1242020 Scenario and Mega-Trend Model Scoring Guidehttps.docx

1/24/2020 Scenario and Mega-Trend Model Scoring Guide
https://courserooma.capella.edu/bbcswebdav/institution/BMGT/
BMGT8132/190700/Scoring_Guides/u01a1_scoring_guide.html
1/1
Scenario and Mega-Trend Model Scoring Guide
Due Date: End of Unit 1
Percentage of Course Grade: 15%.
CRITERIA NON-PERFORMANCE BASIC PROFICIENT
DISTINGUISHED
Evaluate scenario
planning and trend
convergence
theories, models,
and processes.
25%
Does not evaluate
scenario planning
and trend
convergence
theories, models,
and processes.
Evaluates some aspects
of scenario planning
and trend convergence
theories, models, and

processes from
references, research,
and personal
experiences. Analyzes
some themes and
concepts in the
literature.
Evaluates scenario
planning and trend
convergence theories,
models, and
processes from
references, research,
and personal
experiences.
Analyzes major
themes and concepts
in the literature.
Evaluates and
synthesizes scenario
planning and trend
convergence theories,
models, and processes
from references,
research, and personal
experiences. Analyzes
major themes and
concepts in the
literature.
Create and illustrate
a scenario planning
and trend
convergence model.

25%
Neither creates nor
illustrates a
scenario planning
and trend
convergence
model integrating
theoretical support.
Creates and illustrates a
scenario planning and
trend convergence
model. Includes some
aspects from activities,
roles, and
responsibilities, and
how and when activities
will be performed.
Creates and illustrates
a scenario planning
and trend
convergence model.
Includes a set of
activities, roles, and
responsibilities, and
how and when
activities will be
performed.
Creates and illustrates a
trend convergence
model integrating
theoretical support.

Includes a set of
activities, roles, and
responsibilities, and how
and when activities will
be performed.
Develop an
approach to leading
and implementing a
scenario planning
and trend
convergence model.
25%
Does not develop
an approach to
leading and
implementing a
scenario planning
and trend
convergence
model.
Develops some aspects
of an approach to
leading and
implementing a scenario
planning and trend
convergence model.
Develops an
approach to leading
and implementing a
trend convergence
model.

Develops a
comprehensive
approach to leading and
implementing a scenario
planning and trend
convergence model.
Communicate in a
scholarly and
professional
manner.
25%
Neither
communicates in a
manner expected
of doctoral-level
composition nor
exhibits critical
thinking skills:
grammar,
punctuation,
mechanics, APA
style and
formatting.
Communicates at a
basic level in a manner
expected of doctoral-
level composition, and
exhibits some critical
thinking skills.
Communicates in a
manner expected of

doctoral-level
composition, and
exhibits critical
thinking skills.
Communicates
exceptionally well in a
manner expected of a
doctoral-level
composition, and
exhibits exceptional
critical thinking skills.
Part1 – half page
“There are seven learning styles which are Visual( Spatial),
Aural (auditory-musical), Verbal( linguistic), Physical
(Kinesthetic), Logical( Mathematical), Social (Interpersonal),
Solitary (Intrapersonal). “
Choose 2 learning "styles" and discuss the attributes of each in
half page. Explain why you believe they are effective and
identify any reasons they may not be best for all learners.
Part2 – half page
diana_laufenberg_how_to_learn_from_mistakes
https://www.youtube.com/watch?v=up4hFj-jcTY
After you have viewed the TED talk, please begin a discussion
if you believe schools are still necessary? How about colleges
and universities. How is technology changing the way we view
education and training?
Three Decades of

Scenario Planning
in Shell
Peter Cornelius
Alexander Van de Putte
Mattia Romani
I
nvestment risks and opportunities have to be assessed in full
recognition
of the external environment in which corporate strategies are
elabo-
rated. Environmental uncertainty is not easily encapsulated as a
simple
risk parameter, but rather interacts with corporate strategy in
global,
national, and industrial contexts.' An important risk companies
face is that
major shifts in the business environment (e.g., due to changes in
the geopolitical
landscape, government policies, and industry structure) can
make whole invest-
ment strategies obsolete. These changes can occur very abruptly
as the result of
a single event. The terrorist attacks on September 11, 2001, for
example, have
fundamentally altered U.S. foreign policy, upending nearly all
the basic assump-
tions about political, economic, and financial risks.^ Given the
irreversibility of
most major capital investments, however, their sunk costs may
be huge.
Changes in the business environment can also create important
new

opportunities. The end of the Cold War, the collapse of the
former Soviet Union,
and Russia's opening have allowed companies to invest in one
of the world's
most resource-rich countries. China's race to the market has
produced spectacu-
lar economic growth and become a key driver for the world's
commodity mar-
kets. New opportunities have arisen for renewable energy,
thanks mostly to
more stringent environmental regulations.
Unfortunately, forecasts—which are usually constructed on the
assump-
tion that tomorrow's world will be much like today's—provide
an inappropriate
tool to anticipate shifts in the business environment. In fact,
forecasts may even
The authors would like to thank Albert Bressand, Tom
Copeland, Ged Davis, Bruce Kogut. Adrian
Loader, Thierry Malleret, and two anonymous referees for their
comments. The views expressed in
this article are those of the authors and do not necessarily
reflect the views of the Royal Dutch/Shell
Group of Companies nor those of the World Economic Forum.
92 CALIFORNIA MANAGEMENT REVIEW VOL. 48. NO, •
ridfining in Shell
be dangerous, as they are typically wrong when they are needed
most.^ There
are numerous examples of individual strategic busts in vinually

every industry.*^
Discontinuities in the business environment present the greatest
challenge in the
energy sector, given the average size of investment projects and
their long lead
times. To deal with this problem, the Royal Dutch/Shell Group
uses scenario
analysis, a method it introduced more than 30 years ago.^ Since
then, global
scenarios have been developed every three years, with the latest
set presented
at the World Economic Forum in Davos in January 2005.
Scenarios are not projections, predictions, or preferences;
rather, they are
coherent and credible alternative stories about the future. They
are designed to
help companies challenge their assumptions, develop their
strategies, and test
their plans.^ At Shell, scenarios have played a particularly
important role in
anticipating shifts in the global energy mix and hence in
determining the
Group's upstream and downstream
investments. Combined with other
, , I . J . Peter Cornelius is the Group Chief Economist of Roval
tools s u c h as m a r k e t a n d c o m p e t i - ^utch Shell and a
professor at VIerick Leuven Gent
t i v e analyses, scenarios represent a n Management School.
<[email protected]>
i n t e g r a l p a r t of t h e Group's strategy Mattia Romani is
an economist with Royal Dutch Shell.
process at all decision levels. <[email protected]>
T h e v a l u e of m a n y projects is Alexander Van de Putte is

Director. Business Insight, of the
c o n t i n g e n t o n earlier i n v e s t m e n t s . vyo l̂ d
Economic Forum and a professor at Delft University
OfTechnology. <[email protected]>
Thus, once a company has decided
to invest, it relinquishes the possi-
bility of new information that might affea the desirability or
timing of the
expenditure.^ Given the irreversible character of most
investments, scenario
planning can usefully be combined wath real options analysis,
an approach that
emphasizes that many investments create important follow-on
opportunities for
a company. This approach is an extension of financial option
pricing models to
the valuation of options on real assets, and it is a way of
thinking that helps
managers formulate their strategic options.^
The real options approach is subject to important limitations.
However,
scenario planning may help overcome some of these limitations
and assist man-
agers in deciding when and how to exerdse an option, capturing
upside poten-
tial due to greater flexibility. Specifically, scenarios can
contribute to real options
at three fundamental levels. First, they can help identify options
in the future.
Second, they can help time the decision to exerdse the real
option. Third, they
can provide an important input in the process of evaluating it.
Scanning the Future with Scenarios

The choices firms make depend on their assumptions about what
the
future may bring. While they know that anticipating and shaping
the future
is critically important for their success, there is increasing
uncertainty in the
medium- to long-term horizon.^ Significant efforts have been
made to improve
forecasting techniques. Econometric methods have become
increasingly
iVOL48.NQ I FALL 2005 93
Three Decades of Scenario Planning in Shell
E X H I B I T I . Scenarios vs. Forecasts
The Present The Future
The Path
Forecasts
Alternative
Future Images
Current
Realities
(mental maps)
Multiple
Paths

1
_
Scenarios
sophisticated, new tools such as neural networks have been
developed, and
powerful computers and software make it possible to work with
huge amounts
of data. Despite the progress in all these areas, firm success has
been limited,
especially over longer forecast horizons.
While forecasts can be reasonably accurate, there is a
fundamental
problem. Pierre Wack, one of the founders of Shell scenario
planning, observed
almost 20 years ago that forecasts tend to be wrong when they
are needed
most—namely, "in anticipating major shifts in the business
environment that
make whole strategies obsolete."'° Forecasts are usually
constructed on the
assumption that tomorrow's world will be much like today's. As
long as this is
the case and there are no critical discontinuities, forecasts
perform reasonably
well. However, sooner or later the world does change in a major
way, which
render forecasts wrong when it huns most.
Rather than looking for better forecast techniques or hiring
more or bet-
ter forecasters. Shell developed scenario planning. With its

roots usually attributed
to the pioneering work by Kahn and Wiener at the Hudson
Institute," several
generations of Shell scenarios planners have refined this
approach over the past
30 years.'^
Scenario planning differs fundamentally from forecasting in that
it accepts
uncertainty, tries to understand it, and makes it part of the
reasoning. Scenarios
help prepare for a range of alternative and different futures.
Scenarios are not
projections, predictions, or preferences. Rather, they are
coherent and credible
94 CALIFORNIA MANAGEMENT REVIEW VOL 48, NO. I
uecaaes oi icenano Kianning in Shell
Stories, describing different paths that lead to alternative
futures (Exhibit 1).
As such, they should not be confused with alternative forecasts
under different
assumptions (for example, the price of oil may be USD 20 or 40
per barrel in
2010—sometimes called "first-generation" scenarios).
Whereas forecasting techniques try to abandon any uncertainty
by pro-
viding managers with only one forecast, multiple scenario
analysis deliberately
confronts decision makers with environmental uncertainties by
presenting them

with several, fundamentally different outlooks on the future.'^
Scenarios are
generally built upon a dynamic sequence of interacting events,
conditions, and
changes that are necessary to reach a particular outcome. Thus,
scenarios focus
attention on causal processes and crucial decision points.
Scenarios serve multiple functions. First of all, they present a
background
for the design and selection of strategies. Since no single
strategy can perform
best in each scenario, special selection criteria, such as "bet on
the most probable
scenario" or "preserve flexibility" are needed."* Second,
scenarios help make
managers aware of environmental uncertainties by confronting
them with fun-
damentally different future states. Third, scenarios provide a
tool to identify
what might possibly happen and how an organization can act
upon or react
to future developments. As such, scenarios can serve as early
warning systems.
Fourth, scenarios offer the possibility to combine quantitative
data with qualita-
tive input, enabling scenario planners to incorporate results
from other forecast-
ing techniques and allow for soft and fuzzy variables. Finally,
scenarios can help
stretch managers' mental models by explicitly confronting them
with their own
biased viewpoints.
A Brief History o f t h e Shell Scenarios

