The Sharing Economy – A Social Movement Dying to Become an Economic One March 1, 2016
Something died. I feel a sense of loss that I just can’t shake. The Sharing Economy has become an icon and an emblem for a business model rather than a movement. The phrase has taken on a meaning that has everyone questioning the actual altruism of technology-enabled sharing, especially when money is exchanged.
Originally, I balked at the critics — bewildered that so many misunderstood the direction and foundation necessary to make sharing sustainable.
What I neglected to account for is that the foundation of the Sharing Economy is backed by the wealthy, who seek to become even wealthier, thus creating a greater economic divide. One can argue that startups generate new wealth as well as returns for investors, but that’s only a sliver of the pie. Like many technocrats, Paul Graham is vocal in his belief that economic inequality is central to the motivation of entrepreneurs and growth of new companies. This is fundamentally false — innovation would be even sexier to entrepreneurs if the majority were thriving. After all, a healthy middle class is good for business.
In his inaugural speech, President Obama never spoke truer words,
“The nation cannot prosper long when it favors only the prosperous.”
All of us need to see this — including the economically advantaged.
Let’s be clear: wealth is not wrong. Money is not bad. Hard work should pay off. And we can do better than this.
Are we really proud that Uber doesn’t own cars, employs zero drivers and is worth a $100 billion? Or that Airbnb has a valuation of $25 billion, without owning a single piece of real estate? It takes only a short step back to realize that these companies are absorbing the value of assets and time that other people are exchanging with each other!
Leading platforms such as Airbnb and Uber are heavily venture backed, profit maximizing entities. The rich get richer on the backs of the less fortunate who are using all that they’ve worked hard for in the form of their possessions and time, such as their homes, cars, and expertise.
The technology of these platforms is not expensive to build. Meanwhile, these companies have skyrocketing valuations (exceeding even the growth trajectory of Facebook) because they are absorbing value from the people actually creating and providing the value.
And let’s not leave Facebook out of the equation. The valuation of Facebook is based on the content, networks, and personal data individuals infuse into the platform. Individuals don’t own their own social network or their data — Facebook does.
And while that might seem insignificant, perhaps Jaron Lanier, author of “Who Owns the Future” gives us something to think about, “Our personal data is not unlike labor — you don’t lose by giving it away, but if you don’t get anything back you’re not receiving what you deserve. Information, he points out, is inherently valuable. When billions of people hand data over to just a few companies, the effect is a giant wealth transfer from the many to the few.”
There is a way to more equally distribute wealth and transfer value. We can easily build technology to account for, assign, and distribute value as it’s created. Value distribution is coming — it’s just a matter of time. What does this have to do with the Sharing Economy? Everything.
Let’s take step back to look at where the Sharing Economy has been as well as where the movement might take a sharp turn toward real sharing.
The stages of the sharing economy
Connection > P2P + VC > Gig > On-demand > Autonomous
Can value sharing built into business? Let’s take a look at the recent past and impending future, along with the stages the Sharing Economy to see where things are as well as where they might go next.
- Human connection, community, and lifestyle reign
The boom of the Sharing Economy represented trusting strangers again — a new way to interact and transact, through different forms of value and exchange opening our hearts, borders, possessions, and attitudes to make extra money, save the mortgage, afford a nicer car, have more time for art, meet new friends, or go on a vacation. All of this pointed at to the deeper context — we have enough — we can share!
- Peer-to-peer economy grows through venture capital
As soon as entrepreneurs and investors caught wind of the raw potential of the Sharing Economy, capital poured into marketplaces for everything, including some obscure examples like peer-to-peer restrooms. At this point, the Sharing Economy crossed the chasm and became a household term. During this time, many platforms that provided social value without obvious revenue models ceased to exist, including Neighborgoods, Grubwithus, and Loosecubes. Meanwhile, Couchsurfing went from filing as a non-profit to becoming a venture-backed company.
- Gig economy goes full force
With the cost savings of 1099’d independent contractors — the gig economy became an efficiency model for underutilized time and resources — a way to generate economic growth with little capital, investment, or overhead. The Sharing Economy became an inexpensive way to employ low wage workers full-time, while skirting traditional employment laws, honing in on the un/underemployed. Marketplaces for cleaning, deliveries of every type, and all kinds of unimaginable services popped up. And they were all touting the revolutionary “Sharing Economy” as their moniker.
- On-demand everything eats the Sharing Economy
This is where we are today.
Ridesharing is spreading like wildfire across cities all over the world. Uber continues to play the media. By subtle, but brute force, the Sharing Economy becomes conflated with “on-demand” — the idea that we should be able to summon whatever we want or need, right when we need it.
With good reason, the press incessantly attacks the Sharing Economy. There is the infamous, “Case Against Sharing,” which explores the ways the movement contradicts itself. And then there is the question of what is the Sharing Economy? Are Amazon, Netflix, and GrubHub really part of the Sharing Economy? Today, every type of online marketplace is claiming stake, further diluting the meaning.”The only thing these companies have in common is that they are all marketplaces, though they differ widely in the amount of control they give their buyers and sellers,”summarizes WSJ technology columnist, Christopher Mims.
