Guide To The Sharing Economy – Part Two

Over the first part of the Intelligenthq Guide to the Sharing Economy, I have introduced you to Luke, Sam and Vicky: three digital urbanites that are part of generation C, standing for connected. They are tech savvy, interested in entrepreneurship, and alternative ways to develop businesses. For a few years they have been using various companies the rely on the principles of Sharing Economy, such as Airbnb, Taskrabbit, street bank and many more.

Sharing Economy, as I have already stated, stands both for a new trend in society, and a business concept based on the ability and preference for individuals to rent or borrow goods rather than buy or own them. A good definition of sharing economy is given by Marco Torregrossa:

“Sharing Economy is a social and economical system driven by network technologies and peer communities that enable the sharing of assets from space to skills to objects to money, in ways and on a scale never possible before.”

Lately, a lot of attention has been given to the sharing economy as the world in general has awakened to the business opportunities it holds. Rachel Botsman the author of a book on the subject, says the consumer peer-to-peer rental market alone is worth $26 billion.

In the second part of this article, I will be reviewing sharing economics characteristics and its challenges for the near future.

Sharing Economy key drivers and characteristics

Image source: The Economist

What  makes the sharing economy different from other economical trends is the particular set of characteristics commonly attributed to it. These are of three kinds: social, economical and technological.

Socially, the sharing economy relies on trust and reputation and a renewed interest on rebuilding a lost sense of community that can raise a sensation of connectedness. Another driver to the sharing economy is a growing disillusionment with the consumerist culture, the coping with a global recession, and shifts in power balance from centralised government to distributed networks of people.

Economically, the drivers of the sharing economy are the goal of monetizing the excess and idling capacity of assets, and the necessity of producing products that can last, which will not contaminate the biosphere.

Technologically, the drivers behind the sharing economy are the peer to peer social networks, the innovations happening with the mobile technologies, peer to peer payments and the internet of things.

Image source : eurofreelancers

Why is the sharing economy growing at such fantastic speed? Its success is attributed to the way it creates value that is environmentally sustainable and connected to local economies. The sharing economy enables local entrepreneurship and local economic investment.It lowers costs and its based on the idea that less is more. Big corporations are also tapping into the Sharing Economy, and some examples can be Nike’s runners communities, Starbucks crowd sourcing design, and Virgin’s sharing luggage space.
In sum, the sharing economy corresponds to a costumers/consumers shift happening in society, in which customers are becoming increasingly sellers, producers, distributors, lenders and teachers, as well as acting as hotels, restaurants, transport operators, manufacturers, banks and universities.

Welcome to Seoul: The Sharing City

Image source: Seoul Urban Sketchers

Urban environments such as cities can benefit from the sharing economy principles. The same technology that serves the sharing economy, can be used to redefine public services, infrastructures and civic engagement. Could it be then possible to take upon the core principles of the sharing economy to invent a “shareable city” in which its population could share a car ride to reduce pollution, rent an office space in a flexible way, or where its residents could teach each other valuable skills, and get help with their projects by connecting with neighbors? One city tried already to do so. Seoul self proclaimed itself as the “sharing city” in 2012, launching 20 sharing programs and policies for generating and diffusing infrastructure to promote and enable sharing based platforms.

“Sharing City, Seoul” was created in September of 2012 as part of the Seoul Innovation Bureau’s plan to solve social, economic and environmental problems in innovative ways. Its goal was to bring the sharing economy to its citizens by expanding sharing infrastructure, promoting existing sharing enterprises, incubating sharing economy startups, taking advantage of idle public resources, and providing more access to data and digital works. Another of its goals is to maximize the city’s resources and budget by creating jobs and increasing incomes, by address environmental issues, and aiming to find ways to reduce unnecessary consumption and waste, and recover trust-based relationships between people and a sense of community.

In June 2013 , a shareable cities resolution was adopted by the United States Conference of Mayors. The resolution was affirmed by 15 mayors that included the ones of San Francisco and New York. The resolution proclaimed the goal to make their cities more shareable.

Peeking into the future

Image source : ACE

Now that the sharing economy seems to be here to stay, and its benefits are becoming evident, such as its possibilities of profit, community building and the strength of local economies, and its capability to reduce waste, governments start to worry about its regulatory uncertainty.  As the current legal framework is all constructed around ownership of goods, rather than access to them, some of its activities are neither legal nor illegal, and there is an urgent need to solve this gap on regulation. Katherine Lake and Brad Jessup that have written about the legal implications of the sharing economy write about the confusion of trying to regulate what can be seen as a gray area: “Is a person who spends time tending to a community share garden in return for vegetables an employee? Or a volunteer protected from negligence actions? What is the extent of their contractual rights and obligations?” As an example, in New York, Airbnb is being investigated for possible breaches of a 2010 law making it illegal to sub-let your apartment.

Sharing Economy Evolution Infographic

In the near future, taxation, insurance, zoning and licensing and consumer protection issues are then all questions to look at.

Another challenge the sharing economy faces will be the creation of a marketplace and critical mass of enough people to participate that can bring enough supply and demand to provide convenience and choice. If this is easier in larger cities, that have higher population densities and more assets to share, platforms should be available in smaller cities as well. Peeking into the future one might see us moving from sharing companies owning the stock to peer to peer networks, that make  the middle man unnecessary.

But not only good things can be previewed. Even though the sharing economy seems so exciting to many, one of the biggest concerns it raises is actually job loss. In a recent article published in The Guardian, Moira Herbst refrains us from too much enthusiasm by remembering us that as it is, the sharing economy model certainly doesn’t solve the hardest problem of our times,  unemployment and the highest rate of income inequality in nearly a century. In her article, Moira pinpoints the fundamental question that is at play here: less consumption challenges the whole economical system upon which our society is structured.  She writes:

”One big problem with claims that the “sharing economy” can lead the way out of our economic morass is that proponents often advocate less consumption. How can that be a solution for an economy that – for better or worse – is fueled by consumer spending?”

Moira Herbst article takes us down to earth and reminds us to be realistic. If the sharing economy sounds like a great idea, one should be aware how it implies profound changes  in society. Are we ready for these ? For now, we still have to navigate and construct a myriad of divergent economic systems. Lets wait for the future and see what happens.

Opportunities in Sharing Economy Source by Latitude 42