Is Sharing Really Caring?

Just to preface this a little bit, I wrote this article for my Grade 12 Economics class and just recently stumbled across it once again. Although some parts are quite extreme (I had to pick a deliberate side) and some facts are no longer applicable as I wrote it in 2015, I do believe there is some merit to my words. I hope you enjoy it, and if not, I hope it can generate discussion at the very least. —

Remember in kindergarten when your teacher would incessantly spew out sayings like “sharing is caring” and “there’s no I in team”? They set out with the intention of reinforcing proper values but I, for one, was a greedy little four year old, and couldn’t fathom sharing my crayons with the smelly boy beside me. I grew up with similar notions; if something was mine, it was only for me to benefit from, and if I wanted something, I had to buy it. I didn’t believe in sharing possessions, and assumed that such were the ways of the world. But while I continued living life with my traditional values, the world around me was changing in such a way that was definitely anything but traditional.

I still remember the first time I learned about the sharing economy. Late last summer, when it was time to return to university in the fall, instead of buying her bus ticket from the Greyhound website, I found my older sister checking out CampusLifts, a rideshare website allowing Ontario students to find or offer lifts to other students. Filled with curiosity, I asked her what this organization entailed; what exactly is rideshare? Who would drive? How much would it cost? How safe was it? I was astounded to find out that “ride-sharing” would be way less of a strain on my sister’s already debt-filled pockets and more convenient than having to travel to and from the bus station to travel by bus. The mere concept of people pooling their resources together in such a creative and efficient manner was enough to blow my mind. Thus marked my first experience with the complex and ever-changing world of the sharing economy.

If you are as blissfully unaware about the sharing economy as I was last year, fret not.

The sharing economy is defined as an economic structure that facilitates the sharing of otherwise unused resources or “idle capacity” for free or a fee between people or organizations . Although you may be unfamiliar with the definition, the sharing economy is no stranger to every-day life; you’ll find it anywhere and everywhere if you look.

Types of Markets:

  1. Social lending — Also known as peer-to-peer lending, this industry is used for people to lend and borrow money when they need loans without the use of established financial institutions such as banks. Well known examples include LendingClub, ZOPA, and Prosper.
  2. Crowdfunding — An industry that provides a platform through which people all over the world can raise money to support specific ventures or projects. Popular examples include GoFundMe, Kickstarter, and Indiegogo.
  3. Home Rental — This market provides travellers with the opportunity to rent lodging through hosts from every corner of the world. Popular examples include Airbnb and Couchsurfing.
  4. Ride-Sharing — This market allows drivers to share their vehicles with strangers when travelling. Popular companies include Uber and Lyft.
  5. Online Marketplace — This industry provides people with a platform through which they can buy, sell, trade, or re-sell products or services. Popular examples include eBay, AliExpress, and Etsy.

These markets and companies essentially create what is known as the sharing economy. It is the first to effectively incorporate technology and business, using websites and mobile apps to maximize convenience and its impact on consumers. The sharing economy has received an unprecedented amount of support from Generation X and Millennials, with youth flocking towards cheaper and more efficient alternatives than the traditional market.

“Unsurprisingly, the generation that lives online, buys online”
- Goldman Sachs

In essence, the sharing economy gives the average consumer an opportunity to become the producer and provides them with the power to make their own decisions.

Initially, when I began studying the sharing economy, all I saw was an incredibly convenient and cost effective market. I was elated to learn about an industry that not only allowed for growth of outsourcing opportunities, but also maximized benefit between ordinary people and companies, and acted as a boost for freelancers and part-time workers. In essence, this was the perfect economy, where companies are technologically advanced and can truly cater to the needs of consumers by sharing.

But at that precise moment, I recalled what my kindergarten teacher told me about “sharing is caring” and an unpleasant thought came to mind. Do these “sharing” companies and industries truly care about the welfare of the consumers? After all, in order for an economy to run, there must be some profit. My grade 12 AP Economics class taught me that there is no such thing as altruism, so how are these companies benefiting from cheaper fees and catering to every whim of the consumers? Are these new industries working for the people or are they simply working the people? This thought provoked me to search for the truth about the sharing economy. How is the sharing economy effecting the world around us?

