07/03/2019 The dark side of the sharing economy | World Economic Forum

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The dark side of the sharing economy

The sharing economy could transform our cities - but we need to see the dark side too

16 Jan 2018

April Rinne
Founder and Adviser, April Worldwide

The sharing economy: depending on who you ask, it’s the engine of a post-capitalist economy,
the poster child of the Fourth Industrial Revolution, or the end of consumer civilization as we
know it. Truth be told, it’s a bit of each of these claims, yet something unique that’s even more.

As an advisor to sharing companies, policy makers, investors and entrepreneurs over the past
several years, I’ve had a seat at the proverbial fifty-yard line: as “access over ownership” has
become a new tagline, as governments initially ignored and then became unglued by the
realities of regulatory reform, and as a bumper crop of related terms grew up alongside. Now
it’s not only the sharing economy we need to worry about, but the gig economy and on-
demand economy too. What next?

At its core, the sharing economy is about the sharing of idle assets, usually via tech platforms,
in ways that produce economic, environmental, social and practical benefits. Or at least it is
supposed to be. Sharing rather than owning helps people - and increasingly organizations as

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well - save money, earn income, lower carbon footprints, increase social capital, boost
community, meet new people, build trust (including “stranger trust”), and even enhance choice
and convenience. Indeed, few if any other business models can profess so many benefits at
once. This is an incredibly powerful proposition for individuals, companies, and society at
large.

And yet, we are far from a sharing economy ecosystem that truly works for the benefit of
society today - or, candidly in many cases, that even considers it. We can get there, but it will
take concerted effort by companies, governments, investors, media, and - not least - sharing
economy participants themselves. Here are the main reasons why:

Sharewashing

Over the past few years, the term ‘sharing economy’ has expanded and morphed to an
extraordinary degree. While there are still many platforms that deliver on the original promise of
the sharing economy - better utilization of resources, both boosting efficiency and building
social capital - there are others who unabashedly add the term ‘sharing’ without it having any
bearing on business model. Calling a new platform ‘the Uber of X’ is an immediate tip-off, and
the press has done a good job stoking these flames.

The sharing economy is not the gig economy

The sharing economy allows people to earn income in new ways, yes. But the gig economy
goes far beyond this, affecting workers of all ages, expertise and industries, and equating the
two distorts both unfairly.

The future of work is a big deal. A huge deal, in fact. But we would do much better to call
those issues accurately, rather than lump them in with the sharing economy. For example, the
growing list of lawsuits being filed around worker misclassification (are ridehailing drivers and
delivery couriers independent contractors or employees?), questions about whether
technology is formalizing or informalizing labor markets, and efforts to rethink social safety
nets in light of the growth of independent workers revolve around the future of work and labor
force shifts. They are neither manifest in, nor bound by, the sharing economy.

Assets still matter

“Access over ownership” has myriad benefits. But let’s not delude ourselves that it’s a
panacea. Historically, many people held their wealth in what they owned: their homes and
possessions. These assets also served as cushions in time of hardship. As we enter an era of
‘asset lite’ lifestyles and fewer physical possessions, this doesn’t negate the need for other
forms of wealth in times of strife. If people are saving or investing the money saved by sharing
rather than owning, great. But if we’re heading towards a world in which people have fewer
assets and lower savings, we are actually decreasing our resilience as a society.
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People and community first

As the sharing economy has grown, there has been a distinct shift towards ease and efficiency,
often at the cost of relationships and community-building. Some have called this tension
“transactions over transformation.”

Interestingly, when people are interviewed about why they first begin to participate in the
sharing economy - sharing their car or joining a co-working space - the overwhelming majority
point to economic benefits. However, when asked why they stay and/or become more involved
in the sharing economy over time, that response shifts, and community benefits matter most:
people enjoy meeting others and becoming part of something greater than themselves. The
insight here is, while economics matter, any platform that fails to focus on community will have
a (much) harder shot at success over time.

Inclusive, really?

It’s easy to claim that the sharing economy is more inclusive. Certainly if more people can
access something - especially if they might not be able to afford to actually own it -- that’s
inclusive, right? Often yes, but not necessarily.

We must remember that inclusion is not one thing: there’s geographic inclusion, ethnic and
racial inclusion, financial inclusion, digital inclusion, age inclusion and many others. In addition,
there are tech-enabled (and usually unintentional) barriers to inclusion, such as the hidden bias
in algorithms deployed by platforms.

