Sharing economy

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A sharing economy takes a variety of forms, often leveraging information technology to empower individuals, corporations, non-profits and government with information that enables distribution, sharing and reuse of excess capacity in goods and services.^[1][2] A common premise is that when information about goods is shared (typically via an online marketplace), the value of those goods may increase, for the business, for individuals, and for the community.^[3]

Collaborative consumption as a phenomenon is a class of economic arrangements in which participants share access to products or services, rather than having individual ownership.^[1]

The collaborative consumption model is used in marketplaces such as eBay, Craigslist, Tradepal and Krrb, emerging sectors such as social lending, peer-to-peer accommodation, peer-to-peer travel experiences, peer-to-peer task assignments or travel advising, car sharing or commute-bus sharing.^[4]

Scope

The sharing economy^[5] encompasses a wide range of structures including for-profit, non-profit, barter and co-operative structures.^[6] The sharing economy provides expanded access to products, services and talent beyond one to one or singular ownership, sometimes referred to as "disownership".^[7] Corporations, governments and individuals all actively participate as buyers, sellers, lenders or borrowers in these varied and evolving organizational structures.^[8]

Types of collaborative consumption

Product-service systems

Goods that are privately owned can be shared or rented out via peer-to-peer marketplaces.^[9]

Redistribution markets

A system of collaborative consumption is based on used or pre-owned goods being passed on from someone who does not want them to someone who does want them. This is another alternative to the more common 'reduce, reuse, recycle, repair' methods of dealing with waste. In some markets, the goods may be free, as on Freecycle and Kashless. In others, the goods are swapped (as on Swap.com) or sold for cash (as on eBay, craigslist, and uSell). There are a growing number of specialist marketplaces for preowned fashion items, including Copious, Vestiaire Collective, BuyMyWardrobe and Grand Circle^[9]

Collaborative lifestyles

This system is based on people with similar needs or interests banding together to share and exchange less-tangible assets such as time, space, skills, and money. The growth of mobile technology provides a platform to enable location-based GPS technology and to also provide real-time sharing.^[10]

History

The term "sharing economy" began to appear in the mid-2000s, as new business structures emerged inspired by enabling social technologies and an increasing sense of urgency around global population growth and resource depletion. One inspiration was the tragedy of the commons, which refers to the idea that when we all act solely in our self-interest, we deplete the shared resources we need for our own quality of life. The Harvard law professor, Yochai Benkler, one of the earliest proponents of open source software, posited that network technology could mitigate this issue through what he called 'commons-based peer production', a concept first articulated in 2002.^[11] Benkler then extended that analysis to "shareable goods" in Sharing Nicely: On Shareable goods and the emergence of sharing as a modality of economic production.^[12]

The term "collaborative consumption" was coined by Marcus Felson and Joe L. Spaeth in their paper “Community Structure and Collaborative Consumption: A routine activity approach" published in 1978 in the American Behavioral Scientist.^[13] The term was used in more contemporary times by Ray Algar, a UK-based management consultant in an article entitled "Collaborative Consumption" in the Leisure Report Journal in 2007.^[14]

In 2011, collaborative consumption was named one of TIME Magazine's 10 ideas that will change the world.^[15]

The UK Government in its 2015 Budget set out objectives improve economic growth including to make Britain the "...best place in the world to start, invest in, and grow a business, including through a package of measures to help unlock the potential of the sharing economy..."^[16]:4

Crowdfunding platforms

These models also use a two-sided marketplace to enable individuals to contribute funds to entrepreneurs, artists, civic programs and projects.^[17]

Transparent and open data

The mesh model is fundamentally based on network-enabled sharing of information. In some cases, this information is shared in order to enable access to shared and rented goods and services, such as AirBnB which enables people to share their homes for a fee, or Taskrabbit, which is a platform that enables people to rent their services directly to others in their community. In other cases, mesh model organizations are sharing information about product design, distribution, repair and re-purposing in order to unlock the unused value in a good or service. Many state, local and federal governments^[18] are also engaged in Open Data initiatives and projects such as data.gov^[19] and the London Data Store.^[20] In all cases, mesh model organizations and initiatives understand that the information they access and retain will be more valuable, and return more value to them, if it is transparently available to the larger community. Data shared in a network can over time become more valuable than the artifact it point to. Open and transparent access to information will enable greater innovation,^[21] more efficient use of products and services, and support resilient communities.^[22]

Trust

The Sharing Economy relies on the will of the users to share, but in order to make an exchange, users have to be trustworthy. Sharing economy organizations say they are committed to building and validating trusted relationships between members of their community, including producers, suppliers, customers or participants. Many mesh economy organizations collect significant amounts of information about the participants in their systems.^[23]

