us as deeply mysterious. How could someone continue to believe in The Body Shop brand knowing it is a fraud?

Slavoj Žižek often recounts a joke that illustrates the strange nature of belief: a man believes that he is a kernel of corn and, after a course of psychiatric treatment, he is eventually cured of his delusion. Leaving the psychiatrist’s office on his final visit, he encounters a chicken and runs back inside, terrified of being eaten. The psychiatrist asks, “But why are you afraid? You know you aren’t a kernel of corn!” The man replies, “Yes, I know that. But does the chicken know?”

The joke tells us that it’s not necessary for us to directly believe in an idea for it to have effects. It is enough that we assume that someone else believes. The delusional man in the joke imputed a belief on to the chicken, and so reacted in the same way as if he himself believed. The former Israeli prime minister Golda Meir confirmed this principle when, asked if she believed in God, replied “I believe in the Jewish people, and they believe in God.”

The true formula of a cult brand is similar: “I believe in the community and the community believes in the brand.” That’s what allows you to be inspired by a figure who you know is a fraud: the community believes in her, and you don’t want to shatter their delusions.

Atkin claims that the internet solves the hypocrisy problem because the truth is readily available. But as he himself notes, cult members attachment to the abstract ideology is secondary. Their first commitment is to very real, tangible bonds of community, the affirmation and sense of belonging that they receive from it. At the same time, the community is sustained by the mythos of the cult, so a threat to the belief system is a threat to the community, which is in turn a threat to the cult members’ sense of belonging and psychological well-being.

Cult brand turn out to be remarkably resilient even when its members know that it doesn’t live up to the ideals. They’re not naive, they may know the truth perfectly well. But they disavow it, paraphrasing Golda Meir to say “I know the brand is a lie. But I believe in the community, and the community believes in the brand.”

When marketing executives at “values-led” companies try to cultivate communities around ethical consumerism, it creates a new class of problems. Much like religious cults, cult brands manipulate their customers’ emotional and psychological needs and encourage them to construct their identities and lives around the brand. The collapse of the ideal would be felt as a personal catastrophe for its community, so the brand becomes practically immune to criticism.

We’re familiar with the archetype of the brand fanatic who is devoted to the company to excessive degree. They go on pilgrimages to the corporate headquarters, line up for hours in front of stores to be the first to own a new product, populate online forums where they connect with fellow fans and vigorously defend the company against criticism. As outsiders, we might feel vaguely discomfited by such intimate associations between customers and a brand, but who are we to criticize how someone chooses to spend their free time?

The marketing profession has long coveted word of mouth marketing as one of the most effective forms of advertising, and are surely delighted by an enthusiastic fan base who are readily converted to an amateur sales team. But what if their ambitions went beyond increasing sales? The community can be relied on to defend the company against competitors, and even bad PR. Could a devoted fan base be convinced to lobby their political representatives, perhaps to help remove regulations that stand in the way of the company’s goals?

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With Atkin behind it, it’s no surprise that Peers closely follows the cult brand formula laid out in his book. The voice-over in their promotional video tells us that “as peers, we’re building the sharing economy, a new economy with humanity at its center and community at its core.” The brand’s difference is rooted in the notion of sharing, a concept that has become increasing vague as its definition has expanded. Departing from our common understanding of the term, it now includes conventional financial transactions between people.

Promoters of the sharing economy apply the term to a wide range of these transactions: renting out your clothes, electronic devices, kitchen appliances and household tools is considered sharing. So is selling your time to strangers to do their laundry, clean their houses, drop them off at the airport, cook them a meal, watch their kids, help them with their homework or teach them a new skill. Startups that allow users to lend their money with interest to other users are also included in lists of sharing economy companies.

Much of what counts as sharing turns out to be nothing more than ordinary economic transactions between individuals arranged through digital platforms owned by venture-funded companies that act as middlemen, enabling them to take a percentage off the top.

But digital platforms that enabled community members to connect and share existed before venture capital arrived on the scene. Websites like Couchsurfing allowed people to open up their homes and couches to travelers from around the world. But no money changed hands. The benefits were strictly non-economic: meeting new people, experiencing new cultures and so on—true sharing in the conventional sense of the word.

It is tempting to conclude that the transformation of “sharing” is a corruption of this early ideal, that startups are trying to pull the wool over our eyes by misrepresenting the interactions on their platforms as non-economic. But I believe this conclusion is mistaken, and also misses something quite important.