Although the scenarios at Shell have been made public only
recently,'^
earlier scenarios are well documented in the literature,
especially through con-
tributions by former Shell scenario planners.'^ The first
scenarios were devel-
oped in 1972, although a special "Survey of Energy in the
World Political and
Economic Environment for the Years 1985-2000" and some
experimental sce-
narios had already been prepared in 1967 and 1971. The six
scenarios produced
in 1972 concentrated on economic growth, oil supply, and oil
price options.
While they included some description of the geo-political
context, the scenarios'
main focus was on the key variables of direa impact for the
businesses. In a
world characterized up until then by continuing and sustained
expansion, the
scenarios foresaw a disruption in oil supply and the subsequent
rise in prices. By
October 1974 this scenario had quickly materialized, with the
Arab Oil Embargo
following the Yom Kippur War pushing oil prices to
unthinkable levels. The
advent of the first oil price shock did much to cement the
scenario tool in the
planning process in the Group.
Later in the 1970s, in an attempt to make scenarios more suited
to
address medium-term concems and assist tactical decision
making, scenarios
were produced both for medium- and for long-term purposes. In
1974, "the

VOL 48. NO. I FALL 2005 95
Rapids" emerged as a framework onto which to build specific
scenarios: it
described a period of transition and new challenges in the wake
of the oil crisis.
Clearly what was needed at that specific time was a map to
orientate the busi-
ness in a very different and uncertain environment: Belle
Epoque and World of
Internal Contradictions (WIC) were the first comprehensive
scenarios—where the
long-term economic and energy markets predictions were
accompanied by an
equally important geo-political and social analysis.
Constrained Growth was developed in 1975 as part of WK. and
was cen-
tered on the idea that recovery would be slower than In previous
upswings. WIC
described a world of low economic growth in stark contrast with
the "miracu-
lous" economic growth of the previous 25 years. This again was
a voice out of
the crowds, during a period in which quick and powerful
recovery was
expected. The 1976-1978 period was indeed a period of internal
contradictions,
with what had been the fioor for economic growth expectations
before 1973
now having become the ceiling. Many Shell managers

recognized the structural
change and adapted their business decisions, hedging the
possible risk.
The late part of the 1970s saw an extension regarding the scope
of the
scenarios—in particular, in terms of analyzing societal change.
Nevertheless,
the scenarios maintained a focus on the key variables relevant
to the business:
energy demand and oil prices. The recession of the end of the
decade made it
difficult for the scenarios to attract managers' attention away
from the troubled
short-term conditions.
In the 1980s, the Shell scenarios elaborated the socio-political
analysis
further. High oil prices and a looming recession inherited from
the late 1970s,
represented the background for a series of rather pessimistic
scenarios. First in
1982 and subsequently in 1984, the scenarios included the
possibility of a sharp
drop in oil prices in the medium-term: Next Wave suggested
that by 1986/1987
the price for oil could drop to USD18/bbl. A key driver was
seen in the tighten-
ing of the credit markets and the growing burden of the U.S.
fiscal deficit.
The 1982 scenarios speculated about the longevity of the former
Soviet
Union. This was the result of a specific scenario for centrally
planned economies,
a first attempt at focused scenarios, which would become the

norm by 1988.
Devolution suggested a gradual opening-up of Central and
Eastern Europe due
to the need for technology and for consumer goods.
By 1987, the Shell scenarios had grown in size, comprising
three separate
volumes on oil, energy, and socio-economic trends. For the first
time, the sce-
narios identified the possible tensions arising from
globalization as a fundamen-
tal trend for the 1990s. Moreover, in these scenarios
environmental issues
gained increasing importance. It was only in 1989, however,
that these two
areas represented the gravity center of analysis. Specifically,
the Sustainable World
scenario contemplated the write-down of developing countries'
debt and the
signing of stringent environmental treaties.
In the book The Roaring Nineties,^'^ the dismantling of
economic borders,
the liberalization of markets, and the relentless onrush of new
technology
became such powerful trends that they were widely perceived as
something
96 CALIFORNIA MANAGEMENT REVIEW VOL 48. NO.
oi scenario nanning in Shell
to which "There Is No Alternative" (TINA). With these trends
believed to con-

tinue to be the primary shapers of the future, the 1995 scenarios
were built on
New Frontiers, one of the 1992 scenarios, with the question
being not "will the
world embrace or resist TINA?" but rather "What form of
embrace will be most
successful"? With governments seen as neither quick enough
nor competent
enough to match the dynamic power of corporations, the world
of Just Do It!
stressed individualism and libertarianism. This scenario was
contrasted with
one—Da Wo—which was based on a more communitarian
approach, emphasiz-
ing cohesion and the idea that "governments do matter."
As technological progress, market liberalization, and
globalization con-
tinued unabatedly, and indeed gathered further steam in the
second half of the
1990s, "the 1998 scenarios were built on Just Do It! as the only
successful kind of
response to TINA." The New Game, a "TINA above" scenario,
represented a world
where global governance was promoted through the
development of new insti-
tutions to enhance the health of the global economy. People
Power, a "TINA
below" scenario, explored the effects of growing numbers of
people becoming
wealthier and better educated than ever before.
Shortly after The New Game and People Power were published,
the world
was shaken by the events in Seattle, which led to a breakdown
in the WTO

trade negotiations. These violent demonstrations against
globalization
represented a major branching point, which was difficult to
reconcile with TINA
as expressed in the 1998 scenarios. It was against this
background that the 2001
scenario. People and Connections, asked whether TINA was
overturned. The
answer given was a no, albeit a qualified one. The forces of
globalization, liberal-
ization, and technology were anticipated to continue. However,
it was recog-
nized that people want not only the efficiencies that market
liberalization brings,
but also government regulations to assure uninterrupted supply
of essential
goods, including energy.
These issues were explored in two scenarios. Business Class and
Prism.
Specifically, the scenarios emphasized that globalization was
not just expanding
economic opportunities, but was also pushing the boundaries of
culture and
family. They also stressed the enormous ethical dilemmas
technology may bring
about. In Business Class, the world was seen as one that was not
run by business,
but like a business with a focus on efficiency and individual
freedom of choice.
Prism, by contrast, was depicted as a world that had gone
beyond the modernist
emphasis on efficiency, functionality, and global homogeneity
toward the real-
ization of "multiple modernities" that incorporate diverse
cultural values and

practices.
Motivated by the dual crises of international security and trust
in the
market—which were triggered by the terrorist attacks of
September 11'^ and
the corporate governance debacles of Enron, WorldCom, and
others—the most
recent scenarios presented in early 2005 focus on the interplay
of market incen-
tives, aspirations to social cohesion, and the provision of
security and oversight
by the state. While these scenarios are built on past global
scenarios, notably
People and Connections, they emphasize to a considerably
larger extent the
VOL 48. NO. I FALL 2005 97
interaction between these forces and the trade-offs between
objectives that
they can plausibly foster. While societies often aspire to all
three objectives-
efficiency, equity, and security—the scenarios make clear that
these objectives
display elements of mutual exclusiveness: One cannot be at the
same time freer,
more conforming to one's group or faith, and more coerced.
Against this background. Shell's latest scenarios consider three
different
worlds. In Low Trust Globalization, the leading theme is

"carrots and sticks." Gov-
ernments use market incentives to promote economic efficiency
within a strin-
gent regulatory and security framework. However, institutional
discontinuities
persist, with rapid regulatory change, overlapping jurisdictions,
and conflicting
laws leading to intrusive checks and controls—which impede
economic integra-
tion and hinder the movement of goods, people, and knowledge.
Compliance
and superior risk management are key challenges in this
scenario.
Driven by economic efficiency and the aspiration to social
cohesion. Open
Doors represents a world in which a trans-national society
develops around mar-
ket incentives. Compliance certification, regulatory
harmonization, voluntary
best-practice codes, and close links between investors and civil
society encourage
cross-border integration, international cooperation, and virtual
value chains.
Globalization continues unabated, and rapid technological
progress and diffusion
of knowledge supports strong productivity growth. In this
world, networking
skills and superior management are essential.
Flags, finally, is a world of nations and causes. Unlike in Open
Doors, how-
ever, causes are pursued defensively, and as trust remains
fragmented, the state
resorts to the flag in an attempt to rally groups fighting under
various political,

social, and religious banners. Thus, the backlash against
globalization is the
result not so much of anti-globalization sentiment as of the
absorbing nature of
divisive domestic politics. Efficiency takes a back seat to
security and solidarity.
Governments resort to populist policies, with differing rules and
standards, and
to protectionist measures that inhibit the flows of trade and
capital. Gated com-
munities, patronage, and national standards exacerbate
fragmentation and call
for careful country-risk management.
Scenarios as an Integral Part of Strategic Planning
Shell's track record in anticipating major structural changes in
the global
energy markets has substantially enhanced the credibility of
scenario analysis
within the Group. The most legendary example is probably the
first oil price
shock that was anticipated in Shell's first global scenario. Other
examples
include the impact of higher oil prices on economic growth in
the 1970s, the
substantial decline in oil prices in the mid-1980s, European
integration, and the
collapse of the former Soviet Union. Of course, not everything
was detected by
the scenario team's radar screen, and some important
developments have been
underestimated in terms of their importance for the Group.
Recent examples
includes China's rise as a global economic powerhouse, the
backlash against

hree Decades of Scenario Planning in Shell
E X H I B I T 2 . Capitalising on Uncertainties: Scenarios at
Shell
1970s
Methodology
Developnnent
THE RAPIDS
Pioneering of
scenarios to prepare
the organization for
uncertainty and
change
Focus on energy
markets (oil)
Internal publication
only
1980s
Integration
into
Corporate
Strategy
TRANSITION

Broadly based global
scenarios
Energy focus is
combined with political
and economic analysis
Internal publication
only
Workshop with
business units
1990s
Focus on
External
Stakeholders
T I N A r T H E R E I S N O
ALTERNATIVE
• Scenarios involve
extemal stakeholders
& incorporate their
views
• Deeper analysis of
social trends and
environment change
• Internal and extemal
publication
• Workshop with
business units &
extemals

