5 Ways the Sharing Economy Will Revolutionize Business

The sharing economy is blossoming and creating enormous levels of opportunity as it does. This is already having a massive impact on the way we work, finance our projects, and get around town. The longer term impacts are difficult to overstate, as they will be far-reaching and transformative for our economies, our communities, and ourselves.

Here are some of the implications of the sharing economy in the coming years, and a few ways it will change our world for the better:

1. Emphasize Access Over Ownership

Access is becoming more important than ownership for a variety of products. The average drill will only be used for 10-20 minutes over the course of its several-year lifetime, so why buy when you can borrow on sites like Neighborgoods? As Rachel Botsman, a thought leader in collaborative consumption points out, you need the hole, not the drill. Millennials and Gen Xers in particular are hopping onboard with this concept, realizing that they need the end goal completed or the emotional experience of using the product, not the actual product itself. Collaborative consumption barter systems like Swaptree allow for non-cash barter exchanges that make up a secondary market for goods of all kinds. An emphasis on sharing access over individual ownership can have substantial community and psychological effects, such as increasing the willingness to communicate with strangers and decreasing the impulse to define oneself based on possessions.

...sharing is to ownership what the iPod is to the eight-track, what the solar panel is to the coal mine.
- Share My Ride, The New York Times

2. Unleash Latent Work Potential and Expand Economic Capacity

By providing platforms with low barriers to access work on demand, companies like Lyft, TaskRabbit, Rinse, and oDesk are opening up work opportunities for millions of people to do either skilled or unskilled work. By connecting the customer directly to the provider of goods or services, commerce no longer needs to go through the bottleneck of a corporate structure or government institution (while electronic reputation scores encourage quality and trust). According to the CIA World Factbook, the global unemployment rate is over 8%, and the combined unemployment and underemployment rate is over 30% in non-industrialized countries. Imagine all the unemployed or underemployed people in the world who would love to work or create something, but sit idle due to resource constraints, waiting to find someone who can pay them to do some kind of work. Now imagine all the people working at jobs just to get a paycheck, who are disengaged and unproductive (over 68% of all workers, according to Gallup), and how much more productive they would be if they were passionate about their work. What if all these people could readily find work, find work that they cared about, and find people to help them complete projects that they were truly passionate about?

The sharing economy is helping people gain access to work, and more forms of work than they would have been able to find previously. Once the barriers to finding and providing work are reduced, workers can have more security in the fact that they can log on to the on-demand labor economy as they please, liberating them from rigid workday schedules or the need for a single employer. Startups like Breeze are even popping up to offer weekly car rentals for the sole purpose of enabling people to join the sharing economy as they wish. Let's look at an example to put the potential opportunity and scale into perspective: Uber was founded in 2009, and now operates in over 200 cities and 55 countries globally, is projected to generate over $10 billion in revenue in 2015, and had over 162,000 active drivers in December, 2014. The chart below illustrates the growth in driver partners for its UberX program.

3. Democratize Access to Capital and Empower Entrepreneurship

Aside from making work more accessible and available, the sharing economy is enabling entrepreneurship and funding personal projects through crowdfunding. Sites like Indiegogo provide a source of funding for everything from films to business ventures to inventions, and they're catching on fast. The World Bank estimates that the global crowdfunding market raised over $5 billion in 2013, and will grow to over $90 billion by 2025, which is over 1.8 times the size of today's entire global venture capital industry! Funds are also coming from individuals instead of institutions, leading to an increase in the spectrum of ideas that get funded. This means that through crowdfunding more consumers will become producers, entrepreneurship will be more feasible for more people, and the ripe conditions for innovation will spread. The chart below shows the recent explosive growth of this form of crowd-sourced capital.

