The Sharing Economy
How many times have you been told to share? Turns out, your mom was on to something. A new approach to goods and services has emerged. It is called the ‘sharing economy.’ Others describe it as peer-to-peer marketplaces, or collaborative consumption. Whatever the name, the idea is simple: instead of spending money on goods you will use occasionally (and will sit unused often), find someone who owns it, and pay them to share. The flip-side for owners is instead of having your belongings gather dust while you aren’t using them, earn money and share with others. What makes this twist on sharing unique is that instead of borrowing a car from a car rental company, you are borrowing a car (or getting a ride) directly from the car owner. The concept has spawned a host of app-based businesses where people share everything from cars and guest rooms to cameras and surf boards.
Everyone is not thrilled about this new way to connect people with goods or services. Established business owners (i.e. taxi drivers) who are highly regulated and pay steep taxes and permit fees, resent these new upstarts that skirt the system and funnel off customers. Government agencies must decide how new app-based sharing companies fit into the current system. On September 19, the California Public Utilities Commission voted to allow ‘transportation network companies’ (or tns) that connect people who need a ride with drivers who own cars to operate but with regulations. On Thursday, September 27, Seattle’s city council heard three options for how to handle the conflict between taxi companies, private car companies, and transportation network companies. Their final decision will be announced soon.
As sharing businesses work their way into the mainstream, they will continue to push old business models and government agencies to adapt. It is worth understanding how the sharing economy works. After all, the next time you need camping gear or a ride to the game, sharing may be the answer.
What’s Mine is Yours…for a Price
The sharing economy is not new. Cooperative gardens and kidswap programs that share child care (not the actual child) have been around. So too have car-sharing companies like ZipCar. Car-sharing companies such as ZipCar own a fleet of cars that are parked around town. Members may use one for a day or a few hours and then return it to its designated parking spot. But the new wave of sharing does not rely on a company to provide the goods. Instead, ‘transportation network companies’ use mobile apps to connect owner and borrower. They harness the powers of gps and mobile apps to create a network of car owners who are available to pick you up. Need a ride now? Log in to UberX, a transportation network company, and see who is available and where they are, request a ride, and the driver picks you up.
Cars and rides are not the only goods and services available to share. The other popular commodity is a place to stay. Have you ever considered putting an air mattress in your kitchen and renting the space to visitors? Would you ever imagine that would be the basis for a multi-million dollar business? The poster-child of the sharing economy is Airbnb. It connects owners and users, but it is unique because the commodity it sells is unused guest rooms, beds, even floor space. Listen to co-founder Brian Chesky share the wacky story of how the idea was conceived. Watch two excerpts: 5:16 to 8:22 and 13:47 to 21:24.
While accommodations and cars are the most common shared goods, the possibilities are endless. Consider your and your family’s possessions. What do you use regularly? What might be shared with others? View the collaborative house and discover some of the companies that help buyers and borrowers find goods and services.
The Rose that Grew from Concrete
The idea for Airbnb was born in part out of economic desperation. Just as Chesky and his roommate struggled to make their rent payment, so too did millions of other Americans. Review statistics of the total debt held by Americans and the youth unemployment in the United States. 2008’s economic downturn created an opportunity for Airbnb and other sharing economy businesses. However, Airbnb and other sharing economy companies also benefitted from a generation accustomed to online transactions and mobile devices.
App-based companies that offer goods to share, like diamonds, were created under pressure. Economic, technological, and social changes allowed these companies to emerge and to flourish. Examine the infographic, The Rise of the Sharing Economy, for some statistics that reveal how prevalent and successful they have become. View how Airbnb has grown since that first week of three air mattresses.
The benefits of sharing may seem obvious; however, there are barriers as well. To address these concerns, sharing companies are increasingly linking owners and users through social media sites, such as Facebook, so they can check who they are riding with or staying with. Traditional companies counter these checks are insufficient and that the background checks required of traditional companies do a better job of protecting consumers.
Local and state governments have begun studying how to incorporate transportation network companies into the system that regulates transportation. California’s Public Utilities Commission was among the first in the country to grapple with this issue. Read the CPUC press release that shares the rules that will guide transportation networks in California. Read about last week’s Seattle Council meeting and the three options they are considering. Read editorials from the Seattle Times and the SanFrancisco Gate for a final view of some issues governments and communities must consider when a sharing app moves into town.
Airbnb was, in the eyes of many, a bad idea. Its founders were told, "I hope this isn't all you're working on." But its founders recognized a need that was not being filled and pursued it. This week, read a range of articles in [TargetNewspaper]. What ideas do they spark? What problems do people grapple with? What solutions exist? What other solutions might solve the problem more efficiently, compassionately, or economically? How might new technologies be used? Discuss the problems you find with a small group of peers. Assess the current solutions and brainstorm potential new ways of dealing with the problem.