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From the first day of preschool, we're taught that sharing is a virtue. If little Billy wants the toy you're playing with, you (grudgingly) let him borrow it. On the playground, we're scolded by parents and teachers to "Take turns!" Sharing, we learn, is the glue that holds society together. It breeds trust, generosity and compassion among neighbors, cities and citizens. And now, in a brilliant Internet-inspired twist, sharing has launched an economic revolution. The sharing economy is built on the idea of collaborative consumption. In the traditional capitalist economic model, goods are owned by individuals. If you want to be able to drive to the store or the airport, you need to buy a car. If you want to keep your lawn in control, you need to buy a weed whacker. That's called personal consumption. Basically, it's a monetized form of sharing. If you own a car, that has value - both to you and the guy who wants to borrow it to drive to Buffalo this weekend.
If your car sits idle, you are squandering its value. Why not earn some extra cash by "sharing" it? Starting in 2009 with the launch of the apartment-sharing Web site Airbnb, there has been an explosion of online companies enabling complete strangers to pay each other for the short-term use of goods or services: homes, cars, boats, dog sitters, office space, tools, grocery shoppers, tour guides and more. The sharing economy is attracting billions of dollars of venture capital, and old economy stalwarts - hotels, car rental companies and taxi drivers to name a few - are starting to sweat. Is a Facebook profile enough to trust someone with the keys to your apartment for the weekend? And don't you need a special license for that? What is the right balance between regulations that ensure public safety and the freedom to use your personal property as you want? Is the sharing economy really about virtuous collaboration, or is it just another Silicon Valley Internet bubble waiting to pop?
Let's start by tracing the evolution of the sharing economy, from preschool crayon-swapping to Airbnb. Every positive rating earns a buyer or seller a colored star. Even though eBay users go by anonymous names like CarJunkie3895, they earn trust through their ratings. 1999:Napster popularizes peer-to-peer file-sharing, technology that lets you share personal assets (MP3 files of music, in this case) with a connected "community" of anonymous Web users. The idea catches on with city-dwellers who don't want the hassle and expense of owning a car, but want a quick and easy way to rent one by the hour. 2004: Facebook builds on the successful model of MySpace, enabling users to create personal profiles, make "friends" with other users, post text, photos and videos, and comment on each other's posts. Mark Zuckerberg's brainchild dominates what's called the "social Web," online communities that mirror our real-world social interactions. 2007: Apple's iPhone represents a significant leap in smartphone technology, putting unprecedented power and connectivity in the palm of your hand.
2007: Netflix brings streaming video to the mainstream, popularizing the idea of "borrowing" vs. With always-connected mobile devices, they can stream songs from Spotify or Pandora for free, or watch TV and movies online wherever, whenever. The sharing economy represents one more step in this evolution of innovation. On sharing economy websites, trust is established using Facebook profiles and user-generated rating systems like the one popularized by eBay. That trust is reinforced by face-to-face meetings. Airbnb hosts, for example, are required to physically hand over their keys to renters. Of course, trust in your fellow man can only take you so far. These sharing companies add an extra layer of protection in these peer-to-peer exchanges by collecting and paying out the money for the service and providing a formal system for complaints. To get a better idea of the scope of the sharing economy, let's look at some of the major players in this emerging online marketplace. A study by two Harvard Business School economists found that African-American hosts on Airbnb charged about 12 percent less for properties than nonblack hosts, reflecting a lower demand.
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