Peer-to-peer collaboration is gaining ground and changing the economics of the future, but there are questions to answer and obstacles to overcome.
Here's a typical story you're hearing about the sharing economy: Millennial needs ride to music festival. She lives 15 minutes from downtown, which has hardly any parking, and her city doesn't have an efficient public transportation system.
No cabs are available. She remembers the ride sharing service Lyft recently came to her city and downloads the app. Three minutes later, a guy who drives a neon green Dodge pulls in her driveway.
She finds out the driver had just started his shift after a day of work at his full-time job at a health insurance company. He likes the extra money, but he also enjoys meeting people and helping them out. There's no pink moustache on the front of his car like most Lyft drivers — it attracts too much attention.
They arrive at the music festival, she tips him, bids him well. She probably won't see him ever again, but for a short period of time, they had a mutually beneficial relationship.
That anecdote is likely one of the many reasons the "sharing economy" is still considered a hippie movement by some, and a yuppie San Francisco trend by others. Why would a Lyft ride be important for the future of global business?
The answer: trust.
It is the crux of this new economy — the movement to be more inclusive and less distrusting; to be more democratized and less traditional; to help each other make better decisions about resources and waste less, and to harness the best aspects of technology to do so. With collaborative services, the hope is that, albeit slowly, we're all changing for the better. It's an altruistic idea, but there it is. If people can trust more, they can save money and gain flexibility.
But there's also a different picture being painted of the sharing economy. It features billion dollar Silicon Valley investments that cause companies to scale at exceedingly fast rates, and it's burying the original mission of this movement.
Airbnb is no longer just a short-term room rental for people who couldn't pay exorbitant prices for hotels, but an upscale lifestyle brand that's hinting at possibilities in the restaurant, auto, and food industries. With its power and wealth, Airbnb is also hinting at becoming a monopoly in a sharing economy industry that has not been fully defined yet.
Lyft and Uber are operating without having to abide by the same taxes and employee protection laws as taxi companies, and the two startups are already attempting to sabotage each other. That neon Dodge driver knew of at least two instances of cab drivers, angry at their business competition, throwing coffee at Lyft vehicles on the road or spitting on windshields in the parking lot. There are no regulations in his city yet, but it is just a matter of time before lawmakers realize — like they have in New York and San Francisco — that there needs to be.
This is a dangerous game to play in our economy: to build a new, inspiring system that may have the same old-world problems — the most pressing of which is that we may already be creating an even bigger gap between the minorities and the majorities, the haves and have-nots.
States of sharing
The sharing economy is here to stay. It is a small but rapidly expanding market that is transforming social, economic, and environmental practices.
"I think the thing about the sharing economy is we still don't know what it is yet. Things that happen have been happening through all of humanity, in our communities for thousands of years," said Milicent Johnson, director of partnerships and community building at Peers, an organization that promotes what they call the collaborative economy. "At the same time we have new ways people can share or collaborate with other people — it's really important we understand what's happening and people aren't doing it alone."
Clearly, sharing is a primitive concept. We've been bartering and cooperating since the beginning of time. If we didn't have money, we have traded time, meals, favors, or personal belongings, and many cultures still do the same.
On the web, the peer-to-peer model started with eBay in 1995. It remains an important internet standard and it has influenced many of the peer-to-peer models that are in motion today. Then came Craigslist, which started in the late 1990s, and Zipcar, whose fleet entered the market back in 2000. When Airbnb took off in 2007, and "collaborative consumption" was championed in 2010 when Rachel Botsman's book, What's Mine Is Yours: The Rise of Collaborative Consumption was released, people started to take more notice.
The "sharing economy" has become the most-used description of this movement, though it has far outgrown the term. Sharing economy is too abstract to encompass all of the startups and models in the industry these days — some are monetary trades, some are free services, some use credits. So depending on who you ask, we can call it "peer to peer sharing," "collaborative consumption," or even "collaborative production," which would refer to something like having extra power generated from your solar panels return to the grid to help power someone else's home. We can even expand collaborative practices to include crowdfunding, microfinancing, or peer-to-peer lending.
