The Brighter and Darker Side of the Sharing Economy

Today, people stream music rather than owning records or CDs. Today, society shares information and images without imposing copyright on them through the use of social media. Through increasingly global, yet decentralized business models, individual consumers are revolutionizing the creation and exchange of value. Airbnb, Über, Kickstarter, Shapeways and TaskRabbit are in their respective domains of activity eliminating barriers to entry and allowing grassroots and disruptive players to compete on a viable basis. In the sharing economy, we can produce goods and services locally and in sufficient quantity without the need for scale. Creativity and commercialization of new ideas traditionally requires massive investments in sunk cost relate R&D and new product development. Yet with 3D printing and collaborative online sharing of knowledge, individuals can develop and configure unique goods, services and experiences that are more authentic than mass-produced, scaled consumption.

Despite the positives, these changes are occurring in a highly uncertain context related to future employment patterns, new technology and transformations in consumption.

First, is rising inequality. A recent book by French economist, Thomas Picketty, for the first time meticulously detailed the emergence of persistent inequality in the world associated with low growth economies in the developed world.^[1]

Second is persistent underemployment. Despite economic activity returning to pre-crisis levels, workers are either unemployed or working hours well below full time and making it hard for them to provide enough income to cover the cost of living. The causes of this are in part related to rapid automation that is fulfilling tasks that were traditionally done by people. This has impacted all sectors of the economy from traditional manufacturing sectors to service sectors with the emergence of artificial intelligence that can now complete tasks associated with document generation and translation services.

Third, rapid digitization has transformed services that were previously requiring face-to-face interaction between supplier and user such as educational services. The arrival of free Massive Open Online Courses (MOOCs) offered by both new players such as Coursera but also traditional heavyweights of higher education such as Harvard University, Massachusetts Institute of Technology (MIT) and Stanford University have threatened educational establishments that relied upon tuition revenues to operate. Now, with sophisticated interactive platforms, students may no longer need to be physically present to attend classes.

Fourth, energy production and distribution is being revolutionized in two ways. The impact of climate change and the link to human use of fossil fuels is forcing societies to shift towards the generation, distribution and use of renewable energies such as solar and wind. This allows individuals to generate their own energy using enough for their own needs and selling it on to existing energy grids. Moreover, manufacturers of ‘smart devices’ are enabling users of energy to more efficiently consume electricity and in so doing generating valuable data on usage which can be analyzed, re-packaged and sold to others.

Fifth, 3D printers are rapidly becoming mainstream technology. These printers now allow users to produce perfect facsimiles of 3D objects and have the potential revolutionize how we produce and consume to the extent that it may become possible in the future that we will no longer need to buy goods from factories but instead print them at home. 

The upshot of these transformations has both positive and negative consequences. On the negative side, underemployment and inequality will make it hard for individuals and families to make ends meet in the late capitalist economy with traditional employment opportunities becoming less and less available. A shrinking middle class and increasingly vicarious employment opportunities will force society to find new ways of consuming and creating value. Companies such as Über are benefitting from a large number of uncontracted employees working long hours in order to earn money. At the core, the sharing economy is a way of shifting risk from companies to workers, discouraging organized labor and helping capitalists reap huge profits with low fixed costs. In the specific case of Über, drivers have to pay for their own cars, repair and petrol, Über sets the rates drivers receive and terms of their labor, taking a hefty cut in the process

On the positive side, the sharing economy offers hope. With the emergence of tradable renewables and recycled goods produced on 3D printers, we may create opportunities for shared prosumption and self-sufficiency. Jeremy Rifkin, a prominent thinker and futurologist, outlined in a 2013 study how the emergence of three related ‘Internets’: communication, energy and distribution (dubbed the ‘Internet of Things’ (IoT)) raised the prospect of removing whole swathes of the economy from traditional market exchange.^[2] Thus while industries such as agriculture and food; healthcare and hospitality may still remain dependent on the separation of production and consumption, industries where the production can be shared at near zero incremental cost could form part of a new era that Rifkin called the “Collaborative Commons”. We may even see the emergence of neo-bartering where people exchange their own produced goods and services with each other – without the need for money.

The author of article is Dr. Yusaf H. Akbar, Associate Professor of Strategy, CEU Business School

[1] Picketty, T. (2014), Capital in Twenty-First Century Cambridge: Harvard University Press

[2] Rifkin, J. (2013), The Zero Marginal Cost Society London: Palgrave Macmillan