Was 2014 the year the sharing economy grew up?

Sensemaking / Was 2014 the year the sharing economy grew up?

Did last year's bad press take the shine off the sharing economy, or did it simply raise some important questions, asks Nicholas Walton.

By Nicholas Walton / 23 Feb 2015

The Economist labelled them the ‘Antisocial Networks’ and one commentator complained they were not in the ‘spirit’ of the sharing movement. There was Monkeyparking, an app that allowed a driver leaving a parking place in effect to sell it on to another motorist on the hunt for a space. ReservationHop, which sold off scarce reservations at top restaurants, was accused of pushing commodification rather than community. Elsewhere, city streets were clogged with angry taxi drivers who charged Uber with trying to destroy their livelihoods. Even the sharing economy’s posterchild, AirBnB, found itself accused of abetting everything from tax avoidance to bypassing safety legislation. Was 2014 the year when the sharing economy went bad?

The answer is far less sinister. It is simply that 2014 was the year when the sharing economy grew up, and the emphasis started shifting from the ‘sharing’ bit to the ‘economy’ bit. Although this has thrown up some very important questions about how the sharing economy may fare in coming years and decades, this also marked a massive opening up in the potential of the sharing economy for those looking to make the world a better place.

Up until now the sharing economy has been getting a lot of good press, as it has been stretched and squashed into all kinds of service by marrying up unmatched or unrecognised supply and demand. As it becomes more mainstream, small-scale sharing, such as renting out unused ladders to the girl down the road, will continue to be a revolution in micro-relationships. The environmentalist Paul Hawken, who has said that the sharing economy could grow to be bigger than the internet, argues that this has also embedded values such as trust into economic exchanges. Whereas in the traditional economy this trust was between consumers and the brands they purchased, in the sharing economy it is between peers. This has the capacity to bring communities back together, as with the Singapore-based ‘blockpooling’ project, which is aimed at reconnecting communities in high rise blocks so they can deal with communal problems like combatting dengue and helping isolated old folk.

It is not just democratising transactions and rekindling links between people that got the good press. The sheer efficiency and common sense also caught people’s imagination: the chance to squeeze waste out of the system, and make the most of resources to hand. New ventures sprung up all over the world: Tripid in the Philippines aims to cut traffic and join communities through car sharing; Triip in Vietnam allows locals to share their knowledge and make some extra money by acting as tour guides; in Cambodia, Backstreet Academy connects local artisans to tourists with an appetite to try their hand at crafts; the city of Seoul is trying to recreate its a local version of Uber that would work in the interests of its citizens.

I spoke to Son, who works as a tour guide for Triip, leading two-day excursions from Ho Chi Minh city to the Mekong Delta, where he was born and grew up. “I can design the tour by myself”, he says. “There are wonderful places, with our mandarin and tropical gardens. It’s my pleasure, and the price [for the tourists] and salary are quite suitable.” Tourists commenting on Triip.me give good reports too, appreciating the way Son tailors the plan to suit their interests, and the welcome of his friends and family – topped by his mother’s home-cooking.

To what extent might these connecting – yet isolated – initiatives add up to a disruptive force in traditional economies? Will they outflank traditional industries by tapping into unrealised economic value? Or will big business jump on the band wagon to protect its market share? Many already are, either by buying up the innovators (as Avis acquired Zipcar) or trying their own hand – like BMW which joined up with Sixt to create the accessible rental scheme DriveNow, which aims to "make mobility so cheap that only the rich will buy cars". Paul Hawken suggests that traditional companies could end up in trouble by failing to recognise that money is increasingly in the service rather than the sales, and that smaller numbers of durable products are a better bet than large numbers of products with in-built obsolescence.

Some of the bad press around the sharing economy in 2014 was simply due to the world catching up with its potential. Now that AirBnB’s valuation is in the multibillions, and that it’s widely recognised as a lucrative opportunity rather than a cost-effective side line, and is putting the corporate business traveller firmly in its cross hairs, the situation is different. Is it a bad thing that this is also coming under the gaze of regulators who are concerned about safety standards and tax collection?

Government involvement is important for smaller enterprises for several reasons. It regularises the unconventional space where much of the sharing economy sits, setting out rules for individuals to cooperate. A more structured environment could enable wider trust in new innovations, and avoid situations like the eviction of some Singaporeans who used AirBnB to rent out their social housing.

 There is a parallel with the internet, for instance in how media laws have evolved to adapt to the proliferation of blogs and social media. Although some futurists suggest that the sharing economy will lead to a booming ‘off-grid’ economy, moves by authorities around the world in 2014 – who spotted the potential for enormous growth and want to oversee the slicing of the pie – suggest that this is more likely to be confined to the micro or peer-to-peer level.

One concern is the potential for lobbying by early giants (again, AirBnB is an example), who may seek to fix new rules to protect their own positions, hindering future innovators and challengers. Monopolies will occur, especially where there are powerful scale effects (for instance, in brand recognition or dominant networks of users). Again, this is a reason to welcome official moves to understand and regularise the growth of the Sharing economy, rather than resent government intrusion.

More far-sighted governments may even begin to play a more involved role in the growth of the sharing economy. Given pressure to reduce environmental impacts, and the need for community cohesion, governments may turn to it as a way of getting more from less, achieving outcomes that cannot just be counted in dollars.

The bad press of 2014 also signals something less welcome: the growth of companies that are more concerned with profiting from disintermediation rather than using it to create shared value. The year’s big villain, Uber has been accused of everything from bullying to exploitation. It will certainly not be the last. The big questions surrounding the growth of the Shared Economy – from taxation to regulation, and from natural monopolies to the impact on traditional companies – are becoming clearer as a result of growth in the ideas, business models and technologies that lie behind the sharing economy. The swaggering corporates might get the media attention, but the same innovations and technologies are also powering a raft of ventures where the ‘sharing’ part is still the main motivation for doing business.

Nicholas Walton is a writer, journalist and former BBC foreign correspondent.

Image credit: Ed Yourdon / Flickr 

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