Sharing Economy 101

What is ‘sharing economy’?

At present, there isn’t a formal definition of what a ‘sharing economy’ is, but at its core lies the idea that people will make their unused goods and property available to others in situations where they previously wouldn’t have, or that people will share a communal belonging.

Going on a holiday? Rent your house out for the time you’re away. Got a spare room? Allow travellers to stay in it. Don’t want to own a car? Buy a subscription to one instead, and only have it in your possession at the times you’re using it.

The definition is constantly evolving as people try to balance what they want it to be with what is possible with current societal structures, and so instead of being one thing, it’s a spectrum. At one end, no money exchanges hands at all, and all possessions are communal with everyone having equal claim to them. At the other lie ever expanding businesses, which draw upon existing resources (houses, vehicles, clothes) that are shared between many.

woman holding sign saying 'share' in a crowd

How does it work?

One of the most visible examples of the share economy is Airbnb, a website which allows people worldwide to rent out their spare rooms or temporarily vacant properties to travellers.

The website provides a safety net to both hosts and guests, requiring approval from both sides, and relying on reviews to ensure that what is being advertised is what is delivered.

Another example is Uber, a rideshare service in direct competition with the taxi industry, which allows drivers to use their own cars and set their own hours.

On the smaller scale we have websites such as Etsy and Carousell which allow people to sell on their clothes and accessories. There are also similar setups on Facebook, with groups set up with specific sales and trades in mind; homewares, clothing brands, vintage furniture. If you dig deep enough, you’ll find it.

What are its benefits?

The benefits to the individual are plentiful. For buyers, the big one is saving money. Businesses like Airbnb and Uber don’t need to own any assets and therefore are able to pass on significant savings to their customers. For Airbnb hosts and Uber drivers, they have the opportunity to make money from something that might otherwise lie dormant – a spare room, or a trip home which can be turned into a fare.

On an environmental and social level, the current and potential benefits are even bigger. By encouraging people to sell or pass on their unwanted goods, landfill is decreased, and the call for production of new items is diminished. In the context of short term renting over hotels, using space that already exists for a purpose that otherwise would need a specifically dedicated building could mean less urban build-up, less pollution and less wastage.

Part of a Cleveland mural, the full saying was "Life is sharing a park bench"

Does it have drawbacks?

One of the most immediate drawbacks of the share economy – beyond the potential for a traveller to trash your house in an Air BnB arrangement gone wrong – is the potential loss of jobs and work in the hotel and travel industries.

The philosophy underlying a share economy is directly at odds with the capitalist nature of society. As a result, there has been a lot of backlash – Uber in particular has faced bans in various states and countries as the law tries to catch up and see whether it should protect the taxi industry over its competitor.

The challenge is that there are limits to how much a share economy can thrive in the current environment – it can only reach a certain point as the dependence on private property, hotels and taxis decreases and then plateau, reaching an uncomfortable equilibrium. When we reach this point, taxis and ride-share services, hotels and Airbnb will co-exist, neither side thriving nor growing, each existing to the detriment of the other.

What comes next?

The way our current economy is structured relies heavily on private ownership, and so for a perfect execution of the share economy to happen, it would require a re-examination of how businesses currently work and for things to get shaken up at a legal level.

Share economy is a philosophy with great potential but which brings with it a range of difficulties that need to be worked through. But, while all great ideas have the potential to be corrupted or to descend into chaos – this doesn’t mean they should be ignored or put aside.

It’s an exciting time, where new ideas are being tested, and we are being given the opportunity to shake long-held foundations. Just because something has been done a certain way in the past, doesn’t mean we have to keep doing it for tradition’s sake. The growing boom in share economy shows that people are keen to try something new, and that there is demand and potential for a different kind of economy in the future – less focussed on the individual, with more of a community mind.

Written by @ElizabethFlux