E-Commerce

Writing the Rules of the Sharing Economy

NYU Professor Arun Sundararajan kicks off the Collaborative, Peer, and Sharing Economy Summit at NYU's Stern School of Business. (Photo:  Annabelle Ladao/PFNYC)

NYU Professor Arun Sundararajan kicks off the Collaborative, Peer, and Sharing Economy Summit at NYU’s Stern School of Business. (Photo: Annabelle Ladao/PFNYC)

The sharing economy has been called the next big disruptor. But is it disrupting enough? Fast enough? Broadly enough? The answers depend on whom you ask. As sharing expands into more industries and infiltrates more cities, it’s hard to keep up with the changes and understand whether they amount to progress.

“We should be looking forward and asking ourselves, ‘What kind of future do we want to create?’” said Airbnb Co-founder and CTO Nathan Blecharczyk at the Collaborative, Peer, and Sharing Economy Summit at New York University last week.

The summit sought to take a big-picture look at the much-hyped sharing economy, examining not only what it is, but also its effects, the platforms and institutions powering it, and the regulatory questions it’s raising. Tech leaders including Union Square Ventures’ Fred Wilson, Betaworks’ Andrew McLaughlin, and Personal Democracy Media’s Andrew Rasiej gathered with an audience of more than 300 technologists, academics, economists, and students.

In a conversation with summit creator and NYU Stern professor Arun Sundararajan, Blecharczyk explained how online communities like Airbnb are helping people gain more financial security. He said that Airbnb enables its hosts, most of whom earn below the median income, to supplement their salaries—not just a little, but to the tune of $768 million in 2014 in New York alone. And these people don’t need a college degree, Blecharczyk added; all they need is some spare space.

Beyond Airbnb

Peer-to-peer transport services like Lyft and Uber are also providing additional streams of income, allowing anyone with a car to compete with professional taxi drivers. In New York City, drivers who earn a for-hire driver’s license can join the market to use the Lyft or Uber app to find ride-seekers, said Meera Joshi, chair and CEO of the New York City Taxi and Limousine Commission. They get access to a client base of 1.5 million people in New York City who use for-hire transport.

Meanwhile, online marketplaces like Etsy connect makers with buyers, and online workplaces like oDesk match freelancers with clients. As the line between personal and professional continues to blur, these makers and freelancers range from hobbyists cashing in on their interests to full-time entrepreneurs earning annual salaries via peer-to-peer platforms.

What all this purportedly means is that anyone can be self-employed, doing whatever they want, whenever they want—a concept that might come as a blow to the corporate world. Many companies, though, are seeing the benefits of self employment. “Corporations do want to embrace the freelance economy,” said Jeffrey Wald, co-founder and COO of Work Market. Freelancing sites, said John Horton of oDesk, allow corporations the luxury of buying labor in small increments and tapping into a pool of worldwide experts.

Creating an infrastructure for sharing

For all its apparent ease and convenience, the sharing economy poses its fair share of hassles, stemming mostly from the need for regulation. And as startups and local governments alike struggle to understand how to adapt a web of rules built for another era, there are those who see the movement as a passing trend, not an economically viable shift.

Most summit speakers agreed that more collaboration is needed among regulators, platforms, and users. David Estrada, vice president of government relations at Lyft, stressed the importance of inclusiveness, asserting that all stakeholders, including the disruptors, should be able to come to the table to talk about their concerns.

If, as Natalie Foster, co-founder and executive director of the sharing economy organization Peers, said, “Regulation is frozen power,” then, “How do we create a system where we thaw it out, redistribute it, and keep it flowing?” asked “The Metropolitan Revolution” author Jennifer Bradley. Without a suitable infrastructure of regulation that protects all parties, many users and platforms are left vulnerable to risk. Summit speakers discussed how creating new divisions of responsibility might successfully shift some of these risks from the individuals and platforms to the government.

“We need a new understanding of what regulation is and who makes these regulations,” said Bradley, who is also a fellow at the Brookings Institution. “We expect our regulatory systems to be flexible, just like we don’t expect that we are still going to use the same operating system for our 2007 iPhones.”

