Are we really “sharing” in the Sharing Economy?

We humans have always shared as sharing solidifies social relations and solidifies cultural practices. Sharing Economy has become an overused term in the recent past.  The digital platforms has given rise to a new kind of sharing which has brought in this much used word to the forefront.

So what have we always shared?

Traditionally, we shared our homes, cars, tools/equipment, musical instruments and even clothes with our friends and relatives, and this kind of sharing typically does not include financial remuneration. But there are instances of sharing where money is a part of the arrangement, such as sharing a cost of a meal, sharing expenses etc. But the word “sharing” was backed primarily by “social motivation”. Economic motivation was considered secondary.

How is Sharing Economy defined?

This new age term Sharing Economy, as defined in theory is, consumers (or firms) granting each other temporary access to their under-utilized physical assets (“idle capacity”), possibly for money.
In essence shareable goods are goods that by nature provide owners with excess capacity, providing the consumer with an opportunity to lend out their goods to other consumers. Excess capacity of a consumer good is present when the owner does not consume the product all the time. Typical examples include houses, cars, boats, houses, clothing, books, toys, appliances, tools, furniture, computers, etc.  At its core, the sharing economy gives a person access to something they don’t own through other individuals.  This is being called peer-to-peer (p2p) sharing.
But the term Sharing Economy is being stretched beyond reasonable usage when we say that paying a person $8 to make a pizza delivery (as on Postmates- an on-demand service provider for groceries, lunch, dinner and office supplies in the US) or a bit more to clean one’s house or put together Ikea furniture (as on TaskRabbit) is or has anything to do with “sharing”.
Some of the popular Sharing Economy platforms are:

  • Uber, Ola, Lyft, BlaBlaCar. They call themselves ride sharing platforms;
  • TaskRabbit, Upwork are in the freelancing space. They connect those offering services with those seeking services;
  • WeWork provides co-working space where freelances, entrepreneurs ad telecommuters can rent a desk or an office;
  • Airbnb provides a platform to share your home;
  • There are others that provide platforms to share fashion accessories, clothes, kitchen appliances, tools and lend money.

So what is being shared?

There is a widespread “common good” –social benefits claim by the sharing economy platforms, which is the benefit of meeting people, making friends and getting to know others.
In the case of Airbnb (platform to share homes), the confusion is – if people do so while staying temporarily elsewhere (vacation, business trip, family visit), their otherwise vacant/uninhabited house is now being shared. If, by contrast, people live permanently in another house, and continuously rent out their own house, they are actually just running a hotel. The first example is part of sharing economy, the second is not. People are now buying apartments to specifically rent it out on Airbnb. So should this rise of professional Airbnb investors cannot be called “Sharing Economy”.
Similarly, an Uber driver who drives us to town does so not out of the generosity of his heart but only because he expects he will be paid. He does not “share” his car except to the extent we pay for it.  Moreover, his car is not an asset lying idle. An Uber driver bought a car specifically to become an Uberpreneur.  The primary motivation was not to share but to make money by providing taxi service. Uber and Ola are actively offering car leasing schemes to encourage taxi drivers to buy cars and join their platforms (and become Uberpreneurs).

It is apparent from the above examples that secondary motivation (economic value generation), trumps the primary (social benefits).  So should these not be called “Rent a car”, or “Rent a house” or “Rent a service” platforms rather than “Sharing Economy”. The popular culture may use the term “sharing economy.” But many economists would like to call it, what it more accurately is- a more efficient economy.

In my view, “Rent a service” or ‘On-Demand” economy is a better term.

The Man in the Middle

The much overused term, ‘sharing economy’ has become a rage and platforms want to be under its big tent because of the positive symbolic value of sharing. While it has been using a socially-progressive feel-good rhetoric of sharing an underutilized asset, the sharing economy is also generating enormous amounts of wealth (for a few). It is one of the fundamental precepts of market economy that the transaction between willing buyers and willing sellers makes everyone better off. But in case of sharing economy, who really gains?
Most of the sharing economy examples that we see are taking place through platforms. There is no direct peer-to-peer sharing. You go through the man in the middleThe platform. Well such an intermediary does enable a frictionless peer-to-peer transaction and thereby reducing the transaction costs.  But who wins? Does such transactions make everyone (the buyer and the seller) better off?  If they are going through platforms, there is something to be gained by everyone.
It is the platform which decides how the value generated by the sharing transaction is shared between the two parties and how much does it keep with itself. It makes sure that the “sharers” get some value but not all of it.The Monkey and the two cats_2We all remember the Aesop’s fable “A Monkey and Two Cats” and know happened to the two cats who wanted to share the cheese and went to a monkey to complete the transaction. Think of monkey as the sharing economy platform here. We should not expect the outcome to be any different.

 

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