- On-demand becomes autonomous
This is what’s next.
Peer-to-peer connections will become less important. We’ll have drones, self-driving vehicles, and the IoT (Internet of Things) ruling the economy — basically, robot world. People will lose their jobs unless they are already skilled and educated or can easily adapt to the quickly changing tides. This is the era when we’ll seriously contemplate reform like universal income since there will be ever decreasing needs for manual labor.
Business goes through a predictable cycle: idealism, adoption, and integration — then repeats. The Sharing Economy is no different. We simply haven’t integrated sharing yet.
While the Sharing Economy seems to have lost much of its original meaning, we now have a social movement that is full force, breaking down the social constructs of ownership and exchange. Today, people are thinking more about the value they already have — slowly creating a new consciousness around abundance.
Our minds are starting to map the possibilities of an economy that shares the responsibility and value with its participants. That’s big!
Venture capitalist, Fred Wilson recently wrote, “As more and more businesses leverage the power of networks to create economic value, there is a question of whether the network participants should share in the value they help create.”
The lessons of the Sharing Economy are not lost, but they do need to be reborn into the fabric of business — we have to see that we have enough to share incentives, to give a voice to the many instead of the few, and to work toward sustainable jobs that nurture all of us. With autonomous technology on the horizon, we need to create structures for sharing value that are inclusive of all, but we must start now. We must carefully consider how the ownership of the machines will impact everyone in the future and build models that will ultimately share the wealth.
How can we integrate sharing?
There are many ways to structure or restructure organizations to distribute value, including the cooperative model — for which there are multi-stakeholder approaches, allowing for outside investment. There are also ESOPs, (employee-stock-ownership-plans) that can distribute value amongst the value creator employees and with this model, unlike cooperative, the business can even eventually be sold. In contrast to an ESOP however, the employees, participants, or members of a cooperative actually share ownership and help operate the business.
A cooperative is a legal entity, which originated 1844, generating partial or full-time employment for 250 million people worldwide. Today, we can attach the cooperative model to the digital environment, allowing for the creation of scalable platforms that share value amongst the value creators, known as Platform Cooperativism. While venture capital is often necessary to establish a prolific marketplace, the crowd can act as a marketing engine if given the incentives to do so. The cooperative business model is not new, but has endless implications when applied to global platforms. There are a number of recently minted companies choosing a Platform Cooperative model, including: Stocksy (a stock photo marketplace), Fairmondo (a Germany-based, more conscientious eBay), Lozooz (a blockchain version of Uber), and Loomio (a tool for group decision making).
The decentralized digital ledger that Bitcoin was built on top of is known as the blockchain, a technology used to create secure transactions, which records exchanges. While much of the Sharing Economy is currently deemed peer-to-peer, a truly peer-to-peer system would allow for transactions to happen without the need for an intermediary platform — and the blockchain can do this. The blockchain can also operate self reinforcing smart contracts (see Ethereum) and allow platforms to distribute work and further, govern organizations. Trust and privacy are built-in. With the blockchain making transactions happen more easily between strangers without the need for lawyers, accountants, and bankers.
Crowdfunding has gone from a fad to an explosive industry, with an estimated $34 billion distributed to individuals, projects, and ideas that might not have otherwise had legs in 2015, making crowdfunding a worthy rival of venture capital. Today, there is a crowd for everything — including equity, philanthropy, investing, buying, and even banking. We haven’t fully realized the power that our individual transactions have yet. If we understood how our individual purchasing power as a collective can directly and positively impact lives, industries, and therefore livelihoods — we’d make different decisions (all other factors of competition being equal). With crowdfunding doubling or more every year, we’re getting there. When you combine value distribution platforms with the crowd (who by the way has the most to gain by getting involved), there is the potential for everyone to win.
The blockchain and crowd technology are only as effective as the ethos and governance operating behind the scenes. As Nathan Schneider, a political journalist and huge proponent of platform cooperativism points out,
“The blockchain and the crowd will be good for sharing only if we’re serious about incorporating principles of the commons and democracy into how we use it.”
That’s one of the reasons that the cooperative business model is so compelling; there are 7 guiding principles that are very specific, setting the operational ideals of the business as a foundation.
The future of sharing
In the future, businesses will consider the contribution of their value creators beyond the typical rationale of needing “ambassadors” for marketing purposes. If for no other reason — sharing is and will continue to be a competitive advantage.
Existing organizations will have to find creative ways to compete with new and copycat value sharing alternatives, which will empower the people to do more with less by sharing the upside. If you think this is farfetched, Reddit went public with their plan to share platform equity with their contributors during their last round of funding. Who will be next?
Once sharing is built into our financial models, legal structures, and into the very backbone of our economy — Cooperation will be a foregone conclusion. Sharing no longer a trend, but rather an axiom for survival.
The systems that create the language for our interactions can be rewritten and I fully intend to be part of making that happen!