Why the Sharing Economy is Here to Stay

Posted by on April 9th, 2014

By: Haiz Oppenheimer

As of March 2014, Airbnb has hit 600,000 current listings of people who are offering to rent space in their homes to overnight guests for a fee. Airbnb is just one of a suite of bold startups that are making profits by changing the way people think about how they buy, sell, share, and trade products and services in their daily lives. Companies like Uber and Lyft use smartphone apps to connect car owners with people who are looking to pay for a ride. Craigslist and NeighborGoods have created markets for people to sell, swap, or loan their unused stuff with each other.

Airbnb, Uber, and NeighborGoods are part of the rise of what is being called the sharing economy. In the sharing economy, millions of people are cutting traditional hotels, taxis, and retail businesses out of the equation to earn income and save money by renting out their cars and homes, and sharing expensive items like power tools that they don’t need every day.

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At first glance, the sharing economy can seem like just the latest hip new province of the millennial generation and a bit alien to those of us who were raised in the twentieth century. Does it strike you as surprising that so many people are willing to catch a ride or stay the night with perfect strangers, or that people would rather share things they need than buy their own? While it may seem novel to us, from another perspective the sharing economy is about the oldest thing going.

Indigenous societies the world over have thrived for millennia in complex economies of sharing. If you think about it, it just makes sense. When you live in a community where you know everyone and can reasonably expect to keep seeing them day in and day out for the rest of your lives, why not share? If you loan me an important tool or share your day’s catch of fish, there is a strong incentive for me to return your plough in one piece, and share some of my food on a day when your catch is small. We are in it together, and in this kind of collaborative economy, wealth does not come down to what you personally own, but rather what resources your community can access together.

This kind of sharing already happens in our society too. We let the neighbors borrow the lawn mower, or stay on a friend’s couch when we travel out of town. These are people we know and trust, and sharing with them feels good. The challenge comes when we start trying to share with people we don’t know. In the twentieth century, with the rise of megacities and increasingly mobile populations, most people found themselves living outside of networks of trust, and it followed that to guarantee access to the resources you needed, it was important to own them. After all, how can you trust your neighbors enough to share necessities when you don’t really know them very well and may not live near each other for more than a few months?

At first glance, this basic challenge of building networks of trust in huge societies has only accelerated as populations have continued to migrate and grow. However, the equation begins to shift when you factor in the rise of online social networks. Key to the success of companies like Airbnb is that they are using technology to map people’s offerings to other people’s demand, and connecting them in a social context where people can feel safe placing trust in one another. In an indigenous community or in a close-knit suburban neighborhood, if people share generously with me and I fail to take care of what I borrow or I don’t share back, people are going to find out, and it is going to cost me relationships. Similarly, if I trash someone’s home I rent via Airbnb not only will Airbnb help them recover their losses, Airbnb may outright ban me from the site, and even if they do not, I will have a huge black mark on my reviews and people will not be likely to rent to me again.

What is making the emergence of the sharing economy possible at scale is that Airbnb and other companies create a social context in which reputation matters, even among people who do not personally know each other. Increasingly, we are asked all the time to rate individuals and companies that we do business with. As more and more people begin to rely on the feedback of strangers to determine where they will shop, who to stay with when they travel, even who they will go on a date with, our online reputation becomes more and more important.  Rachel Botsman has even argued that in the twenty-first century your “reputation capital” will become even more important to your daily life than your credit rating is today.

In any case, it is clear that the sharing economy has arrived and it is growing all the time. While is best known for companies like Airbnb and Uber, the sharing economy is not limited to revenue generating companies. Indeed, pioneers like CouchSurfing have been thriving for years without generating any cash revenue. Nor is the sharing economy limited to collaborative consumption. In the open data movement, organizations are unlocking collective creativity by sharing information to open source problem solving and innovation around challenges that affect us all.

As we move into a future where global population will spiral further and further into the unknown billions, it is likely that we may have to make do with fewer resources per person. The good news is that if we can reimagine how we access and experience wealth, we may find that we can cut our individual footprints and yet enrich our lives by owning less and sharing more. So next time you travel on vacation, catch a ride across town, or start shopping for a new leaf blower, consider looking to share rather than own. You might just meet a new friend along the way.

Sharing Economy and Impact Investors Share the Same Values; They Should Make Common Cause

Posted by on April 9th, 2014

While we hope to send out the Good Capitalist on a somewhat regular basis, to be honest, I usually put an issue together when I have something that has caught my attention that I feel our impact investing community needs to be aware of.

