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Sharing Is Everything But Caring In The Sharing Economy

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Editor’s Note: Christopher O. Hernæs is Vice President of Strategy, Innovation and Analysis of SpareBank 1 Group, Norway’s second largest financialinstitution. He was previously a partner at Core Group, where he worked with strategy development and innovation for Technology, Media, Telecom and financial services.

One of the hot topics so far this year is what will become of P2P services and the sharing economy. Last year Airbnb became the largest hotel chain in the world, Uber expanded abroad with large protests from incumbents in the taxi industry and P2P-lender Lending Club got listed on Wall Street.

At the same time pwc estimates the sharing economy to generate revenues up to $335 billion by 2025, and Uber alone is valued at $ 41 billion. The millennial generation has also expressed a lack of trust in incumbents and is craving an alternative, and would rather trust peers over brands. With predictions of the sharing economy affecting nearly all industries, venture capitalists are pouring investments into what is hopefully the next Uber.

But as the sharing economy becomes prevalent, so does criticism from incumbents, attention from regulators and demands from participants arise. A common denominator of these reactions is as stated earlier this year by Harvard Business Review that the sharing economy is not about sharing at all. What is viewed by cool new sharing services are in fact commercial platforms that move distribution from traditional distribution to digital ecosystems. This can apply to refinancing student loans through SoFi, as well as renting a prom dress from Rent The Runway just to mention a few examples.

 

The sharing economy is merely a business model favoring digital ecosystems.

Most successful services associated by the sharing economy are essentially all about convenience, cost efficiency and ease of access rather than sharing and social interactions. Additionally the fundamental of the sharing economy lies in trust, and despite common belief, Pew Research states that only 19 percent of millennials believe that people can be trusted.

But building trust is a time-consuming process, and the result of this is users turning to the platforms to ensure trust between peers. This is made possible by big data and analytics, measuring your trustworthiness based on everything from how you fill out forms online to who your Facebook friends are. By acting as a trust broker the success relies on offering the users lack of social interaction, rather than encouraging it. This becomes even clearer with Airbnb, which is already becoming the host to a whole new sub-economy with subcontractors offering value-added services to smooth out any friction related to the customer experience. This includes key delivery through lock boxes, as well as providing similar amenities as hotels, all without the need to talk to a single human being.

The second central element of the sharing economy is centered on the transaction. By implementing financial infrastructure as an integrated part of the platforms, friction related to payments, settlement and insurance is significantly removed. In addition, P2P services as the inherent ability to create an efficient marketplace matching supply and demand near equilibrium, challenging saturated markets where incumbents are able to set artificial prices.

For incumbents, the sharing economy is a disruptive force that is challenging the playbook of existing markets. For workers, the sharing economy can both provide a secondary income for some, as well as supporting freelancers. For regulators it is the time to adapt rather than prevent and prohibit, and perhaps the best solution is a revised taxation scheme similar to 1099 self-employment forms for workers in the sharing economy as an alternative to income taxes or capital gains taxes.

 

When everyone is equal there will always be room for someone to be more equal than others.

Considering these characteristics, it is safe to assume that neither Uber drivers, Airbnb homeowners or the investors and founders of Airbnb, Uber and Google have no altruistic motives in the sharing economy. The sharing economy is merely a business model favoring digital ecosystems, where the factors of production are no longer the value drivers, but the customer and user relationship and related data are the most important assets. This challenges how we view ownership of both the means of production as well as the value of labor, and whether services offered through the platforms are offered by an individual or corporation are indifferent.

As a socio-economic system the sharing economy has been both associated with socialism as well as free-market capitalism. From my point of view, a plausible scenario for the future of the sharing economy could be viewed as a digital feudalistic system where both individuals and companies become vassals who provide and rent services at the grace of digital ecosystems like Google, Facebook, Uber and Airbnb. After all, when everyone is equal there will always be room for someone to be more equal than others.

Featured Image: Roobcio/Shutterstock