2000s
Integration
into
Business
Strategy
PEOPLE &
CONNECTIONS
Global scenarios
are used to develop
focused scenarios
on specific business
initiatives
Scenarios are used
systematically to test
business strategy
robustness
Internal and ©
extemal publication
globalization, and the new scale of global terrorism. However,
it appears doubt-
ful whether traditional forecasting techniques would have
performed better.
Arguably, however, the accuracy of the scenarios with regard to
the pre-
diction of events and the assessment of economic, energy, and
price trends is
only of secondary importance. What matters most is the ability
to identify the
driving forces, explain how these work, and ensure that the

client understands
them. Only then can scenarios be expected to influence and help
improve strate-
gic planning.
Refiecting this fundamental insight, scenario planning in Shell
has been
subject to important changes over the last three decades, not
just in terms of the
focus of the global scenarios, but also with regard to the
underlying approach
and how scenarios are incorporated into the strategic planning
process (Exhibit
2).'^ The global scenarios remain at the center of this process,
providing a com-
prehensive assessment of how the future business environment
could develop.
They are combined with a range of applications that provide a
broad framework
of ideas influencing strategy at the corporate level and assisting
the businesses in
identifying risks and opportunities. With the global scenarios
setting the macro-
economic framework, the strategic funnel is then narrowed
further by analyzing
demand trends in individual energy markets and the strategic
behavior of Shell's
competitors. This analysis is followed by a comprehensive risk
analysis. At this
stage, the degree of uncertainty is sufficiently reduced to define
the Group's
customer value proposition and its strategic differentiators,
which then leads
VOL 48. NO. I FALL 2005 99

E X H I B I T 3. Using Scenarios in Strategic Planning
Understand macro environment
What does Market want?
Who provides & how?
Scenarios
How can Shell differentiate?
Shell's strategic differentiators
Competitor
Customer Intelligence
Intelligence
to Strategic decisions about the aspired upstream and
downstream portfolios
(Exhibit 3).
The global scenarios have helped the Group gain competitive
advantage
in the past and continue to drive Shell's upstream and
downstream portfolio
decisions.'^ In its Group Strategy Review in late 2004,^° the
Executive Commit-
tee outlined several key decisions regarding Shell "aspired"
portfolio that are

based on scenario planning. Against the background of a higher
price outlook,
these decisions include more capital spending on exploration
and production of
oil and gas; a rising share of natural gas, with integrated gas
reaching 40-45%
of total production by 2014; and a rising share of
unconventional oil especially
from Canadian oil sands. On the downstream side, capital
deployment is envis-
aged to shift to new growth markets, with Asia's share in oil
products forecast to
rise by around 15 percentage points to around 40% by 2010.
While the global scenarios are designed to help the company
formulate
its overall tactical and strategic policies and permit management
to explore new
ideas by shifting the company away from "group-think," over
time focused sce-
narios have gained in importance. Typically, these scenarios
deal with country-
specific issues or individual projeas (Exhibit 4). While the
different levels of
analysis are closely intertwined, the process that links them is
flexible. As Shell's
experience suggests, a mechanistic planning process that forces
managers to
produce a strategic response to global scenarios at the same
point in time does
not necessarily produce uniformly high-quality responses from
the business
units. Indeed, it appears that business units invest more energy
and creativity in
strategy development only occasionally when there is a formal
planning process.

100 CALIFORNIA MANAGEMENT REVIEW VOL 48. NO. I
hree Decades of Scenario Planning in Shell
E X H I B I T 4 . Bringing Scenarios to the Business
• Country Issues
• Competition, etc.
Global
Scenarios
Global Strategies
General Trends
Competition
Price & Margin
Trends
Technical &
Management
Risk
Impticatfons at
Country or
Business Level
Focused
Scenarios
Country or

Business Strategies
Implications at
Project Level
Project
Scenarios
Investment
Decisions
Focused scenarios tend to be more closely aligned to improving
the judg-
ment of individual managers on specific investment decisions.
At the project
level, it must be demonstrated that a particular investment is
sufficiently robust
against both the global scenarios and the supporting focused
scenario. For
instance, could abrupt changes in the regulatory framework
make a project
obsolete? To what extent could changes in the geopolitical
landscape affect pro-
duction and transportation? To what extent could demand shifts
affect the eco-
nomics of a project?
Selecting Projects Using Real Options
The belief in a single outcome can lock us into a narrow set of
options, a
risk that scenarios can help to mitigate by discovering the full
range of pathways.
Suppose we know that scenario A is going to happen. All the
uncertainty is gone
and we can actively think about options. If we know, for

example, like Noah,
that it will rain for forty days and forty nights, we would need
to creatively gen-
erate options for a fiood scenario. In this "take-a-phone-call-
from-God" exam-
ple, we might just come up with the idea of building an ark,"̂ ^
an option we
might never have conceived if we had seen the fiood only as a
very remote pos-
sibility. By going through all the scenarios and turning them
into 100 percent
certainties, we can identify options that we may overlook if we
limit ourselves
VOL 48, NO. I FALL 2005 101
to predict probable futures. Thus, scenarios can help us
determine the universe
of possible options. The question remains, however, as to how
we should select
a particular project out of this universe.
Firms should allocate investment resources according to the
highest net
present value (NPV). NPV is the future discounted cash flow of
the project and
can be calculated using a variety of intrinsic valuation methods
depending on
the situation at hand. The most commonly known method is the
discounted cash
flow (DCF) method, whereby the present value of future cash
flows is adjusted

for both time and risk. The time factor is dealt with by using
appropriate interest
rates for the time frame considered, whereas the risk adjustment
requires esti-
mates of both expected values of the cash flows and their
correlations with the
overall market portfolio.
The DCF approach appears particularly suitable for valuation
purposes
when uncertainty about the critical drivers of the valuation
(such as prices, vol-
umes, and costs) is low. However, this assumption is
increasingly being chal-
lenged. In an earlier era, the business world had much less
uncertainty. As
Amram and Kulatilaka argue,^^ given that most product and
commodity mar-
kets were relatively stable and predictable and globalization
was much less pro-
nounced, there was seldom need for a sudden and major change
in corporate
strategy. Analysts had a reasonably high degree of confidence
in their forecasts,
and they could operate with the assurance that once the project
was accepted,
the firm would attempt to run it pretty much according to plan.
This is where real options analysis comes in. Representing the
right—but
not the obligation—to invest, real options are a tool that may
have important
advantages where uncertainty is high. Their roots lie in the
financial option pric-
ing models developed by Black and Scholes and by Merton in
the early 1970s.^^

As an extension of such models to the valuation of options on
real (i.e., nonfi-
nancial) assets,̂ "^ the real options approach is a way of
thinking that helps man-
agers formulate their strategic options, i.e., the future
opportunities that are
created by today's investments. The real options approach
focuses on the poten-
tial value embedded in exercising the option once the
uncertainty has been
resolved—that is, it values strategic initiatives by recognizing
all the downstream
choices that may be encountered over an investment's life.̂ ^
Real options and DCF analysis are not necessarily mutually
exclusive. In
fact, as van Putten and MacMillan show, real options may
actually enhance DCF
analysis. Where future cash flows are subject to substantial
uncertainty, DCF
analysis requires them to be discounted at a high rate. While the
possibility that
actual cash flows may be lower than forecast is captured in the
valuation, the
possibility that they may be higher is not. Therefore, there is an
inherent bias
in the DCF approach in the sense that managers may be led to
reject highly
promising, if uncertain projects. This is exactly where real
options come in: They
provide a way to recapture some of the value lost through the
conservative DCF
valuation while still protecting against the considerable risk of
pursuing highly
uncertain projects: "The DCF valuation captures a base estimate
of value; the

option value valuation adds in the impact of positive potential
uncertainty."^^
102 CALIFORNIA MANAGEMENT REVIEV^ VOL 48, NO.
r nree uecaaes OT :>cenano nanning in Shell
E X H I B I T 5. DCF versus Real Options*
DCF—Traditional Real Options
Operating decisions will not change in the future Directional
changes pending arrival o f new information
Base case set o f expected cash flows Cash flows contingent on
future uncertain conditions
Static sensftivrty analysis Managerial flexibility t o reart t o
changing conditions
•See Manon A. Brach, Real Options in Practice (Hoboken, NJ:
John Wiley. 2003). p. 331.
While real options analysis may offer some intriguing benefits
for the
appraisal of investment decisions and significant advantages
compared to a
static DCF-based NPV appraisal process (Exhibit 5), there are
also important
challenges that may limit the applicability of real options.
Importantly, standard
approaches based on the Black-Scholes formula, which are
routinely used to
value financial options, cannot be applied as a number of

conditions are vio-
lated. Moreover—although this applies to the DCF approach as
well—the
assumption must be made that there is a traded security or a
portfolio of securi-
ties whose risks and payoffs mimic the expected risks and
payoffs of the invest-
ment project to model future returns. However, the farther we
move away from
financial markets, the more difficult and costly it is to track an
option.
Furthermore, while the purchase and exercise of financial
options is
unlikely to alter the payoff dynamics of the replicating portfolio
consisting of
financial assets (stocks and bonds), the same might not be true
for real options.
Steps taken or not taken by any individual firm may have an
immediate impact
on the action of its competitors and hence the market
equilibrium. An oil com-
pany, for example, that relies on the volatility of oil stocks,
futures, or oil prices
to replicate its real option on exploring a new oil field becomes
immediately part
of the dynamics that govern the twin security when acquiring
the option. Its
decision to explore the oil field will already send a signal to its
competitors and
alter their investment decisions.
While these challenges in applying real options to oil energy
investments
are important but not insurmountable, the most important
problem lies in the

limited guidance that history can provide for the future.
Specifically, the search
for twin securities whose past stock volatilities could serve as a
proxy for the
future volatility of a corporate investment project appears of
limited value in
rapidly changing environments. To be sure, there have been
several paradigm
shifts over the last three decades—most importantly, the two oil
prices shocks in
the early and late 1970s, the subsequent collapse of oil prices in
1986, and the
recent increase in prices since 1999. If stochastic processes
assumed in financial
option pricing to estimate future values of the underlying asset
do not seem
appropriate for real options, what are our alternatives to
quantify the uncertain
value drivers of the project (the source uncertainties), notably
the forward-
looking mean annual volatility and the mean reverting
coefficients?
V O L 4 8 . N O . I FALL 2005 103
E X H I B I T 6 . History as a Predictor of the Future
Factors
Impacted by
the Firm's Decisions

Factors
outside the
Firm's Control
Historical Behavior of
Source Uncertainty
Potential Future Behavior
of Source Uncertainty
Starting from an analysis of historical price and quantity data, it
is impor-
tant to understand the factors that may affect them. These
factors explain why
future payoffs may differ from past payoffs (Exhibit 6):
• Factors affected by the firm's decisions are usually projea- or
sector-
related and are generally easy to identify. Technological
breakthroughs
are examples of factors influencing the volatility of source
uncertainties.
These factors are typically not correlated with the general
movements of
the economy and require deep sector knowledge to identify
them and
assess their potential impact.
• Other factors may be outside the firm's control, however.
Often, they
depend on the social, economic, and political environment and
may affect
an entire sector or region and even the global economy.
Deregulation of
the telecommunication sector in Europe during the 1990s is a

factor out-
side the firm's control that turned the telecommunication seaor
upside
down, as most incumbent players were not ready to effectively
compete
in a deregulated market. Not surprisingly, deregulation of
markets usually
leads to an increase in uncertainty. Conversely, regulation leads
to a
decrease in uncertainty as the future becomes more predictable
and
stable.
In analyzing the potential future behavior of source uncertainty
on the
basis of factors that are within and outside the firm's control,
scenario planning
may provide a useful tool. As Brach argued, "for real option
analysis scenario
planning approximates what volatility is for financial option
pricing. It builds on
existing knowledge and past experience to create a range of
plausible scenarios
for the future, just as financial options rely on past volatilities
when predicting
nree uecades or bcenano Planning in Shell
E X H I B I T 7. The Five Phases of Oil and Gas Exploration
Early
Exploration

