James Riley
November 16, 2015

Hanauer on the sharing economy

Hanauer on the sharing economy

Hanauer: Civic innovation has not matched the pace of technological innovation. It's a problem*

Nick Hanauer is that zillionaire guy from Seattle who upset a bunch of people at his local zillionaire's club a couple of years ago by running a campaign to significantly boost the minimum wage.

He has some sharp and well-formed views about dumb government, the hollowing-out of the American middle-class, and the ruinous impact that trend has had on the broader economy.

He summarises this thesis by saying that using ‘trickle-down’ economic theory to energise a sluggish US economy is stupid. And that we need to find another way.

Well, Mr Hanauer is still that guy. And he has been making progress. If not with his zillionaire mates – or the national political mainstream – then certainly his message resonates among communities and has inspired a growing number of local-level, grass-roots campaigns.

Mr Hanauer’s background is best explained through his now famous memo “To My Fellow Zillionaires,” written for Politico Magazine. He talks about how he became a “0.01%er” as the first investor in Amazon from outside of Jeff Bezos’ family.

He is an avowed and enthusiastic capitalist who went on to found many other startups (including at least one other multi-billion dollar exit.)

I spoke to Nick Hanauer recently from Seattle. He's an incredibly interesting mix of straight-forward capitalist thinking with politically progressive instincts. This is not a hobby for him. He is simply active in civic affairs as a positive contributor of ideas and energy.

His attention has now turned dramatically to the need for a fundamental shift in the way governments work to deliver better value to citizens. Civic innovation, he says, is falling waaay behind business innovation, and that is causing problems for the people these civic administrators are supposed to be serving.

This thinking has moved well beyond the campaign for increasing the minimum wage as a response to the hollowing out of the middle-class (which is like a hollowing out of the customer base as the destroyer of economic growth.)

Mr Hanauer is looking at ways to drive ‘middle-out’ growth. By securing the middle-class, he says, America has a better chance of also securing sustained growth.

Rather, the rapid technological and commercial innovation has so comprehensively outstripped civic innovation that the ‘traditional’ social contract is effectively broken. In the US, he is talking about the post-WWII years through until the 1980s.

You could leave school, find a job and work hard at that one job for all (or a large portion) of your career, paying taxes and contributing. And through all your hard work, you would earn your way to a nice retirement having had a comfortable life, and with holidays and health benefits and even your retirement fund all derived through that workplace position.

That was the prevailing social contract. But this is no longer the case the case for most workers now. People work more than one job, as a casual in unrelated industries and positions. It is more difficult to accrue benefits. Wages stalled decades ago, meaning longer hours in less secure positions.

He has put forward a simple – if somewhat radical – idea for civic innovation that would better enable government to better respond to profound technological change.

In a lengthy article written for Democracy with co-author David Roff, Mr Hanauer advocates the creation of a ‘Shared Services Account’ as a civic response to disruptive change. Such a system is reasonable response to the deeply disruptive technological and commercial changes.

The Shared Services Account seems like a response to the shared economy platforms like Uber or TaskRabbit in the US, but actually addresses longer-term technology change that has enabled worker casualisation for decades.

At its core, it recognises that people don’t have jobs for life. They don’t have the same job security, and therefore don’t have the same benefits that would be attached to a full-time job.

Such a scheme should be universal, Mr Hanauer says. Everyone has an account. It is portable, so that benefits accrued in your account – including holiday and sick leave – are portable between employers (whether you work as a coal miner or an Uber driver.) And it is pro-rated, so that it accrues benefit for every hour (or some other unit of work) that is performed.

The point, Mr Hanauer makes, is not to get in the way of the innovation, because innovation is what drives the prosperity in a capitalist technological economy.

But that doesn’t mean governments can sit back and do nothing.

That’s not an option, because of the social dislocation that disruption causes (in Australian political lexicon, this would be the conversation about the fairness test.)

And frankly, the better the innovation, the bigger the disruption. This works well in the commercial sphere, with fabulous returns for investors and customers. But in the social context, governments are obliged to adjust the way they do things to minimise dislocation and damage.

Uber is the poster-child for disruptive innovation around the world, if only because it has picked so many fights with civic leaders along the way, to force change. And it is an example that Mr Hanauer uses to illustrate the Shared Service Account model.

Because Uber is a superb innovation, he says. You simply don’t want to get in the way of that kind of innovation. But Uber drivers don’t get benefits of any kind, and that’s not healthy for the collective society. So needs government to apply new thinking.

“Technological innovation like Uber and Airbnb – or the latest cure for cancer – innovation is the foundation of economic growth and human prosperity and you want as much innovation in a society as you can get,” Mr Hanauer said.

“But technological innovation in the commercial sphere always creates disruption because it creates change. One person’s regulation is another person’s protection, and what we have to remember that as the rate of technological innovation increases, so must the rate of civic innovation.

“Because if you can match the rate of technological innovation with civic innovation, then the disruptions are minimised.

“Uber is an unbelievable service – it really is – but it also disrupts a bunch of things that were actually working quite well. So it necessitates the society adjusting to the innovation, hopefully in ways that support the innovation while also minimising the way in which it brings collateral damage,” Mr Hanauer said.

The central theme of the Hanauer-Roff thesis is not to get in the way of innovation, but to find ways for better civic response to these innovations than governments are currently supplier.

The point, Mr Hanauer says, is not to stop Uber, but to “make adjustments in civic society to accommodate more and more innovations like that.”

Part of the change is cultural. When there is the need for dramatic change in civic policy, it’s not necessarily because government has failed, but because circumstances have changed.

“The need to adjust is not a failure as if something went wrong. That’s the wrong way to look at it.”

“These are high quality problems to have. When new things come along and disrupt old ways, that’s a sign that things are changing and getting better, not worse,” Mr Hanauer said.

The Hanauer-Roff thesis is not completely analogous to the Australian situation. But the forces of disruptive change are, and the central themes are worth a good look.

And there has never been a better time to have the conversation in this country. For all of the Prime Minister’s optimistic clarion calls to “embrace the future,” we still have no real sense of how policy will be shaped to get this done with as little collateral damage as possible (this would be the fairness debate.)

But with “everything on the table” in terms of innovation policy debate, these are issues we should be looking at closely.

*Photo Credit: Nick Hanauer

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