The Sharing Economy: a false economy

In 1963 it was Harold Wilson, the then UK PM, who talked about “the white heat of technological change”. 50 years later and we feel that heat more strongly in everyday life than ever before.

Heat requires fuel, and technology is a voracious consumer of ideas, trends, platforms and even arguably people. Next Big Things are as rapidly forged in that heat as they are burnt out by it. One such NBT that I’ve been thinking about a lot recently is the Sharing Economy.

From Wikipedia: “The sharing economy (a.k.a. the share economy, the shared economy, the mesh or the collaborative economy) is a sustainable economic system built around the sharing of human and physical assets. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organisations.“ (https://en.wikipedia.org/wiki/Sharing_economy). It has some big-name enthusiasts like Jeremiah Owyang and Rachel Botsman, who both define their roles in terms of collaborative consumption.

I remember when I first heard about this concept, I was immediately struck by just how left-wing it sounded to have been adopted by somewhere as conspicuously Laissez Faire Capitalist as San Francisco. Common ownership of the means of production and distribution? I wondered whether the hippies had finally taken over, and central planning was the next on the list. Of course, when you look in detail at the businesses in the vanguard, it becomes obvious that the concept is grossly misnamed, or under described.

At the forefront of this new economy are organisations like AirBnB and Uber. Both offer low priced alternatives to traditional delivery models. Both have fallen foul of the regulators of the industries they’re trying to disrupt, but we’ll return to that presently. What they do essentially is allow a user of their services to purchase a chunk of time in which they have use of a resource. The obvious (if possibly unkind) comparison is not to Socialism, or Communism, but instead to that bastion on 1980’s aspirationalism: the Time Share Holiday. The comparison isn’t quite exact, there’s less planning by the service provider, and usage is far more flexible. However, what is the same is that the businesses reach those who cannot afford to own an asset, and rent it out on a temporary basis.

It is, you might argue, providing access to facilities that would be out of reach of the many - and you’d be right. The flip side of that is however that these businesses achieve margin by not subscribing to the same standards as their industry as a whole. I’m not suggesting that using Uber or AirBnB is inherently more non-standards compliant or more dangerous than a taxi or a hotel room. Instead what these businesses do is push the responsibility of safety and regulatory compliance on their suppliers. I believe this is the only way that they are able to compete. If they were subject to the same scrutiny / industry fees as their more traditional competitors, then their overheads would be sufficiently high that the only way they could exist would be as direct resale marketplaces for unsold time (like Hotel Tonight).

What is being collaboratively consumed? At best it is time. There’s no hint of anyone other than the suppliers themselves ‘owning’ the asset. I find it hard for the most part to even call it consumption, since little (again, other than time) is used and cannot be used again. Depreciation on the assets remains the same. A car that had covered 100000 miles with one owner will have a similar resale value to one that was “collaboratively consumed”.

What then is being Shared? Little if anything in these examples. These businesses are platforms that provide access to booking technology, whilst offloading commitment for quality and standards to those suppliers desiring access to their platform. They act to minimise their own overheads and sell time with an asset for a fee. They’re offering temporary ownership paid by the hour, and whilst that may be a loose definition of sharing, it’s not “sharing” for the businesses themselves. Rather, for them it’s about high-volume rentals with minimum overheads, and no real labour or regulation on their own part. What could be more Laissez Faire Capitalist than that?