EFFECT ON CONSUMERS

Companies such as Uber and Airbnb have grown exponentially over the past few years due to the easy, fast, and convenient services they provide. The main appeal is that service is cheaper and can be accessed with the touch of a button. Consumers are left with money in their pockets and all they had to do to get the job done was open an app or website and click a few buttons. Ideal for those who live harried and rushed lives, the sharing economy takes a load off their backs and allows them to live in the moment. In theory, this economy is perfect.

In an ideal world, with emerging markets such as Airbnb and Uber that allow people to facilitate the use of private resources like homes and cars, there would be perfect hosts providing consumers with guaranteed satisfaction, and they would ride off into the sunset singing kumbaya. But we don’t live in an ideal world, and reports show that some hosts can be anything but perfect.

There’s no guarantee of what you’re buying through the sharing economy. What looks like a villa online could be a run-down shack. What was supposed to be an autographed baseball could be a dirty ball scribbled on by a stranger. There are no guarantees in the sharing economy and no way to be compensated for the mistakes that were made because in participating, you are willingly taking the risk that you may be scammed.

These companies refer to themselves as a part of the “sharing” economy while getting money from renting out rooms and charging for rides. The only thing they truly seem to share is the opportunity for danger. There have been countless real-life horror stories under the watch of huge “share” companies such as Airbnb and Uber.

EXHIBIT A

Imagine renting a room in Madrid through Airbnb with the hopes of travelling through one of the most beautiful countries in the world, but being trapped in your rooms as your host threatens to sexually assault you to the point that you need trauma therapy afterwards. This was a reality for Micaela Giles’s son, who was only 19 years old at the time of the attack. He called his mother while trapped in his room and pleaded for help while she was thousands of kilometers away in the US. Fearing for her son’s life, Micaela called Airbnb headquarters for help, asking for the address of her son’s rental home and asking them to contact the Madrid police, both of which they refused to do. When she tried calling back, her number was put straight to voicemail. This horrifying behaviour not only exemplifies the lack of organization and regulation companies have when there are no background checks or criminal checks placed on hosts and sellers, but also the negligence to take responsibility for serious crimes that occur due to their business.

EXHIBIT B

In a story that brought tears to my eyes, Airbnb once again neglected to assume responsibility for a customer who was gang raped in Budapest, and then had the audacity to phone the victim’s parents and refer to him as “imbalanced”. The victim stated:

“So they called my mother — without my knowledge or permission. My mother, who has been dealing with my father’s Alzheimer’s. And told her that I’m “unbalanced.” My mother told them (politely) that she didn’t have a word to say to them. My parents both worked for the US government and don’t like attention. Then Airbnb changed their rules and said I could no longer contact them or their Legal Department.”

and

“I work for international organizations, foreign governments, NGOs, and charities. I do anything I possibly can to help make the world a better place. Airbnb does not. It placed profits before people long ago.”

These are not isolated incidents; the disregard for safety, quality, and regulation these companies have can be found just about anywhere on the internet and prove that though through the sharing economy providers are given more power to make decisions, there is so much room for people to take advantage of that same power, harming the very consumers they claim to help.

Peer-to-peer companies are just examples of companies who have started an entirely new industry, booming with opportunities. But with opportunity comes greed, and it has been noted that only one or two large companies dominate the market in a duopoly or oligopoly, fuelling money to Wall Street and no longer caring about customer needs. While the sharing economy originated with the idea of fulfilling an unmet need in society in an efficient manner, such as the humble beginnings of Airbnb, is the main focus still consumer need? Or corporate greed? The three co-founders of Airbnb started off as roommates simply living paycheck to paycheck, but are now valued at over $1 billion each. What I mean to say is, these companies that set out with the image of being new and different from traditional markets, but as time progresses and capitalism takes its toll, what is the real difference between old and new, other than marketing strategies?

EFFECT ON EMPLOYEES

Now let’s take a look at how the sharing economy effects their employees and competitors. Employees in this innovative market aren’t tied down by 9–5 work schedules or even the commitment of having to be a full-time employee. These jobs can be part-time or full-time, sometimes less than that. A way for people to make good money on the side, the sharing economy is a reflection of society’s boredom with the same work schedule, meeting the same people, and doing the same things everyday. No commitments and no obligations. However, with no commitment means their job isn’t fixed. There are no constants in the sharing economy. Low costs to customers means lower wages to employees, with portions of the revenue going directly to the corporations themselves.

