The story was originally published on Pandeia.
The internet and its technologies have opened up endless possibilities and changed profoundly the way we structure our lives. The recent and ever growing phenomenon of the sharing economy has generated new online platforms like Airbnb, BlaBlaCar and Jobbatical, just to name a few. However, sharing has always been part of our social life.
Think about all those cookies you shared with friends at school or the many lighters you have used from strangers not to give up smoking that one last cigarette. According to Sharing Economy expert April Rinne "own less, embrace more" represents the slogan of the future.
The potential of the 'sharing economy' might be enormous with benefits for all classes, if it is integrated within the legal market. Policy makers are warned: play it smart and take it to the next level.
Internet Week Denmark melting pot for digital future
The second edition of the Internet Week Denmark in Aarhus from June 1 – 5, 2015 has been an intense journey into the Danish internet industry and beyond. The event is based on the premise of sharing knowledge on the most diverse topics in online business and innovation. Speakers from within and outside Denmark presented their companies, products and viewpoints.
The many workshops, presentations and follow-up networking revealed an interesting occasion in which digital advancement and hi-tech distribution are promoted.
One of the main speakers at the event was April Rinne, a Harvard Law School graduate and strategic adviser who explained that the sharing economy is tackling the "waste of time, money and enjoyment" in our ways of living. Rinne explained that people pursue to own everything but end up using their belongings poorly once they purchase them. "An average car is not used 23 hours a day," she says.
So why are we not making better use of the things we own?
Resource under-utilization is one of the principles the sharing economy is based upon. Sharing what we possess might have huge social advantages, states Rinne. The internet has taken over old functions and the connections we make online form new ways of access to share more means.
Technological innovations facilitated the decentralisation of services, establishing a direct contact between partners while avoiding third party revenues. In the sharing economy we can become providers, producers and consumers simultaneously.
Still, in order to use our assets more efficiently and participate in online platforms we need to be trusted. Working with people online can sometimes be a risky venture. Building up a solid reputation through social media networks is therefore a necessary condition to develop your personal business.
How Sharing Economy could affect every aspect of our life, if we want it to…
At first sight, the sharing economy gives the impression of an anti-capitalist movement that prioritises re-use and encourages moderation in ownership. Yet, when put into perspective, the system offers a wide range of options characterised by flexibility and free choice.
Although the sharing economy disapproves of capital accumulation and overconsumption, making better use of your belongings benefits everyone, even the super-rich.
Using the example given by Rinne, the maintenance of a luxurious yacht is very demanding compared to the time period we actually enjoy the item. Renting it out on different happenings reduces its overall cost.
Furthermore, Rinne stresses that the sharing economy touches almost every aspect of our life and that it is just a matter of uniting with a community of people that have the same interests and are willing to share them. From accommodation to transportation, from job opportunities to skill sharing platforms, everything is possible to combine.
For young people this could signify a transformation and a new way of bread-earning that was unavailable to the previous generations.
In fact, the phenomenon of the sharing economy could entail the characteristic of our time in which more value is given to experience than materialistic property.
As one of the co-founders of Airbnb, Brian Chesky, told the New York Times: "There used to be a romanticism about ownership, because it meant you were free, you were empowered. I think now, for the younger generation, ownership is viewed as a burden.
"Young people will only want to own what they want responsibility for. And a lot of people my age don’t want responsibility for a car and a house and to have a lot of stuff everywhere."
However, this does not mean that from now on we will live in an anti-materialistic world. The sharing economy only exposes a change of mindset that is occurring in modern society and growing on a global scale. Renting the same house your entire life would not be the smartest decision and some things are meant to be bought eventually.
When looking at the origins of the sharing industry, it is remarkable that big companies like Airbnb and Uber were created during the financial crisis. It seems like people succeed in reinventing themselves when most needed. In this way, money is saved and they do not have to give up the things they like.
It is also important to distinguish the sharing business from platforms as Ebay. Ebay is basically an online second-hand store that has been in circulation for a while. Sharing companies have an inherently different approach since they do not sell used products but literally offer a shared experience with communal devices.
This form of collaborative consumption embodies a cooperation between direct partners to achieve full (or nearly full) utilization of resources by taking advantage of each other’s possessions. The noble idea behind the system is to create healthier and sustainable lives by introducing a shift in mentality. In this ideal scenario, reputation and not money would be the new deal breaker.
One of the most popular and wide-spread businesses in the sharing industry Airbnb. After its launch in 2008, it is now one of the most rewarding companies of the Silicon Valley. Created during the peak of the global crisis, Airbnb is highly used, especially among the middle class. According to Rinne, the company introduced three revolutionary assets on the market. First of all, it increased the number of tourists by making accommodations cheaper while remaining pleasant.
