The rise and rise of digital has enabled a new form of value production through the so-called sharing economy. Artisans sell their wares on Etsy, home owners sell their spare room on airbnb, car owners sell trips on Uber, digital workers sell their skills on Elance, creatives have their idea supported by the crowd on Kickstarter. Not all value is about money: the coproduction of Wikipedia delivers information about almost everything, at 97% accuracy.
We are in the middle of a paradigm shift from local to global, from ownership to access, from producer and consumer to prosumers and conducers, driven by global digital connectivity. New platforms connect demand and supply more readily than existing models. New players, unburdened with the cost of raising capital, put pressure on existing corporations (think Hilton struggling with airbnb competition). Resource limitations are replaced by digital abundance where scaling no longer means additional costs.
Sharing sounds all lovey dovey – and it can be. Some people will enter this realm because it meets other needs, like green living or social contact. But it is not just love and harmony – there are some serious issues we must grapple with. Journalist Peter Hesseldahl’s project We-economy does just that.
I first met Peter at MindLab Morgen on the Sharing Economy. I met him again at his seminar on Collaborative Sustainability at Dansk Design Centre, concerned with the life cycle economy and the increasing pressure on our resources – the ‘resource peak’ we are facing. Finally, I attended a workshop he cohosted with Deloitte, Fair Share – dilemmas in a digital jobmarket. This brilliantly illuminating process has made me think differently about digital and the sharing economy. The sharing economy is about mobilising tiny bits of resources – like plankton in the sea – to produce larger and larger productivity gains. To do so often requires touching the heart – editors of Wikipeida are passionate about the information they contribute and correct. People might sign up to GoMore not only to save on petrol and transport, but also because it serves their social and green agenda to not drive alone in a car. In some cases, like Elance, it may be more about money than heart – a supplier of labour services may seek to secure an income and a livelihood, but could also be a hobbyist offering very particular skills because they love doing it. When checking out Elance, I noticed that writers were commonly offered USD1 for 500 word articles. That will hardly pay the bills, at least if you reside in the Western world!
In the sharing economy, digital platforms act as an intermediary between demand and supply that coordinates, integrates and enables. The value of the platform is not in capital assets, but in mobilising disparate capital and resources owned by its many suppliers who may be in it for the money or the heart or a bit of both. A platform’s value rises with the number of users. The more people using it, the more useful it is. Once a platform has critical mass, multinational investors with a clear profit motive become interested. Typically, the value is the data collected through the platform about its users and their resources, which can be mined and sold as insight for direct marketing or as big data. Because critical mass is essential for an effective platform, one or a few large players quickly become monopolies.
Some models may increase inequality – owners of capital can reap the benefits of models like airbnb and Uber. Those who do not own resources can only sell their skills in a market of global competition: someone in India may do the research job for USD2 an hour, which would not be tenable in Australia or Denmark. Here, professionals with formal skills and qualifications may find this global competition pressuring their livelihood, also because new entrants may neither have the overheads of established suppliers nor declare this income to the tax office. In a global labour market, world inequality will impact the less well off in the well-off part of the world. In turn, this has serious implications for our welfare state. Freelance is fine, indentured labour not. Access to a global digital labour market could erode working conditions taken for granted in the western world. Suppliers may be unable to contract to secure superannuation savings, insurance, suitable work enviornment, working hours and recreation leave. In the long term the welfare state will need resources to support these suppliers if they get sick or when they get old. And the ability of the welfare state to do so may be further undermined if the platform transactions escape the taxable market: if no tax dollars flow to the state coffers from the transaction, how will the welfare state cope with these gaps? For consumers it is a risk that platforms usually does not guarantee the quality of the product or service, though typically user reviews provide transparancy about quality. The consumer contracts with the supplier, not the platform. Horror stories like the Dehli Uber rape case may force the platform to take additional measures to protect consumers.
Law makers all over the world need to grapple with the consequences of the sharing economy. We need ways to ensure fair competition between incumbents and new entrants and protection of consumers and suppliers. For example, do we tax resources and consumption, rather than income? Do we provide inalienable consumer rights that platforms must honour, even if they are not party to the contract? We also must consider the total economy of the sharing economy, the life cycle of the process, including in a global sense. Projects like Peter’s are useful in crystalizing the issues and bringing them to the attention of our legislators. This will not go away, no matter how strongly suppliers hanging onto existing models lobby law makers: it will only grow in significance exponentially.
There is no doubt we can solve global problems with new digital models in the new collaborative economy, but we need to be on the front foot or the most vulnerable in our community are likely to draw the short straw.
What do you consider the greatest challenges of the sharing economy?