We focused a bit on the sharing economy at SOCAP13, but it has begun to gather speed in a way that the investment possibilities are growing. (To read more about these investment opportunities see Jeremiah Owyang’s great report ). My perspective here is a bit more philosophical because I believe the people doing impact investing and those working in the sharing economy have more in common than they imagine.

At SOCAP, we believe the millions of people involved in the sharing economy can be very valuable strangers for impact investors to begin to make common cause with. Enlisting them as retail investors or pooled in a targeted donor advised fund are two immediate ways that I think could be productive. Despite the flood of capital from huge sources like Google, and funds like Andreesen Horowitz, Benchmark and super angel Ron Conway’s ecosystem, there are people who are saying venture capital, which has to be, by nature, extractive, will not work in an economy where the buyers and sellers are empowered and own the means of production.

Janelle Orsi, a respected thinker, is suggesting T Corporations - a rebranding of cooperatives without 70’s hippy era cultural baggage. It is clear that the people should own these sharing economy businesses, rather than having them be vehicles for investors to extract extraordinary value. It is clear, that is, because this is the post-barista economy; the people providing the services are owners – of cars, apartments, etc. They will react even more drastically than the 9,500 crowdfunders of Oculus did over giving money to the company and seeing them sell a year or so later to Facebook. If people buy in to build the company, you can’t sell out, or the brand risk, the risk that they will take their cars, apartments or talents to another service, is huge. Keeping trust of your empowered providers of stuff and services is competitive advantage and brand equity in the sharing economy

These T Corporations will still need growth capital within this new social paradigm. Impact investors could have an edge in engaging with this group. And, as investors who know how to handle the trust of a community, impact investors are better suited, by their DNA, to do that than traditional Sand Hill VC’s who are all about extracting as much cash as they can as fast as they can.

As these T corporations arise, and they will arise because community/seller/service provider ownership is the best vehicle to encapsulate the economic value in these trust-dependent companies in the sharing economy, there will be opportunities for impact investors to attract the best entrepreneurs. And there will be, I predict, an opportunity for an impact investor led institutional venture fund that could invest in cooperatives. Impact investors could understand the goals of freedom and empowerment that are behind the sharing economy and engage well with those cooperatives as they arise, providing the network support, capacity and investment to help them reach their goals, working with the people powered networks of the sharing companies.

To deploy capital well here would require a lot of movement building, community organizing skills, engaging well between grass roots efforts and social media, and collective ownership of the brand. Impact investors POSSIBLY understand that landscape better than traditional investors. They have been investing alongside communities for decades.

Impact investors, as they become more culturally literate, could handle the power dynamic the sharing economy investees would want. They would want to be part of reengineering the economy, using growth capital to build what they want. It might be the people are in charge and the growth capital fuels the group’s goals. That’s one scenario, anyway.

The relationships that could occur between these two groups, would lead to a mutually satisfying alignment of values that could cause investment to go toward things impact investors want to get done. It would be a collaborative relationship between investor and investee that most institutional investors have not experienced. The possibility for mutual value creation between the people at the heart of the sharing economy, the peers, and impact investors is huge.

P.S. There is as lot more to be said about this, and a lot more thinking to be done, and we are kicking this conversation off in real time at the SHARE Conference in San Francisco May 13-14. Come be part of engaging with what could be the most valuable group of strangers the SOCAP team has brought you yet.

Can I SHARE something with you?

Posted by on March 31st, 2014

SOCAP works hard to produce conferences at the cutting edge to help you know where the good economy is going.

We are thrilled to announce that SOCAP, in cooperation with Peers, is producing a new event that will help you engage the sharing movement. The sharing economy is breaking news and has turned into a market phenomenon that will help impact investors and social entrepreneurs go mainstream.

This event, SHARE, is being held May 13 to 14 in San Francisco.

SHARE will bring together top industry and tech analysts, like Jeremiah Owyang (Crowd Companies), Lisa Gansky, (author of The Mesh), and April Rinne (Collaborative Lab), the expert on the new rules and laws needed to make the sharing economy work. Natalie Foster, who leads the 250,000-member Peers organization, is co-convening this event with SOCAP.

If you want to understand the investment opportunity, the risks and the way the sharing economy makes things easier for impact investors, you need to be at SHARE.

Kevin Jones
Co-founder & Convener
Social Capital Markets (SOCAP)

Report: Sharing is the New Buying, Winning in the Collaborative Economy

Posted by on March 4th, 2014

SAVE THE DATE: MAY 13 & 14

Posted by on February 19th, 2014