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Shared Economy: the three radical changes of the last 30 years

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The Shared Economy is one hot topic that all medias are covering massively those days. I recently got interviewed by a Belgian magazine for a special issue on the subject. On that occasion I gave them with my view on the evolution of a model that finds its roots in the local trading exchange systems dating back to the 1980’s.

LETS : the origins of the Shared Economy

Wikipedia will tell you that the idea to share time and materials locally is not new. Although the first experiment was reportedly done in 1930 in Austria (and forbidden in 1933), the real starting point of the Local Trading Exchange Systems (LETS) is thought to be in the 1980’s in Canada. Exchanges were based on the alternative currency called “Green Dollar”. The initiative ambitioned to help residents of British Columbia where, at that time, unemployment was rising.

Here’s how Wikipedia defines the aim of the LETS :

“LETS networks facilitate exchange between members by providing a directory of offers (and wants) and by allowing each a line of interest-free credit to each. Members IOUs are logged in a centralised accounting system which publishes a directory and balances visible to all members. In case of a default, the loss of value or units is absorbed equally by all members, which makes it a mutual credit exchange. For instance, a member may earn credit by doing childcare for one person and spend it later on carpentry with another person in the same network, or they may spend first and earn later.”

What you can notice is that this initiative is based on altruism, the desire to help others and the willingness to share time and material for the greater Good of the community.

Three things that have changed in today’s Shared Economy

What the 1980’s perspective shares with today’s perspective is the satisfaction of consumers’ needs by other individuals. Available time and material are still required to make the equation hold. Consumers are looking for other individuals to execute services (provided they have time in surplus) or to borrow underutilized objects.

We see three radical changes in the way the Shared Economy works today compared to how it was conceived in the 1980’s.

First, the currency used to trade those goods and services went from IOU (I Owe You) to real Euros/Dollars.

Second, the altruism part of the concept was replaced by the quest for profit. Individuals, put under pressure by the financial crisis of 2008, are looking for new ways to compensate for their loss in buying power. Monetizing underutilized assets and time they have in surplus is just one way, among others, to maintain revenues.

Third, the most obvious change regards the business model. In the original configuration there were only two parties : the giver and the receiver. Nowadays there is a third party : the intermediary that makes a living out of putting giver and received in contact. This changes everything and actually leads to a further fragmentation of the offer and further pressure put on the givers. The latter are now in competition at a global scale with other providers.

Conclusion

In an earlier article I already dealt with what I thought was a worrisome evolution of our Society. Fifty years ago, people stayed with the same company their whole life. Then it became evident that it became impossible to keep the same job for 40 years or so. What we are now heading towards is a Society where we’ll all be independent workers, chasing every short-term opportunity to make some money. We’ll lose long-term perspectives and the confidence to build something on the long run. Uncertainty will become the rule. In fact we went from a Win-Win situation initially where the giver and the receiver both enjoyed the LETS, to a Win-Win-Lose configuration where the receiver and the intermediary win, and the giver loses because of the competition effects induced by the intermediary.

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Author: Pierre-Nicolas Schwab

Dr. Pierre-Nicolas Schwab is the founder of IntoTheMinds. He specializes in e-commerce, retail and logistics. He is also a research fellow in the marketing department of the Free University of Brussels and acts as a coach for several startups and public organizations. He holds a PhD in Marketing, a MBA in Finance, and a MSc in Chemistry. He can be contacted by email, Linkedin or by phone (+32 486 42 79 42)

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