The Sharing Economy is commonly referred to as collaborative consumption – the core of which is people renting things from each other. The Sharing Economy’s value is driven by the role of technology in driving down transaction costs to facilitate peer-to-peer transactions.
But, not unlike everything else on the internet, is it possible that we are getting a little carried away with trying to fit everything into this growing marketplace? Is it possible that many of the “sharing economy” companies are using the label without focusing on the sharing? Without caring, the sharing economy can lose its value to society.
Let’s take a really simple example. Assume there is a town with 100 taxi drivers each making $50,000 per year. Now, a ride sharing company, call it Goober, comes to town with a “sharing economy” app. Goober drives prices down 20% for consumers, decreasing the total transportation market from $5 million to $4 million. Instead of 100 drivers, they employ 200 drivers. Better prices for consumers, and more people working. But…
Goober then takes 25% of the existing $4 million market as a fee and 200 drivers have to share the remaining $3 million market, leaving the drivers with $15,000 each and all of the taxi drivers out of work. The owner of Goober is doing great; he just got paid $1 million. So, in effect, the market was reduced and another $1 million was taken from middle income Americans, the existing taxi drivers, and transferred to a single, very wealthy individual.
Let’s say Goober gets greedy and starts using self-driving cars, violating labor rules and pushing additional costs and fees onto the drivers. Now, the owner of Goober gets even more wealth by taking more of the remaining $4 million market and leaving everyone else with even less.
The Sharing Economy doesn’t have to work this way. However, without caring, the sharing economy has the potential to be extremely dangerous. “As long as greed is stronger than compassion, there will always be suffering.” – Rusty Eric Quote.
Of course, the Sharing Economy has the power to be a wonderful tool to bring down costs for consumers and include more people in some sort of workforce. But, we can not let the “sharing economy” be used to transfer wealth from ordinary Americans to wealthy ones. We have to hold participants in the Sharing Economy accountable. One way to do that is to reward those companies that share the equity and ownership of their companies with a broader segment of society. That is a true Sharing Economy. And, that is a Caring Economy!