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The Sharing Economy is On the Rise

3p Contributor | Wednesday November 10th, 2010 | 0 Comments

By Eric Liu

Our current economy is based on consumerism and individual ownership of property.    Yet there are many who believe that an entirely different economy is on the rise that is based on a concept even older than money: sharing.

Scores of new businesses are leading the way and exploring how sharing can lower our environmental impact, increase community and happiness, and yes, generate revenues.  These companies have changed how people live, from car sharing to couch surfing.

There are four types of goods exchange possible:

  1. Selling:   This is the predominant force in our current economy.  Though this is mostly done through large corporations, eBay and many others like Etsy have shown how individual sellers can play a large part in the selling economy.
  2. Giving:  Charity is a well-known and growing part of the economy.  Freecycle is an example of how technology allows more people to take part in giving.
  3. Renting:  Though typically, the arena for small businesses, companies like Rentalic are hoping to make the rental of personal goods into a big industry.
  4. Swapping:  The bartering of items or services where no money changes hands has always existed but been mostly invisible to the economy.  However, the same tools that are making giving and renting possible peer to peer will make swapping of goods possible as well, putting a significant portion of the economy outside of the monetary system.

The last three are sharing transactions, where the benefit from goods and services are not enjoyed by a single person, rather used by several people over time.

A Perfect Storm:

Rachel Botsman, author of What’s Mine is Yours:  the rise of collaborative consumption, believes the time is ripe for a transformation into a sharing economy because of four main factors:

  1. Environmental awareness:  A majority of products sit unused a majority of the time.  Raised social awareness around environmental sustainability makes the efficient use of our resources more important.
  2. Economic Recession: the shock of the worldwide recession has caused our society to question the long-term viability of a consumption-driven economies.
  3. Resurgence of Communities:  Societies are looking for ways of finding new communities to replace the dissolution of traditional residential communities.  This is being expressed through the growth of farmers markets, cohousing, facebook, and meetup groups.
  4. Technology enablers: web-based tools are allowing people to build the necessary trust structures (eBay feedback) and monetary systems (Paypal API’s) to allow alternate economic structures to exist.

A New World Order

Despite the challenges ahead, sharing will eventually become a larger part of both our culture and communities and of the economy.  Sharing will be necessary to increase the efficiency of our resource utilization, lowering our individual footprint while still increasing our happiness.  We can reduce our ownership of goods while increasing our access to goods and services.  Sharing has also been shown to increase community and trust, something that also increases happiness.   Businesses must learn to adapt to this new economy, where corporations no longer depend on selling goods, but instead provide the tools that give people access to the goods and services they need.

See Sharable.net for more information about the sharing economy.

This post is the first in a series on the sharing economy. Click here to read part two.

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Eric Liu works in research and development at Palm, Inc. and writes for Changing the World and other minor thoughts.


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