Option on
Option on
Option on
Option on
Underlying
A55et
Late
Exploration
Option on
Option on
Option on
Underlying
Asset
Development
Option on
Option on
Underlying
Asset
Exploitation
Option on
Underlying
Asset
Marketing
Underlying
Asset
future volatilities."^^ In this context, scenarios can provide key

information that
helps evaluate the option and time the decision to exercise it.
Combining Scenario Analysis and Real Options:
An Illustrative Example
Taking into account that a project's value may change over lime
due to
the introduction of new information and the ability to act on
that information,
real options analysis is especially suitable for staged investment
decisions in
highly uncertain environments.^^ Exhibit 7 shows the stages of
an oil or gas field
investment from exploration to extraction, a sequence that
might cover several
decades. Each box indicates a stage of activity, and a decision
whether to con-
tinue or not is made at the beginning of each stage. Each stage
can be seen as a
call option on the value of continuing with the exploration, a
value that Includes
the value of all future options. As Amram and Kulatilaka
argue,"^ exploration
decisions are strongly affected by market-priced risk and
exploration options can
be valued with reasonable accuracy by tracking portfolios
composed of oil/gas
securities.
For example, consider an oil and gas company in the mid-1990s
that had
just discovered significant amounts of natural gas in West
Africa. Bringing this
natural gas to the market requires either piping or liquefying
and then shipping

it overseas to Europe and North America. However, sliipping
natural gas adds
significant costs associated with liquefaction, storage,
transportation, and
regasification.
In the 1990s, the natural gas market in the United States was
very much
business as usual with few changes. With the gas market having
become largely
decontrolled in the 1980s,^° few expected new discontinuities
going forward.
Thus, the mean gas price between 1991 and 1999 was
$2.0/MMBtu, with an
annual volatility of 57.2 percent (Exhibit 8). Under these
conditions, an energy
company would not have considered developing the overseas
field in West
Africa to supply North America, since the high costs associated
with liquefaction,
transportation, and regasification would have yielded a negative
NPV.
VOL 48. NO. I FALL 2005 105
E X H I B I T 8. Historical Henry Hub Prices
CQ
Z
z
Q)

Source: Bloomberg Professional.
However, natural gas prices in the United States more than
doubled in the
first few years of this decade. Specifically, between January
2000 and January
2005 the Henry Hub price (the benchmark price for the U.S. gas
market) aver-
aged $ 4.6/MMBtu. At the same time, price volatility increased
substantially,
to more than 100 percent. Several demand and supply factors
have caused this
fundamental shift in what is the world's largest integrated gas
market. On the
demand side, concerns about air pollution have become
increasingly important,
and with people becoming more health conscious, natural gas is
increasingly
favored for domestic heating.'' It is estimated that 75 percent of
all homes built
in the last fifteen years use natural gas, bringing the current
level of all U.S.
homes to 50 percent. At the same time, environmental
regulations have been
tightened, favoring natural gas to fire power plants.
Greater demand for cleaner energies and more stringent
environmental
regulations has fostered technological progress. Combined
Cycle Gas Turbine
(CCGT) technology is both simple and efficient (a premium of
around 50 per-
cent compared with coal). In addition, output can more easily be
matched to
demand, resulting in less wastage of energy. Over the last

decade, this resulted
in massive investments in CCGT plants for electricity
generation, dramatically
increasing the demand for natural gas.
The impaa of higher demand for natural gas has been
compounded by
supply-side factors. According to the U.S. Department of
Energy (DOE), techni-
cally recoverable natural gas reserves amount to around 36,200
tcf (trillion cubic
feet), which is equivalent to around 67 years of current U.S.
production. How-
ever, as the DOE points out, most of the increase in U.S. natural
gas production
nree uecaoes ot bcenano Kianning in Shell
will come from unconventional sources (tight sands, shale, and
coalbed meth-
ane) whose costs are considerably higher. Moreover, restrictions
on exploration
and produaion in some areas have limited the development of
resources. In
fact, almost 40 percent of the gas found on U.S. federal lands is
subject to pro-
duction restrictions. Furthermore, no acreage along the east and
west coast is
available for exploration and production. Against this
background, it is expected
that a large increase in LNG imports will be required to satisfy
rising domestic

demand.
This example emphasizes the importance of mapping causal
linkages
among different factors that may or may not be outside the
firm's control.
Focusing on the complex interplay of technological, regulatory,
environmental,
and supply factors, scenario planning could have helped to
anticipate the emerg-
ing discontinuity in the U.S. natural gas market. Of course,
scenarios, as stressed
earlier, are not forecasts, and they can be used in the strategic
planning process
only in conjunction with specific tools to select individual
projects. Traditional
DCF analysis would have rejected the investment in the
development of the
West African gas field and the LNG chain to ship the natural
gas to the United
States. However, real options analysis combined with scenarios
could have come
to a different conclusion. Instead, scenarios would have
signaled that the firm's
option to develop the gas field could come to maturity.
Capturing the upside of
price risk, a combined real options/scenario analysis could have
induced invest-
ment in the entire LNG chain between the gas field and the U.S.
consumer mar-
ket, with the option to expand the investment later depending on
market
conditions.
Conclusions

While scenario planning represent an important tool to
understand the
critical uncertainties and their interrelationships, this tool is not
designed to
choose particular investment projects and allocate capital
efficiently in the best
interest of shareholders. Scenarios should usefully be combined
with a real
options approach, as a project's value may change over time due
to the introduc-
tion of new information. Scenarios can contribute to real
options at three funda-
mental levels. First, they can help identify future options.
Second, they can help
time the decision to exercise an option. And finally, scenarios
can provide
important input in the process of evaluating real options.
Notes
1. Withold J. Henisz and Jonathan Story, "Corporate Risk
Management and Business Strategy:
A Prime Task for Senior Management," in Peter K. Cornelius
and Bruce Kogut, eds.. Corpo-
rate Govemance and Capital Flows in a Global Economy (New
York, NY: Oxford University Press,
2003), pp. 217-238.
2. Nicolas Checa, John Maguire, and Jonathan Barney, "The
New World Disorder," Harvard
Business Review. 81/8 (August 2003): 70-79.
3. Pierre Wack, "Scenarios: Uncharted Waters Ahead," Harvard
Business Review, 63/5 (Septem-
ber/October 1985): 72-89.

VOL 48, NO. 1 FALL 2005 107
4. Peter Schwartz, "The Official Future, Self-Deiusion and the
Value of Scenarios," in James
Pickford, Mastering Risk. Volume 1: Concepts (London:
Financial Times and Prentice, 2001),
pp. 42-46.
5. On July 20, 2005 the shareholders of Royal Dutch and Shell
Transport and Trading voted
in favor of the unification of the Royal Dutch and Shell Group
of Companies under a single
parent company. Royal Dutch Shell pic. In this article, we refer
to the "Royal Dutch/Shell
Group of Companies," or simply "the Group" or "Shell."
6. Ged Davis, "Scenarios as a Tool for the 2 1 ' ' Century,"
paper presented at the Probing the
Future Conference, Strathclycde University, July 12, 2002,
<www.shell.com/slatic/royal-
en/downloads/gd_scenarios_as_a_tool_12072002.pdf>.
7. For most firms, a substantial part of their market value is
attributable to their options to
invest and grow in the future, rather than the capital they
already have in place. See
Avinash K. Dixit and Robert S. Pindyck, Investment Under
Uncertainty (Princeton, NJ: Prince-
ton University Press, 1994).
8. Martha Amram and Nalin Kulatilaka, "Strategy and
Shareholder Value Creation: The Real

Options Frontier," Journal of Applied Corporate Finance. 13
(Summer 2000): 8-21. Myers, who
coined the term in 1977, argues that by recognizing that
standard discounted cash flow
techniques tend to understate the option value attached to
growing profitable lines of busi-
nesses, the real options approach has the potential of closing the
wide gap between strategic
planning and finance. See Stewart Myers, "Determinants of
Corporate Borrowing," Journal
of Financial Economics. 5/2 (November 1977): 147-175.
9. C.S. Galbraith and G.B. Merrill, "The Politics of Forecasting:
Managing the Truth," California
Management Review. 3&/2 (Winter 1996): 29-43.
10. Wack, op. cit.
11. Helmut Kahn and A. Wiener, The Year 2000 (New York,
NY: McMillan, 1967).
12. Peter Schwartz, The Art of the Long View: Planning for the
Future in an Uncertain World (New
York, NY: Doubleday Currency, 1991); Kees Van der Heijden,
Scenarios: The Art of Strategic
Conversation (New York, NY: John Wiley, 1996); Kees Van der
Heijden (with Ron Bradfield,
George Bun, George Cairns, and George Wright), The Sixth
Sense: Accelerating Organizational
Learning with Scenarios (New York, NY: John Wiley, 2002);
Pierre Wack, "Scenarios: Shooting
the Rapids," Harvard Business Review. 63/6
(November/December 1985): 139-150.
13. Robert Bood and Theo Postma, "Strategic Learning with
Scenarios," European Management
Journal, 15/6 (December 1997): 633-646.

14. Michael E. Porter, Competitive Advantage (New York, NY:
The Free Press, 1985).
15. Shell International, People and Connections: Global
Scenarios to 2020. Public Summary (London:
Shell International, 2002).
16. Schwartz, op. cit.; Van der Heijden, op. cit.; Wack, op. cit.;
Davis, op. cit.
17. Joseph Stiglitz, The Roaring Nineties (London: Penguin
Books, 2003).
18. Paul Schoemaker and Kees Van der Heijden, "Integrating
Scenarios into Strategic Planning
at Royal Dutch/Shell," Planning Review, 20 (1992): 41-48; Arie
De Geus, The Living Company
(Boston, MA: Harvard Business School Press, 1997).
19. For instance, the scenario that anticipated the first oil price
shock enabled the Group to
respond quickly to the oil embargo, boosting its margins to the
top of its peer group. In the
years that followed Shell's advantage among the international
oil companies widened fur-
ther, and while in 1970 the Group had 35 percent less market
capitalization than Exxon, it
led Exxon with 25 percent by the end of 1994.
20. Available on Shell's website at
<www.shell.com/home/Framework?siteId=media-en&FC3=
/media-
en/html/iwgen/news_and_library/press_releases/2004/strategy_p
res_stock_
22092004.html&FC2=/media-
en/htniI/iwgen/news_and_library/press_reIeases/2004/zzz_
lhn.html>, downloaded on April 29, 2005.

