Sharing economy

Scope

According to sharing economy expert Alex Stephany, it is a mystery as to who first used the term sharing economy, which has left the term "without a guardian and vulnerable to loose definitions."

A variety of definitions exist. "The people who share" is one of the broadest definitions, which encompasses the on-demand economy, the gig economy, social media, and a great deal else. Academic definitions tend to be narrower, limiting the sharing economy to only peer-to-peer transactions, and sometimes further limiting the definition to only peer to peer transactions that relate to the temporary exchange of physical goods. Another set of narrow definitions used by free culture activists, members of the co-operative movement and similar, excludes for-profit companies from the sharing economy, even if they facilitate just peer to peer transactions. Sometimes called the "real" or "true" sharing economy, organisations that operate within such definitions are mostly small and localist, run by volunteers on a cooperative basis, though sometimes also by governments and municipal authorities. They can include some organisations that operate without online transactions, such as bike kitchens. The "true" sharing economy does include some large internationally available web sites however, such as Freecycle.

The term sharing economy has been widely used since about 2010, yet according to a Pew survey taken in winter 2015, only 27% of Americans had heard of the term.

Survey respondents who had heard of the term had divergent views on what it meant, with many thinking it concerned "sharing" in the traditional sense of the term. In 2010 and 2011, many people involved with the sharing economy did indeed consider it to be about sharing in the traditional sense. A commonly used example at the time was the idea of sharing a power drill —a tool that many consumers might use for only a few minutes in their lifetime. Advocates said it made sense for regular consumers not to buy their own power drill, but to borrow from others instead, and that this borrowing could be facilitated by online platforms. Several startups companies were launched to help people share drills and similar goods along these lines. Yet looking back from 2015, it was clear that consumers had generally not been interested in such temporary exchanges, leading to the failure of many startups which aimed to facilitate traditional sharing. While some successful platforms such as Airbnb can be described as involving the sharing of a resource, as of 2016 the term sharing economy has been widely criticised as being misleading.

The scope of the sharing economy has been a subject of academic debate. Depending on the criteria used, some platforms would be included within the sharing economy, but not others. For example, going by whether companies self-describe as being part of the sharing economy, TaskRabbit would be included, but not mechanical turk.

Commercial implementations encompass a wide range of structures including mostly for-profit, and, to a lesser extent, co-operative structures. The sharing economy provides expanded access to products, services and talent beyond one-to-one or singular ownership, which is sometimes referred to as "disownership". individuals actively participate as users, providers, lenders or borrowers in varied and evolving peer-to-peer exchange schemes which are often web-mediated.

History

Several key macro developments led to the (re-)emergence of mutualization in consumption. The "sharing economy" results from several deep-seated technological, economic, political, and societal changes:

The term "sharing economy" began to appear in the early 2000s, as new business structures emerged due to the Great Recession, enabling social technologies, and an increasing sense of urgency around global population growth and resource depletion. Professor Lawrence Lessig was possibly first to use the term in 2008, though others claim the origin of the term is unknown.

The phenomena of the sharing economy certainly emerged much earlier than 2008 however, even in the sense of exchange co-ordinated by online platforms. 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. 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.

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.

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

Developments since 2015

The UK Government in its 2015 Budget set out objectives to 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...".

Also in 2015, The Business of Sharing by Alex Stephany, CEO of JustPark, was published by Palgrave Macmillan. The book features interviews with the high-profile entrepreneurs such as Martin Varsavsky and venture capitalists such as Fred Wilson.

Size and growth

The rapid growth of the sharing economy has been frequently remarked on. Yet according to a June 2016 report by the United States Department of Commerce, quantitative research on size and growth remains sparse. Such growth estimates as there are can be challenging to evaluate due to different and sometimes unspecified definitions about what sort of activity counts as sharing economy transactions.

The June 2016 report summarised currently available research. This included a 2014 study by PricewaterhouseCoopers, which looked at five components of the sharing economy: travel, car sharing, finance, staffing and streaming. It found that global spending in these sectors totalled about $15 billion in 2014, which was only about 5% of the total spending in those areas. The report also forecasts a possible increase of "sharing economy" spending in these areas to $335 billion by 2025, which would be about 50% of the total spending in said five areas.

Product-service systems

Product-service systems refer to commercial peer-to-peer mutualization systems (CPMS), allowing consumers to engage in monetized exchanges through peer-to-peer-based for temporary access to goods. Goods that are privately owned can be shared or rented out via peer-to-peer marketplaces. For example, BMW's "Drive Now" is a car rental service that offers an alternative to owning a car. Users can access a car when and where they need them and pay for their usage by the minute.

