The sharing economy is an idea that is very much present in the zeitgeist, but many of us don’t really have a comprehensive understanding of exactly what it is and where it came from. Whatever your level of understanding, the sharing economy is going nowhere, so taking a little look at it and its potential triumphs and pitfalls can’t hurt.
What Is the Sharing Economy?
The acceleration of digital technology kicked off by the birth of the internet’s universal accessibility has birthed many a new concept. The growth of the sharing economy is one of those concepts. Sometimes referred to as collaborative economy, this economic model is defined by the sharing of personal assets and services between individuals using the internet. It allows people to share their own resources, whether material or skills-based, either in kind or in exchange for money or incentives.
The assets that you offer can be anything from your time to your car or even your home; for use by another person for a limited time period. A famous example of a platform that depends on this model is Airbnb, the site/service that allows you to rent your home/property for temporary use. This economic model spans many sectors including technology, communication, lodging, agriculture, labour and finance. It is hugely popular for several reasons, one of the utmost being its flexibility. The exchange of services can be agreed upon under any terms; one may ask for financial payment in return, but social and environmental based exchanges are also popular.
The sharing economy is essentially the closest thing we now have to the old tradition of bartering. There is a lot of confusion about what exchanges this economy refers to, as there are a lot of new economic models out there with which to get it confused. Here is a quick summary on just some of the economic models that the shared economy is not…
Gig Economy. Single projects or jobs for which a worker is employed. There is no skill or asset sharing here, it is a worker being employed in exchange for money in order to carry out a specific job.
Freelance Economy. Similar to the gig economy, except that jobs or projects tend to be more involved, in-depth and longer in length (sometimes lasting months or even years).
Peer Economy. Or P2P for short. This is where two individuals directly interact to buy or sell goods and services.
Crowd Economy. This refers to money making models such as crowdfunding or crowdsourcing; this generally results in an online community of people who participate with each other through a platform in order to achieve a single goal.
Now let’s look at some of the arguments for and against the sharing economy…
PRO: Recycle, Reuse, Repurpose
It is a great way to avoid waste. If you have an item or resource that you are not using quite as much as you used to, this model offers a great way for you to loan their use to others. You can not only make money out of something that you are not currently using, but you can also offer another person access to what they need for a reasonable, non-commercial price. Most importantly though, it prevents possessions and assets from going to waste.
CON: Scam Threats
One of the issues with this system is that buyers are more open to fraud and trickery, as there is no real protection against this kind of situation occurring. All you have to go on, with regards to the person you are dealing with, is their promise and the apparent character they present. Protection against this is slowly getting better, but the speed at which technology advances can make this kind of issue hard to regulate.
In a world where getting a job is increasingly difficult, many doors seem to be closed, and innovation appears to be very expensive, this economy gifts pretty much anyone with the opportunity to turn a dime, or simply be more productive. It means that individuals can set their own terms, their own hours and have the flexibility to make their lives work for them. It invites communication between individuals, which creates community, diversity, interesting ideas and ultimately brings people together. The presence of this economy offers liberation for those who are prepared to get into it.
CON: Lack of Benefits and Lost Revenue
Individuals who earn their full living in this economy do not have access to the benefits that those working for a company do. The benefits might include sick leave, pension schemes, maternity/paternity leave and bonuses. It can also impact on the success of other businesses. A famous example of this is the impact that Uber has had on the traditional taxi hailing services.
Unemployment is always an issue, but this economy goes some way to making a positive dent. Not only are there more jobs available because of the rise of companies such as eBay and Amazon (in many cases, these are jobs that can be performed from home), but the sharing economy offers a platform from which to advertise on a global scale. If you make ornaments, for example, you can access an entire global market, which is a huge change from the artisan and small business landscape of only a decade ago.
As the laws around claiming financial gain from online platforms are not that tight yet, governments report a loss in tax revenue. Just like any economic model, there are arguments as to its success, fairness and validity on both sides. But one thing is for sure, like it or not, the sharing economy is here to stay! Where do you stand?