STUDY The California Challenge How(not) to regulate disruptive business models STEVEN HILL September 2016 „ „ The latest trend from Silicon Valley is known as the»sharing economy,« sometimes referred to as the»gig economy,«»on-demand,«»peer-to-peer« or»collaborative­consumption« economy. Dozens of»disruptive« companies like Uber, Airbnb, Up­work, TaskRabbit, Lyft, Instacart and Postmates have proven to be attractive to con­sumers and those who would like to»monetize« their personal property(real estate, car) or find flexible, part-time work. In some ways, these new platforms have the potential to provide new opportunities. But they also display a number of troubling aspects. „ „ Many of the CEOs of these new companies tend to follow an extreme philosophy of»economic libertarianism,« in which they resist regulation and try to evade pay­ing taxes. Theirs is a new business model, in which companies are little more than a website and an app, with a small number of executives and regular employees who utilize technology to oversee a vast army of freelancers, contractors and part-timers. „ „ Recent attempts by governments to regulate these companies provide examples of why poorly designed legislation that fails to comprehend the different nature of these companies will inevitably result in regulatory failure. In particular, the widely distributed workforce and anonymous nature of the commercial transactions that occur on these platforms make it all the more crucial that governments have access to the data of the commercial transactions that will make effective regulation pos­sible. Rather than providing the data, these companies have plowed significant re­sources into sophisticated political and legal operations to resist regulatory attempts. „ „ California and the US are several years ahead of Germany and Europe in these devel­opments. It is becoming clear that changes in the workforce may be more advanced than traditional measurements are revealing.