Will the sharing economy go down – because of people?
As Josie Cox argues, yes, the sharing economy will go down because essentially, people cannot be trusted. For me, this theory sounded a lot like a very pessimistic rage about humankind at first sight, but after thoroughly reading her article on the INDEPENDENT from July 2017, I have to admit that she has a point. Most sharing economy business models do have one dangerous, unpredictable factor: the human, who rarely does anything without maximizing his/her interest.
The article opens its argumentation with an example from China where a start-up offered umbrellas to people on the run (Cox, 2017). Sounds like a good idea to me: the sky opens up, rain starts pouring and you are in the middle of the city – of course without umbrella even though you have ten of them at home. Especially since living in Rotterdam this happened many times to me. However, this start-up was blown up by their unreliable customers: 300,000 of the company’s umbrellas actually went missing after only a few months in business (despite the customers paying an initial deposit for the umbrellas) (Cox, 2017). This, Cox argues, stems from only one thing the business overestimated: the overall trust and reliability of its customers (2017). Consumers, are inherently focussed on satisfying their needs, in this case arriving dry and without too much effort at their final destination. As soon as this need is satisfied, we forget about anything related – and throw the umbrellas into the trash or take it home and forget about it – because returning them would probably mean extra effort for us. (Cox, 2017)
After thinking about this, I actually came up with some other examples by myself: ever went to large American cities where these Lime e-scooters are offered? I’ve seen many of them lying damaged and twisted on the streets, in garbage tons or similar. Well, even think Europe or Germany: I’ve seen multiple sharing bikes being fished out of the Isaar in Munich.
So, I’d partly agree and say: humans, generally, shouldn’t be trusted blindly. The rise of the sharing economy cannot be attributed to any kind of reinvention of the collective good – in most cases it is just more convenient for consumers. I am not booking an AirBnB because I love to share a flat with a complete stranger while on vacation with my boyfriend – I am doing it because it is cheaper than a hotel with the same standard. This in fact, is not necessarily something particularly negative, I just think that it is a factor that is not enough accounted for in sharing economy models.
Any company whose business model relies on the belief that human will do anything else than profit maximization, should be aware of that. Their business is based on “a constant balancing act between greed and trust, value and cost, convenience and risk.” (Cox, 2017) What do you guys think?
Cox, J. (2019). The sharing economy is failing because people can’t be trusted. [online] The Independent. Available at: https://www.independent.co.uk/voices/uber-airbnb-sharing-economy-people-cant-be-trusted-a7867301.html [Accessed 7 Oct. 2019].
Hi Sophie,
interesting read!
When I was reading the title of your article it immediately caught my interest, as I always attributed a positive connotation towards the sharing economy. In a world with a fast growing economy, overly populated cities, and rising prices, a sharing economy often seems like the way to go. From personal experience I was always a beneficiary of the gig economy, reaping the benefits of e.g. renting vs. owning a car or being economic in staying in a more affordable Airbnb in comparison to renting a hotel room. I see your point in saying that the gig economy is very dependent on humans in delivering the quality it promises. However, I think regulations and state authorities need to be more proactive in giving guidelines as in many cases there is a lack of regulation to oversee the products and service. Hotels, for example are inspected to assure quality by regulations, whereas Airbnb apartments are not. For further reference I found an interesting article giving a balanced overview of the pros and cons of the sharing economy as of today. https://www.eu-startups.com/2019/02/the-ever-growing-sharing-economy-pros-and-cons/
Cheers,
Eva
Dear Eva, thanks for your perspective! I think you have a very good point regarding the role of authorities: for businesses like Airbnb or Uber, more thorough controls have to be implemented to ensure safety and certain quality standards. Cheers, Sophie
Hey Sophie,
I agree with you one of the biggest problems of the sharing economy is the human error but at the same time it is often the biggest strength.
You mention the example of AirBnB which i personally think is a good example of a working sharing economy. I think the key here is that we have to be made responsible. In the case of AirBnB you get a shitty rating and after some time no one wants you to stay at their apartement. However, you truly wish to keep using this cheaper option of a hotel so you stick to the social protocol of behaving good at someone’s apartement.
This is different with Lime e-scooters or umbrellas where there is no direct feedback and the people feel unwatched and tempted to release their inner rebel, because you are very right, people do have a strong tendency for this type of behaviour.
Personally, I think that the sharing economy works surprisingly well, but just if it is applied to the right goods/services and in an appropiate accountable way. Obviously there are exceptions who do not care about a social backlash but most of the time I perceive people to be very concerned about their public image. This is especially true if there are real consequences like not being able to use a service like AirBnB anymore and so on.
Hi Ruben, thanks for your comment! I think you are right: people need to be “monitored” to decrease the probability of misbehavior. Also, I like your point with the social platform. As I also said to Yana, I can imagine that there is a difference in behavior depending on whether you use a physical object while being “unwatched” or using BlaBlaCar were social behavior is immediately recognized and protocoled through negative feedback. So maybe Lime and others should think about incorporating such mechanisms as well in order to solve their problems. Cheers, Sophie
Hi Sophie,
I consider this in an interesting topic because I do believe that the great majority of people can be trusted. I think that a factor involved in the umbrella example is the low economic value of the umbrellas. I am not sure what the deposit for the umbrellas is but if the barrier of paying it is too low, the neglection of them is explainable. Furthermore, I believe AirBnB allready checks for the untrustworthiness of customers and suppliers since users of the platform write reviews about each other. This filters the good from the bad I suppose. Nevertheless, it is definetely a factor sharing platforms should take into account!
