Monthly Archives: November 2014

The Sharing Economy

About a month ago, I was lucky enough to attend the launch of a new report into the sharing economy, “Design for Sharing” by Ann Light and Clodagh Miskelly (which I’ve now read). It was a thought provoking talk and report, and my view of the subject has been broadened, so this blog post is the result – if you’re interested in learning more you can download the report at http://designforsharing.com/about/.

The Sharing Economy is something that I am interested in, and I had listened to quite a few interviews and podcasts on companies like TaskRabbit, airbnb and Uber, which are often described as being exemplars of the sharing economy.

The report calls us to think about activities that are being shared or could be shared, in a broader way than many (including me) had been thinking.  This makes sense to me, and I propose assessing activities through three key questions:

  • Does it improve resource utilisation for the two parties?
    Are the parties, together, better off. For example, if one person doesn’t need to buy a vehicle, or another can sell something, I generally consider that a good thing. I believe that TaskRabbit, AirBnB and Uber all fit into this category, but then so does my job, me buying vegetables from the supermarket, or the vast majority of things that go on in the economy. On the other hand, if I lend you a book that you then feel obliged to read, that may not improve resource utilisation.
  • What is the wider impact (i.e. externalities)?
    When assessing an activity, our natural inclination is to think short term, tangible costs/benefits, and to focus on the main parties, but we do need to consider wider costs and benefits – whether to ourselves in the future or to society and the planet, for example, sharing goods may reduce environmental burden of producing new ones.I generally think I make an effort to keep wider impacts in mind, but I clearly hadn’t done enough as this was the area where I learned the most from the talk and report. Appreciating the ways that relationships and trust and communities can be affected by the type of activities should have been obvious to me, but wasn’t. We also need to keep in mind issues of access and fairness – if we create a marketplace that some people can’t access, that is going to create wider problems in our society.
  • Do both parties benefit?
    Assuming the activity is voluntary (for example, I wouldn’t want to promote theft) I’d look at if both parties intended to be tangibly better off. Market economics would tell us that we’d obviously want this to be the case, but thinking about it, often this forms the distinction between sharing/gifting and renting/selling, and I know some people believe that market transactions are inherently damaging. I’m inclined not to view one approach being better, but can see that it could well affect wider impact.

Now we have those questions, we can think about how best to structure activities to optimise resource allocation and promote positive wider impact. I don’t believe there is a one-size-fits-all approach, and invariably there will be a combination of market-based and not-for-profit approaches.

The report made a particularly valid point that markets look after themselves, and when setting up economics, we are often too quick to jump to a market system. We would do well to consciously remind ourselves of opportunities for sharing/gifting, as these are less likely to happen without conscious effort and drive, or what the authors call ‘Designing for Sharing’.

 
An aside: technology
Sharing has been going on forever, but technology obviously does offer opportunities to identify opportunities for sharing (or other forms of resource optimisation), or for reducing risk. While these can enable more sharing to occur, this can reduce the wider benefit. For example, by anonymising sharing and removing the need for trust to be developed, you are likely to reduce the relationship/community development benefits.

Motivation and capitalism

People’s Motivation

I believe that people, naturally and deep down, want to make the world a better place.  I don’t think philosophy (let alone economics) can prove that is the right goal, but I do believe it is a good one (whether justified on evolutionary, religious or other grounds).

Trying to make the world a better place is definitely easier said than done.  I believe the biggest challenge is knowledge: knowing how to achieve that goal.  Much of what is wrong in the world can be explained by people taking shortcuts, failing to fully consider the impact of their actions.

For example, it is a lot easier to think about the impact of your actions on your company or family or self, than on the whole world.  That could be blamed on selfishness, but I prefer to believe that these people, if they did look more broadly, would not take actions that they knew to make the world worse.

I often don’t know how to make the world better, and am often guilty of making simplifying assumptions.  While there is a lot of merit in trying to improve my understanding of the world, I believe their is as much to be achieved by acknowledging my assumptions, and where my conclusions are limited (hopefully this comes across in the blog!).

(I’m sure by this point some of you will be thinking, “Isn’t that all obvious?” and some of you be thinking, “how could Guy be so stupid and naive?” – that’s the joy of having a diverse readership!)

 What it means for capitalism

My beliefs about people wanting to make the world better may seem completely at odds with capitalism.  Surely if people were motivated by global and societal improvement, they wouldn’t be motivated by incentives like money?  While I definitely believe it is right to do what makes the world best irrespective of how it changes your personal position, I do think it is right to consider incentives, for three reasons:

  • Given the complexity of our world, and the amount of information we would need to consider in order to decide what made the world better, capitalism operates as a remarkably effective signalling mechanism to direct people to what needs doing.  It isn’t perfect, and we always be ready to not ‘follow the money’, but there is merit in improving the way it signals what society really values.
  • While I believe we are motivated by making the world better, this goal is likely to be overwhelmed if conflicting incentives become too strong.  For example, if you can’t feed yourself or your family except through crime, I’m not going to be shocked if that’s the action you take.
  • While it is nice to think of everyone just doing the right thing without caring about themselves, I care about how money is distributed from a justice perspective (I believe a more just world tends to be a better one).  I don’t have an answer as to what a just distribution would be, but I don’t believe a world in which you are entitled to whatever you can grab in some giant game of Hungry Hippos is a just or a better world.