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Sharing Economy : a new form of exploitation ?

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I got a call last week from the TV : they wanted to know more about the sharing economy for a forthcoming broadcast and discuss in particular what it could change in our Society.

After 1 hour of discussion I was more pessimistic than ever. I concluded for myself that the Sharing Economy was more of a threat to our model of Society than a real advantage.

What is today’s perspective on the sharing economy?

It is first of all very interesting to note that there are two words in “sharing economy”. The word “share” and the word “economy”.

First, let’s have a look at the definition of “to share”

to let someone else have or use a part of (something that belongs to you)

By definition, the “sharing economy” could therefore be a model of economy based on the act of “sharing”. The act of sharing becomes in this definition a way to “make money” out of the act of sharing. My definition of the “sharing economy” is therefore the following (and I know some people find it too extreme) : “the monetization of underutilized assets”. Please note the word “monetization” which conveys the idea of “making money”, something which is inherent to Capitalism.

What are the roots of the “sharing economy”

I guess the roots of it can be found in local initiatives aiming at exchanging goods and services between people living in the same area. “I borrow this underutilized screwdriver from you and you can borrow something from me“.

Local initiatives to exchange goods and services are called “Local Exchange Systems” (LES). There is a willingness in those LES to avoid the use of “real” money. This however forces people to exchange directly, without intermediary (an intermediary usually doesn’t work for free). There is no money involved and there is a local dimension. This exchange enables making bonds with other people (which is great in our indivisualistic Society) but at the same time you realize it’s limited to a certain area. The revolution that Internet brought was to connect people to each other virtually and to enable more of those exchanges. Suddenly people were for instance able to exchange houses for holiday and to discover new horizons for little money.

The negative effects of monetization

Many companies are nowadays trying to harness the power of “sharing”. You all have heard of It AirBNB, UberPOP, perhaps less of work-plateforms like Elance or Odesk.

In this business model there are three stakeholders : the customer, the provider, and the intermediary. The intermediary needs to make a living and takes a fee. The price of the service can be either defined by the intermediary (like in the case of UberPop) or defined by the provider (like in the case of Elance, ODesk or AirBNB). In the first case we see that providers often make little money : read for instance this article on the situation in The Netherlands where UberPop drivers actually earn less than the minimum wage. In the second case the situation is even worse. Provider compete against each other. This may be less obvious in the case of AirBNB where you are free to define the price per night but if no one “buys” from you you’ll have to lower the price tag. This is much obvious in the case of Elance and ODesk where freelancers compete against each other to land a job. Customers have a huge bargaining power and providers (freelance) are the victims of it.

Conclusion

We started with a definition of the “sharing economy” and what we see is that it has not much to do with underlying “altruism” that most of us may see in the word “sharing”. Actually, the monetization of the act of “sharing” led to even more fragmentation, less bonds between people. This culminates on plateform like Elance or Odesk in a negative spiral between providers, who destroy value to make a deal.

I’m sorry to say that today’s infatuation for the “Sharing Economy” actually hides some very negative consequence. To me, most forms taken by the sharing economy are charactristic of capitalism in its worst forms. The group culture that most countries have lost after world war II and the rise of consumerism, will not be found back with the sharing economy. It’s actually the contrary that will happen.

There are however amazing business models in the sharing economy that really contributes to the Greater Good. “Coworking” is an example of this where all stakeholders benefit from the system.

Credit : Romel via Flickr.com
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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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