2 1 . Paul Schoemaker, Profiting from Uncertainty (New York,
NY: The Free Press, 2002).
22. Amram and Kulatilaka, op. cit.
23. Fischer Black and Myron Scholes, "The Pricing of Options
and Corporate Liabilities," Journal
of Political Economy, 81/3 (May/June 1973): 637-654; Robert
C. Merton, "Theory of Rational
Option Pricing," Bell Journal of Economics and Management
Science." 4/1 (Spring 1973):
141-183.
24. Although the term "real options" was already coined in
1977, the new approach gathered
considerable momentum only in the second half of the 1990s
thanks to important contribu-
tions by Dixit and Pindyck, Trigeorgis, and Amran and
Kulatilaka. See Dixit and Pindyck,
op. cit.; Lenos Trigeorgis, Real Options. Managerial Flexibility
and Strategy in Resource Allocation
I nree uecades ot bcenano Planning in Shell
(Cambridge, MA: MIT Press, 1996); Martha Amram and Nalin
Kulatilaka, Real Options:
Managing Strategic Investment in an Uncertain World ^Boston,
MA: Harvard Business School
Press, 1999); Jeffrey J. Reuer and Michael J. Leiblein, "Real
Options: Let the Buyer Beware,"
in James Pickford, ed.. Mastering Risk. Volume 1: Concepts
{London: Financial Times and Pren-

tice, 2001), pp. 79-85.
25. Real options analysis may also be applied to country risk
assessments. One example con-
cems altemative modes of market access through exports as
opposed to foreign investment.
For example, if the investor is uncertain as to whether the
introduction of a more invest-
ment-friendly tax rate is permanent, he may attach a
(subjective) probability to the potential
reintroduaion of the tax at the original level at a later stage,
which could make his invest-
ment obsolete. Clearly, the investor will only commit his capital
if the expeaed profits from
investing now (net of investment costs) exceed the present
discounted value of all future
profits from exporting; he will continue to expon otherwise.
However, if the investment can
be delayed, the investor will gain information about the
eventual state of policy and take the
optimal decision once all uncertainty is resolved. By
committing his capital in the initial
period, he kills the option and thus foregoes this opportunity.
He incurs an additional cost
that is equal to the value of the option to invest. See Alexander
Lehmann, "Country Risks
and the Investment Activity of U.S. Multinationals in
Developing Countries," IMF Working
Paper, Washington, D.C, Intemational Monetary Fund, 1999.
26. Alexander B. van Putten and Ian C. MacMillan, "Making
Real Options Really Work," Har-
vard Business Review, 82/12 (December 2004): 134-141.
27. Marion A. Brach, Real Options in Practice (Hoboken, NJ:
John Wiley, 2003), p. 333.

28. Schoemaker, op. cit.
29. Amram and Kulatilaka, op. dt.
30. For details, see Franklin Tugwell, The Energy Crisis and the
American Political Economy (Stan-
ford, CA: Stanford University Press, 1988).
31. According to the World Energy Council, a natural gas
powered power plant emits about
0.64 carbon per ton of oil equivalent (TOE), compared to 1.08
for coal-fired and 0.84 oil-
fired plants.
V O L 4 8 . N O . I FALL 2005 109
Reproduced with permission of the copyright owner. Further
reproduction prohibited without permission.
How You Can Benefit By Predicting Change
Anthony, Scott A;Christensen, Clayton M
Financial Executive; Mar 2005; 21, 2; ProQuest Central
pg. 36

1623
ESSAY
THE TAKING ECONOMY:
UBER, INFORMATION, AND POWER
Ryan Calo∗ & Alex Rosenblat∗ ∗
Sharing economy firms such as Uber and Airbnb facilitate

trusted
transactions between strangers on digital platforms. This creates
eco-
nomic and other value but raises concerns around racial bias,
safety,
and fairness to competitors and workers that legal scholarship
has
begun to address. Missing from the literature, however, is a
fundamen-
tal critique of the sharing economy grounded in asymmetries of
infor-
mation and power. This Essay, coauthored by a law professor
and a
technology ethnographer who studies work, labor, and
technology,
furnishes such a critique and proposes a meaningful response
through
updates to consumer protection law.
∗ . Lane Powell and D. Wayne Gittinger Assistant Professor of
Law, University of
Washington School of Law.
∗ ∗ . Researcher and Technical Writer, Data & Society Research
Institute. The authors
would like to thank Christo Wilson, Yan Shvartzshnaider, and
Michelle Miller at
Coworker.org; Nayantara Mehta and Rebecca Smith at the
National Employment Law
Project; participants in the Berkeley Law Privacy Law Scholars
Conference; participants in
the Loyola Law School faculty workshop; participants in the
University of Pennsylvania IP
colloquium; and danah boyd, Stacy Abder, Shana Kimball, Janet
Haven, Julia Ticona,
Alexandra Mateescu, Caroline Jack, and Shannon McCormack

for thoughtful insights,
comments, and feedback. The Uber Policy Team also provided
helpful comments, which
we try to address throughout the paper. Madeline Lamo, the
librarians at Gallagher Law
Library, and Patrick Davidson provided excellent research and
editing.
Rosenblat’s ongoing qualitative research on ride-hail drivers
from 2014–2017 is vari-
ously funded by Microsoft Research (FUSE grant–Peer
Economy, 2014); the MacArthur
Foundation (Intelligent & Autonomy Grant, 2014–2016); Open
Society Foundations
(Future of Work, 2014); and the Robert Wood Johnson
Foundation (Mapping Inequalities
in the On-Demand Economy, 2017–2018). Data & Society, a
nonprofit research institute
where Rosenblat is employed as a Researcher, has a very long
list of generous funders,
including Microsoft, the Ford Foundation, and the Digital Trust
Foundation. The complete
list is available at Funding & Partners, Data & Soc’y,
http://datasociety.net/about/funding-and-
partners/ [http://perma.cc/AX6Z-MV68] (last visited July 26,
2017). Calo’s work on this
Essay is funded in his capacity as a professor at the University
of Washington School of
Law. Calo’s broader scholarship also enjoys support from the
UW Tech Policy Lab, of
which he is one of several Faculty Directors. The Tech Policy
Lab is generously funded by
the City of Seattle; The William and Flora Hewlett Foundation;
Knight Foundation;
MacArthur Foundation; Microsoft; National Science
Foundation; and Rose Foundation

Consumer Privacy Rights Fund, all of whom are listed here:
Funding, Tech Policy Lab,
http://techpolicylab.org/funding/ [http://perma.cc/B3FK-JKQD]
(last visited July 26, 2017).
The positions articulated in this paper are those of the authors.
1624 COLUMBIA LAW REVIEW [Vol. 117:1623
Commercial firms have long used what they know about
consumers
to shape their behavior and maximize profits. Sitting between
consumers
and providers of services, however, sharing economy firms have
a
unique capacity to monitor and nudge all participants—
including peo-
ple whose livelihoods may depend on the platform. These firms
reveal
their monitoring activities only selectively. However,
preliminary evi-
dence suggests that sharing economy firms such as Uber may
already be
going too far, leveraging their access to information about users
and
their control over the user experience to mislead, coerce, or
otherwise dis-
advantage sharing economy participants.
This Essay argues that consumer protection law, with its
longtime
emphasis on restraining asymmetries of information and power,
is well
positioned to address this underexamined aspect of the sharing
economy.

Yet, the regulatory response to date seems outdated and
superficial. To
be effective, legal interventions must (1) reflect a deeper
understanding
of the acts and practices of digital platforms and (2) limit the
incentives
for sharing economy firms to abuse their position.
INTRODUCTION
........................................................................................162
5
I. THE STORY OF THE SHARING ECONOMY
................................................1634
A. Why “Sharing”?
..........................................................................1635
B. Sharing’s Rewards
......................................................................1641
1. Efficiency and Income Flexibility
.......................................1641
2. Greater Competition
...........................................................1642
3. Access to New Resources
.....................................................1643
C. Sharing’s Perils
...........................................................................1645
1. Regulatory Arbitrage
...........................................................1645
2. Discrimination
.....................................................................1647
3. Privacy
..................................................................................1647
II. TAKING IN THE SHARING ECONOMY

.....................................................1649
A. Digital Market Manipulation
.....................................................1650
B. Some Evidence of Digital Market Manipulation in the
Sharing Economy
.......................................................................1654
1. Taking from the Traditional Consumer
.............................1654
2. Taking from the Entrepreneurial Consumer
.....................1660
3. The Wisdom of the Captured
.............................................1668
III. THE (NEW) ROLE OF CONSUMER PROTECTION LAW
..........................1670
A. Consumer Protection: Origins and Purposes
...........................1671
B. Consumer Protection in 2017: From Amway to Uber
..............1676
C. Updating Consumer Protection Law
........................................1681
1. Detecting
Harm......................................................................1682
2. Addressing Harms
..................................................................1686
CONCLUSION
............................................................................................1
689
2017] THE TAKING ECONOMY 1625

INTRODUCTION
Each time you hail a ride with Uber or book a room through
Airbnb,
you are participating in the so-called sharing economy. The
sharing econ-
omy and its sister terms—“collaborative,” “platform,” or “gig”
economy—
refer to a set of techniques and practices that facilitate trusted
transac-
tions between strangers on a digital platform.1 Instead of
hailing taxis or
booking hotel rooms, today’s consumers can download an app
or visit a
website to connect with individuals willing to provide access to
their pri-
vate cars or homes. The sharing economy, of course, did not
emerge
spontaneously. Antecedents include everything from Internet
classifieds
such as Craigslist to the carpools of the 1950s.2 What
distinguishes today’s
services is the widespread availability of smartphones and other
con-
nected devices, as well as technologies like rating systems, that
facilitate
trust among strangers.
Sharing economy rhetoric tends to lump together small
enterprises
motivated by a common social bond, such as local food and
housing
cooperatives, with billion-dollar global businesses like Uber
and Airbnb
that readily integrate the language of sharing and connectivity
into their

branding.3 This conflation is a salient feature of what the
sharing econ-
omy has come to represent—a disruptive force to established
industries
led by technology companies. We, however, draw a distinction
between
the variety of businesses that the rhetoric of the sharing
economy evokes,
like selling grandma’s pies on the corner, and the billion-dollar
compa-
nies that operate for profit at a global scale. The latter have
become a
universal focus of the tensions wrought by platforms,
technology, and
business, and they are the focus of this Essay—though the
larger themes
of changing commerce that sharing economy proponents
promote
through an emphasis on sharing, such as reduced ownership of
goods,
are common to smaller operations.4
The upsides of this multibillion-dollar phenomenon are obvious.
The sharing economy helps people leverage more of their
personal
resources and make better use of what Professor Yochai Benkler
calls the
“excess capacity” of many goods and services.5 When used only
by their
1. Orly Lobel, The Law of the Platform, 101 Minn. L. Rev. 87,
89 (2016).
2. See infra section I.A.
3. Shehzad Nadeem, On the Sharing Economy, Contexts, Winter
2015, at 13, 13