None of the users of the new profit-driven services are under any delusion that they are transacting with others—the term sharing economy even highlights this fact. What’s crucial to realize is that proponents of “sharing” are reinventing our understanding of economic relations between individuals so that they no longer imply individualism, greed or self-interest. Instead, we’re led to believe that commerce conducted on their platforms is ultimately about generosity, helpfulness, community-building, and love.

It’s what enables TaskRabbit to claim that hiring a stranger to do your laundry, perhaps for less than minimum wage, is really about “neighbors helping neighbors,” as they put it. The company’s mission is to “revolutionize the way people work — by redefining what it means to be neighborly.”

It’s also why Etsy is often included in lists of sharing economy startups. Unlike non-sharing economy companies like eBay and Amazon who provide identical ecommerce services to sellers, Etsy qualifies because, according to its promotional material, “[the company] is more than a marketplace: we’re a community of artists, creators, collectors, thinkers and doers.” Their mission is “to re-imagine commerce in ways that build a more fulfilling and lasting world… a new kind of company that uses the power of business to solve social and environmental problems.”

The marketing of almost every startup in this space is saturated with this mood. Lyft’s “Community” video features wistful riders and drivers expounding on the benefits of the ridesharing service over the sound of a dreamy glo-fi beat. “Instead of just having a company come and pick you up, you’re having a person come pick you up,” says one rider. “There’s something about getting a Lyft that just puts you at ease—because this is a person that’s just like you,” says another. “You’re not just driving them around, you’re a friend first” agrees a third. “I love being someone they can depend on. I’m basically a buddy with a car,” and “It’s a great way for people to get to know each other in a way that they can help each other as well.”

Sharing economy investor and author Rachel Botsman says “At its core, it’s about empowerment. It’s about empowering people to make meaningful connections, connections that are enabling us to rediscover a humanness that we’ve lost somewhere along the way, by engaging in marketplaces like Airbnb, like Kickstarter, like Etsy, that are built on personal relationships versus empty transactions.”

Chip Conley, Airbnb’s new Head of Hospitality and founder of the boutique hotel chain Joie de Vivre, has a similar vision. At speaking engagements like TED and the Conscious Capitalism conference, he promotes the idea that businesses can profit by becoming venues for self-actualization and emotional connection for employees and customers.

Atkin himself claims that the sharing economy “is about much more than just making ends meet. At Airbnb, we are creating a door to an open world—where everyone’s at home and can belong, anywhere.” What motivates hosts to open their homes to strangers? The company produced a video called Airbnb Hosts: Living a Richer Life where we learn that yes, it’s about money—but not greed. The extra income helps hosts pursue very relatable goals: to follow a passion, save for their wedding, free up time to spend with their children and secure their retirement. But there are also non-monetary rewards like seeing the joy in their guests’ faces and helping them realize their travel dreams. Nalin, an Airbnb host from New Dehli explains “Nothing gives you joy like making someone happy. That is, I think, the reason that motivates me to be a host… The presence of a guest here is that you treat them like your family.”

In June 2013 at a technology conference in London focused on the sharing economy, Atkin announced the formation of Peers to a hall filled with fellow executives and investors, asking for their support and funding but not letting on that he was anything but an observer. Atkin repeats the standard line about community and connection, but also claims that the sharing economy has a redistributive function:

We literally stand on the brink of a new, better kind of economic system that delivers social as well as economic benefits. The old system centralizes production, wealth and control… the peer sharing economy is a new model that distributes wealth, power and control to everyone else. Best of all, the very things that have become the casualties of the old economy—things like economic independence, entrepreneurialism, community, individuality, happiness—it’s actually built into the very structure of this new economy.

The various startups, investment funds, media outlets and nonprofit advocacy organizations shout from the rooftops that their new, improved version of communitarian capitalism will heal what ails us. Although they couch the message in terms designed to appeal to political progressives, there’s nothing about the services themselves that prevents them from being attached to a completely different set of values. For example, John Stossel, a noted libertarian and TV host on Fox News, has championed Airbnb’s fight against what he believes is big government regulation keeping the little guy down.

