What does the future of the sharing economy look like?
The sharing economy is a fascinating and powerful movement. It has unlocked new sources of income and new jobs for millions of people. We are still at the very beginning of what’s possible. The opportunities for entrepreneurs are obvious. One of the most interesting parts of this change to think about is the dynamics that may come as more and more of daily life is shared between ourselves.
What will happen when everyone shares resources?
If services like Airbnb, Uber, Lyft, etc. keep growing, there will be less of a need to own stuff.[1] Analyses have already been done showing the cost of using Uber/Lyft can be cheaper than the cost of owning a car. I believe this will only continue to grow, to the point where owning a car will be considered foolish. This case gets stronger with more and more people moving into cities and the imminent move to self-driving cars.
This presents some intriguing economics. In a world where there are fewer people buying possessions, supply will exceed demand at first. This is especially true early on in the shift as companies will be slow to change their original businesses. This will cause prices to fall drastically. Just look to the solar panel market as a recent example of what happens when supply heavily outweighs demand.
The companies that are currently making money by selling these products will suffer greatly with this change. Many solar panel manufacturers ended up going out of business after the price drop. In contrast, this is great for consumers. With fewer things you need to buy and falling prices, your purchasing power rises. See Benedict Evans’ blog post on Ways to think about cars for more details on how the car industry will be changing.
What impact will this have between those who possess things and those who do not?
The sharing economy has been great for providing people with jobs. Whether you are driving for Lyft or renting out a spare room in your house on Airbnb, people have been given a new source of income. This provides opportunities for those who have the resources (car, house, etc.) but what about the people who don’t? This is one aspect of the sharing economy that few seem to talk about.
On the one hand, the sharing economy helps bring the costs to use something down. As I discussed above, this gives more people access to more things. On the other hand, it puts the power in the laps of those who own the resources. If you have a car or house you have a source of income. If you don’t you have to look elsewhere or depend on the people who do own resources for your income.[2]
Let’s unpack this a little bit further. If owning a resource is where the money is, companies will want to control the possessions. It’s not a huge leap to make to think that in 3–5 years, Uber not only controls the platform but also owns its own fleet of self-driving cars. It’s also not crazy to think companies will form to own houses whose sole purpose is to rent out on Airbnb.[3] Or going even further, companies may soon develop that own the labor for these on-demand services.[4]
Does that mean companies begin to own everything in the future? If so, instead of placing the power and control in the hands of everyday people, the sharing economy could end up putting the power back into the hands of large companies. That would destroy one of the great benefits of the sharing economy, being able to work for yourself.
What role does government end up serving in the sharing economy? Much of this begins to sound like current public services. You can imagine that if Uber has a fleet of self-driving cars, eventually your city will have a fleet of self-driving buses. An interesting look at what the future might hold would be current bike sharing programs. They are approved and planned by cities but run by companies.
Conclusion
This post wasn’t meant to make any predictions about the future but instead be a thought experiment for what might happen. I am very bullish on the future of the sharing economy but there are some legitimate concerns about what it might be like in the future. We live in an interesting time where the middle class is starting to disappear and we need to fix it. The sharing economy looks like a potential solution but should be examined thoughtfully.
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[1] Paul Graham has a great essay on the benefits of not owning stuff.
[2] This isn’t entirely true. For the purpose of this blog post I wanted to focus on the sharing economy and physical possessions. Within the sharing economy, services like TaskRabbit, Instacart, etc. give the ability to share skills and time as a means to earn income. I might dedicate another blog post to discuss how these two parts interact to form the whole sharing economy.
[3] This is actually already happening. I have stayed at multiple Airbnb’s where the host was actually paid by the person I interacted with on the Airbnb site. Their job was to keep up the house and be the point of contact for the travelers.
[4] I am a little surprised this hasn’t happened already. With disputes between the services and whether on-demand workers are employees or not, it would seem there is an opportunity for a company to come in and act as a ‘modern union’. At some point I might write another article on this potential.