(describing the sharing economy as a “floating signifier for a
diverse range of activities”);
see also Natasha Singer, Twisting Words to Make ‘Sharing’
Apps Seem Selfless, N.Y. Times
(Aug. 8, 2015),
http://www.nytimes.com/2015/08/09/technology/twisting-
words-to-make-
sharing-apps-seem-selfless.html?_r=0 (on file with the
Columbia Law Review) (criticizing the
term “sharing economy” and how it frames technology-enabled
transactions as altruistic or
community endeavors).
4. See Arun Sundararajan, The Sharing Economy: The End of
Employment and the
Rise of Crowd-Based Capitalism 15–16 (2016).
5. Yochai Benkler, Sharing Nicely: On Shareable Goods and the
Emergence of
Sharing as a Modality of Economic Production, 114 Yale L.J.
273, 297 (2004).
owners, goods like computers and cars will spend a lot of time
idle.6 By
making it easy and cheap to connect to others, we can “share”
this excess
capacity with the world. Assuming a degree of trust, we might
even invite
others to share our private spaces—our extra bedroom
(Airbnb),7 our
car (Uber or Lyft),8 or our dinner table (Feastly or EatWith).9
Sharing

economy firms also create new ways to earn income, especially
for those
who cannot—or do not—wish to work a traditional shift or
otherwise
face impediments to entering the mainstream workforce.10
Additionally,
sharing economy analogs can place competitive pressure on
legacy ser-
vices, presumably lowering consumer costs and increasing
quality. Taxi
companies, for instance, have responded to the convenience of
Uber and
Lyft by offering consumers the ability to hail cabs through apps
instead
of calling into a dispatch, such as Arro in New York City11 or
iTaxi in
Miami.12
Concerns are also evident. Many argue that sharing economy
firms
do not compete on a level playing field. Uber and Airbnb, for
example,
offer the functional equivalent of taxi and hotel services but, by
characterizing themselves as mere providers of a software
app,13 avoid
many of the safety, hygiene, and other regulatory requirements
that
apply to taxis and hotels. A number of class action lawsuits on
behalf of
Uber and Lyft drivers allege that ride-hailing services skirt
labor protec-
tions by characterizing drivers as independent contractors
entitled to
fewer protections.14 Another lawsuit argues, conversely, that
Uber drivers
are independent contractors whom the platform requires to

engage in a
form of algorithmic price-fixing by setting the prices for each
ride and
preventing competition.15 Together these concerns amount to a
claim of
6. Id. at 357.
7. See About Us, Airbnb, http://www.airbnb.com/about/about-us
[http://perma.cc/
5747-TDJ6] (last visited Oct. 4, 2017) [hereinafter Airbnb,
About Us].
8. See, e.g., Our Trip History, Uber, http://www.uber.com/our-
story/ [http://
perma.cc/TEC4-HLZA] (last visited Oct. 4, 2017).
9. See, e.g., About, Feastly, http://eatfeastly.com/info/about
[http://perma.cc/
5NJM-FDGE] (last visited July 26, 2017) (explaining chefs
serve meals for profit in their
own homes by connecting with interested diners through
Feastly).
10. See infra section I.B.
11. Cecilia Rehn, In Response to Uber, NYC Cabs Testing New
E-Hail App, Software
Testing News (Aug. 28, 2015),
http://www.softwaretestingnews.co.uk/in-response-to-uber-
nyc-cabs-testing-new-e-hail-app/ (on file with the Columbia
Law Review).
12. E-Hail: Miami’s Taxi Application, iTaxi,
http://www.itaximiami.com/ [http://
perma.cc/KH9M-32M6] (last visited July 26, 2017).

13. Alex Rosenblat & Luke Stark, Algorithmic Labor and
Information Asymmetries:
A Case Study of Uber’s Drivers, 10 Int’l J. Comm. 3758, 3762
(2016).
14. See, e.g., O’Connor v. Uber Techs., Inc., 82 F. Supp. 3d
1133, 1133 (N.D. Cal.
2015); Cotter v. Lyft, Inc., 60 F. Supp. 3d 1059, 1060–61 (N.D.
Cal. 2014).
15. Meyer v. Kalanick, 200 F. Supp. 3d 408, 408 (S.D.N.Y.
2016).
regulatory arbitrage;16 sharing economy firms flourish by
reproducing
existing services without the same societal restrictions.17
Disability-rights advocates argue that the sharing economy’s
relative
freedom from legal obligation entails fewer accommodations for
disabili-
ties such as wheelchair accessibility.18 Others allege
discrimination based
on race or country of origin: A recent study commissioned by
the
National Bureau of Economic Research finds “significant
evidence of
racial discrimination” in that people of color face longer
waiting times
when hailing an Uber or Lyft along controlled routes in Seattle
and

Boston.19 Another paper (coauthored by Rosenblat) suggests
that the
passenger-sourced rating system may facilitate employment
discrimina-
tion against Uber drivers because it masks consumer bias, which
can ulti-
mately lead to lower pay, loss of employment, and other adverse
employ-
ment outcomes for affected drivers.20 Professor Nancy Leong
and Aaron
Belzer go so far as to question the sufficiency of public
accommodation
laws under the Civil Rights Acts to address various instances of
aggregated bias on Airbnb and other sharing economy
platforms.21
These and related concerns are important and real. But they
threaten to overshadow a fundamental critique of the sharing
economy
that has seen little attention to date. Put simply, platforms like
Airbnb,
Lyft, and Uber possess deeply asymmetric information about
and power
over consumers and other participants in the sharing economy.
And they
are beginning to leverage that power in problematic ways. The
sharing
economy seems poised to do a great deal of taking—extracting
more and
16. See Victor Fleischer, Regulatory Arbitrage, 89 Tex. L. Rev.
227, 229 (2010)
(defining regulatory arbitrage as exploiting the gap between the
economic substance of a
transaction and its legal treatment).

17. See Julia Tomassetti, Does Uber Redefine the Firm? The
Postindustrial
Corporation and Advanced Information Technology, 34 Hofstra
Lab. & Emp. L.J. 1, 34
(2016) (arguing the sharing economy reflects the growth of
“postindustrial” corporations
that maximize profit through regulatory arbitrage).
18. See Thomas P. Murphy, Legal Rights of Individuals with
Disabilities Chapter 8:
Ensuring Equal Access to Public Accommodations § 8.3.5 (2d
ed. 2015) (calling the
sharing economy an “emerging area of controversy” in
disability law); see also, e.g., Ramos
v. Uber Techs., Inc., No. SA-14-CA-502-XR, 2015 WL 758087,
at *1 (W.D. Tex. Feb. 20,
2015); Salovitz v. Uber Techs., Inc., No. A-14-CV-823-LY,
2014 WL 5318031, at *1 (W.D.
Tex. Oct. 16, 2014).
19. Yanbo Ge et al., Racial and Gender Discrimination in
Transportation Network
Companies 1–2 (Nat’l Bureau of Econ. Research, Working
Paper No. 22776, 2016),
http://www.nber.org/papers/w22776.pdf (on file with the
Columbia Law Review).
20. Alex Rosenblat et al., Data & Soc’y, Discriminating Tastes:
Customer Ratings as
Vehicles for Bias 7 (2016) [hereinafter Rosenblat et al.,
Discriminating Tastes], http://
datasociety.net/pubs/ia/Discriminating_Tastes_Customer_Ratin
gs_as_Vehicles_for_Bias.pdf
[http://perma.cc/W2MC-5SQS]. Uber hopes to avoid
antidiscrimination lawsuits by class-
ifying its drivers as “independent contractors.” See infra section

I.C.2.
21. Nancy Leong & Aaron Belzer, The New Public
Accommodations: Race
Discrimination in the Platform Economy, 105 Geo. L.J. 1271,
1296–317 (2017).
more value from participants while continuing to enjoy the
veneer of a
disruptive, socially minded enterprise.
Today’s companies relentlessly study consumer behavior and
use
what they discover to maximize their bottom line.22 This is true
in the
mainstream economy. Items cost $9.99 because firms exploit a
cognitive
bias that causes consumers to perceive the price as closer to
$9.00 than to
$10.00.23 Grocery stores place sugary cereal at eye level for a
toddler
hoping to increase the nag factor.24 As recent work by one of
us argues,
digital transactions provide especially significant opportunities
for firms
to discover and exploit the limits of each consumer’s ability to
pursue her
rational self-interest.25 When a company can design an
environment from
scratch, track consumer behavior in that environment, and
change the
conditions throughout that environment based on what the firm

observes,
the possibilities to manipulate are legion. Companies can reach
con-
sumers at their most vulnerable, nudge them into
overconsumption, and
charge each consumer the most she may be willing to pay.26
Sharing economy firms, by virtue of sitting between the
consumers
and providers of services under the scaffolding of a software
app, can
monitor and channel the behavior of all users. This is partly
how they
manage to deliver new value to consumers. But their position as
all-
knowing intermediaries also presents unique opportunities for
market
manipulation. The stakes are greater too: For many participants,
the
sharing economy represents a primary or important
supplementary
source of income.27 Experimentation by the platform is not just
annoying
but affects their livelihood. Meanwhile, consumers may
understand that
they “pay” for free internet services such as Facebook with their
data and
yet assume that sharing economy firms are different because of
the dis-
tinct experiences and rhetoric that surround these services.
Although difficult to verify without behind-the-scenes access,
there is
evidence that sharing economy firms are already taking
advantage of their
power over participants. One company in particular—the

multibillion-
dollar “unicorn” Uber—stands out, showcasing what an
intermediary in
the sharing economy could do should it be inclined to press its
advan-
tages aggressively.28 The willingness of one highly visible firm
to push
22. See infra section II.A.
23. See Jon D. Hanson & Douglas A. Kysar, Taking
Behavioralism Seriously: The
Problem of Market Manipulation, 74 N.Y.U. L. Rev. 630, 739–
42 (1999) [hereinafter
Hanson & Kysar, The Problem].
24. See Aviva Musicus, Aner Tal & Brian Wansink, Eyes in the
Aisles: Why Is Cap’n
Crunch Looking Down at My Child?, 47 Env’t & Behav. 715,
716–19 (2015).
25. Ryan Calo, Digital Market Manipulation, 82 Geo. Wash. L.
Rev. 995, 999 (2014)
[hereinafter Calo, Digital Market Manipulation].
26. Id. at 1029–30, 1033.
27. See infra section I.B.
28. This Essay will draw on Rosenblat’s ongoing qualitative
research with drivers that
work for Uber (and other ride-hail companies, like Lyft) as an
illustrative case study. The