The conservative news sites Human Events published a column praising the sharing economy for relieving the burden of following employment laws:

it’s an end-run around the increasingly expensive, heavily mandated and regulated business of hiring employees. As the burden on labor increases, creative fee-for-service arrangements become appealing alternatives to expensive, traditional “jobs.” It’s the next logical step after the large-scale transition of the American workforce to part-time status.

A senior fellow at the right-wing Cato Institute voiced his support for Airbnb in their battle to roll back New York City hotel tax, rent control and zoning laws:

New York State Attorney General Eric Schneiderman, however, is challenging the entrepreneurial innovation—probably under pressure from special interests who would like the government to stifle their competition. This is crony capitalism as usual… Cato has long supported free markets, entrepreneurship, and innovations to make goods and services more affordable. Government overreach like [Attorney] General Schneiderman’s campaign punishes not only AirBnB hosts and travelers, but also the New York economy…

Another senior fellow at Cato argued that the sharing economy’s use of reviews to control service quality means that the rationale for government regulation disappears.

“[Uber’s] review system makes it easy for the company to monitor driver quality without demanding too much effort from passengers… Which means the question isn’t whether the regulations need to be updated to accommodate a new kind of cab service: It’s why this kind of service needs a regulator at all.

The well-known Republican operative and future Burning Man attendee Grover Norquist recently weighed in, arguing that progressives’ ideological confusion over the regulatory issues facing the sharing economy is an opportunity for Republicans to take back control over major cities which are traditional Democratic strongholds.

The rhetoric of the sharing economy is designed to appeal to progressive liberals, much like “values-led” business in general. There are few “values-led” businesses which appeal to conservative values, suggesting that progressives are uniquely seduced by the view that capitalism is an effective tool for promoting their values and effecting political change. But it wouldn’t be difficult to invent a much more Republican-friendly brand for the sharing economy. In his speech at LeWeb before a group of investors and internet entrepreneurs quoted above, Atkin leaned in that direction, departing just slightly from the values of caring and connection and also stressing the values of autonomy, individualism and entrepreneurialism.

It is possible to move even further in this direction, rebranding the sharing economy as new movement that liberates individuals from the tyranny of the collectivism found in regular work, freeing them to become captains of their own destiny so they can pursue their self-interest by becoming small-scale entrepreneurs all while thumbing their nose at big government regulation. Brian Chesky, CEO of Airbnb alluded to this potential when he said to a group of Airbnb hosts, “There are laws for people and laws for business, but you are new category: people as businesses.”

But beyond the marketing, if people like Douglas Atkin, Brian Chesky and Rachel Botsman get their way, and the sharing economy as it is currently constituted expands dramatically to where a significant fraction of services are delivered using their business models, it will have serious negative long-term consequences for the people in their communities, and for all workers.

Sharing economy companies most often classify the people who provide services on their platforms as independent contractors—they are considered to be self-employed, not regular employees. At the end of each year, thousands of these contractors receive a 1099 form and their income is reported to the IRS. Since navigating the rules for filing self-employment taxes is not very straightforward, Rachel Botsman’s Collaborative Fund created 1099.is to help contractors understand their obligations. They say that the purpose of the site is “to try and help you to understand your taxes in the Sharing Economy.”

It turns out that employee classification is an important issue, and has some significant implications for both employers and employees.

The Department of Labor runs a program to go after companies who practice employee misclassification, a term used to describe companies who misrepresent their full-time employees as self-employed independent contractors. Because companies must pay more taxes for employees than contractors, the IRS and state tax agencies crack down aggressively on employee misclassification, treating it as a form of corporate tax evasion. To get a sense of the scale of the problem, the Government Accountability Office estimated that in 2006, $2.72 billion in federal taxes was lost by misclassifying employees.

The Department of Labor is also involved in investigating these cases because some employers try to avoid compliance with the provisions of the Fair Labor Standards Act and the National Labor Relations Act by misclassifying their workers. These laws give workers a host of benefits: the right to be covered by minimum wage laws, the right to overtime pay, the right to have employers pay social security, disability and unemployment insurance taxes, the right to family and medical leave, workers’ compensation protection, sick pay, retirement benefits, profit sharing plans, protection from discrimination on the basis of race, color, religion, sex, age or national origin, or wrongful termination for becoming pregnant, or reporting sexual harassment or other types of employer wrongdoing.

Workers classified as independent contractors are entitled to none of these benefits.

