The paradoxes of the sharing economy
My column this week in Spain’s leading financial daily Expansión is called “The Sharing Economy and Other Paradoxes” (pdf in Spanish) and is about a very interesting subject: the ways in which different industries, sectors, and traditional competitors are facing up to disruptive new models.
To illustrate this, I have chosen Uber and Airbnb: the respective traditional players in both industries, taxi firms and hotels, have highlighted the “risks” of taking the cheap option, arguing that Uber taxis are dirty and driven by criminals, and that apartments let within the Airbnb scheme are filthy hovels. The assumption is that only people on a low budget would use such services.
But it appears that this is not the case by any means. I know plenty of people who are thinking about using Airbnb while making overseas visits that I wouldn’t describe as backpackers. Instead, they are looking for a different experience, they want to stay in a nice apartment in the center of town whose owners go out of their way to provide a positive experience: cold drinks in the fridge, advice on how to get around the city. On many occasions, having made contact with the person you are renting the apartment from can provide valuable information that will allow you to make the most out of your stay. In the case of Uber, the majority of people I know, and I accept that I am not perhaps the most impartial observer, who use the service are looking for comfort, convenience, and reliability far above that normally offered by a taxi service, and not simply a cheaper alternative.
The sharing economy is not a race to the bottom. The majority of my students visiting Madrid as part of their IE Business School and Brown University Executive MBA program will be spending the next two weeks in accommodations they found through Airbnb; believe me, these people are anything but backpackers.
The worst thing that can happen to you when trying to deal with the impact of disruption is to have no idea of what you are dealing with.
Below, the text of my column in full:
The paradoxes of the sharing economy
Airbnb, Uber: don’t worry if you haven’t heard of them; you soon will. They are examples of the so-called sharing or P2P economy, a way of improving the efficiency of services providers, and one that has largely sidestepped traditional entry barriers. Airbnb allows home owners to rent out their properties for short stays, and Uber is a way for anybody with a car to be a taxi driver. There are plenty of other examples, and they all represent a threat to traditional service industries, many of which say they are unfair competition and calling on the authorities to protect them.The paradox in all this is that the traditional players in these sectors have undervalued the competition. Hotels think that Airbnb is a cheap alternative for backpackers, imagining that the accommodations on offer are pigstys. Taxi drivers are fearful of Uber, believing that it only attracts drivers with criminal records and worn-out old bangers.
The truth is that the majority of people I know who uses these services are not backpackers, and say that their experience of services like Airbnb has largely been more positive than hotel stays. Some say they have stayed in wonderful apartments in the center of cities, almost luxury properties whose owners have gone out of their way to make their guests’ stay as pleasant as possible.
In the case of Uber, once tried, there is no going back, and most people say the experience was very positive, with new cars driven by pleasant, well-mannered drivers.
The paradox of the sharing economy is that in many cases, the service on offer is better than that it is substituting. What’s more, the businesses suffering the disruption have no idea what’s going on.
