Reputation Economics: Why the Sharing Industry Needs to Start Sharing Its Data

We are asked to take a lot on faith these days even as the forces that do so much to manage our lives appear determined to abuse that trust in an effort to squeeze as much profit as they can out of our desire to trade information for service.

Despite this allegiant asymmetry, our belief in the financial and moral benefits of the sharing economy remains relatively unshaken. Existing enterprises are thriving and new ones continue to emerge.

The one barrier yet to be crossed, however, is the sharing of data in order to strengthen the industry and the philosophical construct on which it is built. There are, of course, sound strategic reasons for this hesitancy. The fundamental sense that information is power, especially in another one of our economies - the information one, to be precise - means that enterprises, their founders and their funders are loathe to give too
much data away for fear that strategic advantage will disappear along with the insights the data reveal.

But the more those committed to sharing actually share data about the underlying drivers of performance, the more likely it is that the industry will grow and achieve truly global scale. There are risks: some competitive advantage may be sacrificed in the short term, but experience in tech-based enterprises generally suggests that the enhanced growth prospects in the long term will more than make up for it. A radical thought, perhaps, but for an industry based on a radical concept. JL

Jason Tanz reports in Wired:

As the sharing economy spreads across so many other markets — from car rides to house cleaning — other companies could benefit from this storehouse of data. That prospect has led some to predict the dawn of a fully reputation-based economy

To hear cofounder and CTO Nate Blecharczyk tell it, Airbnb built its data empire almost by accident.
In its early days, the company was little more than a second-generation Craigslist, connecting homeowners and renters and leaving them to work out the finer points of the stay. But, says Blecharczyk, the limitations of this approach became clear when cofounder Brian Chesky used the service to book a room while visiting the SXSW conference in 2008.
Chesky’s host picked him up at the Austin airport, drove him to his house, and served him dinner. He set up an airbed with a chocolate on the pillow. “Real nice touches,” Blecharczyk says. But then things changed. “At the end of the night, the host asked Brian for the money and he hadn’t gone to the ATM. He said: ‘Can I get it to you tomorrow?’ The host said: ‘No problem.’ The next night the host asked again: ‘Brian were you able to get the money?’ And Brian had forgotten. And suddenly the trust evaporated.”
Today, Airbnb’s hosts and guests don’t have to deal with that unpleasantness, because Airbnb handles all the payments. The company also handles all the communication between hosts and guests, tracks every review, helps photograph the properties, and integrates all that activity with users’ Facebook accounts. Blecharczyk says each one of these steps was taken as a way of improving the customer experience. But this also means that Airbnb collects a ton of data about its users, and as I write in WIRED’s May cover story, the company can mine this data to boost trust in still more ways.

This means that Airbnb collects a ton of data about its users, and the company can mine this data to boost trust in still more ways.

Every reservation is analyzed by Airbnb’s algorithm, which combs it for red flags — new listings that are signing up reservations at a suspicious clip; messages that include the term Western Union — and assigns it a trust score. If the trust score is too low, someone from Airbnb’s trust and safety team will follow up to ensure that everything is on the level. And of course, these efforts are supplemented by Airbnb’s user reviews and comments, which can also steer unsuspecting renters away from dicey properties.
All this seems to work well enough for Airbnb. But as the sharing economy spreads across so many other markets — from car rides to house cleaning — other companies could benefit from this storehouse of data as well. After all, if someone wanted to sign up as a Lyft driver, it would be good to know that they had been banned from Airbnb. That prospect has led some to predict the dawn of a fully reputation-based economy — one in which your behavior and track record follows you from service to service, a kind of FICO score for the sharing economy that would let both platforms and individuals know how trustworthy you are based on your history and activity.

Author Rachel Botsman, one of the preeminent writers on the sharing economy, shared this vision in a 2012 TEDGlobal talk. “It’s only a matter of time before we’ll be able to perform a Facebook- or Google-like search and see a complete picture of someone’s behaviors in different contexts over time,” she said. “I envision a realtime stream of who has trusted you, when, where and why, your reliability on TaskRabbit, your cleanliness as a guest on Airbnb, the knowledge that you display on Quora. They’ll all live together in one place, and this will live in some kind of reputation dashboard that will paint a picture of your reputation capital.” Over the course of the last couple of years, various startups have attempted to provide something like this. But none have ever gotten off the ground, primarily because the companies that have the most data don’t want to release it, precisely because they don’t want to empower any potential competitors. Ironically enough, when it comes to data, the most successful sharing-economy companies aren’t so great at sharing. “We’re in an early and competitive stage,” says Monroe Labouisse, Airbnb’s director of customer service. “That asset — the trust, the data, the reputations that people are building — is hugely valuable. So I’m not sure why a company would give that up.”
From a business perspective, Labouisse is certainly correct. But that proprietary attitude could be a real hindrance to the growth of the sharing economy writ large. Customers may trust any transaction that takes place over Airbnb, but won’t have an independent way of trusting any of the individuals outside of that context. That’s fine if Airbnb wants to act as a decentralized hotel chain. But if it really wants to see the emergence of a true sharing economy — one in which various companies provide different kinds of services across a wide variety of platforms — it’s going to have to learn to share, too.