4. Drastically Reduce Waste Through Collaborative Consumption

Producing a new car is incredibly resource and energy-intensive. However, like many other products, cars go unused a majority of the time: the average car sits parked between 92-96% of its lifetime. Companies like Zipcar and Getaround are helping people share the use of cars, increasing the resource efficiency of each vehicle, and decreasing the demand for producing new ones. Studies from Frost & Sullivan and UC Berkeley claim that carshare programs like Zipcar take somewhere between 9 and 15 cars off the road for every car they make available to share. This resource efficiency was not the only benefit of carsharing. In fact a study found that joining carshare programs had a dramatic impact on members' behavior and preferences:

• Members reduced heavy car use (over 5 trips per month) from 38% to 12% of the time
• Members increased their usage of alternate transportation, including walking (up 21%), biking (up 14%), and public transit (up 11%)
• 72% of new members said it was less likely they would purchase a new car in the future
• Nearly 20% of members sold their cars after joining

These trends have obvious large-scale positive impacts on emissions from manufacturing and driving cars, as well as peripheral positive impacts on traffic congestion, health, and quality of life for city dwellers. 

5. Bring Community and Trust Back to Business

Trust in institutions, including big businesses, banks, government, and the news media is at an all-time low. By connecting individuals to other individuals who provide the products and services we usually seek from institutions, and implementing reputation feedback loops, the sharing economy is rebuilding trust and encouraging community-building. In this system, reputation becomes extremely important for us to access or provide goods and services. Many sharing economy proponents note that this is not a new way of doing things, in fact person-to-person and community interaction is the way we have been doing business for thousands of years, before the Industrial Revolution. Lyft and AirBNB are actively promoting and working hard to build this aspect of their businesses, encouraging people to interact with each other by exchanging a fistbump before sitting in the front seat during a rideshare (only if they choose, it's not mandatory), or meeting face-to-face to exchange keys while renting a room from someone. Lyft actively recruits community partners via its community solutions initiatives, with the explicit core values of empowerment, opportunity, and partnership. The company also focuses on hiring friendly, sociable drivers that their riders can relate to, says co-founder John Zimmer:

“We try to find aspirational, friendly people, and when you take a ride with a person, you think “hey, that could be me.”

These efforts are meant to connect individuals (the "social atom") as the first step in reopening communities and rebuilding trust between strangers. This idea is embodied in saying "a stranger is just a friend you haven't met yet." Not only does this community-building improve the experience of the people involved, it is an essential part of the sharing economy business model. As AirBNB's Christopher Lukezic puts it:

As a company we learned very early on that what makes collaborative consumption work, is trust. To meet people in person, get to know them. We opened those offices, not for marketing, not to grow the market that we already have in those cities – we actually opened them to better serve the existing hosts and travelers we have in those cities. The more trust we can build, the better our platform and the better our marketplace will work.

Finding a Shared Definition for the Sharing Economy

Although the terms "sharing economy" and "collaborative consumption" are widely used in headlines, many times precise definitions are not presented. The slideshow below from Rachel Botsman provides a wonderful framework for defining and thinking about the sharing economy, as well as its implications for business and society.

 
Is The Sharing Economy All It's Cracked Up To Be?

The sharing economy, collaborative consumption, and crowdfunding have seen incredible growth over the last few years and produced equally incredible amounts of optimism and hype. Jeremy Rifkin, in his book The Zero Marginal Cost Society: The Internet of Things, The Collaborative Commons, and The Eclipse of Capitalism, argues that the collaborative commons (a derivative of the sharing economy, freely shared information, and collaborative consumption), along with technologies like 3D Printing and the IoT are bringing about the Third Industrial Revolution. He argues that this will fundamentally change our economic and social systems and shift our collective paradigm from one of scarcity and competition to one of abundance and collaboration. 

Will the sharing economy ultimately live up to its lofty goals? Recently criticisms have emerged about the nomenclature, legal and policy implications, worker benefits and job security of participating in the sharing economy, and what it implies about our economic system itself. Many of these concerns have valid interests at heart, and should be addressed in a constructive manner (one that avoids Luddism or supporting entrenched interests for their own sake, and seeks to find the best use of these technologies for the sake of humanity). Like any new industry there are uncertainties and important formative discussions that we need to have about the checks and balances we put in place, how we ensure participants are being fairly compensated, and which companies we support for staying dedicated to solving the underlying issues that enabled the disruption of the old industry. As we make decisions to mitigate the risks and promote the benefits of the sharing economy, we should keep the founding values of open access, transparency, community-building, sustainability, and trust as our guiding principles to ensure that the outcomes originally envisioned, as well as those listed above can be fully realized.

What do you think? Is the sharing economy overhyped? Will it bring about social and economic change on an unprecedented scale? Join the conversation or share additional resources in the comments below.