Unused value is wasted value

Unused value refers to the time that products, services and talents lay idle. This idle time is wasted value that mesh models businesses and organizations utilize. The classic example is that the average car is unused 92% of the time.^[24] This wasted value has created a significant opportunity for share economy car solutions. There is also significant unused value in "wasted time" as articulated by Clay Shirky in his analysis of power of "crowds" connected by information technology. Many of us have unused capacity in the course of our day. With social media and information technology, we can easily donate small slivers of time to take care of simple tasks others need doing. Examples of these crowd sourced solutions^[25] include the for-profit Amazon Mechanical Turk and the non-profit Ushahidi.

Waste as food

Waste is commonly considered as something that is no longer wanted and needs to be discarded. The challenge with this point of view is that much of what we define as waste still has value that, with proper design and distribution, can safely serve as "nutrients" for follow-on processes, unlocking new levels of value in increasingly scarce and expensive resources. One example is "heirloom design"^[26] as articulated by physicist and inventor Saul Griffith.^[27]

Driving forces

The driving forces behind the rise of sharing economy organizations and businesses include:

1. Information Technology and Social Media: A host of enabling technologies has reached the mainstream, making it easy for networks of people and organizations to transact directly. These include open data,^[28] the ubiquity and low-cost of mobile phones,^[29] and social media.^[30] These technologies dramatically reduce the friction of share-based business and organizational models.
2. Population Growth: By 2050 there will be roughly 9.3 billion people in the world. According to the United Nations 64.1% and 85.9% of the developing and developed world respectively will be urbanized.^[31] The denser living arrangements afforded by cities offer more opportunity for sharing resources and services.
3. Rising income inequality: Steven Strauss, a faculty member at Harvard University, has offered the hypothesis that rising income inequality is another driving force behind the growth of the sharing economy at least in the United States^[32][33]
4. Increasing Global Crises (financial, environmental and social): The financial crisis of 2007- 2008 ^[34] meant that unemployment and income insecurity became widespread across the developed world, forcing many people, organizations and governments to make do with less. In this period many sharing economy businesses, such as Airbnb, Zipcar, Kickstarter and Taskrabbit began to thrive. In addition, recent natural disasters, such as the Japanese earthquake and tsunami,^[35] the Chilean earthquake,^[36] Hurricane Sandy,^[37] and the 2012 US drought,^[38] have demonstrated that local issues have clear global impact, creating an increasing interest in more resilient social and economic structures. Finally, widespread social unrest as evidenced by the Arab Spring, Arab Winter ^[39] and the Occupy movement further underscore a period of rapid dislocation and change.
5. Increasing Volatility in Cost of Natural Resources: Rising prosperity across the developing world coupled with population growth is putting greater strain on natural resources and has caused a spike in costs and market volatility. This has been increasing pressure on traditional manufactures to seek design, production and distribution alternatives that will stabilize costs and smooth projected expenditures. In this context, the circular economy approach has been gaining interest among many global corporate actors. While a handful of pioneering companies are leading the way, wider adoption will rely on mesh economy skills such as the collection and sharing of data, the spread of best practices and increased collaboration.^[40]
6. Forbes estimates the revenue flowing through the share economy will surpass $3.5 billion in 2013 with growth exceeding 25%.^[41]

Benefits of a sharing economy

The benefits of a sharing economy may include reducing carbon foot print by sharing transportation and assets, and saving costs by borrowing and recycling items. Researcher Christopher Koopman, an author of a study by George Mason University economists, said the sharing economy "allows people to take idle capital and turn them into revenue sources". "People are taking spare bedroom, cars, tools they are not using and becoming their own entrepreneurs."^[42] Arun Sundararajan, a New York University economist who studies the sharing economy, told a January congressional hearing that "this transition will have a positive impact on economic growth and welfare, by stimulating new consumption, by raising productivity, and by catalyzing individual innovation and entrepreneurship."^[43]

Criticism and controversies

Andrew Leonard,^[44][45][46] Evgeny Morozov,^[47] Bernard Marszalek,^[48] Dean Baker,^[49][50] and Andrew Keen^[51] criticized the for-profit sector of the sharing economy, writing that sharing economy businesses "extract" profits from their given sector by "successfully [making] an end run around the existing costs of doing business" - taxes, regulations, and insurance. Salon further writes that "the sharing economy ... [is] not the Internet 'gift economy' as originally conceived, a utopia in which we all benefit from our voluntary contributions. It’s something quite different — the relentless co-optation of the gift economy by market capitalism. The sharing economy, as practiced by Silicon Valley, is a betrayal of the gift economy. The potlatch has been paved over, and replaced with a digital shopping mall."^{[52][53][54][55]}

