Picking Up the Slack: The Sharing Economy and the Inefficiencies of Modern Life

This whole sharing thing started out as a kind of philosophical construct. We can take some actions that dont cost us much and that make the world a better place.

So, yeah, cool. When I have the time and the inclination, I'll indulge, says the average harried urbanite. 

But as time has gone on and the popularity of various sharing programs at scale has become apparent, a significant economic truth has emerged: we have way too much of certain kinds of stuff like cars and extra rooms, and way too little of certain other assets like time and money. And therein lies a tale.

The US and Europe have been living off past glories for a generation now. Big homes, big cars, expensive tastes, all underwritten by the rents from an economy that, in the new world order, no longer commands the margins it once did. Jobs and incomes and household wealth have been downsized, but the physical imprint of those previous triumphs is hard to re-engineer. The result is that there is a lot of slack in the system, which creates inefficiencies that society is ill-equipped to support.

Enter the notion of sharing: bikes, cars, homes, food, whatever. It's a way of making life a tad more affordable and it is an intelligent response to the mismatch between assets and utility. The challenge, as the following article explains, is that all this sharing takes a lot of effort. This is not necessarily a bad thing given how many people are un-or-underemployed, but there are concerns that all this frenetic personal marketing may be reinforcing that trend. In the interim, however, society appears to have hit upon a means by which the transition from where we have come to wherever it is we may be going - and one senses that direction is relentlessly smaller and less obtrusive - can be managed effectively and maybe even responsibly. JL

James Surowiecki reports in The New Yorker:

There are a lot of slack resources in the economy. Assets sit idle—the average car is driven just an hour a day—and workers have time and skills that go unused. If you can connect the people who have the assets to people who are willing to pay to rent them, you reduce waste and end up with a more efficient system.

For most of the past century, Americans have been the world’s greatest consumers. And usually consumption has meant ownership: just before the Great Recession, the average American household owned 2.28 cars, and had more television sets than people. But these days a host of new companies are trying to disrupt the paradigm—offering the benefits of consuming without the costs of ownership. Ride-sharing companies such as Lyft, Sidecar, and, in some cities, UberX, own no cars themselves. Instead, they sign up ordinary car owners: when you need a ride, you can use their apps to find a driver near you and ask to be picked up. Many other companies are trying to cash in on what’s often called “the sharing economy.” Airbnb now features more than three hundred thousand listings from people making their apartments and homes available for short-term rentals. RelayRides and Getaround let you rent cars from their owners (rather than from Hertz or Avis). Boatbound offers boat rentals, Desktime office space, ParkatmyHouse parking spaces. SnapGoods makes it possible for people to borrow consumer goods from other people in their neighborhood or social network. It may not be too long before you’re able to pay to sit in a stranger’s living room and “share” his home theatre.

Just a couple of weeks ago, Uber (which also runs services allowing you to book livery cars and cabs) disclosed that it had raised more than a quarter of a billion dollars in venture-capital funding, most of it from Google. The flood of new money into all these new businesses feels like a mini-bubble in the making. But beneath all the hype is a sensible idea.

In the past, this was hard to pull off, because the transaction costs involved in borrowing and lending were high: there was no easy way to find someone who had what you were looking for and no easy way to know if someone was trustworthy. So if you borrowed a lawnmower it was typically from your neighbor. But digital technology has made it much easier for buyers and sellers to find each other quickly, and to evaluate the people they’re trading with. The effect has been to make sharing a much more plausible business model. “We now have hundreds of millions of consumers who are carrying in their pockets powerful computers that are always connected to high-speed networks,” Arun Sundararajan, a professor at N.Y.U.’s Stern School of Business and an expert on the sharing economy, told me. “That makes it possible for people to rethink the way they consume.”
Sharing has also had a boost from the weak economy. People are leery of making big up-front purchases, and many have had to scramble for ways to monetize their time and their assets. More important, there are signs that the ties between consumption and ownership are loosening, particularly among younger people. Studies suggest that Millennials are less interested in owning cars than previous generations have been, and the success of sites such as Netflix and Spotify show that, at least with some goods, renting can trump ownership. For one thing, people get access to a much wider range of products than they could ever own. “There’s a mind-set that consumers are doing this just to save money,” Sundararajan said. “But I think that what’s really compelling about the sharing economy is the variety and expansion of choices that it offers. Instead of being tied to owning one car, I can drive twenty different ones. So I expect this will expand consumption, rather than shrink it.” Before that happens, though, there are serious hurdles that the sharing economy has to get over. The most obvious of these is regulation. Cities typically have elaborate rules for cabs and limos that control drivers, vehicles, fares, and so on. These rules in part reflect the desire of vested interests (like cab companies) to protect their businesses and in part consumer concerns about safety and liability. Sharing companies circumvent some of those rules, in effect arguing that, if you choose to pay someone to give you a ride to the airport—or rent you an apartment—the state shouldn’t stop you. That’s an appealing position, but the companies are actually piggybacking on the trust that consumers feel in what is typically a highly regulated economy. If these companies become more established, they’ll have to reach some kind of accommodation with regulators, perhaps along the lines of rules that California’s Public Utilities Commission recently proposed, which would let Sidecar, Lyft, and Uber operate if they implement certain safety and driver regulations.
It isn’t just companies and regulators who will have to be flexible, though. Workers will, too, since the sharing economy requires people to function as micro-entrepreneurs. Uber is just a broker, and the drivers aren’t anyone’s employees, any more than the landlords in Airbnb’s system are. They are all independent contractors, working for themselves and giving the companies a cut of the action. This has certain attractions: no boss, the ability to set your own hours, control over working conditions. It also means no benefits, no steady paycheck, and the need to always be hustling; in that sense, it fits all too well with the free-agent nation we’re increasingly becoming. Sharing, it turns out, is often a hell of a lot of work. ♦