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. Additional forms of redistribution markets include ReHome (a free pet redistribution service by PetBridge.org).

Collaborative lifestyles

Collaborative lifestyles refer to commercial peer-to-peer mutualization systems (CPMS), allowing consumers to engage in monetized exchanges through peer-to-peer-based for services or access to resources such as money or skills. These systems are based on people with similar needs or interests banding together to mutualize 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.

Crowdfunding platforms

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

Expert networks

These models also use a two-sided marketplace to enable experts to provide on-demand information to consumers.

Transparent and open data

Many state, local and federal governments are engaged in Open Data initiatives and projects such as data.gov and the London Data Store. The theory of open or 'transparent' access to information enables greater innovation, and makes for more efficient use of products and services, and thus supporting resilient communities.

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 and trust each other. Sharing economy organizations say they are committed to building and validating trusted relationships between members of their community, including producers, suppliers, customers or participants. Beyond trusting others (i.e., the peers), the users of a Sharing Economy platform also have to trust the platform itself as well as the product at hand.

Unused value is wasted value

Unused value refers to the time over which products, services and talents lay idle. This idle time is wasted value that business models and organizations that are based on sharing can potentially utilize. The classic example is that the average car is unused 92% of the time. This wasted value can be a significant resource, and hence an opportunity, for sharing 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 people have unused capacity in the course of their day. With social media and information technology, such people can donate small slivers of time to take care of simple tasks that others need doing. Examples of these crowd sourced solutions 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" as articulated by physicist and inventor Saul Griffith.

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, the ubiquity and low-cost of mobile phones, and social media. These technologies dramatically reduce the friction of share-based business and organizational models.
2. Social commerce: the notion that commerce is facilitated by social networking. It has contributed to the emergence of the sharing economy. People are more likely to buy products because of the “social influence exerted by peers on purchasing decisions.” The involvement of social media encourages and promotes the sharing economy and social commerce because it not only encourages people buy similar products and try similar things, but it also encourages people to look for group deals on these similar products as well. Group deals are proliferated by companies like Groupon. “Social commerce is moving beyond individual enjoyment and centering on economic concern. For instance, a pertinent form of social commerce is the consumer self-coordination of group deals for pursuit of economic gains.” “The results show that participation in sharing economy is motivated by many factors such as its sustainability, enjoyment of the activity as well as economic gains.”
3. Urban Life Style: The congested urban setting creates a new series of problems that can be addressed by the sharing economy. “Unlike earlier generations of information or technology-based enterprises, sharing enterprises rely on a critical mass of providers and consumers who are sufficiently close to each other or to other amenities to make their platforms work, often finding value in the very fact of the beneficial spillovers from proximity.” Uber, for example, takes people who live in one common area and transports them to another area. However, to make the initial pick up the Uber driver must be relatively close to the passenger. Urban settings inherently force people to live and work in close proximities. This means that the amount of people going to and from similar destinations is gong to increase. Uber realized this and created a business format to take advantage of this new urban setting. Airbnb is another example of a company that solves a problem created by the centralized urban setting. In urban settings where there is limited space for housing people are always hard pressed to find cheaper housing and rental options when moving from city to city. AirBNB realized this and was able to take advantage of people who had space they aren’t using and rent it out at cheaper costs to the people who need a place to stay for shorter amounts of time.
4. 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 manufacturers 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.

Forbes estimates the revenue flowing through the shared economy will surpass $3.5 billion in 2013 with growth exceeding 25%.

Benefits of a sharing economy

By sharing transportation and assets the benefits of a sharing economy are said to include the following:

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." He has stated, "People are taking spare bedroom[s], cars, tools they are not using and becoming their own entrepreneurs." 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".

A study in Intereconomics / The Review of European Economic Policy noted that the sharing economy has the potential to bring many benefits for the economy, while noting that this presupposes that the succes of sharing economy services reflects their business models rather than 'regulatory arbitrage' from avoiding the regulation that affects traditional businesses.

An independent data study conducted by BUSBUD compared the average price of hotel rooms with the average price of Airbnb listings in thirteen major cities in the United States. The research concluded that in nine of the thirteen cities, Airbnb rates were lower than hotel rates by an average price of $34.56. A further study conducted by BUSBUD compared the average hotel rate with the average Airbnb rate in eight major European cities. The research concluded that that the Airbnb rates were lower than the hotel rates in six of the eight cities by a factor of $72.

Transport

Using a personal car to transport passengers or deliveries requires payment, or sufferance, of costs for fees deducted by the dispatching company, fuel, wear and tear, depreciation, interest, taxes, as well as adequate insurance. The driver is typically not paid for driving to an area where fares might be found in the volume necessary for high earnings, or driving to the location of a pickup or returning from a drop-off point. Mobile apps have been written that help a driver be aware of and manage such costs has been introduced.