Susie Cagle wrote that the benefits big disruptive sharing economy players might be making for themselves are "not exactly" trickling down, and that the sharing economy "doesn’t build trust" because where it builds new connections, it often "replicates old patterns of privileged access for some, and denial for others."^[56] William Alden wrote that "The so-called sharing economy is supposed to offer a new kind of capitalism, one where regular folks, enabled by efficient online platforms, can turn their fallow assets into cash machines ... But the reality is that these markets also tend to attract a class of well-heeled professional operators, who outperform the amateurs — just like the rest of the economy."^[57]

New York Magazine wrote that sharing economy innovations such as bidirectional rating systems, background checks, frictionless payment systems, and platforms that encourage buyers and sellers to get to know each other face-to-face have made a difference, but that the for-profit sector of the sharing economy has succeeded in large part because the real economy has been struggling. Specifically, in the magazine's view, the sharing economy succeeds because of a depressed labor market, in which "lots of people are trying to fill holes in their income by monetizing their stuff and their labor in creative ways," and that in many cases, people join the sharing economy because they've recently lost a full-time job, including a few cases where the pricing structure of the sharing economy may have made their old jobs less profitable (e.g. full-time taxi drivers who may have switched to Lyft or Uber). The magazine writes that "In almost every case, what compels people to open up their homes and cars to complete strangers is money, not trust. ... Tools that help people trust in the kindness of strangers might be pushing hesitant sharing-economy participants over the threshold to adoption. But what's getting them to the threshold in the first place is a damaged economy, and harmful public policy that has forced millions of people to look to odd jobs for sustenance."^[58][59][60]

Business Insider wrote that companies such as Airbnb and Uber do not share their reputation data with the very users who it belongs to. This is an issue since no matter how you well you behave on any one platform, your reputation doesn’t travel with you. This fragmentation has some negative consequences, such as the Airbnb squatters who had previously deceived Kickstarter users to the tune of $40,000.^[61] Sharing data between these platforms could have prevented the repeat incident. Business Insider’s view is that since the Sharing Economy is in its infancy, this has been accepted. However, as the industry matures, this will need to change.^[62]

Giana Eckhardt and Fleura Bardhi say that the sharing economy promotes and prioritizes cheap fares and low costs rather than personal relationships, which is tied to similar issues in crowdsourcing. For example, Zipcar is advertised as a ride-sharing service, but it’s been brought into consideration that the consumers reap similar benefits from Zipcar as they would from, say, a hotel. In this example, there is minimal social interaction going on and the primary concern is the low cost. Other examples many include myriad other sharing economies such as AirBnB or Uber. Because of this, the “sharing economy” may not be about sharing but rather about access.Giana Eckhardt and Fleura Bardhi say the "sharing" economy has taught people to prioritize cheap and easy access over interpersonal communication, and the value of going the extra mile for those interactions has diminished.^[63]

Examples

Organisations promoting the sharing economy

• OuiShare:^[64] A French-based non-for-profit aiming to connect efforts within the Sharing or Collaborative Economy to create a global network of collaborators. Having started in France in 2012, they have spread to Europe, Latin America and the Middle East.

• Shareable:^[65] "Shareable is a nonprofit news, action and connection hub for the sharing transformation",^[66] and the primary global online magazine on the Sharing Economy.

• Echo (Economy of Hours):^[67] A UK based non-profit providing infrastructure to, and lobbying at national level on behalf of, local time banking projects. Echo develops systems for local projects to become part of national networks, aggregating offers and requests, and a commercial B2B model to provide long term sustainability to time banks.^[68] Echo has introduced non-profits, businesses and corporates to time banking as a legitimate way of doing business, with the aim of dissolving the distinction between the personal and the professional, resulting in a comprehensive marketplace without money.^[69]

Category examples

See also

Notes and references

Further reading

• A Policy Agenda for the Sharing Economy, The Urbanist, October 2012
• All Eyes on the Sharing Economy, The Economist, March 9, 2013
• The Twilight of the Sharing Economy—or the Dawn?, The Atlantic, May 7, 2013
• The End of Ownership, Boston Magazine, May, 2013
• Leonard, Andrew (January 2012). "The Economy of Sharing". Sunset Magazine. 
• Nanos, Janelle (May 2013). "The End of Ownership". Boston Magazine. 

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