"Collaborative consumption, as we define it, is the reinvention of older market behaviors that are really taking charge through tech now," said Lauren Anderson, chief knowledge officer at Collaborative Consumption, "which is enabling people to share anything and everything online, but also in the real world as well."
Shifting the economy
In a 2013 poll, 73% of Americans said they were dissatisfied with the economy. Lower income Americans are more financially insecure than they've been since the 1970s, with 85% worrying how they would pay their bills. A quarter of Americans said they don't trust the companies they work for, according to the American Psychological Association. And according to one report, the number of independent workers rose 10% since 2011.
Many people aren't satisfied with the current system, and this new type of economy could be much more beneficial for part-time workers, the unemployed, stay-at-home parents, and people in the midst of job transitions. That's a big window of opportunity for the peer-to-peer economy, although it can also have its drawbacks for the workers involved, as recently detailed by The New York Times.
"It's in tandem. Young people are pursuing more entrepreneurial paths straight out of the gate, and people in their retiring years found themselves with all this time and not enough to do and they want to stay engaged. So it's created an opportunity for them to stay engaged and earn a bit of income as well," Anderson said.
A new global economy can be good for many reasons. It can allow people to share their underused assets and make money. For instance, 56% of Airbnb hosts in San Francisco said the service helps them pay their rent, according to the company. The average RelayRides member makes an extra $250 a month. Forbes estimates the revenue people will earn from the sharing economy will surpass $3.5 billion this year, with a growth rate of 25%.
"While people may not always get their income with a combination of Airbnb, Relay Rides, and TaskRabbit, this next generation of micro-entrepreneurship, or the freelance economy, people are becoming more and more comfortable with being responsible for their own income to a certain extent," Anderson said.
Almost every industry is in some state of "disruption." Look at 3D printing and manufacturing. Crowdfunding is challenging venture capital. Benefit corporations are trying to change business standards. Food tech startups are taking on big ag.
"We are in this huge transition, and it's an uncomfortable time. The sharing economy is one of the most interesting ways we are challenging the ways that we live ... and the ways we follow regulations," Johnson said.
In July, Airbnb (who did not respond for comment for this article) announced a huge rebranding, transitioning from a hotel service to a lifestyle brand. "We're proud to introduce the Bélo: the universal symbol of belonging," the company stated in a blog post announcing its massive rebranding. They also stated they want to have the logo on a variety of products, houses, and businesses, to make sure people know that whoever owns it is a supporter of their ideal — but, more notably, of their brand.
The startup is now worth $10 billion, and has expanded around the world. It's the first company that comes to mind when we think of the "sharing economy," and it's likely to stay that way for the near future. In just seven years, it transformed from a couch-renting service in San Francisco to a company that is legitimately challenging the hotel industry — or instead, turning into an alternative hotel giant itself.
Unfortunately, the sharing industry is already starting to look eerily similar to traditional capitalism. A report by the San Francisco Chronicle, which surveyed 5,000 Airbnb listings in San Francisco, showed that two thirds of them were entire houses or apartments, and 160 homes were rented full-time. About 86% of the listings were rented by single hosts, but 513 hosts had multiple listings, and the top 10 hosts controlled 248 listings.
Airbnb showcases rental categories like "European treehouses," "luxe yachts," and "homes of famous authors" as their top picks. Though the company released data that said 50% of its users are moderate and low income, it isn't reflected in the new rebranding. Almost all of their promo photos are of white, heterosexual couples, for example.
According to new research by Paragon Real Estate Group, San Francisco now has about 3% vacancy rate, and a nearly $3,300 median rent. The average home price just hit the $1 million median mark, and the population has reached an all-time high. Critics are blaming Airbnb for the low vacancy and the rising rent prices.
