What is the Sharing Economy?

Jon York

Nov 30, 2018
What City & State do you work in?
New York City
What is the Sharing Economy?
The sharing economy is also referred to as peer-to-peer or P2P. In every day usage it generally refers to that portion of our economy where people share things they own or services they can provide to buyers who find them via websites and apps.

Buyers and sellers are matched up through the company that developed the app and facilitates the service. These companies exercise varying degrees of control over the goods or services that are sold through their online platform.

Uber was one of the first (not the first, but close), but certainly the most well-known of the companies that best symbolize the sharing economy.

Why is the Sharing Economy Different?
People have been sharing things since the beginning of time. So, how is this anything new. The main reason it’s considered new and different is because of technology. The ability for people who have no other connection to each other to be able to instantly connect in a buy-sell transaction is what’s new. The internet is what makes this so new and different. And it’s not because people, are in the end, doing anything they didn’t do before, it’s because the internet has made it possible for anyone and everyone to participate in it. So, if you have something to sell or a service you can provide, you can find instant buyers thanks to the internet.

Why is it Called the Sharing Economy – when it’s really just Buying & Selling?
That’s the best question! It’s not clear why it’s called the sharing economy because in most cases, you’re right, it’s not sharing at all.

Uber is a great example. That new app-based transportation economy is called “ridesharing”. The only possible connection it has to sharing though is that you’re riding in the driver’s own car. If you take a taxi, usually a taxi company owns the actual car, not the driver. Although in many cases even in the taxi business, the drivers did actually own the cars.

But in the end, drivers aren’t really sharing their cars with riders. They’re really renting them out – or selling space and time in them for a price. That’s not sharing. When you share, you don’t charge anything!

People who have sought a more accurate name have taken to calling it “ride-hailing” because that is in fact much closer to what this really is. Riders use an app to hail a ride – and that’s what’s different. That’s what makes it different from the historical taxi business, the ability to hail a ride electronically through the internet with an app.

But for whatever reason, the name “sharing economy” has stuck, for now, and pretty much anything and everything that you can purchase from another individual through an app over the internet is called “sharing”. So, it looks like the word “sharing” is getting redefined!

How the Sharing Economy is Changing
When the so-called sharing economy started off it mainly involved transportation. People getting rides with other people – where the driver and his car were not part of any regulatory system or part of any traditional transportation/taxi company. Thanks to Uber and Lyft, this became so well-known that the term “sharing economy” is almost synonymous with it. But that is rapidly changing.

Today the “sharing” economy has spread like wildfire into all kinds of other industries, such as:
  • Co-working platofrms – like WeWork. Companies that provide shared and open office spaces for freelancers and entrepreneurs.
  • Peer-to-Peer lending platforms where individuals can lend money to other individuals at cheaper rates than those offered by banks and traditional loan companies.
  • Fashion Platforms – yes, fashion too! Like The RealReal, where people can sell or rent their clothes through an online app to other people.
  • Freelancing – now there are sites that specialize in pairing freelancers from all kinds of different fields with buyers. Freelancers that do software coding or web design or graphic design can now get work online through apps and websites.
  • Medical – yes, doctors too! And nurses as well. There are now apps that are attempting to figure out the best model for putting doctors, physician’s assistants and nurses together with patients for a cheaper and hopefully better form of care.
  • Handymen & Tasks – there are now platforms for pretty much any kind of work. Need somebody to run downtown to pick up a package for you? There’s an “sharing” app for that. Need someone to fix your leaky bathroom faucet? There’s a sharing app for that too.
  • Home sharing – thanks to companies like Airbnb and HomeAway, people can rent out rooms in other people’s homes as they would have rented hotel rooms in the past.
  • Car sharing – instead of driving your own car to earn an extra income, now you can rent it out through various sharing platforms – to other people who want to earn money by driving people around.
Problems with the sharing economy
By far and away the biggest problem in this new economic system is the treatment and compensation workers and service providers get. People in first-world countries are making third-world wages. And they’re not provided any benefits at all by the companies they work for. These companies are trying hard to keep them classified as independent contractors rather than employees because that technicality saves them a ton of money. (It’s much more expensive for companies to have employees than independent contractors).

Regulatory issues are a problem as well. People are now providing goods and services that have been traditionally regulated but now aren’t regulated at all. Taxis are heavily regulated for two primary reasons. One, to insure passenger safety and two, to insure there aren’t so many taxi drivers on the road that none of them can make a living. But with Uber and Lyft all those regulations have been thrown by the wayside. Riders have some protections, but drivers have none.

Issues with car transportation also affect the home rentals market. In the past many regulations were in place to protect hotel guests from unsafe conditions at hotels. But no regulations exist for that purpose when it comes to “home sharing” a la Airbnb. Guests are really on their own. If a host happens to have good safety equipment in their home, then you’re lucky. But if they don’t, there’s not much you can do about it and you probably won’t even know about it unless a problem crops up during your stay.

Consistent Quality of Service – this is another issue with the sharing economy. Since the companies classify their workers as independent contractors rather than employees, they, by law, must not exercise too much control over how their independent contractors perform their work. Therefore, customers are getting very inconsistent quality. One Uber ride may be great, with a great driver and a nice clean car and the next one may be terrible.

Same with home sharing. You might rent an Airbnb for your next vacation and have an absolutely awesome experience. You get a great home for a great price. But your next experience might not be so hot. You may pay a higher price, get a grouchy host who makes your whole stay miserable and whose home, while looking similar to the pictures, is just dirty and not well kept.