Collaborative consumption
NEW YORK, USA — People in the know agree that it will never the replace the capitalist system around which the majority of the world’s economies revolve. But they are also in agreement that the sharing economy is changing the way we do business.
From sharing living space and meals to talents and cars, the sharing economy, which experts value at well over US$100 billion, is discouraging waste and engendering micro-entrepreneurship across the United States. It’s a new way of making extra money and, if embraced, could be a game-changer in places like Jamaica where unemployment and underemployment are constant.
Powered by technology, the sharing economy — which has been gathering steam in the US over the past few years — is causing a shift from individual ownership to collaborative consumption and turning ordinary people into micro-entrepreneurs. Academicians agree that the concept is not new, but that technology has transformed this age-old model of peer-to-peer sharing into a modern phenomenon. It is a concept that relies heavily on trust and as such has spurred the emergence of complementary services that ensure there is no dark side to sellers in the mix.
“It is the latest wave of change that digital technology is engendering. There seems to be the creation of new marketplaces and alternative forms of consumption, new formats of education and finance and production,” explained Dr Arun Sundararajan of New York University, who has spent the last 15 years teaching, writing, and studying how digital technology has transformed business and society.
Dr Sundararajan, who was addressing a group of international journalists on a Sharing Economy Press Tour in the US, said that, although it is still too early to assess the implications of the sharing economy, supporters are already seeing benefits with a reduction in transactions costs, better usage of assets and existing capital, new investment alternatives, and increased economic activity.
“In many countries, for the last 50 or 60 years we have developed a model of consumption that is predicated on exclusive individual ownership. And so, if you want a tablet, you buy one; if you want a desk, you buy one; if you want a car, you buy one; if you want a home, you rent one or buy one.
“But this could be because that’s how we are as human beings; we want to own stuff, but it could be because other models of market-based acquisitions for use weren’t easily possible. So… one feature that characterised how we bought stuff and how we used stuff prior to the sharing economy [was] that use was tied to individual ownership to a large extent,” he explained.
“A second feature that characterised the economy prior to these set of changes was that most of our commercial transactions had moved to being with large institutions or companies. Something with a brand, something with scale, something that was organised as a formal organisation,” he added.
But the sharing economy, he argued, is breaking these “assumptions”.
“Usage does not necessarily have to be tied to exclusive ownership anymore, and… multiple people can access [goods and services]; not by buying it and using it together, but in a market-based way, where you pay for something and you get it only for the time you need it, rather than having to hold it permanently. You are doing it through a market, but without the constraint of ownership,” he said.
There are many examples of the sharing economy business model popping up in New York City and other busy metropolises in the United States that are big on tourism, like Las Vegas, and San Francisco. Take, for example, Eat With that allows people, like friends Emily and Anais, to earn extra money by offering visitors home-cooked meals in their Brooklyn apartment, while car-sharing networks like Uber and Lyft, though rivals, give motor vehicle owners a chance to earn extra by renting their private vehicles and transporting people around.
Similarly, bike-sharing Citi Bike is making it easier for thousands to navigate the congested streets of New York City. On the other hand, Meetup, which was motivated by the ‘neighbourliness’ that started among Americans after the dreadful 9/11 terrorist attacks in New York in 2001, allows individuals to use their platforms to form groups with others who share their interests, while Kirb offers people in the US and other countries a more personable platform to sell used and unwanted items to those who need them.
But, at the forefront of the sharing economy movement is Airbnb, whose platform allows users to rent their living spaces — whether entire homes, apartments or spare rooms — to travellers. Using the Internet and mobile phone applications, the six-year-old platform currently connects people to short-term accommodations in 34,000 cities across 190 countries, including Jamaica. At its peak, the platform facilitated 425,000 boarding connections in a single night earlier this year.
“The largest hotel chain worldwide has 625,000 rooms, whereas 425,000 people stayed at Airbnb accommodations in a single night. That means something,” Dr Sundararajan emphasised.
He believes that, although the sharing economy is redefining how tourists book accommodations, the model will not replace the traditional products with which visitors are accustomed. He, therefore, thinks that the concept should be embraced in tourism-dependent countries like Jamaica as it will, to a great extent, add variety.
“I think that, from a government’s point of view, if tourism is an important part of your economy you should do everything possible to encourage sharing economy [particularly] in the provision of accommodation and transportation,” he said in response to a question from the Jamaica Observer, adding that some form of regulation would be needed to ensure that high standards are maintained.
Also at the forefront of research on the sharing economy is New York City-based Fiscal Policy Institute (FPI), where differing views contend on the benefits, threats and sustenance of the economic system in the United States. For example, FPI’s deputy director and chief economist, James Parrot, argued that, while the sharing economy provides additional income for some, it represents a clear threat to existing businesses in a country that is experiencing arguably the weakest economic recovery since the Great Depression of the 1930s and 1940s.
“It has the potential to erode worker standards and wages. And we’ve seen some of that. The car-sharing industry has been very disruptive to the taxicab system in NYC,” he argued.
“And there is a potential to undermine wages in those sectors that are in direct competition with those services. For example, the hotel workers’ union has been very active and raising questions about Airbnb not being closely regulated, and questioning what insurance there is for people to stay at Airbnb accommodations,” he said.
Parrot also said that earnings by Airbnb members could foster problems in terms of wages and otherwise for formal hotel operators and their workers.
However, his colleague David Kallick, a senior fellow at the institute, held a different view, in that the sharing economy can complement what already exists, but with proper regulatory systems.
“It is not going to take over America, but it will certainly cause changes in some sectors,” he argued.
In terms of regulation, he said, it is not a question of difficulty, but rather one of “will”.