For example, Uber permanently lowered their fares by 20% in September in many cities in the US. Additionally, a flat rate of $1 from each fare goes directly to Uber headquarters for their “safe rides fee”, thus reducing pay even more. Taking into account then the mandatory 20% of the fare that goes to Uber, pay for an Uber driver is adequate at best. But on top of that is the fact that drivers must pay for their own gas expenses, car repairs, insurance, mechanics, etc. and we’re looking at drivers that can barely meet minimum wage and may even live below the poverty line.

In addition to this, from an economist’s perspective, we must think of the implicit costs involved as well. At a traditional job, workers are often offered health benefits, insurance benefits, paid sick leave, vacations, and more. There is no such job security in the sharing economy. Only when workers exceed both explicit and implicit costs can they have what is called a normal profit, a difficult sight to imagine when some workers are currently struggling to meet explicit costs.

EFFECT ON TRADITIONAL BUSINESSES

While the sharing economy might be less than ideal for some workers, it is a nightmare for traditional businesses that have found new competitors springing up and dominating the market in a short span of time. While demand for sharing economies are increasing, demand for industries such as hotels, taxis, car rentals, and many more has decreased drastically, putting hundreds of companies out of business and thousands of people out of jobs.

Take, for example, the sharing economy’s effect on taxi service all around the world. Demand for private taxi services have declined dramatically with the introduction of ridesharing options such as Uber and Lyft, leaving thousands of registered full-time drivers without enough money to make ends meet. This new market competition has caused taxi medallion prices in Boston to drop over 40% in just one year from $666,547 to $402,444, shocking taxi owners. Reports show that Boston taxi ridership dropped by 22% within the first half of 2015, a loss of $33 million in fares. This number will only continue to decline, posing as a serious threat to professional drivers everywhere. Uber’s home town of San Francisco has found that average monthly trips per taxi have declined by almost 65% since Uber’s taxi service was introduced, from 1,424 trips in 2012 to 504 in July of last year. These losses in the taxi industry can only be attributed to the unbelievable expansion of the sharing economy and cheaper alternatives to taxi service. While companies such as Uber and Airbnb are receiving billion-dollar valuations, traditional business owners are at a loss, questioning if this sharing economy is simply a fad or they should sell their businesses while they’re ahead.

EFFECT ON GOVERNMENT

We all know about the dangers that surround the sharing economy, and though the companies themselves continue to neglect their consequences, this lack of regulation has not gone unnoticed by municipal, state, and sometimes even federal governments around the world. As is anything that suddenly grows so exponentially, the sharing economy has been very difficult to regulate and monitor. The government likes order, but the sharing economy is anything but organized. Economists predict that the sharing economy will rise to a value of over $335 billion by 2025, but this rise cannot come without order.

It’s no secret that the sharing economy has existed for years now, beginning with the likes of eBay and Craigslist, but the main difference between these pioneer sharing companies and the ones dominating the new market is how personal the nature of the product or service is. Years ago we were selling, buying, and trading books, DVDs, and renting cars, but now we’ve come to renting homes, sharing cars, sometimes even having strangers wash your clothes for you. These companies are so different than regular industries that it is difficult to monitor taxes, regulation, safety, and more. Because governments cannot monitor such problems, many countries have banned companies in the sharing economy. Despite this government approval, in places such as Mumbai, India, companies such as Uber and Lyft have been banned until they get licenses. After numerous sexual assault cases, the Indian government was forced to rethink about the social implications of these new sharing companies. In places where societal values differ greatly from the Western world, sharing economies fail to account for misuse of power and unethical behaviour.

They say, move aside, capitalists, the sharing economy is here. We are different, we are better. But wait, we may be breaking laws, evading taxes, and disregarding customer safety, all for what? Money. Down with traditional economies, the sharing economy truly cares about the people (and their money).

We flock to these companies, blindly taking money from our pockets while listening to promises about convenience and efficiency. Don’t be fooled, sharing may be caring, but convenience only fuels the greed of corporate officials, who have same childish beliefs I did. The sharing economy may have initially cared about you and I, but as my kindergarten teacher used to tell me, “all good things come to an end.”