 Now, welcome to the third issue briefing of the day, day two of the annual meeting of the new champions, you will have noticed as we are going through the meeting, we are moving subtly from the science and technology, we had robots and mind reading and invisibility cloaks this morning, moving on to financial regulation and again here is another digital disruption most definitely on the business side of the meeting. We're talking about the sharing economy in this session. I'm very, very glad and proud to be joined by an expert not just in the sharing economy but or round in digital transformation and the effect it is having on job's employment and skills. It is Aaron Sunda Rarragen. He's a professor and the Rosen Faculty Fellow at New York University here to answer any questions in true issue briefing style. We'll start with some mae'n fawr o gweithio'r cymrydau gwybodaeth ar Arun, a rydyn ni'n golygu gydag hynny o fynd i'w cwestiynau'r gwestiynau. Rydyn ni'n gweithio'r cymrydau sefydlu'r gwestiynau arall yn y llunio'r gwestiynau. Rydyn ni'n gweithio'r gwestiynau arall yn y sosial mediae ac mae'n gweithio'r gwestiynau arall yn y gwestiynau. Rydych yn gweithio'r gwestiynau ymlaen i gydag ymlaen ffôrwm.org. Arun, rydyn ni'n golygu'r gwestiynau yma? Well, I don't think it's going to spell the end of capitalism, it's just going to transform it into a world where capitalism is more crowd based rather than being industrial. If you think about it, the sharing economy's primary impact has been most saliently on the transportation industry. It's certainly got the automotive sector worried. Short term accommodation, the hotel industry is definitely sort of being disrupted in part by Airbnb. And so these are particular industries that seem to be changing quite significantly now because of the creation of peer to peer markets that threaten the traditional business model of industrially or institutionally provided accommodation or transportation. The industries that I see sort of following are likely to be perhaps sort of alternative energy, certainly healthcare. Additive manufacturing will create a whole host of peer to peer alternatives to traditional manufacturing, so those are the industries that might go. To address the issue of whether it's a flash in the pan or whether it's something that is here to stay, I definitely think it's here to stay. There are a number of ways in which it's going to redefine what we think of as a job. In 10 or 20 years from now, a much larger fraction of the world's population is going to make a living doing multiple things through platforms in some ways being micro entrepreneurs of sorts rather than holding one job in which they sort of work a fixed number of hours every week or every month and get paid by one institution. And so it's here to stay, it's hitting some industries now, it's going to sort of expand its scope of industrial disruption and it's going to redefine what it means to have a job. I suppose you couldn't have any clear indication that an economic transition's time has come than having the Premier of China mention it in his speech in the plenary session at this meeting indeed here today this morning. Give us an idea of what you think is transformational capability is for countries like China, other large markets as well as the markets there, the US where it's possibly the most advanced and most developed. Yes, I was happy to hear the Premier remark this morning that the mass entrepreneurship and innovation that is facilitated by the sharing economy is likely to improve the state of wealth distribution in China. And I think what he's alluding to is the fact that if more and more people own tiny businesses rather than just being providers of labour, they start to be owners of not just providers of labour but owners of capital as well. And as a consequence the fraction of the population that is able to innovate that owns their own business and that is part of the segment of the population that sort of is that faster growing segment, the segment where people who own capital tend to sort of see higher income growth rates than people who provide labour and so that will be equalizing in the long run. To me China is the biggest potential market for the sharing economy in the world, bigger than the United States for sure. The reasons for that are simple. Currently the major enabling technology for the sharing economy has been the smartphone, the fact that you've got a sort of internet enabled, high speed platform based computer that hundreds of millions of people carry around in their pockets. And so it allows you to sort of redefine how you consume. You don't have to own, maybe you can sort of get it when you need it. You can call a taxi on demand for example. So if you start with that point and you realize that China has 600 million smartphone users at this point, more than any other country, like there are two smartphone users in China for every smartphone user in the United States, more than two. And so the set of sort of the population, like the middle class and the upper middle class, even though their total spending power per person is lower, the sheer size of that segment in China over the coming decade is going to make this the biggest market for the sharing economy. At this point, DD Qwadi, who you'll see on a panel tomorrow, I believe has three times as many users as Uber just in China compared to Uber around the world. The Airbnb just made a significant sort of advance into China. The second largest Airbnb-like sort of company is based in China. And so I think that these countries, India, China, Brazil, Russia, will have to sort of create a large fraction of the world's work sort of in the coming decades. And I think a key enabling factor is going to be the sharing economy. The sort of like mass empowerment, mass entrepreneurship, mass innovation will have a much bigger impact on the countries which have a much greater need for job creation and job growth. It's interesting when you put it into the context of jobs and of course we do a lot of work here at the forum on the future of jobs and which industries will be most affected by disruption and transition. I guess it's interesting. The future of jobs is changing and of the 