normative boundaries is important in several respects. First, it
showcases
the capacity and incentives of platforms of a certain kind to
engage in
market manipulation should they be, or become, inclined.
Second, if left
unchecked, such behaviors may socialize certain practices and
encourage
emulation or tolerance across and beyond the sharing
economy.29 While
Uber’s corporate practices may not be wholly unique, our
unique lens
into their operations, which originates in Rosenblat’s research,
provides
us with a new way of seeing the frameworks in which they
operate.
The evidence that Uber is abusing its position is mounting. Uber
sometimes operates in a legal gray area such that drivers or the
company
risk citation by local authority for operating without a taxi
license.30 In
March 2017, the New York Times revealed that Uber
systematically targets
regulatory authorities, like city officials and code inspectors,
and law
enforcement officers—identified by the phones they use, their
location,
and other factors through a tool called “Greyball”—and
purposely makes
it difficult for those officers to find Uber drivers and issue them
Uber driver experiences cited throughout this paper are drawn
primarily from digital
fieldwork in online forums in which many tens of thousands of

drivers gather to compare
notes on their work. This Essay also draws on the combination
of Rosenblat’s participant
observations through trip requests, hails, and rides with over
400 drivers and interviews
with select drivers between 2014 and 2017 who work with Uber,
Lyft, other ride-hail plat-
forms, and taxi companies, primarily across the United States
and Canada. The fieldwork
from which the authors draw for this Essay is primarily based
on driver experiences
between 2014 and 2016 but occasionally includes data from
2017 to account for very
recent events or changes to the Uber app or its functions. In
May 2017, Uber introduced a
series of changes to its platform that addresses some, though not
all, issues related to pay
transparency. For example, the company has made the practice
of upfront pricing, in
which drivers are paid a lesser amount than passengers pay
without alerting drivers to this
discrepancy, more transparent. Throughout Rosenblat’s
ethnographic and digital field-
work over a period of about three years, other practices and
features of the Uber app have
evolved, albeit inconsistently across the hundreds of cities in
which Uber operates. The
conditions of drivers’ work are subject to frequent change, and
major sharing economy
platforms’ business and technology practices should be
evaluated as constantly evolving
processes, not as historical artifacts. In the authors’ view, past
practices, as well as present
and future changes to these practices, continue to provide us
with a lens into the tensions
and challenges produced by data-centric platforms and the

complexities of algorithmic
transparency and accountability in platform employment.
29. Cf. Hanson & Kysar, The Problem, supra note 23, at 726
(noting that “the hidden
hand of market forces” requires all firms to manipulate
consumers to remain competitive
with the firms that do so).
30. See Alex Rosenblat, How Uber’s Alliance with Montréal
Drivers Turns Labo[u]r’s
Tactics on Its Head, Medium (Aug. 4, 2016),
http://medium.com/uber-screeds/how-ubers-
alliance-with-montr%C3%A9al-drivers-turns-labo-u-r-s-tactics-
on-its-head-af490b252dae [http://
perma.cc/PVH8-YBFJ] (detailing Uber’s practices in Montréal,
where Uber is illegal); Alex
Rosenblat, Is Your Uber/Lyft Driver in Stealth Mode?, Medium
( July 19, 2016), http://
medium.com/uber-screeds/is-your-uber-driver-in-hiding-
484696894139 [http://perma.cc/
9E7Y-Z93N] (describing how Uber and Lyft drivers use trade
dress and ride-hail accessories, or
their absence, to navigate contexts in which the legality of ride-
hailing services is in question).
citations.31 The company went so far as to create a “fake
version of the
app, populated with ghost cars.”32
These manipulations may be part of a broader pattern. Consider,
for

instance, claims that Uber is manipulating the perceptions of
consumers
on its popular ride-hailing app. Some consumers report opening
the
application on their phone and seeing plenty of cars driving
around their
pickup location, visualized with icons. But after the consumer
clicks to
request an Uber, these “phantom cars” disappear, and the
consumer
faces a wait.33 Or consider the experiments Uber is running on
what ride-
hailers might be willing to pay. Apparently, in studying its
consumers, the
Uber data-science team discovered that people whose phone
batteries
are low are more willing to pay inflated or “surge” pricing—
leading to
concerns that the company is interested in what amounts to
contextual
or individualized price-gouging.34
The opportunity and incentive to manipulate drivers is even
more
pronounced. While Uber drivers use the system, they may be
offered a
plethora of temporary contracts around price and other factors,
and they
are perennially forced to agree to new terms of service such as
new com-
mission structures, when they log in to work.35 As contract
scholars
explore in other contexts, Uber stands to profit from the
inability of the
driver to keep up with both the dizzying complexity of such
documents

and their high rate of change.36
Even when the terms are fairly clear, the mechanism of the
interac-
tion can be inscrutable. For example, drivers understand that
Uber will
31. Mike Isaac, How Uber Deceives the Authorities Worldwide,
N.Y. Times (Mar. 3, 2017),
http://www.nytimes.com/2017/03/03/technology/uber-greyball-
program-evade-
authorities.html (on file with the Columbia Law Review)
[hereinafter Isaac, How Uber
Deceives the Authorities Worldwide].
32. Id.
33. Alex Rosenblat, Uber’s Phantom Cabs, Vice: Motherboard (
July 27, 2015),
http://motherboard.vice.com/en_us/article/ubers-phantom-cabs
[http://perma.cc/HKE6-
VEQ8] [hereinafter Rosenblat, Phantom Cabs]. Uber
acknowledges that vehicle icons do
not always represent the real position of Uber drivers but denies
that this is a purposive
tactic to manipulate users. Id. However, in reports by the New
York Times from 2017
detailing the program known as Greyball, Uber admits that it
deceived regulators about
the real and accurate location and number of vehicles available
in the Uber system by
showing them cars that did not exist—phantom cars. See Isaac,
How Uber Deceives the
Authorities Worldwide, supra note 31.
34. Biz Carson, You’re More Likely to Order a Pricey Uber

Ride if Your Phone Is
About to Die, Bus. Insider (May 18, 2016),
http://nordic.businessinsider.com/people-with-
low-phone-batteries-more-likely-to-accept-uber-surge-pricing-
2016-5/ [http://perma.cc/G2AN-
DQ5Q]. Uber denies using phone-battery information to set
pricing at this time. Id.
35. See infra section II.B.2.
36. See Oren Bar-Gill, Seduction by Contract: Law, Economics,
and Psychology in
Consumer Markets 141–45 (2012) (describing the inability of
consumers to manage
increasing contractual complexity); see also David Horton, The
Shadow Terms: Contract
Procedure and Unilateral Amendments, 57 UCLA L. Rev. 605,
649–50 (2010) (arguing
consumers cannot keep up with later changes to boilerplate or
other contracts).
guarantee them an hourly rate if they accept a certain
percentage of ride
requests, along with meeting other conditions. On rare
occasions, drivers
will report that these ride requests flash so fast that the driver is
unable to
click on them in time to meet Uber’s criteria.37 Or, more
commonly, a
driver will wait for five minutes at a pickup location for a
missing Uber
rider so as to recuperate a cancellation fee, only to be told that

Uber’s
internal measurement of time disagrees with that of the driver’s
app.38
Some issues are subtler still: Uber presumably fuels its
ambitious
mapping and driverless-car programs with data it gets from
monitoring
drivers.39 This may mean that Uber drivers are unwittingly
training their
own replacements.40
While the sharing economy presents new factual challenges, we
are
not necessarily in uncharted legal territory. The law of
consumer protec-
tion has long concerned itself with information and power
asymmetries
among market participants.41 Indeed, given the field’s history
and focus,
it is notable that the burgeoning legal literature around the
sharing
economy has scarcely engaged with consumer protection law.42
A central
aim of this Essay is to address this gap and put forward a
positive vision of
how consumer protection law should engage with the sharing
economy.
This is not to say regulators have ignored the sharing economy,
but
the challenges regulators face when balancing out the interests
of multi-
ple stakeholders are many.43 In a recent and lengthy report, the
Federal
Trade Commission (FTC)—a federal agency with responsibility

for pre-
serving the conditions of free and fair trade—heaped praise on
sharing
37. See infra section II.B.2.
38. See infra section II.B.2. There may be technical reasons for
these issues, but this
does not necessarily absolve Uber of fault under existing law.
See infra section III.A
(discussing the Federal Trade Commission’s unfairness
authority under Section V of the
Federal Trade Commission Act).
39. See Alex Rosenblat & Tim Hwang, Data & Soc’y, The
Wisdom of the Captured 7
(2016) [hereinafter Rosenblat & Hwang, Wisdom of the
Captured], http://datasociety.net/
pubs/ia/Wisdom_of_Captured_09-16.pdf
[http://perma.cc/THY5-V92K].
40. Id.
41. See infra section III.A.
42. For work addressing the sharing economy but mentioning
consumer protection
in passing or not at all, see e.g., Lobel, supra note 1; Stephen R.
Miller, First Principles for
Regulating the Sharing Economy, 53 Harv. J. on Legis. 147
(2016); Brishen Rogers,
The Social Costs of Uber, 82 U. Chi. L. Rev. Dialogue 85
(2015), http://
uchicagolawjournalsmshaytiubv.devcloud.acquia-
sites.com/sites/lawreview.uchicago.edu/files/
Rogers_Dialogue.pdf [http://perma.cc/6LTC-VR6P];
Symposium, The Legal Landscape of

the Sharing Economy, 27 J. Envtl. L. & Litig. 1 (2012). The
only work that specifically
addresses consumer protection argues that existing regulations
are outmoded and should
not apply to the innovative new sharing economy. Christopher
Koopman, Matthew
Mitchell & Adam Thierer, The Sharing Economy and Consumer
Protection Regulation, 8
J. Bus. Entrepreneurship & L. 529, 532 (2014).
43. Vanessa Katz, Note, Regulating the Sharing Economy, 30
Berkeley Tech. L.J.
1067, 1084–107 (2015) (reviewing “how regulators have
approached the sharing econ-
omy . . . and the enforcement challenges that regulators face
under any approach”).
economy companies for offering new affordances to consumers
and
disrupting existing markets through novel means of
competition.44 A few
months later, the other shoe dropped: The FTC settled a
complaint with
Uber alleging that the company misrepresented, in recruitment
advertisements, how much drivers (whom the Commission
called
“entrepreneurial consumers,” consistent with Uber’s own
designation of
drivers as “entrepreneurs”) could earn.45 The Commission has
since
entered into a consent decree with Uber for its alleged failure to
adequately safeguard user data, including against employees

