Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

'Sharing' Is Not An Economy - But Renting Is - The Disruptive Power Of A True Sharing Network

Posted by Tom Foremski - June 2, 2014

The article "The Case Against Sharing" by Susie Cagle is a good vehicle for her cartoons and a soft critique of the "sharing economy" based on the recent Share conference organized by the lobbying group Peers.

Peers is funded by more than 22 companies that include its founder Airbnb, Lyft, TaskRabbit, and others – to "protect the sharing economy." Natalie Foster, the CEO of Peers, has her work cut out because it's not protection that is needed but rather legalization, a much tougher job. She has said many times that the biggest issue with the sharing economy is that it is not legal.

Despite this simple fact, VCs have poured hundreds of millions of dollars into "sharing" startups. All that capital carries the substantial risk that laws won't be repealed or modified. Especially if legitimate businesses lobby to protect themselves from what is clearly illegal competition.

Foremski's Take: Here is my critique of the "sharing economy":

Words matter. Sharing does not describe the commercial activity of people on Airbnb, Lyft, etc. It is a renting economy. People rent to each other. It is not sharing. 

If I share a meal, share a bottle of wine, or share a car trip with someone there is no commercial transaction of any kind. There might be an offer to help but sharing is not a commercial transaction so how can we have a "sharing economy?"

Words matter. "Sharing" is deliberately used by supporters, to disguise as a community-spirited activity, what is clearly a mundane commercial service: renting. 

2 - Sharing is not an economy but renting is. But renting by individuals, at a discount to local businesses, isn't disruptive in the least,  as many have claimed. A more accurate description is as a marginal "discount" economy that relies on lower costs of business due to avoiding the expense of regulations and legal protections that legitimate businesses are mandated to follow. It's a simple opportunity of arbitrage, and not much of it in the first place, but profitable for the middle-man if it can be aggregated. 

Unsustainable economy...

The Peers group claims to be liberating people into a "21st century economic solution," that enables them to "pay the bills, work flexible hours, meet new people or spend more time with our families." Yet there is no recognition of the need to manage an "economy" around their business services to make sure people can pay bills, etc. And to make sure they can develop and grow into great providers of rented goods and services.

Without such management their startup will struggle to develop long term value and sustainability.  

Technophobic defense...

Talk of regulations, or demands to enforce existing laws, is usually described as technophobic and ignorant. But this is a weak response to critics and it highlights the lack of a strong and moral argument in favor of small-scale renting.

The regulations around taxis, for example, were crafted over many decades with a strong community aim: to protect riders and provide a livelihood for drivers. This ensures a better service for all rather than a having crowd of amateurs potentially scaring off repeat customers due to uneven and risky experiences.

You would think that the "sharing" startups would hire an economist from the very beginning to help build an "economy" that provides a good service and allows their renters to earn a reasonable reward. Instead, companies such as Airbnb, Uber, etc, ignore such issues in favor of scaling as fast as possible so that their investors can cash out as fast as possible. There's nothing noble in that yet these companies lay claim to noble goals, a hypocrisy that can't be hidden by using "sharing."

The result of such mismanagement of the "sharing economy" is the inevitable race to the bottom that an unfettered market produces, where few are satisfied but the technology provider benefits tremendously. 

An alternate future...

There is another path to the future, a solution that would impact the economy: create a technology platform that enables people to share goods and services without any money being exchanged, through a barter exchange or simply a desire to be a good neighbor. It would attract a lot of people that see the community benefit of sharing unused goods and resources. It would be seen as a noble activity.

A peer-to-peer sharing network based on trust and community rather than money would be an incredibly positive service.  And it is on its way... because it can. 

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