100 million plus jobs that need to be found just in Africa alone every year, they're not going to be created in factories or in shops and services. They're going to be created by people owning, actually having access to finance becoming investors in their own right. And in some sense this is very empowering because you don't have to actually depend on an industrial provider, a factory, sort of like a garment manufacturer, a call centre operator to be able to sort of create employment for hundreds of thousands or millions of people. Instead individuals can sort of sense what the market need is in their country and they are given access potentially to the capital and to the tools necessary to be able to sort of transform that understanding of a local market into a small business. And so to me there are often two scenarios that are painted about the on demand or gig economy that is sort of like associated with the sharing economy. One is if you're interested the forum published a blog post that sort of describes some of these issues this morning. But like you know one of the scenarios is always the empowered entrepreneur and this is the scenario that many of us believe in that like you know you will sort of scale the set of people who are able to actually sort of realise their dreams like you know sort of these platforms become gateways to innovation finishing school for entrepreneurs. And then there's the other scenario the more dystopian scenario where you have like you know sort of lots of people plugged into these platforms providing labour and the platform captures sort of like you know most of the economic rent. And so it's going to be interesting to see which of these two plays out more saliently but early indicators from my research and the research of others are that it will be the first scenario. Lots of points here I'd like to develop. Let's focus on China because this week Uber announced a large raising of capital to fund expansion, a billion dollars I believe. Leads to the question is that going to lead to a saturation of the market? Can the market just expand exponentially to suit the amount of capital there? Well that particular sector sort of point to point urban transportation is in a sort of dramatic growth phase. And I think that there are two things to take into consideration when thinking about like you know sort of the massive amounts of venture capital that are going into the sector. Uber has six billion dollars, they've got a billion dollars for China. Didi Qwadi which is sort of the market leader in China has close to four billion dollars in venture capital. But you know first of all like you know this is a point in the evolution of this industry where like you know the platforms are trying to sort of capture supply. They're trying to get as many people driving cars as possible to plug into their platforms. And you know a driver in Shanghai does nothing for the demand in Beijing. A driver in Dalian does nothing for like you know the demand in Shanghai. And so this is sort of a supply build out city by city. It's sort of like you know very capital intensive. And so like you know I fully expect that more and more capital will be sort of expanded in this growth phase. But these are small numbers if you put them into context. Right because if you think about it what eventually this industry will threaten is the automobile industry. The notion of owning your own car. The alternative being you sort of call one on demand whenever you need it as an alternative to car ownership. And if you think about that like you know the average car in the United States is used like five or six percent of the time. So it's got very low efficiency of use when it's being used it's sort of being used at 20 or 30 percent capacity. So you've got one to two percent and the things aren't very different in China or in Europe. And so you've got one to two percent capacity utilization for an industry that is often like you know a low double digit percentage of GDP. It's like you know a trillion dollar industry in the United States or close to a trillion dollar industry here. So when you put it into context like a few billion dollars into venture capital that like you know is shaping what might be the biggest disruptive threat to the automobile industry before autonomous vehicles become a reality. Then it's not such a large amount of money and I don't see any danger in market saturation in the near term. Okay so this point where I normally open the floor to questions. Do we have any questions. Lady there so two ladies lady there first please and then we'll go to this lady in the second row. Could you remind us where you're from and your name. It's working. Sorry can you start my question again please. It's working now. It's working now. You mentioned Professor you mentioned two points about one about the mobile user base and the consumer base in China. I just want to know besides these two and how do you how would you evaluate the the eco landscape of this. Shared economy in China and my second question is there there's enhanced competitions here in China for for the shared economies no matter it's transportation or housing. But on the same hands you mentioned that the premier appeal to more opening up to the new economies to the shared economies and the enterprise and the collaborative needs. Between Chinese companies and the international peers how would you think this factor will shape the industry in the next five years. Thank you. Okay I'll try and address your first question briefly and then maybe touch on your second. Yes like you know sort of a technology a technologically enabled population is an important part of like you know sort of a vibrant sharing economy. These technologies are fundamental enablers a digital trust infrastructure that is also emerging is another key enabler. I also think that an advantage that China has in sort of like you know being a promising sharing economy marketplace is that say take the United States a lot of consumption behaviors are already entrenched. People are used to owning their cars a vast majority of the population that is a potential car owner already owns a car. Like you know a large fraction of the population got used to staying