Kind regards,
Laura
Interesting read Sophie, and couldn’t agree more! I wrote one of my blog posts on the electric scooter (i.e. Lime, Bird, Scoot, etc.) wars in big US cities, and it highlights as well the ‘danger’ of humans in this regard. Yes, some sharing economy services are great for us to get around, increase the efficiency of commuting, and just make our lives easier in so many different areas. However, on the other side of the spectrum, we also see the challenges it brings. Take, for instance, Airbnb in Amsterdam. The government is nu trying to impose regulations that put a cap on houses that can operate on the Airbnb platform. Go a step further and look at Lime in the US. This ride-sharing start-up was founded in San Francisco and now you can’t find a single Lime scooter in the centre of San Francisco. This is not only because of the immense competition, but simply because the government has banned them completely, as a result of ‘human misbehaviour’.
As the desire for such services (Airbnb, Lime, Uber, etc.) grows, I’m excited and interested to see how this will develop in the (near) future in terms of human (mis)behaviour and what impact that has on the entire sharing economy. The general saying a lot of users go by is “Don’t be gentle, it’s a rental” , and I think we can clearly see that is being applied widely.. unfortunately.
Hi Tom, thanks for your input! I didn’t know that Lime was already banned from San Francisco. This is a very good example for governments taking actions to avoid negative consequences of the sharing economy in general and human misbehavior in specific. I see all the benefits of the sharing economy so I really hope that a better solution than just banning them can be found in the future. It would be very sad if everyone had to suffer from the misbehavior of rather a few.
Hi Sophie,
I really enjoyed reading your article. It is interesting to read the examples of the unsuccessful implementations of the sharing economy philosophy. In my opinion, the sharing economy does not necessarily need to collapse because of people’s mistrust. According to Cambridge Dictionary, sharing economy is ‘an economic system that is based on people sharing possessions and services, either for free or for payment, usually using the internet to organize this.’ It means, that as long as people ‘share’ but do not ‘sell’ or ‘rent’, the idea of sharing economy flourishes. AirBnB is an example of the failure of its initial idea (Baker (2014)), but not because the concept failed, but because AirBnB left the sharing economy market. As we know, AirBnB has successfully entered the market and became a key player in its own industry, however one cannot say anymore that is still the sharing economy. Initially, people used to share their free space (a room or a floor) to others for a fee. However, later on people started to rent the whole apartments only via Airbnb for short-term, excluding local society from the rental possibility, thus decreasing the supply of rental space in the cities, hence increasing costs of living (Barron et al. (2019)). That is when AirBnB lost its sharing spirit.
There are some examples of the real sharing economy concept. It is rarely mentioned, but the hitchhiking is the true sharing economy concept. People share their services for free or for small fee by giving a lift to random people, well-known BlaBlaCar. People share their seats with a fee with people who are also heading into the same direction as the driver. Within the lodging sector, couchsurfing is the real sharing economy boss. People do really share their free spaces without having a bad impact on the housing market and compared to AirBnB, people do share rather than rent.
Summing up, I think, that the sharing economy concept is really observable in the current society, built on people’s trust and I believe that we should be more optimistic looking into the future of sharing economy.
Best,
Yana
Dean Baker (2014) https://www.theguardian.com/commentisfree/2014/may/27/airbnb-uber-taxes-regulation
Barron et al. (2019) https://hbr.org/2019/04/research-when-airbnb-listings-in-a-city-increase-so-do-rent-prices
Dear Yana, thanks for this clear distinction of the sharing economy. I personally, wasn’t really aware of this shift that many initial sharing-companies went through. However, I agree that under this definition the perspective has to be adjusted. BlaBlaCar for me is also a very valid example of the sharing economy working out. But that might also be due to the personal contact during such a ride. I feel like people might be more prone to misbehavior when they simply get an object (e.g. the Lime scooter) and are not “monitored” while using it. With BlaBlaCar, your misbehavior would be observed immediately. Cheers, Sophie
Hi Sophie,
I believe you touched upon a highly relevant topic in our today’s economy with new business models increasingly having a shared product/service approach. Everyone knows that humans are far from what some people state as “perfect” or “error-free”. So, wouldn’t it be a the business’ fault to assume error-free behaviour in the first place? Cox put it nice that the umbrella business was overestimating the human factor in their business model. Referring to the comment from Ruben Busch, I agree that the success of a sharing business model really depends on the product and the way how interaction between business – product – consumer is designed. Since the sharing economy is yet to fully emerge, I am convinced that there will soon be standard procedures to eliminate the misbehaviour of humans. How we will make sure that treatment of products is appropriate (ratings, regulation, or tracking of consumers while using the product) is also dependent on the nature of the product.
Thanks for the bringing in this relevant perspective!
Cheers,
Sven
Hi Sven, thanks for your feedback! As mentioned before, I also believe that there is a lot more to come in the sharing economy as a whole. However, I also think that businesses should focus a lot more on factoring the human factor into their models, but again this depends also on the product or the experience.