who do not
require access. 46
Such interventions, however, while welcome, have evolved little
over
the previous half century and feel antiquated in an age of digital
plat-
forms. Apart from requiring basic information security, the
FTC’s
approach to Uber in 2017 is strikingly similar to its handling of
the 1979
case involving the multilevel marketer Amway.47 As with Uber,
the FTC
praised Amway for its innovative model of consumer-driven
sales of home
goods, a technique that permitted Amway to “interject[] a
vigorous new
competitive presence” into a market dominated by a few major
distribu-
tors such as Procter & Gamble.48 And as with Uber, the FTC
restrained
Amway from overestimating in published materials how much
an Amway
consumer-salesperson could make selling its goods.49
But there are key differences between the Amway of 1979 and
the
Uber of today. Amway governed its network of distributors
through writ-
ten materials, the terms of which seldom changed. Its business
model was
different from its competitors’ but straightforward: Consumers
bought
goods from Amway, redistributed them in local neighborhoods,
and
recruited new consumers in exchange for a commission. This

remains
44. See FTC, The “Sharing” Economy: Issues Facing Platforms,
Participants &
Regulators 14 (2016) [hereinafter FTC Sharing Economy
Report], http://www.ftc.gov/
system/files/documents/reports/sharing-economy-issues-facing-
platforms-participants-reg
ulators-federal-trade-commission-
staff/p151200_ftc_staff_report_on_the_sharing_economy.pdf
[http://perma.cc/48QW-JJVQ] (“Many Workshop participants
described how entrepre-
neurial activity in the sharing economy generally enhances
competition and consumer
welfare by enabling the entry of new sources of supply.”); see
also id. at 23–25 (describing
the advantages of platform-based markets). The FTC Sharing
Economy Report also raised
a variety of regulatory challenges, especially for state and local
policymakers. Id. at 14, 53–58.
45. Complaint for Permanent Injunction and Other Equitable
Relief at 10–11, FTC v.
Uber Techs., Inc., No. 17-261 (N.D. Cal. Jan. 19, 2017)
[hereinafter Uber Techs. Complaint],
http://www.ftc.gov/system/files/documents/cases/1523082uberc
mplt.pdf [http://perma.cc/
JG4Z-3PZF].
46. In re Uber Techs., Inc., FTC File No. 1523054 (F.T.C. Aug.
15, 2017) (Decision
and Order),
http://www.ftc.gov/system/files/documents/cases/1523054_uber
_technologies_
decision_and_order.pdf [http://perma.cc/Y3QU-9FGU].

47. In re Amway Corp., 93 F.T.C. 618, 618 (1979) (Final Order,
Opinion, Etc., in
Regard to Alleged Violation of the Federal Trade Commission
Act).
48. Id. at 710.
49. Id. at 729–32, 738. The Commission also placed limits on
Uber’s car-leasing
partnerships. Uber Techs. Complaint, supra note 45, at 9–10.
Amway’s model thirty years later.50 Uber is, by contrast, a
multivalent digi-
tal platform with ambitions to revolutionize global logistics.51
It meticu-
lously tracks participants in real time, constantly iterating on
approach
and design.52 In light of these new affordances, it defies
imagination that
the only problematic practice Uber engages in happens to be the
same
plainly visible sin of Amway: overestimating incomes in
recruitment ads.
The thesis of this Essay, coauthored by a legal scholar and a
technol-
ogy ethnographer who studies ride-hailing and labor in the
sharing econ-
omy, is that the advantages of information and power that
platforms like
Uber possess over participants merit a deeper response from
consumer

protection law.
Regulators face two key challenges in crafting this response.
First,
regulators must gain a deeper understanding of the acts and
practices of
digital platforms. This can be accomplished, we argue, by
exercising
existing authority to demand more granular information from
firms
about their practices and by incentivizing third parties, such as
the
research team that uncovered the Volkswagen emissions
scandal, to
demand and analyze such information.53 Second, regulators
must find
ways to characterize and address problematic behavior.
Regulators can
accomplish this by drawing lines between acceptable and
unacceptable
(or harmful) conduct, as the law must often do, or else by
attempting to
better align the incentives of sharing economy firms with those
of other
participants.54 Consumer protection law must be capable of
restoring a
sensible balance between sharing and taking.
Our Essay proceeds as follows. Part I offers a more nuanced
concep-
tion of the sharing economy than presently exists in the legal
literature.
While there is no stable consensus definition of the sharing
economy,
this Part identifies a set of core claims, practices, antecedents,
and

technologies that underpin ride-hailing and other contemporary
sharing
services. Part I also canvasses in greater detail the benefits and
costs of
the sharing economy that commentators have identified to date.
Missing from the standard recitation of benefits and concerns is
a
fundamental critique of the sharing economy grounded in
asymmetries
of information and power. Part II advances such a critique. We
draw from
the theory of digital market manipulation and other work to
argue for
recognition of a greater range and complexity of dangers. Many
of the
50. See successwithamway201, How Amway Works—Sales and
Marketing Plan,
YouTube (Nov. 17, 2012) [hereinafter How Amway Works],
http://www.youtube.com/
watch?v=n8bCcSi2V4g (on file with the Columbia Law
Review).
51. See infra section II.B.
52. See infra section II.B.
53. See Gregory J. Thompson et al., In-Use Emissions Testing
of Light-Duty Diesel
Vehicles in the United States 106–08 (2014),
http://www.theicct.org/sites/default/files/
publications/WVU_LDDV_in-
use_ICCT_Report_Final_may2014.pdf [http://perma.cc/YP7U-
PUWA]; see also infra Part III.
54. See infra Part III.

concerns we emphasize in Part II are necessarily speculative in
nature, in
part because sharing economy practices occur behind the digital
scenes.
We therefore ground the discussion in a case study of Uber,
which we
select for its unique visibility among sharing economy firms and
its appar-
ent willingness to push normative boundaries, and because one
of us
(Rosenblat) has studied Uber’s drivers extensively in her
ethnographic
fieldwork. Our concerns, of course, apply beyond this single
company
and across the sharing economy of today and tomorrow. Others
are likely
to also engage in versions of the behaviors we catalogue, and
many are in
a powerful position to do so.
Part III advances the argument that consumer protection law—
with
its long emphasis on asymmetries of information and power—
represents
a critical but oddly missing lens through which to understand
and
address the full complexity of the sharing and taking economy.
Part III
concludes by suggesting ways consumer protection law can
evolve to
address the techniques used by sharing economy firms.

I. THE STORY OF THE SHARING ECONOMY
There is no consensus definition of the sharing economy.55 We
define the sharing economy loosely as a set of practices and
techniques
that leverage digital architectures to facilitate trusted
transactions
between strangers. But at base the sharing economy and its
sister
terminology, like “collaborative consumption,” the “peer-to-
peer” econ-
omy, or the “gig economy,” represent a rhetorical device, a
story that pro-
ponents tell in service of some business or political purpose
such as
attracting participants and funding or minimizing government
interven-
tion.56 On this view, the sharing economy poses as a social
movement
even as it engages in what Professors Elizabeth Pollman and
Jordan
Barry term regulatory entrepreneurship (or, more pejoratively,
regula-
tory arbitrage).57 This Part begins by telling the story of the
sharing econ-
omy from the vantage of its proponents and then describes the
considerable concrete benefits and real dangers that sharing
economy
commentators have identified to date. This Part presages Part II,
in
which we introduce and contrast our own novel critique
grounded in
asymmetries of information and power.
55. FTC Sharing Economy Report, supra note 44, at 10–11

(noting the term “sharing
economy” is “vague,” has “a range of meanings,” and
“generates criticism”); Lobel, supra
note 1, at 89 (highlighting no one term “completely captures the
entire scope of the para-
digmatic shift in the ways we produce, consume, work, finance,
and learn”).
56. See Singer, supra note 3 (discussing why it is inappropriate
to frame “technology-
enabled transactions as if they were altruistic or community
endeavors” when they serve
some other marketing or regulatory purpose).
57. Regulatory entrepreneurship refers to pursuing “a line of
business that has a
legal issue at its core,” including “a significant uncertainty
regarding how the law will apply
to a main part of the business operations.” Elizabeth Pollman &
Jordan M. Barry,
Regulatory Entrepreneurship, 90 S. Cal. L. Rev. 383, 392
(2017).
A. Why “Sharing”?
The gist of the sharing economy narrative is that technology
helps
people collaborate economically at scale. Consider the classic
carpool
that was introduced and popularized in the 1950s and that
persists today.
Many people need to get from the suburbs to downtown. If

everyone
drives, there is traffic congestion, and no one can read the
newspaper.
Meanwhile, cars are designed to hold four or five people, and so
that
extra space and gas is wasted. Carpooling by neighbors, who
generally
know and trust each other, adds value by sharing the
responsibility and
resources needed to get to work. Broader carpooling might be
even bet-
ter but would introduce search and transaction costs. Worse yet,
it could
introduce the prospect of unreliable or undesirable drivers or
riders.
Sharing economy firms address these perceived problems of
scaling by
introducing apps and rating systems to find, connect, and assess
people.
Not only can you get downtown via Uber, but you can invite a
stranger to
dinner (Feastly), let your spare bedroom for the week (Airbnb),
or even
rent out your power tools (NeighborGoods). People trade or
purchase
resources from one another; the platform acts as an impartial
intermedi-
ary to help them connect.
The sharing economy narrative emerges from a variety of
sources,
including our familiarity with online social networks and a
general sense
of economic urgency that flows from the wake of the Great
Recession
and the rise of precarious employment in the United States.58

But its
intellectual home is really the notion of “commons-based peer
pro-
duction” that Professor Benkler put forward as early as 2002.59
Pro-
ponents initially envisioned that social values and notions of
individual
empowerment would flavor the missions of businesses under the
sharing
economy umbrella. This vision of the sharing economy gets its
roots from
advocacy groups interested in the structures and decentralized
impact of
peer-to-peer technologies, like the file-sharing service Napster
or the vir-
tual currency Bitcoin.60 Prominent sharing economy advocate
Peers.org
58. Arne L. Kalleberg, Good Jobs, Bad Jobs: The Rise of
Polarized and Precarious
Employment Systems in the United States, 1970s to 2000s, at 85
(2011).
59. Yochai Benkler, Coase’s Penguin, or, Linux and The Nature
of the Firm, 112 Yale
L.J. 369, 375 (2002).
60. See Michael Gowan, Requiem for Napster, PC World (May
18, 2002), http://
www.pcworld.idg.com.au/article/22380/requiem_napster (on
file with the Columbia Law
Review) (noting the first iteration of Napster enabled users to
share music over the
Internet in the form of MP3 files until the service shut down
following the Ninth Circuit’s
application of copyright law to its peer-to-peer system in A&M

1242020 Scenario and Mega-Trend Model Scoring Guidehttps.docx

1242020 Scenario and Mega-Trend Model Scoring Guidehttps.docx

Recommandé

Recommandé

Contenu connexe

Similaire à 1242020 Scenario and Mega-Trend Model Scoring Guidehttps.docx

Similaire à 1242020 Scenario and Mega-Trend Model Scoring Guidehttps.docx (20)

Plus de aulasnilda

Plus de aulasnilda (20)

Dernier

Dernier (20)

1242020 Scenario and Mega-Trend Model Scoring Guidehttps.docx