in hotels and so there was sort of a big behavior shift that was needed before Airbnb got popular. And there is a huge behavioral shift that is necessary in the consumption patterns of US customers before Uber becomes a viable alternative to owning a car. In China on the other hand people are much sort of not as far advanced along in that sort of consumption cycle. A significant fraction of the population is just learning sort of consumption behaviors right and just scaling it. And so there's a very good chance that they will come of age as consumers in a world where the sharing economy alternatives are available. So we won't have to have to switch them from owning two cars to taking DD. They will just sort of start doing that as consumers and so the transition will be a lot easier to touch on your second question. You know I think the most you know I think whether it's a multinational platform or a China based platform that's less important actually. What's more important is that these platforms facilitate this kind of large scale entrepreneurship. You know people who are Uber drivers are sort of taking small loans and setting up their own small business right and this is happening. Millions of drivers now are providers of like you know transportation but they're doing it as a tiny business owner. So I think this is the kind of sort of mass entrepreneurship that is being enabled. When marketplaces like Alibaba and Etsy sort of take off your empowering millions of people to become manufacturers and retailers. Not large scale massive manufacturers and retailers like Walmart but manufacturers of one sort of like you know the makers that the premier mentioned that he had visited and sort of small scale retailers. And so whether it's through a multinational platform or whether it's through a domestic platform I think the critical element here is to make sure that the platform itself is facilitating enough entrepreneurship and innovation and not converting these providers into simply providers of labour that they should sort of retain some capital ownership as well. OK. The lady in the front row. I'm from Bloomberg Business Week. I want to ask a question to Chinese. So my question is that you have mentioned that in the shared economy there are some industries that might be changed including the alternative energies and the manufacturing industry. So my question is how in what way will the shared economy impact and change those industries. And the second question is in the development of the shared economy what might be the obstacles like the regulatory obstacles that may have the industry on the shared economy. So the question is about like in how exactly is the sharing economy going to change industries that I mentioned are on the horizon like manufacturing energy health care. And so if you think about it right now the provision of energy is largely centralized. There is sort of institutional industrial sort of scale production of power that is then distributed. And so it's you know it's an industry in which you have a few large providers. Like you know there are solutions emerging where someone can finance you know I can finance someone's solar panels. They can set up solar panels. They can become a provider of solar energy not just for themselves but for a couple of people who are close to them. And so at this point in time like you know individuals can start to sort of become producers of energy. Not just for themselves but through a peer-to-peer market for people in their local community. And so there is a lot of efficiency that is gained by this because you don't have to sort of transmit the power from sort of a distant source. So I think as the sort of localized alternative energy options start to take off through peer-to-peer markets we may see a decentralization of the supply of energy. Similarly in manufacturing we're seeing a transition away from reductive manufacturing. Like you know which is today's manufacturing model where you sort of take a sort of like you know you take sort of like raw material and then you reduce it to what it's supposed to be. And now we're seeing the emergence of increasingly sophisticated 3D printers which are additive manufacturing where you sort of create it from scratch. You create it from the material rather than taking the material and reducing it. As these 3D printers get more and more sophisticated again it decentralizes the manufacturing process. You know you don't need a large scale provider of smartphone covers for example. Any individual can design a smartphone cover today and can sell the design and someone prints it on the local 3D printer. And so this completely sort of is a rethinking of the model of mass manufacturing in which the manufacturing is decentralized and sort of put in the local community. Similarly I think in the provision of low end healthcare for example you cut your finger while cooking and like you know you need to get it stitched up. You know I think that there's a big market opportunity for peer to peer provision. Like you know qualified healthcare provider gets connected to you through a sharing economy marketplace and fulfills that by passing the need for example to go to an emergency room. And so in certain sectors I see that there is inefficiency in provision of certain things in the traditional industrial model. That as these technologies sort of progress alternative energy additive manufacturing we will see sort of a shift towards like you know sharing economy or peer to peer models. Any other questions? Lady in the third row. Ni haw, sy'r Laiser Tengyn. I'm from Tencent. And from your presentation I heard that the shared economy impacted housing and the transportation including the Airbnb, the emerging Airbnb and you also mentioned the potential in China of shared economy is higher than in US. But I have a question that China has a short house leasing company that just copy Airbnb. And actually there are less houses that are shared by the individuals than the houses shared by the intermediaries. So the intermediaries actually take over providing more housing resources. So in this situation when the shared economy really take off here in China that might be some people that might be impacted. So