Uber, Airbnb, and other companies have had drastic effects on infrastructures such a road congestion and housing. Major cities such as San Francisco and New York City have become even more congested due to ride sharing. According to transportation analyst Charles Komanoff, "Uber-caused congestion has reduced traffic speeds in downtown Manhattan by around 8 percent".

The New York Times wrote that there was a recent corporate decision by Uber which aimed at lowering its fare rates by 15% in over 100 cities in the United States. This decision caused many Uber employee drivers to assemble and express their disagreement with the recent pay cut. Uber has made a statement claiming that "when it cut prices previously, the amount of time drivers spent waiting for fares fell, meaning drivers did more business and ultimately earned more money".

A number of academics recently demonstrated that in 2015, Uber generated $6.8 billion of consumer welfare in the United States.

Criticism and controversies

The Harvard Business Review argues that "sharing economy" is a misnomer, and that the correct word for this activity is "access economy". The authors say, "When "sharing" is market-mediated—when a company is an intermediary between consumers who don't know each other—it is no longer sharing at all. Rather, consumers are paying to access someone else's goods or services." The article goes on to show that companies (such as Uber) who understand this, and whose marketing highlights the financial benefits to participants, are successful, while companies (such as Lyft) whose marketing highlights the social benefits of the service are less successful.

The notion of "sharing economy" has often been considered as an oxymoron, and a misnomer for actual commercial exchanges. Arnould and Rose proposed to replace the misleading concept of "sharing" by that of mutuality or mutualization. A distinction can therefore be made between free mutualization such as genuine sharing and for-profit mutualization in the likes of Uber, Airbnb, or Taskrabbit. To Ritzer, this current trend towards increased consumer input in commercial exchanges refers to the notion of prosumption, which, as such, is not new. The mutualization of resources is for example well known in business-to-business (B2B) like heavy machinery in agriculture and forestry as well as in business-to-consumer (B2C) like self-service laundries. But three major drivers enable consumer-to-consumer (C2C) mutualization of resources for a broad variety of new goods and services as well as new industries. First, customer behaviour for many goods and services changes from ownership to sharing. Second, online social networks and electronic markets more easily link consumers. And third, mobile devices and electronic services make the use of shared goods and services more convenient (e.g. smartphone app instead of physical key).

Salon 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."

Oxford Internet Institute, Economic Geographer, Graham has argued that key parts of the sharing economy impose a new balance of power onto workers. By bringing together workers in low- and high-income countries, gig economy platforms that are not geographically-confined can bring about a 'race to the bottom' for workers.

Relationship to job loss

New York Magazine wrote that 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."

The Huffington Post wrote that some people believe the recent recession lead to the expansion of the sharing economy because people could easily employ themselves through the services that these companies offer. However, this concept is only hiding the fact that such employment is only a new face for contractual work and temporary employment that doesn't provide the necessary safeguards for modern living. When companies use contract based employment, the "advantage for a business of using such non-regular workers is obvious: It can lower labor costs dramatically, often by 30 percent, since it is not responsible for health benefits, social security, unemployment or injured workers' compensation, paid sick or vacation leave and more. Contract workers, who are barred from forming unions and have no grievance procedure, can be dismissed without notice".

Circumventing labor protection law(s)

Xconomy wrote about the debate over the status of the workers within the sharing economy, whether they should be treated as contract workers or employees of the companies. This issue seems to be most relevant among sharing economy companies such as Uber. The reason this has become such a big issue is that the two types of workers are treated very differently. Contract workers are not guaranteed any benefits and pay can be below average. However, if they are employees, they are granted access to benefits and pay is generally higher. The State of California is trying to go after Uber and make them pay a fine to compensate workers fairly. The California Public Utilities Commission was working on a case that "addresses the same underlying issue seen in the contract worker controversy—whether the new ways of operating in the sharing economy model should be subject to the same regulations governing traditional businesses". 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 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. 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.

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.

Benefits not accrued evenly

Andrew Leonard, Evgeny Morozov, Bernard Marszalek, Dean Baker, and Andrew Keen 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. Similarly, In the context of online freelancing marketplaces, there have been worries that the sharing economy could result in a 'race to the bottom' in terms or wages and benefits: as millions of new workers from low-income countries come online.

Susie Cagle wrote that the benefits big 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." 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."

The local economic benefit of the sharing economy is offset by its current form, which is that huge tech companies reap a great deal of the profit in many cases. For example, Uber, which is estimated to be worth $50B as of mid-2015, takes up to 30% commission from the gross revenue of its drivers, leaving many drivers making less than minimum wage.