Renting through Airbnb also enhances a more local experience and makes tourists feel more integrated. In addition, it has brought tourism to places where there was none before and tends to discourage mass tourism.
Of course, this phenomenon has not left Denmark untouched and also the city of Aarhus has become a booming business on Airbnb. A quick search on the Airbnb website reveals dozens of pages of accommodation options in the Aarhus area only. For a city like Ribe which has only 8,000 inhabitants, 163 available housing offers seems quite a high amount too.
One of the many Airbnb hosts in Aarhus, Thomas, affirms that the greatest bit of renting out your home lies in saving up a significant amount of money for own travel plans. In particular, most people start using Airbnb as guests and then become hosts themselves when they perceive the economic advantages combined with the safety and security options Airbnb is providing.
Still, exceptions exist. A couple of weeks ago a family in Calgary saw their entire house destroyed by Airbnb guests. Then again, Airbnb’s assurance is covering all costs to renovate the family’s house.
Meanwhile, Thomas does not use hotel accommodation when travelling and is happy this sharing experience made him familiar with a lot of different nationalities.
Raul from South America is an experienced Airbnb user that is currently living in Aarhus. His journeys in Copenhagen through Airbnb have been good so far. One of the most attractive and efficient tools of the Airbnb website seems to be the possibility to rank housing offers according to neighborhood which makes the process easier.
Moreover, Raul is convinced that Airbnb filled a gap in the accommodation market. "I guess for a long time hotels have been unable to develop a model for those travelers who want to keep an eye on the budget." However, although Raul considers Airbnb a threat to the hotel industry, he thinks that for wealthy people hotels will always be the main option due to overall comfort.
Similarly, Clara is an Airbnb user from Southern Europe and rented accommodation in Aarhus. "I think it is safe because the system identifies perfectly who is renting the property and the pay system is regulated by Airbnb."
Although, Clara’s statement touches upon a criticism made towards Airbnb by Raz Godelnik, an assistant Professor at Parsons School of Design. Godelnik points out that Airbnb in itself did not take part "in the whole concept of removing the middleman in peer-to-peer markets." In fact, instead of omitting a third party, they created an "intermediary layer that wasn’t there before."
Direct service from a hotel has been substituted by an Airbnb host using the service of a middleman. For this reason, the aspect of decentralisation is not necessarily true for all sharing economy businesses.
The other side of Sharing Economy: regulation and tax evasion
Despite the fact that the sharing economy has a prominent bright side, there are also some factors that make the system quite controversial. Criticism has been raised by hotel chains as well as government officials.
The biggest issue relates to the so-called ‘unfair competition’ Airbnb is encouraging against other players in the accommodation market. As outlined by many, Airbnb customers often do not pay the taxes required by the law in specific cities. The situation is quite complex because Airbnb itself is paying the taxes it needs to pay as an enterprise, but does not oblige, instead only advises, its customers to pay the taxes imposed for short rentals in private accommodations.
In addition, Airbnb has been sued multiple times in the last couple of years. It has been reported that the police department of New York took Airbnb to court because the company did not want to share private information of its customers. After that, an agreement between the two parties was made in which Airbnb would hand over part of its data.
Following this, Airbnb has been sued again, and this time by its own members, for sharing private data that should be kept confidential according to Airbnb’s rules and conditions. This suggests that the fundamental problem for Airbnb is caused by a lack of regulation. The sharing economy is a new and fast-growing phenomenon that took most of us by surprise. Therefore, policy makers have been caught unprepared to deal with its implications.
The current regulation on accommodation facilities is clearly outdated and soon
municipalities will have to make a compromise on how to go along with the ever-growing presence of Airbnb accommodation in their cities.
Updated regulation will surely benefit all parties involved; hotels, hostels and B&Bs do not want to be the only ones paying taxes and submitting to safety inspections. As pointed out by some, if no controls exist, the risk of creating illegal hotels through Airbnb is possible. This could have consequences not only in terms of tax evasion, but also with regards to safety issues and nuisance for neighbours.
Put simply, the empowerment of the sharing economy produced by the digital area shouldn’t be stopped, but can and should be regulated. It is opening a lot of doors to new means of living and working opportunities. This transformation embodied in the words "own less, embrace more" has the chance to build up a new community mindset in which experience is put before ownership.
As Brian Chesky declares: "We used to live in a world where there are people … and where there are businesses. Now we live in a world where people can become businesses in 60 seconds."
Let’s see where this can take us.
Claudia De Meulemeester is a Belgian journalist currently based in London. You can reach her on Twitter.