The sharing economy and the commons: what you need to know

The sharing economy is in rude health. Global growth is expected to gallop along at 25% annually to 2025,¹ and even faster in China where the government sees it accounting for a whopping 20% of GDP by 2025.² 

The sharing movement now spreads far beyond the simple lending of assets within a community (think Uber or Airbnb), as businesses rather than citizens increasingly rent out all manner of goods under the banner of ‘sharing’, from bikes to umbrellas. Call it what you will, but “sharing” certainly sounds nicer.³

Glaring signals underpin confident growth forecasts and have made sharing-based businesses the largest category for VC investment globally.⁴ Sharing can be cheaper for consumers. Living spaces are becoming squashed by a rapidly growing, increasingly urbanised global population, leaving less room to own and more scope to share. Millennials want access, not ownership. The blossoming digital fabric of our lives makes sharing not just easier but the logical first choice. 

These and many other factors are clear, spurring the early flagbearers of the sharing phenomenon like Uber and Airbnb to amass warchests big enough to make them some of the largest start-ups ever. Put aside Uber’s seemingly limitless ability to burn cash,⁵ as well as the consistent stream of depressing news regarding its cultural practices,⁶ and you have a powerful business model forcing most executives to ask ‘what’s the Uber for our industry?’

For many organisations the answer will lie on the peripheries of a bubble chart somewhere: a small but fast growing market. There will likely be a proportional strategic response: maintain a watching brief; pay consultants to explore business opportunities further; partner with sharing businesses; start to hedge through investing in new players.

So far so good, but I would argue that there are two underlying factors that may have been missed in this analysis, which warrant looking again at the sharing economy through a broader lens. 

Firstly, the dovetailing of the sharing economy and environmentalism. Secondly, the role of the sharing economy as a step towards more fundamental change to the global economy.

The dovetailing of the sharing economy and environmentalism 

The sharing economy and environmentalism are inextricably linked because sharing can reduce per capita consumption. This is by no means guaranteed, as a burgeoning global middle class may still share their way to even higher consumption than their 20th century forbears.⁷ Consensus seems to fall the other way as the white knight of the sharing economy “eliminates waste like never before”. ⁸

Most businesses’ environmental goals are focussed on cleaning up old business models though, and not changing their model to one based on the concept of sharing. Obvious really when you consider how most boardrooms would respond to pitches that propose gambling on switching from a sales to a rental-based business model (“we should sell fewer products?!”)

Examples, particularly in China, show that these pitches should perhaps be taken more seriously, whether based on environmental aspirations or just economic sense. 

Coming back to that staggering number we started with: one fifth of Chinese GDP to be based on sharing business models by 2025. Peel back the covers and there’s a veritable Cambrian explosion of new businesses making anything and everything shareable. Gone is the maxim that sharing rests with higher value, under-utilised goods (think cars, rooms), Chinese consumers may now rent anything from bikes to phone chargers and basketballs.

Extinctions will follow. Perhaps the embryonic umbrella sharing market can’t overcome the fact everyone needs the service at the same time, rendering sharing unlikely.⁹

Like the Cambrian though, many sharing businesses will flourish. Sharing low-value goods may seem ridiculous to many people, particularly those comfortably accustomed to owning whatever they need. In reality though, the sharing economy is just the digital world catching up with the way things have always been: borrowing from the local community. Ask yourself, have you ever needed a football for the afternoon, a cooking dish for a dinner party, some chairs for a kid’s birthday? And if this could be easily and cheaply organised through sharing not buying wouldn’t you be open to it? Goldman Sachs research would concur, particularly for Millennials.¹⁰

Sharing is therefore already an important trend, but it also provides a platform for innovative businesses to take strides with their environmental agenda by reducing the consumption of all but the most day-to-day necessities (think mobile phones) and consumables. 

Sharing as the bridge to the commons

While sharing business models take their place as a mainstay across industries, they may also be a harbinger of a broader economic change: the re-emergence of the commons. 

The commons are assets that are mutually owned and managed by the community for everyone’s benefit. Think of common land for everyone to graze their sheep, or read all about the commons on Wikipedia,¹¹ itself a great example of the commons from the digital realm.

The idea is as old as humanity, and a lifetime’s work by Nobel-winner Elinor Ostrom highlights the efficacy of the commons to protect shared resources.

Economists and political scientists anticipate the re-emergence of the commons alongside, rather than replacing, businesses and the broader capitalist market.¹²

The sharing economy under its current guise is often not a true “commons”. Examples whereby companies own and rent goods obviously bear little resemblance, while even models like Uber and Airbnb are not really managed by the community for its common good but by a central entity for profit.

The concept of sharing however, especially when it starts to account for large proportions of national GDP, opens the door to commons-style organisations as people become used to engaging directly and even for the common good.

This may sound farfetched, but with the current frenzy around BitCoin and Initial Coin Offerings (ICOs) there are striking examples staring us in the face. In many of these blockchain-based developments there is an underlying desire by many participants to be involved in commons-style endeavours, whereby groups of people own and run their digital asset for the common good. In the case of BitCoin, a cheap currency outside central control. In the case of ICOs, ready access to easy capital for start-ups. Of course, these are still not perfect examples, not least given the many speculators sniffing hot money, criminals shifting funds, and underlying energy consumption equal to decent-sized economies doing little good to our global commons through heady carbon emissions.¹³

From a business perspective, it’s easy to dismiss the idea as too distant, but at the least the rise of the sharing economy raises pertinent questions about the commons: What role does our business play in the commons? What’s best for our customers, employees and shareholders?

Overall then, the booming sharing economy raises an economic imperative to act, as well as a means to deliver on environmental goals which is being missed today. It also raises questions about the rise of the commons, and what role a business plays in this future environment.

1. PWC, The sharing economy, April 2015
2. The New York Times, China’s Revealing Spin on the ‘Sharing Economy’, 20 November 2017
3. (https://en.m.wikipedia.org/wiki/Sharing_economy
4. Schroders, The sharing economy, July 2016
5. FT, Uber losses mount amid tough global competition 29 Nov 2017
6. The Guardian, Uber’s scandals, blunders and PR disasters: the full list, 27 June 2017
7. The Washington Post, The sharing economy helps fight climate change (but not as much as you think), 18 September 2017
8. World Economic Forum, How much is the sharing economy worth to GDP? 28 October 2016; HuffPost, Top Myths of the Sharing Economy, 13 January 2016
9. Quartz, The ridiculous sign China is in a sharing bubble: a crop of umbrella-sharing startups, 12 July 2017
10. Business Insider, Goldman Sachs says millennials didn’t inherit a spending habit companies have capitalized on for years, 12 January 2017; Goldman Sachs Asset Management, Investing in the Millennial Effect, September 2016
11. https://en.m.wikipedia.org/wiki/Commons
12. Kate Raworth, Doughnut Economics: Seven ways to think like a 21st century economist, 2017
13. https://digiconomist.net/bitcoin-energy-consumption