The law is attempting to catch up with these rapidly growing companies. Without a permit, residents in San Francisco are prohibited from renting for under 30 days, though it's occurring regardless. Airbnb is also in a long-standing battle with New York City. An "illegal hotel law" was passed in 2010 that prevents people from subletting apartments for less than 29 days, which is preventing the company from expanding its market. They've responded with a massive promotional ad campaign that is causing a stir among residents.
Uber and Lyft are also in a tangle with New York, as the former is allowed to operate regularly and the latter is in court against claims of evading regulations. And now, Uber and Lyft are accusing each other of setting up fake ride requests to cause the other to lose business.
These companies are turning into taxi services themselves, though with no worker regulations or laws to abide by. Uber is worth $17 billion, and drivers are complaining they aren't getting paid enough.
These companies don't want to be controlled like traditional corporations, so the issues come in when determining what types of taxes and other regulations they need to follow. The uproar right now over how to regulate sharing services is reminiscent of what's happening with crowdfunding (i.e accredited vs. unaccredited investors, SEC regulations, and the JOBS Act).
"The impact from the sharing economy is a great way to think about how to address regulatory structures and legal issues," Johnson said. "At the end of the day it's incredibly important that regulations happen in the sharing economy — in a way that makes sense and is different."
It's up to consumers, citizens, and governments to determine what will work. This is still in its adolescent phase, with many issues to overcome. Fortunately, that means we can determine what we will support, and in turn, what will shape the industry.
A sustainable future
Several years ago, UCLA researchers did an extensive study on our accumulation of stuff by following 32 Los Angeles area families for four years. The results: an average of three rooms held more than 2,200 possessions; 75% of garages had nowhere to store a car; possessions increased 30% with each new child.
Enter Yerdle, a service that helps you give and get things for free, using a simple smartphone app. Gain credits by giving away, and spend them on whatever you need: clothes, kitchen appliances, that tool you will only use one time. The goal is to displace 25% of what we are using now, the company said.
"People have been buying strangers' things from garage sales and estate sales for years and years," said Rachel Barge, director of marketing for Yerdle. "We are allowing people to do it online and nationally vs. only locally... the use of technology and communication systems to basically facilitate more efficient use of resources, the way that Airbnb technology facilitates the use of physical space."
The uncomfortable truth is that we won't have a choice in the future, and environmental consciousness is something that has been lost in conversations about the sharing economy. We will have to share resources, as our cities are growing exponentially, spaces are getting smaller, and valuable resources — water, food, oil — are growing more scarce.
"We are using resources in a way that isn't sustainable. Things need to shift. There is absolutely an endpoint where we won't be able to do things like this anymore, and these platforms offer us not a way we have to sacrifice our lifestyles, but actually get access to more in this collaborative and connected way that actually makes the whole experience richer. That's the ultimate in how we should be living and working with each other," Anderson said.
Here are some other pioneers of the sharing economy, offering services to share goods, services, resources, and space:
Skillshare provides access to top-class tutors for cheap
Tradesy lets you sell and buy used clothes from big brands. The company takes 9% of profits.
JustPark is a London startup that allows you to charge people to use your driveway as a safe, secure parking space.
Bla Bla Car lets you can rent out extra seats in your car when going on a trip.
Leftover Swap is an app where you can find leftover food to share. Sounds strange, but it's important in a country that wastes 30% of our food.
Streetbank allows you can lend things to your neighbors or borrow things you need to use for a set amount of time.
Feastly gives you a way to share any type of meal with people in your area.
RelayRides is on a separate plane from Uber and Lyft. Its main competition are the big names in the car rental industry: Hertz and Enterprise. The company grew from its original idea to do short-term rentals to long-term ones based on what it found out users wanted, which was an alternative to renting a car through a traditional service.
Learning to trust
After a day of sightseeing in Italy, you knock on the home of a family you met via the internet. They have a meal prepared for you: handmade bread and pasta, local wine and cheese. You share a meal, a conversation, and a deeper understanding of their culture.
