Sharing our way to prosperity (Part 1)

August 6, 2013 by
Filed under: Enterprise, Social Economy 

Sharing is popular again. It’s been 25 years since Harry Enfield mocked 1980s greed and individualism as his Loadsamoney character – a cockney plasterer. Now, a quick and exciting route to riches is promised by the sharing economy. Airbnb, its posterchild, is worth $2.5bn (£1.5bn) and Silicon Valley is buzzing again. Does sharing represent a scalable opportunity for a socially productive economy? This blog grounds the sharing economy in some context, and is followed by Part 2, analysing of who profits from sharing.

San Francisco, October 2011, Source

San Francisco, October 2011, Source

Since 2008, our dominant economic and financial structures have come under increased scrutiny, from many directions. Many argue that existing systems have delivered material wealth at great environmental cost, contributing to (or even relying upon) growing inequality at many scales, and that as we get wealthier, wealth is increasingly an ineffective means of delivering well-being. As the public sector started talking about “doing more with less’ and “sweating the assets” politicians and business consistently urged the public back on to the treadmill of buying more stuff a generation of social entrepreneurs said “let’s use what we have better”, and were spurred to develop their own peer-to-peer circuits for production, distribution and consumption. They were driven by objectives which ranged from getting rich themselves to meeting their neighbours to minimising overall consumption, and we now have a carnival of applications which connect individuals to one another to exchange in new ways.

The sharing economy in a tweet: “#whyishare is making MORE, for LESS and with NEW people”.

The sharing economy is how we describe this system which widens access to goods, services, assets and talents, through arrangements of collaborative consumption, a term first applied in 1978 to car-sharing. The sharing economy is a bunch of new ways to connect things that aren’t being used with people who could use them. It often does this through internet-based applications, and therefore does this radically better than previous systems in achieving higher utilisation of the economy’s ‘idling capacity’. According to Professor Clay Shirky, “the world has over a trillion hours a year of free time to commit to shared projects”.

In 2011, the RSA hosted Rachel Botsman and Time magazine said collaborative consumption was one of ten ideas to change the world. Now sharing economy initiatives are squaring up to entrenched businesses, and regulators and tax collectors are becoming interested.

Rachel Botsman defines three types of collaborative consumption: product service systems (like Barclays bikeshare in London and Netflix, where you rent for short periods rather than owning), redistribution markets (like eBay, Freecycle, Gumtree, where you sell or give away unwanted stuff) and collaborative lifestyles (like Landshare, Streetbank, and Couchsurfing), where people swap skills, time and other assets.

Like efforts to build a circular economy the sharing economy often promises environmental efficiency. Reducing waste appeals to our moral sentiment (waste is a feature in two of the seven deadly sins) while sharing means we get access to more, and perhaps put individualistic materialism (the envy and jealousy associated with coveting thy neighbour’s goods) in the back seat. To paraphrase Neal Gorenflo, the idea is that instead of keeping up with the Joneses, we are inspired and enabled to collaborate with the Khan’s, rent our under-used assets to the Cheng’s and get tips from strangers on how to hack, fix and rejuvenate objects at a makerspace with shared tools. We meet new people (online and offline) and make a living in new ways, while using money less, hoping to reverse declining social capital.

Sharing can get really creative: through Waze (which Google just bought for $1bn), drivers share their live data on traffic to help others travel more efficiently. GoGenie shares information about disabled access. Carrotmob organises campaigns for people to vote with their money, giving businesses positive incentives to make sustainable investments. On TaskRabbit, people bid to perform chores and…tasks, while Instacart specialises in matching your shopping list with someone to do your shopping and deliver it to you.

Of course, sharing goes way back. We’ve always been sharing, bartering, lending, gifting, and swapping. Collaboration has been our primary competitive advantage as a species. Before we had money, we had a gift economy – “you owe me one” – rather than a barter economy. Within modern capitalism there have emerged a range of redistributive institutions such as co-operatives (800 million members globally) and credit unions. Good 360 has taken $7bn in corporate donations over the last 30 years and distributed them to charities. We often lose sight of the fact that efficient resource allocation is what the (old) economy is fundamentally driven to do, but often fails. The sharing economy might be best conceived as a system to address market failures in personal consumption; to share market information, lower transaction costs and lower barriers to entry, therefore expanding the market of buyers, sellers, donors and recipients.

 

Usage of key terms, indexed, 1955-2008

Usage of key terms, indexed, 1955-2008, Source

In contemporary society, what some have dubbed the core economy – the unpaid care, support and nurturing we provide for one another – structures our lives as much as the monetary economy. Sharing mechanisms have long supported the core economy, through informal networks and more formal institutions: 28,000 people have collectively pooled their skills and support at 300 local Timebanks across the UK, on the basis that an hour of my time is worth an hour of yours, and there is potential for institutions and business to do the same – e.g. Hackney Shares.

We are at a moment of hyperbole, so there is a risk that new tech applications divert our attention from the breadth and heritage of sharing structures in society, and the risks of failure. Many sharing platforms struggle to reaching critical mass in activities which represent a natural monopoly based on a network effect, so efforts are now being made to build infrastructure to consolidate the sharing economy – comparison websites and sector-wide initiatives (…is this meta-sharing?). But the growing consensus is the sharing economy could be as transformative as the industrial revolution; and Natalie Foster says sharing “will be the defining economic story of the 21st century.”

The sharing economy is beginning to look like a panacea: an all-conquering system of innovations which can drive can drive economic growth and social outcomes. It’s more complicated than that, and Part 2 on this blog discusses profiting from a sharing economy.

Jonathan Schifferes (@jschifferes) is a Senior Researcher and leads on the 2020 Retail project for the RSA.

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