On its website, the Department of Labor says that “Business models that attempt to change or obscure the employment relationship through the use of independent contractors are not inherently illegal, but they may not be used to evade compliance with federal labor law.” That could mean that sharing economy startups are legal, but one former Lyft driver has filed a class action lawsuit against the company charging them with employee misclassification.

Whether the suit succeeds or not, the phenomenon of employee misclassification indicates that employers have strong financial incentives to use independent contractors to the point that they are tempted to break the law. A study showed that on average, misclassification allows employers to save $3,710 in taxes for workers who earn $40,000 a year, and witnesses testified to Congress that the labor savings of misclassification have allowed federal contractors to lower their bids by 20-30%.

The Obama Whitehouse has moved aggressively to combat this form of corporate misconduct, endorsing the Fair Playing Field Act and the Employee Misclassification Prevention Act, laws that require employers to inform independent contractors that they have the right to contact the IRS to have their status reviewed if they believe they have been misclassified. It increases penalties for violators, closes a tax loophole that allowed FedEx to dodge a $319 million bill for back-taxes owed when the IRS determined it had improperly classified some of its drivers, and makes infringement into a federal violation of labor laws. Obamacare also increases penalties for businesses who misclassify their employees to avoid triggering the requirement to provide health insurance if they have more than 50 employees.

When Human Events says that the sharing economy allows employers to do an “end-run around the increasingly expensive, heavily mandated and regulated business of hiring employees,” this is what they’re talking about. Silicon Valley entrepreneurs have created businesses that provide contract labor not covered by the federal regulations that employers find so burdensome. As Uber general manager Ilya Abyzov put it, “A driver contracting with Uber is not a bona fide employee.” The sharing economy is really the 1099 economy.

What would happen if the dreams of the investors and executives at these startups came true, and large parts of the economy became dominated by their business models? Employers that hire full- or part-time workers today—paying them minimum wage, overtime and unemployment, disability and social security taxes, and unable to discriminate against them—would switch to a cheaper, less regulated and more vulnerable workforce to do those same jobs. Having lowered their labor costs, they’re able to offer lower prices to consumers, forcing their slower competitors who rely on regular wage labor to adopt the same practices or go out of business.

Today, it’s illegal to misclassify your employees as independent contractors and companies risk fines, penalties and lawsuits. But in a few years, with a little Silicon Valley internet magic and a politically mobilized community bound together with the ideology of sharing, it might soon be possible.

So it won’t come as a shock to learn that venture capitalists have poured $600 million into sharing economy startups. Nor should we be surprised that taxi unions and hotel unions are on the streets protesting against these companies, and right wing thinks tanks, pundits and media outlets are lending them their support.

This makes sense—it fits with our understanding of whose interests are served by these new business models.

The only people who are confused about where they stand are sincere and well-meaning progressives. Many of the young leaders of Peers have impeccable credentials, having previously worked for liberal organizations like MoveOn.org, Organizing For America, the Sierra Club, the Democratic National Committee, Obama’s re-election campaigns, the Obama Whitehouse, and a host of other community, environment and sustainability organizations.

These progressives are unconcerned that investors stand to profit immensely because they’re convinced that capitalism, especially one with a friendly human face, can be a force for good. They delight in the warm community spirit of neighbors who do each others’ laundry, drive each other to the airport and take care of each others’ children. If propagating these peer-to-peer interactions between workers and consumers requires lining the pockets of billionaires and weakening protections for workers, the promoters of the sharing economy feel that it’s a reasonable tradeoff.

That’s because they’ve adopted a kind of cultural critique of capitalism. For them, the problem with capitalism is not the system itself, but rather depraved contemporary Western culture, which is greedy, individualistic, selfish and acquisitive, and rewards greedy, corrupt, ill-intentioned individuals. The opponents of the so-called culture of greed see the behavior of Black Friday shoppers rushing to grab the latest deals and Wall Street bankers as equal manifestations of the same general phenomenon, and perhaps believing that we get the leaders we deserve, conclude that the public’s moral flaws makes them in some way responsible for the greed of Wall Street.

The sharing economy is clearly not the kind of economy where wealth and prosperity is shared between rich and poor. On the contrary, it worsens income inequality and concentrates wealth in the hands of those who need it the least. Progressive advocates are well aware of this, but they also see an upside: these startups teach their workers moral lessons about sharing, community, giving and service with a smile.