for this kind of issue how to deal with that? That you know there's certainly a question of is the supply going to come from individuals or is it going to come from new intermediaries. That sort of like say aggregate like you know hundreds of apartments and then start to provide them through like you know an Airbnb like platform. That's certainly a possibility. I think that what will determine the answer to that question will be two factors. One will be the regulatory issues that actually came up in a previous question. Right now there are regulatory barriers for example in the United States to being a large scale sort of like you know intermediary that is providing sort of apartments as hotels. And so that has been a barrier to the emergence of these intermediaries in the US. I'm not sure if similar regulatory barriers exist in China but you know that will be one determining factor. A second determining factor will be the amount of supply like you know the amount of excess capacity. If there is a lot of spare real estate then these intermediary model is more likely because they can just take over a bunch of apartments and repurpose them a short term accommodation. If on the other hand the real estate is being used efficiently and so you are tapping into small slices of availability of space someone's spare bedroom someone's apartment when they travel. That kind of situation is much more likely to lead to individuals being the suppliers rather than intermediaries. Aaron we're running out of time but I want to just pick up on one of the points you made which is actually going back to jobs. And you paint two scenarios. One is a virtuous scenario practically where people are empowered by the sharing economy and another one is whether the platform comes off best. There's going to be winners and losers for sure and I think believe you've done some research into which various industries. Either way there's going to be a lot of work in terms of gearing people up for this new structure of work. Getting them to think like entrepreneurs getting governments to provide safety nets to give a bit of security and to cover the move towards a more flexible style of working. That's going to cause a bit of pain in the short term. What's your view on how to manage that process as sustainably and stably as possible? On the provision of the safety net I think that's going to be one of the big challenges of the next couple of decades. We have evolved into economies where in a number of countries the provision of the things that we're proud of. The things that we associate with progress like income stability, paid vacations, health benefits, insurance, worker protections. All of those things are tied very closely to having a full time job. We're going to have to start decoupling that and we have to come up with a new funding model for these benefits because they don't come free. At this point in a number of economies they are funded largely by the company that you work for. We have to invent new ways of funding these capital contributions to society. I think that for some countries there will be a greater role that government will play. I think in other countries, in particular in the United States and the UK, I think that there are going to be new government individual market partnerships where the individual somehow contributes to the provision of the safety net. The government provides a tax break like the platform or some other sort of corporate entity that you might be connected with also might play a role. But it's not going to be an easy transition. It's a time when we need to be vigilant because it's very easy to imagine a situation in which these hard-won protections sort of slip away gradually over time. Then we look back in a decade and we say, hey, this has led to a lot of economic efficiency but I'll be really better off. Of course also when business leaders are under pressure actually raise wages for the benefit of wider economic growth. So again you're having downward pressure on wages through the growth of the sharing economy sometimes. I think that in that sense what the eventual ownership structure of the platforms is is going to play a critical role in determining how the spoils are divided. There are a number of proponents of the idea that much like a worker cooperative, a platform might be owned by its providers. That's an extreme scenario. I think that there may be sort of a middle ground where key providers take sort of stock ownership stakes in a platform in the same way that employees have in certain companies. But this has to be structured in a slightly different way. But I think as we sort of spread ownership among the base of people who are the suppliers, we will naturally probably end up with sort of a more robust funding model for these capital contributions. I think what government should be doing is realizing that the idea that your workforce is a set of people who work for one company and receive a salary is a 20th century notion. And the 21st century workforce is going to be in a much larger way a group of entrepreneurs rather than a group of salaried workers. And finally, would you agree then that the most critical factor that will underpin the success of the sharing economy is getting that platform right and getting the safeguards in place and the regulation in place to make sure that it's geared towards providing that kind of framework that protects workers and wages. Absolutely. I think in the early days of the sharing economy, which is over the last five years, the key regulatory battles that have been fought have been on consumer protection. You know, on like, you know, our taxis, you know, we've got all this safety laws for taxis and hotels, like, you know, they translate to Airbnb and Uber and DD and. But I think over the next five years, the key regulatory battles are on the provider protection or the worker protection. And so certainly sort of those are the critical policy choices for the next few years. Aaron Cymdorarrager. It's been a pleasure having you down here in the issue briefing room. Thank you very much. Thank you for having me. Thank you for joining us here today and thank you for watching online. This issue briefing is now closed.