Ep 102: Should We Embrace A Sharing Economy?

Arun Sundararajan is the author of The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism. He is a professor of business at the Stern School of Business at NYU. He is interested in researching how digital technology brings about change in our economy and he has published over 50 scientific papers and over 30 op-eds on subjects related to this research.

The sharing economy is a very hot topic at the moment. How will the sharing economy evolve? How will it impact traditional jobs? How many vendors will succeed in this type of economy? Although we are still in the very beginning stages of this type of economy, Arun Sundararajan's extensive research allows us to take a deeper look into what a sharing economy actually is and what the future of this space looks like.

When asked what the sharing economy actually is, Sundararajan says he believes that a sharing economy has at least 5 characteristics. One of the characteristics is that a sharing economy takes an activity that was once provided by a large institution and takes it to a marketplace type environment. One example of this is shown in hotels vs. Airbnb. Not long ago if you were traveling out of town most likely you would stay at a large hotel chain such as Hilton or Holiday Inn. Nowadays Airbnb has become extremely popular. So instead of staying in a large hotel chain owned by a large corporation, people are using the marketplace type platform of Airbnb to stay in other people's houses.

Another characteristic is that there is a blurring of lines between personal and professional. Companies like Uber and Airbnb are a great example of this. We are using these professional platforms for things that we used to only do on a personal level with friends or family. We are getting a ride from a stranger or staying in a room in a stranger's house.

Some of the other characteristics he touches on are that we are using assets more efficiently and therefore there is an increase in impact in capital of labor of assets, there has been a shift in who is providing the services, meaning a job that used to be done by a group of highly trained professionals is now done by a distributed group of people who may not have had any specialized training, and there is a blurring of lines between professional full time work and casual freelance work.

When talking about the sharing economy it is important to note the advances and innovations that have allowed us to get here. One of the important advances that is necessary for a sharing economy is a comfort with digital platforms. The fact that we have become so used to and dependent on digital platforms such as Ebay, Craigslist and Amazon has played into the growth of the sharing economy. We have become very comfortable with using technology in our everyday life.

Another innovation that had to come about before we could have a sharing economy is the GPS. There are several platforms such as Uber that would not work without GPS. Which leads into another innovation that is essential to a sharing economy, and that is the Smartphone. The Smartphone makes it so easy and convenient for people to connect to platforms such as Uber, Upwork, Airbnb, etc…

Another important aspect of our move towards a sharing economy was trust. Even 20 years ago we didn't have the trust needed to allow a sharing economy to succeed. Platforms such as Ebay and Craigslist eased us into this trust several years ago. People were able to purchase items to be sent to them and the trust needed was fairly limited. You needed to trust that they would send the products on time and in good condition, but there really wasn't much risk involved. Now, our trust level has gone up to the point where we are now allowing individuals to come into our home to paint or clean or we are putting ourselves into a stranger's car.

Even though it has taken a lot of innovation and forward moving to get where we are, Sundararajan feels that we are coming full circle back to the work model of the 18th century where transactions were peer to peer. The only difference is now we are putting platforms in between the individuals. The sharing economy is like a hybrid between the 18th century marketplace and the 20th century organization. Sundararajan hopes that people will see the move towards a sharing economy more as an opportunity then a threat. He feels that this shift in our economy will bring us back to genuine human contact in our everyday economic activities.

In the next few years Sundararajan would like to see the sharing economy expand rapidly. However, to have this happen successfully there are two things that he believes are important to focus on. One is funding for things such as paid vacation, insurance, and other benefits. At this time these things are funded by a company or the government in exchange for full time employment, however if we move towards the crowd based capitalism it will be important to find another way to fund these types of benefits. Another thing that is important is getting past the "regulatory conflict" as quickly as possible. He believes that if we can get past both of these hurdles, then the future of crowd capitalism and a sharing economy is promising.

What you will learn in this episode:

• What the sharing economy actually is
• What are some of the popular companies in this space
• Trends that are fueling and enabling the sharing economy to actually happen
• Get a look into the differences between the platforms being used
• How many vendors will succeed and thrive in this space?
• How big is the freelance economy?
• Legal issues that organizations deal with in a sharing economy
• Economics and the business impacts of all of this
• Where all of this is going in the future

Link From The Episode:

The Sharing Economy On Amazon.com

(Music by Ronald Jenkees)