Regulators, though, are notoriously slow to pass reforms. Some argued the need for speeding up the process, while others advised patience: we shouldn’t be too hasty about enacting new regulation before it’s been proven appropriate and effective for the sharing economy. “Before we regulate in anticipation of consequences, we should see what those consequences are,” said Josh Gold, political director of the New York Hotel and Motel Trades Union.

Time to self-regulate?

As Airbnb’s clash with regulators continues to dominate sharing economy headlines, some suggest platform leaders should self-regulate. Not only would self-regulation reduce friction, but it would also encourage more innovation and participation, proponents say.

“Think about gambling without a casino, think about stock trading without an exchange, think about real estate transactions without deeds, think about transactions without clearing houses. That is the world we’re heading into,” Fred Wilson of Union Square Ventures said in his closing talk, adding that when we reach a place where systems are “truly self-governing and self-regulating, we will not need regulators.” It’s a provocative assertion, but for now regulators are the reality, and most speakers agreed it’s better to work with them than against them. In the end, Airbnb seemed to be of the same opinion, having agreed to release the addresses of its New York City hosts to New York’s Attorney General.

Instead of resisting regulation, Foster said, sharing economy stakeholders should be thinking about what new policies will look like. Regulation is not bad, she added. It’s routine—and even necessary, others concurred.

It’s not just the economy, stupid

In New York City, regulators and peer-to-peer platforms have, for the most part, worked together successfully. Other cities have not fared so well. In Washington, DC, for example, Uber and other transport-sharing platforms have been met with staunch opposition.

According to Bradley, sometimes the most successful sharing economies take root in places that seem the least progressive, where the population is small and the regulatory infrastructure is simple. Conversely, big cities—as progressive as they might be—often struggle to attract sharing platforms because of their strict and complex regulations. Such cities should be updating their regulations, Sundararajan said, because cities that embrace the sharing economy will see more economic growth than cities that don’t.

But while the economic value of the sharing economy cannot be discounted, there’s a lot of other value to focus on, too. “This is not just economic change. This is social change,” said Clay Shirky, distinguished writer in residence at the NYU Journalism Institute. And social change comes from more than just buying and selling. Beyond Airbnb, Uber, and Etsy, the sharing economy also encompasses skills and resource-sharing platforms that are democratizing access to knowledge and information.

Also not to be overlooked are the growing concerns that the sharing economy is not living up to its benevolent moniker. Some believe it’s not sharing broadly enough, quickly enough. Sites like Airbnb, Uber, and Etsy allow everyone to be an entrepreneur—everyone who has an extra bedroom, car, and spare time, that is. “There’s an underlying question of privilege … that the government needs to focus on,” said Kyle Kimball, president of the New York City Economic Development Corporation.

It’s also important to consider how peer-to-peer platforms can extend to more causes. As part of disaster relief efforts, for example, Airbnb can provide emergency housing and Uber can offer emergency transportation. After personal financial crises, peers can lend to other peers. Some of these initiatives are already underway, but many others could be imagined. As Nick Grossman, general manager at Union Square Ventures, put it: sharing economy infrastructure should be part of civic infrastructure.

The sharing economy is already shaping our future, but we’re about to find out just how far it can go in solving the world’s problems.

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  • Anthony Allinson

    An interesting article. Like many I am drawn to the sharing economy it feels liberating and likely adds variety to our lives (where choice and variety are not the same thing). It challenges the big corporations and vested interests with their blandness, beigeness and profit motive.

    But then most of us work for those same corporations. As a result we get to be sick, old and have kids with some security. Perhaps that’s a deal we might not wish to throw away too hastily.

    Then we must remember that AirBnB is global and like many other web plays that kick off with a whiff of libertarianism, looks like pulling off the global winner takes all trick, yet again controlling a huge share of the entire global supply of some commodity, in this case accommodation.

    I don’t think that is really what we have in mind is it?

  • http://johnturmel.com John C. Turmel, B. Eng.

    Jct: Fascinating. Imagine how it would work if they set up a timebank account for everyone so people without cash could also trade accommodations. http://johnturmel.com/unilets for how we use DIY P2P Timedollars for our trades.