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If making a buck meant not caring, would you still do it?

Life basic needs in pie sharingFor many of us, the concept of ‘sharing is caring’ was introduced more as an ominous warning than a sweet adage in the home (especially when we happened to be holding the last cookie). But all motives aside, the message seemed to have got through to this generation; with an annual infusion of $15 billion into the global market, the sharing economy seems to be a case in point that spreading the love literally pays off.

These days, just about everything can earn you a quick buck if you’re smart about it. That’s what Judy learned when renting out an empty boardroom on pivotdesk to Craig who needed the space. Of course, Craig has been saving money and making friends through, whilst renting out his own apartment on Airbnb. Craig’s guests are currently spending the day exploring the city by bicycle, thanks to Liquid’s peer-to-peer bike share programme. And with dog lover, Bridget, on the job, the couple can rest assured that their beloved Baxter is in good hands with DogVacay while they’re away. Down the road, a single mom is using the money she made from selling those dusty fabulous heels on Postmark to rent Kim’s ladder that she found on Snapgoods. And tomorrow Kim will heed Craig’s request on TaskRabbit and take an Uber to the other side of town to prepare the apartment for the next round of Airbnb users. Six degrees of separation just became four in this new economy of collaborative consumption.

Is the sharing economy actually benefiting the economy at large?In one way, it’s simply fabulous; the sharing economy cracks open fresh value on those underused assets around the house. Although, in another way, is the concept risky and our intrepid entrepreneurs have just not realised this yet? The prolific pop-ups of sharing platforms are generally touted as ingenious , but do we have to acknowledge that we’re realistically still in the honeymoon stage. This process has to see the whole cycle scoped through ‒ from macroeconomy to public policy ‒ if we are to grasp its long term impact on society. It’s a robust debate that economists, policymakers, Craig ‒ even Baxter ‒ need to weigh in on.

Helping the planet

Our future cities are faced with a dizzying dilemma. According to a 2014 UN report, two-thirds of the world population will be urbanised by 2050. Considering that another 2.5 billion people will have joined the human race by then, we have a serious case of imbalanced supply and demand on our hands . Naturally, any opportunity we have now to minimise our planetary wear and tear is welcomed. That’s where the sharing economy can offer a brilliant alternative.

A study conducted by the Cleantech Group found that the fewer resources spent on travellers using home-sharing companies has resulted in 66% less CO2 emission than hotel-based travel (including hotels that have earned five-star efficiency ratings). Home sharing has all kinds of other spin-off benefits, ranging from less food waste to higher recycling rates to significant savings in water. Car sharing also contributes to lightening the carbon load: according to a UC Berkeley shared-use vehicle survey, every one car made widely available for sharing takes at least 10 off cities’ congested freeways. Each innovation seems to have us breathing a little easier, loosening the grip on our cities’ necks and helping us to speak a new language of inventive opportunism.

Mind the gapsCars piled up in road traffic

But there’s a flip side to the coin. The sharing economy is a fundamentally viral industry and, as such, it predominantly goes unmitigated and unchecked. The digital economy is evolving so fast it is outpacing the rate at which our policy makers can catch up. Car-sharing network gurus like Uber and Lyft, for example, are generally not yet adhering to the same taxes and insurance standards that taxis uphold. Accommodation for disabled passengers is generally sporadic; contractual obligations are not articulated; and in some countries it’s debatable whether drivers even make the minimum wage. Those subscribing to these platforms have to weigh up the privilege of making a buck on the side at their convenience versus the cost of being thrown in the cold if anything goes wrong.

The same goes with online hospitality. Startup giant Airbnb has booked over 80 million nights across 191 countries since its 2008 inception. But many of those homes or venues may not be situated or designed to anticipate the challenges of noise, congestion, and waste, and neighbours are occasionally (and understandably) irritated about the additional infringements on their privacy. While hotels are taxed and frequently inspected for health and safety, Airbnb hosts are not yet facing such inspections.

Some city residents are now crying out for stronger regulation while, at the same time, many of their neighbours are greeting their ubers with open arms. Cities such as Seattle, who were already feeling the housing crunch before online hospitality entered the scene, now have to compete with the new breed of Airbnb entrepreneur who buys up accommodation for short-term rental purposes only. The San Francisco property market has sky rocketed, thanks to the influx of vacation rentals overtaking the city’s scarce housing inventory.

The big picture

All of it begs the question, is the sharing economy actually benefiting the economy at large? Many would say it is, as even Granny can now find her inner entrepreneur and make her pension stretch. Yes, intrepid entrepreneurs are availing themselves of the new sources of revenue they can leverage out of their existing unused assets, but the warning to existing traditional businesses is that they are tapping into a customer who is dissatisfied and disgruntled with the current business models. And therein lies the wake-up call to those awake enough to heed it. Shareable founder, Neal Gorenflo, would argue that these unregulated ventures are having a disturbing impact on the future socio-economic fabric and flow of our neighbourhoods and cities. He refers to Uber and Airbnb as ‘Death Star platforms’ that will eventually outstrip all facets of traditional competition.