This scenario can be set up through Cookening, a platform available throughout Europe and in New York City. The service allows you to pay to eat with a local to make your trip more authentic.
"Every connection that is happening through us is a success and changes the perspective of people, and that's when you know little by little, you're changing people," said Cookening CEO Cedric Giorgi. "This is based on the food, that is [the] number one criteria [for choosing], but what users talk about after the meal is the people. The moment they shared is more than just the food."
According to Pew Research, only 19% of Millennials say most people can be trusted, compared to 31% of Gen Xers, and 40% of boomers. But, Millennials are more upbeat about America's future, with almost half saying our best years are ahead. Overcoming the hurdle of not trusting each other — of staying distant geographically and feeling attached to belongings that we have no reason to be attached to anymore — will require a shift in cultural values.
It won't be easy to figure out the right way to address the collaborative economy, just as it isn't easy to find ways to cope with a changing climate, a population nearing 9 billion people, or crippling water shortages. But creating a new economy, with higher standards and stronger values, is likely to start with the internet community.
From the ground up
Peers was founded on the basic premise that the sharing economy wasn't just a trend, but a movement around the world — a movement that would create a new economy. The organization is member-driven, and supportive of sharing on its most basic level to give people more flexible work hours, support systems, and more spending money. When people join, they can interact with other members around the world, learn more about the movement, and start petitions to make their city more sharing-friendly.
But, like anything, the grassroots effort can't work on its own. Peers, which was founded in 2013, knew it needed partnerships. So the organization got involved with big-names in the industry: Airbnb, Lyft, Yerdle, Relay Rides, ShareDesk. It also partnered with crowdfunding sites like Mosaic, Divvy, and Crowdtilt.
Collaborative Consumption, on the other hand, has been around since 2009 and is based in Australia, but it considers itself a global organization and serves as an online resource for this movement.
To challenge the traditional industries — whether it is the restaurant, hotel, car rental, or retail — this movement has to scale. But in order for these companies to scale, they must either become bigger (and by default, worth much more money) or open local chapters in a variety of places to service those locations. Making sure they are accessible to everyone, regardless of socioeconomic status or geographic location is the heart of the movement for Johnson, and, she said, many other leaders she has spoken to.
Yonatan Schkolnik is a Peers member who lives in San Francisco. He began driving for a ride sharing platform in May 2013, when he needed more flexibility in his work schedule to complete his college degree. He was worried, at first, that his driver rating would be low because he wasn't familiar enough with the streets of San Francisco, but after a year he is much more comfortable.
"It also provided the opportunity to meet like-minded people: providers, users, and advocates of the share economy with which I found common interests such as provider rights, democratization of income structures, the importance of accountability, etc.," he said. "The first time I used [it] as a passenger, I was happy to be able to provide individual feedback about the driver, finally an opportunity to reward a driver with more than a tip for her safe driving, and sound advice about where to get an authentic burrito."
These types of small moments are often what are the most important — and overlooked — aspect of the sharing economy. The ride sharing platforms have inspired Schkolnik to participate in meal sharing with neighbors and to share food he has grown in his garden.
"Collaborative marketplaces are important for the individual financial effect, allowing people to monetize their time, skills, and assets according to personal needs including family obligations and education goals," he said. "I would like to have access to work related safety networks such as competitive medical insurance rates, retirement saving tools, and some sort of union-based collective bargaining tools."
Though advocates want the movement to scale, there is an underlying push to keep it local — whether that's with local chapters, local versions of these websites, or regional companies, time can only tell. What's important to remember, both Peers and Collaborative Consumption reiterate, is that what works in San Francisco (where most of these companies are growing) won't work for every other city. We must look at their dynamics, needs, and connections in order to scale successfully.
"We want [people] to tell the story of the sharing economy and normalize it," Johnson said. "Beautiful things happen when you open yourself up to that."