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How the Trump presidency will affect Silicon Valley and the sharing economy

By Arun Sundararajan

Arun Sundararajan headshot article

...the sharing economy platforms, today’s darlings of Silicon Valley, may benefit a little from the Trump administration’s stance on labor and regulation.

In the six weeks since Donald Trump became the 45th President of the United States, over 100 technology company CEOs have signed a legal brief opposing his January executive order about immigration, Uber CEO Travis Kalanick has resigned from his strategic and policy forum, in part to placate employees upset about his affiliation with an administration they oppose, and over 2000 Google engineers held a unprecedented walk-out of Google headquarters to protest the White House’s stance on immigration.

Two decades of tech-friendly governments have led to trillions of dollars of market capitalization in the United States tech sector, creating some of the world’s biggest and most profitable companies ever. But today, Silicon Valley seems to be gearing up for war with the federal government. Looking ahead at the next four years, five key policy areas affect the tech and sharing economy platforms most significantly. Here’s a quick prognosis on how the relationship between the new US government and its most valuable industry will shape up on each of these fronts.

(1) Regulation: Sharing economy platforms have faced unprecedented regulatory conflict, earlier in their evolution and with far greater intensity, than any other tech sector in recent history. The Trump administration’s position on regulatory reform is clear: it wants to get rid of as much government regulation as possible. At first glance, this may seem like good news for the sharing economy, but the benefits may eventually be minimal. This is because most policies of relevance (taxi regulations, hotel taxes, limits on short-term accommodation in residential units) are set by state and city governments rather than the federal authorities.

(2) Automation: Perhaps the most interesting looming battle relates to the impending wave of artificial intelligence and robotics enabled automation. Granted, in general, the Trump administration shows clear signs of favoring the large corporations who are the biggest adopters of these technologies. However, the primary political base that got Trump elected overlaps significantly with the US population who lost their jobs to manufacturing automation, and whose employment prospects will be further threatened by the near-term arrival of autonomous vehicles and retail automation. In thinking ahead to a second term, the President may thus favor policies aimed at slowing job losses for his political base. This will place him at odds with tech companies ranging from Uber to Google that are betting their futures quite heavily on AI technologies.

(3) Labor policy: As it blurs the lines between personal and professional and between casual and full-time work, sharing economy platforms ranging from ridesharing platforms Uber and Lyft to labor marketplace Handy and peer-to-peer retail platform Etsy have highlighted numerous inadequacies in US labor laws that were designed for a time in which everyone worked full-time for a large company. Many platforms that have faced class-action lawsuits from freelance providers seeking to be classified as employees, most saliently Uber, may see the Trump administration’s opposition to labor unions and collective bargaining as a short-run advantage. Others, however (in particular, Etsy, Lyft and Handy that have worked actively on shaping new policy directions that favor freelance workers) will shift away from the federal Department of Labor and focus on inducing change via state governments.

(4) Trade Policy: Silicon Valley tech companies are among the most global in history. Over two-thirds of Apple’s revenues come from outside the US, Google and Facebook are category leaders in most major economies (with the notable exceptions of China and South Korea), and even relative newcomer Airbnb operates in 191 of the world’s 195 countries.  As the Trump administration reshapes US foreign policy with an anti-trade “America First” philosophy, these global American platforms may be caught in the crossfire, and must brace themselves for unanticipated regulatory and tax retaliation around the world. The forecast seems especially challenging for Apple and Airbnb: if trade relations between the US and China continue to worsen, Apple may face both manufacturing and retail roadblocks, and Airbnb may have to give up its quest for dominance in the world’s largest sharing economy market.

(5) Immigration: Perhaps the single biggest point of conflict between the tech industry and the Trump administration is immigration policy. All Silicon Valley companies rely heavily on hiring engineers from outside the US, and even more heavily on hiring immigrant engineers with advanced science and technology degrees from US universities. New immigration restrictions are going to severely squeeze the talent pipeline for the sector, especially as US universities become less accessible to foreign students.

More fundamentally, Silicon Valley is the bastion of immigration, a meritocracy that judges you by the pedigree of your talent and education rather than your ethnicity or lineage, and where being from another country is the norm. According to a 2016 study by the non-partisan National Foundation for American Policy, more than half (44 out of 87) of US startups that have gone on to be valued at over one billion dollars were founded by first-generation immigrants. Apple founder Steve Jobs is a second-generation Syrian immigrant; Google founder Sergey Brin came to the US in 1979 as a refugee from the Soviet Union; the current CEOs of Google and Microsoft are both first-generation immigrants from India.  Thus, the differences of opinion immigration transcend business interests; they have to do with a fundamental opposition in philosophy and world view.

To summarize, the sharing economy platforms, today’s darlings of Silicon Valley, may benefit a little from the Trump administration’s stance on labor and regulation. However, these gains are unlikely to outweigh the costs they and their tech brethren will bear from unfavorable policy on automation, trade and immigration.

Read the original article as published in Nikkei.

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Arun Sundararajan is a Professor of Information, Operations and Management Sciences, Robert L. & Dale Atkins Rosen Faculty Fellow, and Doctoral Coordinator of IOMS-Information Systems.