Whatever side of the fence you’re on, you can’t deny the fact that Pandora’s lid is wide open and off its hinges. Consumers now want choice. They are tired of faulty and antiquated services that call the shots and cripple creative mobility by clinging to the past. They seek the personal independence and disintermediation that mega start-ups like Uber and Airbnb defend. ‘Death Stars’ they may be, but ingenious opportunists who simply saw the gap and took it, they are as well.

At either end of the debate, the message is consistent and clear: business, beware. Those who fail to listen and to see what their customers actually need, disregarding the invitation to innovate, may very well be ‘ubered’ some day. In a sweeping digital paradigm that stops for no one, there will only be winners and losers. And businesses that believe they are immune to disruption are probably already on the way to being disrupted . They just haven’t got the memo yet.

The debate is rich and all too early to draw solid line conclusions. Contrary to criticism, the growth of the sharing economy is probably not going to be a case of capitalistic ‘checkmate’ where Uber and their cronies take all. More likely, there’s room for different players on the board. But traditional business will urgently need to catch up if they want to stay in the game . Should they stand around and wait for regulations to evolve and tighten the reigns, they will probably be too late.

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11 replies »

  1. What if the sharing economy is not helping society with supply and demand?

    The first thing that comes to mind (especially as a young person living in Sydney) is housing. It could be argued that Airbnb is creating an imbalance. It is removing a property from the local renting market or removing it from a potential OO. It is creating additional demand within the market where supply is already an issue, with supply already unable to keep up with the demand from inflated population growth and existing government policies.

    Like all things – as technology becomes more prevalent there will need to be public debate about such things and if regulation to some degree is required.

    • Thanks for your comment Blake. We agree with you. The digital economy is enabling new pathways to customers and new business models to be created at an ever increasing rate. Policy and regulation is struggling to keep up in many instances. This poses many questions for existing businesses and regulators.

  2. I would argue that even in environments like Sydney it is a good thing, because if the demand for property is really increasing because of AirBnb that in turn will stimulate the construction industry and the economy to meet the new demand. The only question in my mind for the construction industry is whether the demand is permanent or temporary.

    Great article and something everyone should have in their minds at the moment.

    • Thanks Johann. We like to think questioning things like a shared economy to uncover what others aren’t noticing is key to a long-term, sustainable solution. It sounds like you enjoy questioning things too :-).

  3. Having recently attended a Gordon Institute of Business Science (GIBS) forum which showcased a book called the ‘Wellbeing Economy: Success in a world without growth’ written by Lorenzo Fioramonti, this article resonated with me as it outlines what many of us are thinking – the reality that since the global financial crisis, growth has vanished in the more industrialised economies and the so-called developing countries. Fioramonti’s book echo’s this articles key point, namely by breaking free from the ‘Economic Growth’ mantra, we can build a better society based on a wellbeing and shared economy, which would have a positive impact on everything we do.

  4. Great subject, thank you for the well-written article. I believe it is important to consider the notion of the “SE way of doing business” from a wider social and political perspective; in essence, the whys SE invented. Is it the pushback of societies to the uncontrolled and often unregulated way that “traditional business” evolved throughout the recent years, backed by the policy makers around the globe? By the very same system which SE seeks ways to circumvent from being regulated? Is SE the right tool to rebalance the daily lives of millions of depreciated people globally towards a more sustainable future? Is SE the antidote for curing the diseases of the “bad capitalism”?

    • Thanks Alexandrop – we hoped to raise questions just like these. It’s essential that we question why the SE came about, its effects and its future. In many cases, we haven’t really thought it all through – and therein lies the challenge…we need to keep thinking if we hope to gain a foothold on some of the challenges facing today’s societies. There is no band-aid solution.

  5. Necessity is mother of invention –maybe the cut price holiday accommodation and transport is born from need for better value for money, the widening pay gap, and a railing against globalisation, lack of competition and overpricing. Maybe we are starting to see a true free market economy or maybe just more monopolies (Sky TV all over again).

    “at any cost” is surely a question about the desire to provide an excellent service and desire for $$$. I’ve had awesome stays at unlicensed accommodation, with wonderfully caring owners, and also had miserable licenced accommodation and dangerous taxis. Maybe the “feedback” and “share” is now more relative than anonymous certification. Just require a few minimum standards (warrant and driving licence always a bonus I recon) and let the market decide the rest.

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