Sharing is already estimated to account for 1.3% of Britain's GDP, but can the industry continue to grow without verification, or is it only for risk takers who are happy to trust strangers?
When David McGaw, a business consultant in Oakland, CA, needs a cab, he taps in his location on a smartphone app and waits for another citizen, albeit one owning a car, to collect him.
A frightening prospect, you say? But the sharing economy is taking off, spawning companies for those willing to lend and borrow everything from mattresses to power tools. In fact, McGaw can choose between several ride-sharing companies with names like Sidecar, Lyft and Uber. And when he travels, he often stays in people's homes, using Airbnb. "Yes, initially I had some hesitation," he admits. "But with mutual evaluations happening after each Uber ride or Airbnb stay, there's greater accountability. Drivers know I'll be rating them, and I know they're rating me. It keeps everybody on their best behavior. Those who can't figure that out rapidly find they have fewer options."
Such sentiments explain the success of the sharing economy. In Britain, sharing now accounts for 1.3% of GDP, according to a report by The Sharing People (PDF). But what about all the people who like the idea of sharing but don't trust strangers? Without verification, is the industry's growth bound to stagnate?
"A few years ago, when I first started talking about this sector, I got a lot of sceptical looks: 'Really, you expect me to trust a stranger?'", says Rachel Botsman, author of What's Mine Is Yours: How Collaborative Consumption Is Changing The Way We Live. Nowadays, the reaction towards this space is fundamentally different across age groups. Sharing is not quite the new norm, but it's evolved beyond risk-taking Generation Y-ers into a pragmatic choice for all ages.
"What you tend to find is people enter the sharing economy through the door that has value and meaning to them", says Botsman. "For example, if owning a car doesn't make sense, then car sharing is a good option. Once they start to trust and 'get' one idea, they start looking for other similar ideas in different areas of their lives. But yes, trust is a crucial factor in mainstreaming the collaborative economy."
Regular commerce, too, used to be based on trust, notes Arun Sundararajan, a professor of information, operations and management sciences at New York University's Stern School of Business, who recently testified at the first hearing of the US Congress on the sharing economy. "You traded with people within your group. Today, we're replicating that on scale in the sharing economy. Over time we've built up a commercial infrastructure of licenses and so on which, for example, makes staying in a hotel a small risk. We're still in the early stages of that kind of infrastructure being developed for the sharing economy."
Sundararajan, for his part, had advanced the idea of a model of self-regulating organisations overseen by a government body. Indeed, if sharing companies' explosive growth continues, governments will no doubt want to add a regulatory touch.
For some, today's system of user evaluation through online profiles or social contacts is enough. To make sure you get a better score on your user profile, explains McGaw, you go the extra mile: "Uber drivers keep their cars exceptionally clean, and always offer bottled water, even on short rides. And when I stay in an Airbnb place, I become obsessive about cleaning every last thing, generally being more considerate than I would in a hotel room." Plus, he adds, "it's no longer me versus a corporation. It's me and another individual, teaming up to get something done."
According to Botsman, in order to grow, companies have to get three different types of trust right: trust in the idea itself, trust in the company and trust between the users. "A central 'official' reputation system would help build trust between the users, but it's a tricky thing to create at a time where each company is trying to build their user base and demonstrate value," she explains. "I think the solution will be some kind of independent platform or tool that makes it easy for individuals to aggregate all the different parts of their online identity and reputation, build it into some coherent true picture and take it with them wherever they go."
If such a system becomes reality, peer-to-peer-sharing companies based purely on users' evaluation of one another risk becoming marginalised.
Even with today's ad hoc verification system in place, Sundararajan predicts rapid growth for the sharing economy in the urban-taxi market: "I don't see any reason why it won't completely take over. Getting in a car with a stranger is no different from getting into a car with a cabbie."
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