Who will survive the Sharing Economy?
The emergence of the technology enabled “sharing economy” in recent years has kick started a number of debates on how this new paradigm will challenge existing economic structures and players. Much of the analysis on this issue relies heavily on the distinction between “owning” and “sharing”.
The sharing economy itself has come to represent two distinct trends in the last decade. One has been the rise of online marketplaces that allow individuals to “resell” the use of assets that they own but are not fully utilizing. Uber, Airbnb and TaskRabbit are all essentially real-time marketplaces that provide a platform for buyers and sellers to find each other and transact seamlessly at a scale that was not technologically feasible in the past.
The second aspect has been the rise of providing temporary “access”, as opposed to perpetual ownership, as a model for economic exchange. This general shift has been in evidence for software and non-physical product for several decades, but is now beginning to spill over into the world of physical assets. The likes of HP InstantInk have provided us a window into a world where the provider of a product can simply make its product inoperable if we fail to pay the “access” fee. A similar and more largescale, but perhaps less obvious and perceptible, trend is already in place for smartphones that rely heavily on software and hardware upgrades to remain relevant and usable.
Both these combined seemingly present a split from the models of exchange of the past. We are now in a position to “share” what we own with others and vice versa. And instead of looking to buy an asset outright, we are looking to simply access it when we need it, and thus “sharing” the resource, rather than “owning” it.
It is the treatment of this second aspect of “access” vs “ownership” that I find most interesting in mainstream discussions on the issue. The assumption that the two differ substantially in a philosophical sense deserves further inspection. In fact, what we consider ownership today is not altogether different, practically or conceptually, from the access provided in modern sharing exchanges.
In its most basic form owning is simply the purchase of a guarantee that your exclusive right to use an asset will be protected. Our comfort in ownership relies on our trust that if someone were to attempt to challenge our right to use the product, by attempting to steal it for example, a higher authority, i.e. the government, would step in to return the asset to us.
In essence, even today, what we are purchasing is not a physical product from its seller, but the right to its exclusive use from the government, for an indefinite period from the point of purchase.
What is changing is how easy it is to practically put fences around exclusive use of products, which is largely a technological phenomenon. For instance, technology already exists today that would allow Tesla, or any other car manufacturer, to lock out customers from their cars if they do not pay a prescribed monthly subscription fee to drive their cars.
What is likely to be the real source of upheaval in the market is a quick descent from the current utopian ideal of a decentralized shared ownership of capital, to a naturally monopolistic one. For example, with the onset of autonomous vehicles (or even without), Uber could benefit from consumers shifting away from individual car ownership to simply wanting to access a car when they need it. If Uber chooses to invest building its own fleet of vehicles to meet this demand, it could soon find itself in a position where it is the largest “owner” of an asset that everyone else is trying to access, allowing it to disproportionately appropriate rents. Similar asset concentration will likely happen in markets ranging from real estate to computer hardware and those with the largest pools of capital at their disposal at the onset are likely to benefit the most.
Unless we are careful, the trends that have driven the “sharing economy” could very soon result in an even more hyper-concentrated form of capitalism. Thus, the real question that should preoccupy is not whether we are moving from owning to accessing, but what players are well-positioned to become the new class of asset concentrators.
