Tag Archives: Sharing Economy

What are Pros and Cons of the Sharing Economy?

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.

PRO: Opportunity
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.

PRO: Employment
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.

CON: Tax
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?


Photo by Pop & Zebra on Unsplash

What next for the sharing economy? – SMF President, David Falzani

While conventional markets and brands were under financial siege by the recession, the concurrent development of a global, data-driven, mobile infrastructure provided an answer to the strife: the sharing economy. Billed as a radical new, ‘alternative’ socio-economic system based on the values of ‘sharing’ and ‘collaboration’, the sharing economy seemed like a fluid, big-picture response – one which some commentators have described in utopian terms since.

Benita Matofska, of The People Who Share, defines the sharing economy as, “A socio-economic ecosystem built around the sharing of human, physical, and intellectual resources. It includes the shared creation, production, distribution, trade, and consumption of goods and services by different people and organisations.” It is, in other words, a new, ‘alternative’ market which “Embeds sharing and collaboration at its heart” – a ‘hybrid economy’ enabling different forms of value exchange using shared physical or human assets. Matofska points to the ‘gig economy’, social media, peer-to-peer (P2P) trade and exchange, upcycling and recycling, as examples of economic sharing in action.

At the core of the sharing economy is the principle of people renting things they need from each other, The Economist argues, “The big change is the availability of more data, which allows physical assets to be disaggregated and consumed as services.” Apps and data, therefore, act as conduits for people to get in touch with one another and share what they need within this economy. Technology has reduced transaction costs, making the sharing of assets cheaper and easier than ever – or so the story goes.

The Economist is right in noting the significant disruptive effects of the sharing economy, which seem only to be increasing as these P2P markets develop. The consumer peer-to-peer rental market alone is worth around $26 billion. However, in their bid to market the sharing economy as a collaborative, user-first way of delivering services and products, the major players that make the sharing economy possible, and by claiming to be merely middlemen for ‘independent contractors’, large corporations like AirBnB and Uber understate their own involvement and responsibility for the sustainable development of the sharing economy.

This has impacts not just on ‘conventional’ rental markets but gives way to a whole host of regulatory and workers’ rights issues. Bike couriers for Deliveroo, said to be paid a mere £4 per delivery, receive no hourly rate from the company. This has led to spontaneous strikes and collective action from their drivers, followed by an aggressive response by the corporation. The adverse effects of AirBnB on local rental markets is well-documented, particularly in small cities such as Reykjavík, Iceland, which, in the context of a massive tourism boom, has seen a huge increase in rents and property values as a result of the sharing economy and has reportedly led to a major housing shortage in the capital.

As we get swept up in the excitement of this new means of meeting demand, we are arguably losing sight of the important question that must be asked of the sharing economy: what is being shared, and for whose benefit? Uber and AirBnB may claim to be middlemen for ‘independent contractors’, but they take huge amounts of commission from their contractors and have even been described as, “Giant corporations pursuing monopoly power.” They have not just disrupted the markets and the profit margins of their competitors, but it could be said that their desertion of responsibility has, in some ways, led to the disruption of the lives of the people who work with them by escaping regulation and giving them only precarious ‘access’ to work, rather than solid, reliable jobs. As the sharing economy develops and brands consolidate their grip on markets, its once seemingly-liberatory potential seems to be surpassed by many of the problems facing the ‘old’ ways of doing things. As the casual workers that make the sharing economy possible become increasingly organised, the sharing economy must reckon with its responsibilities and duty of care to contractors and consumers. The regulatory battles they already face with cities such as New York and Los Angeles will set the stage for what’s to come in this regard.

This is not to say that the sharing economy requires more regulation. It is the lack of broad state regulation which has generated many of its advances and entrepreneurial development, after all. What the major players in the sharing economy must do is to put their money where their mouth is and open up their brands as well as their services. That means sharing not just some more of the wealth (revenue at AirBnB increased by 80% during 2016), but the infrastructure and technology that makes the sharing economy possible.

Some have argued this should take the form of open brand APIs. The sea change in the relationship between producers, marketer, and consumers has turned brands into ‘platforms’, ‘ecosystems’, and the collaborative nature of this relationship and the role of consumer participation makes the possibilities for scaling different aspects of the sharing economy endless. For the sharing economy to prosper and grow, it requires the active participation and input of the people doing the sharing. By making their processes and insights open-source in a genuinely transparent developmental dialogue, a true sharing economy might finally emerge. By placing the locus of organisational power in the hands of a few small, closed-off and increasingly powerful companies, the sharing economy risks lapsing into the same old patterns that made conventional corporate culture no longer able to compete or meet the demands of consumers as efficiently.

The battles around regulation and consumer and worker rights are not mere teething problems –they will determine the shape of what’s to come. The cooperative nature of the sharing economy comes from the technology, and it is the technology which must change to be more inclusive and open to innovation in order to meet the sharing economy’s increasingly unstable demands on local economies and workers.