Ariane Conrad represented this side of the sharing economy movement in her talk at TEDxBerlin called “Zombies into Neighbors”. In this talk, she played disturbing footage of an incident in 2011 when a toddler who was run over twice and then ignored by 18 passers-by as she lay by the side of the road, and claimed that this tragedy is a symptom a dysfunctional lack of community spirit and mutual caring in society, a logical extension of less extreme acts like failing to pick up litter in a public place, give money to a homeless man or help an elderly woman board a bus.

In Conrad’s view, we justify our lack of civic virtue in two ways: either we don’t have the time or money to help, or we don’t think we have the responsibility. She calls these two attitudes scarcity and greed, and finds their roots in the today’s cut-throat economic system. This is a reasonable connection, but Conrad somehow concludes that the sharing economy offers a solution, saying “To me, the great potential in this new economic model is that it rewards the better parts of human nature—not the greed, the self-centeredness, the selfishness, but the kindness, the empathy, the generosity… To me, the most exciting part is sharing responsibility for each other and for these places in which we live.”

If we accept the highly dubious notion that paying a stranger to drive you to the airport is a profound gesture of empathy and responsibility, maybe this is true. But only if we consider the users of these platforms. If we turn our attention to the owners, we find tremendous greed.

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In The Culting of Brands, Atkin provides four steps for creating a cult brand. Peers and the sharing economy in general have followed that formula perfectly. A cult brand must determine their difference with a distinctive ideology, then declare it to the world. As we have seen, the tireless efforts of its thought leaders in books and TED talks, sharing economy leaders promote a new compassionate capitalist ideology that promises to cure us of our feeling of alienation and reconnect us with our friends and neighbors, often depending on nostaglic images of an imagined past before the existence of big, impersonal corporations.

The third step is demarcating the cult from outsiders, marking its difference through symbols and rituals. When riders get into a car driven by a Lyft driver, they fistbump, an authentic gesture of friendship that enhances the feeling of belonging, so naturally Lyft makes it a part of driver training. Airbnb offers its hosts hospitality training to teach them how to add a personal touch to their interactions with guests so that they feel like family.

Peers has created the Dinner With Peers program, a potluck dinner that brings togther fans and participants of the service to connect with each other. The emphasis on interpersonal connection reinforces the communitarian brand values, but it also serves to recruit more people into the cult. Atkin advises following the strategy of the Mormon church: the key to creating devoted membership is social contact with other members—the deeper the relationships with others, the greater the devotion to the cult. Keeping tabs on all the members, which Peers does through its petitions and membership drives, is also important, and members run the program, just as Atkin suggests. Their marketing materials constantly stress that “Peers is a member-driven organization.”

Atkin’s fourth step is demonize the Other. For Apple fans, the Other is Microsoft, jetBlue fans demonize older airlines like United and Delta, and we don’t have to look far to see who this Other is for fans of the sharing economy. It’s the “old economy,” the bad kind of capitalism that emphasizes consumerism, selfishness and enjoying ourselves over the supposedly good kind of capitalism that embraces virtues of work (figured as a kind of love and self-sacrifice), giving, sharing and generosity.

The fact that this is an intangible Other is even better. Atkin tells us “Intangible demons can allow a cult or brand to dramatize threats that have no time limit on them.” But in its more politically-minded mood, the cult of compassionate capitalism has more tangible enemies: what they call “entrenched interests” like the hotel and taxi industries who supposedly threaten their community.

What Atkin has achieved with Peers is remarkable. He’s captured the imagination of his target audience, joining the ranks of other successful cult brands like Apple, Harley Davidson, Saturn, jetBlue and Snapple, and also tapped into his members’ need for meaning and purpose in their lives, creating for them a values-based brand like Ben & Jerry’s, The Body Shop and Whole Foods.

The question that’s usually posed about values-led brands is about greenwashing: whether they walk the walk, or like The Body Shop, just talk the talk. But the consequences of this kind of hypocrisy are rarely very serious. Consumers who spend their money with companies that rely on false eco-friendly marketing may feel defrauded, but the impact on the environment is probably no worse than if the brand didn’t exist at all.

The marketing of the sharing economy reveals a more serious threat. Using consultancies like Purpose, a company can create and build a community around a values-based brand that is much more than just a marketing strategy—the community can also be mobilized into a “grassroots” political force that will advocate for corporate interests.