April 9, 2014

Why the Sharing Economy is Here to Stay

SOCAP Global Post Author

By: Haiz Oppenheimer

As of March 2014, Airbnb has hit 600,000 current listings of people who are offering to rent space in their homes to overnight guests for a fee. Airbnb is just one of a suite of bold startups that are making profits by changing the way people think about how they buy, sell, share, and trade products and services in their daily lives. Companies like Uber and Lyft use smartphone apps to connect car owners with people who are looking to pay for a ride. Craigslist and NeighborGoods have created markets for people to sell, swap, or loan their unused stuff with each other.

Airbnb, Uber, and NeighborGoods are part of the rise of what is being called the sharing economy. In the sharing economy, millions of people are cutting traditional hotels, taxis, and retail businesses out of the equation to earn income and save money by renting out their cars and homes, and sharing expensive items like power tools that they don’t need every day.

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At first glance, the sharing economy can seem like just the latest hip new province of the millennial generation and a bit alien to those of us who were raised in the twentieth century. Does it strike you as surprising that so many people are willing to catch a ride or stay the night with perfect strangers, or that people would rather share things they need than buy their own? While it may seem novel to us, from another perspective the sharing economy is about the oldest thing going.

Indigenous societies the world over have thrived for millennia in complex economies of sharing. If you think about it, it just makes sense. When you live in a community where you know everyone and can reasonably expect to keep seeing them day in and day out for the rest of your lives, why not share? If you loan me an important tool or share your day’s catch of fish, there is a strong incentive for me to return your plough in one piece, and share some of my food on a day when your catch is small. We are in it together, and in this kind of collaborative economy, wealth does not come down to what you personally own, but rather what resources your community can access together.

This kind of sharing already happens in our society too. We let the neighbors borrow the lawn mower, or stay on a friend’s couch when we travel out of town. These are people we know and trust, and sharing with them feels good. The challenge comes when we start trying to share with people we don’t know. In the twentieth century, with the rise of megacities and increasingly mobile populations, most people found themselves living outside of networks of trust, and it followed that to guarantee access to the resources you needed, it was important to own them. After all, how can you trust your neighbors enough to share necessities when you don’t really know them very well and may not live near each other for more than a few months?

At first glance, this basic challenge of building networks of trust in huge societies has only accelerated as populations have continued to migrate and grow. However, the equation begins to shift when you factor in the rise of online social networks. Key to the success of companies like Airbnb is that they are using technology to map people’s offerings to other people’s demand, and connecting them in a social context where people can feel safe placing trust in one another. In an indigenous community or in a close-knit suburban neighborhood, if people share generously with me and I fail to take care of what I borrow or I don’t share back, people are going to find out, and it is going to cost me relationships. Similarly, if I trash someone’s home I rent via Airbnb not only will Airbnb help them recover their losses, Airbnb may outright ban me from the site, and even if they do not, I will have a huge black mark on my reviews and people will not be likely to rent to me again.

What is making the emergence of the sharing economy possible at scale is that Airbnb and other companies create a social context in which reputation matters, even among people who do not personally know each other. Increasingly, we are asked all the time to rate individuals and companies that we do business with. As more and more people begin to rely on the feedback of strangers to determine where they will shop, who to stay with when they travel, even who they will go on a date with, our online reputation becomes more and more important.  Rachel Botsman has even argued that in the twenty-first century your “reputation capital” will become even more important to your daily life than your credit rating is today.

In any case, it is clear that the sharing economy has arrived and it is growing all the time. While is best known for companies like Airbnb and Uber, the sharing economy is not limited to revenue generating companies. Indeed, pioneers like CouchSurfing have been thriving for years without generating any cash revenue. Nor is the sharing economy limited to collaborative consumption. In the open data movement, organizations are unlocking collective creativity by sharing information to open source problem solving and innovation around challenges that affect us all.

As we move into a future where global population will spiral further and further into the unknown billions, it is likely that we may have to make do with fewer resources per person. The good news is that if we can reimagine how we access and experience wealth, we may find that we can cut our individual footprints and yet enrich our lives by owning less and sharing more. So next time you travel on vacation, catch a ride across town, or start shopping for a new leaf blower, consider looking to share rather than own. You might just meet a new friend along the way.

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