Personally, I have spent a great deal of time focusing on the potential of the sharing economy
to help low-income people. There is no doubt that the sharing economy can help lower-income
people save money, which increases their disposable income and provides a runway towards
more savings and opportunity. But if participation in these platforms requires reliable internet
access and a credit card, yet in many parts of the world many people lack these things, then is
the sharing economy truly inclusive? Rather, we must look at it holistically, and recognize that
investing in digital infrastructure and financial services -essential gating factors - is necessary
for a sharing economy that can truly benefit everyone.

Company culture, leadership and ethos matter

Tech-enabled sharing economy companies are two things: technology and people. In order to
harness the technology responsibly, we need proper leadership, corporate culture and ethics
in place.

Nowhere have we seen these features tested more than at Uber this year. (Ironically, Uber does
not consider itself part of the sharing economy - it has always claimed to be a technology and
logistics platform, leaving resource utilization and community building aside - but the press

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and public seem to have missed this point.) Uber has had setback after setback, from sexual
harassment scandals to losing its London license (on the basis that the company is not “fit to
operate”), leaving drivers struggling with debt in many markets, and a public showdown to
remove its founder and CEO.

I am reminded time and again of the parallels we see with the commercialization of
microfinance some ten years ago. At this time, some microfinance institutions (MFIs) began
pursuing growth at all costs, including extending loans without financial literacy and putting VC
demands before the needs of clients. Their goal was an IPO. However, those who did so lost
the trust of their clients over time, and pushed many of them into serious personal hardship,
including bankruptcy and suicide.

Failing or forgetting to do one’s homework

Ownership mindsets are embedded deep within many societies, particularly in developed
markets. Building two-sided markets requires intimate knowledge of both sides. Community
building requires building relationships over time. All of these things take time, effort and
research - in other words, homework.

As the sharing economy has grown, some entrepreneurs and investors have become
increasingly lax about doing their homework. Particularly in China, where the government has
declared the sharing economy a “national priority,” there has been a race to launch. This has
not always been matched with appropriate due diligence.

A great recent example is dockless bikesharing, pioneered in China. In less than one year,
start-ups have raised hundreds of millions of dollars and expanded to the U.S. and Latin
America. However, they appear to have done this without paying enough attention to the
significant challenges already faced in China, from theft to piles of unwanted bikes clogging
city streets. This is not a case of “build it and they will come”; they may come, but gradually
and in their own time. Meanwhile, investors and platforms alike should gird themselves for a
long, bumpy road ahead.

Restoring the sharing economy to its full potential

The challenges faced by the sharing economy today are largely a result of its success, and as
many would agree, it is here to stay. Needless to say, much can be improved. What steps
should we take to ensure the sharing economy is a force for good and has a banner year in
2018?

Go back to basics: the sharing economy is undoubtedly complex, but we should not include
things in it that simply aren’t sharing. Rein in overbroad use of terms.

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Take responsibility: the sharing economy is tremendously powerful and offers many benefits,
but it is not a panacea. It must be harnessed responsibly. Collectively we -- platforms, policy
makers and users -- must do our homework. It’s time for industry-wide alliances to invest in
new approaches to social safety nets. It’s time for policy makers to step up and do the hard
work of meaningful, fair, appropriate policy reform. And it’s time for new partnerships between
private, public and social sectors that help keep tech as a means to an end, rather than an end
in itself.

Business model reform: the sharing economy has shown us that there are a lot of new, and
previously un-fathomed, ways to build a business. Now is the time we must take this
knowledge to the next level. From platform cooperatives to zebra companies (as an antidote to
unicorns), the time is ripe to invest in models that are - by their very DNA - more equitable and
resilient, and that provide upside to everyone that’s involved in their growth over time.

Think holistically: for the sharing economy to thrive - and to be truly inclusive - it must also be
linked to digital inclusion, financial inclusion and cultural inclusion initiatives. Invest
accordingly.

Hold the press and politicians accountable: the press has had a field day using incorrect
terms and stoking the wrong kinds of debates. Politicians are concerned, not least because
there are a lot of unknowns to answer and hard work to be done. But these excuses cannot be
shields. Rather, it’s time to wake up, lean in, and get to work.

Fundamentally, the sharing economy is a phenomenal tool in our economic toolkit. It is also an
increasingly important part of the overall economic pie. So let’s gear up for its best year ever,
one that - finally! - calls it what it is, places people at the center, and reaches its full potential.

Written by

April Rinne, Founder and Adviser, April Worldwide

The views expressed in this article are those of the author alone and not the World Economic Forum.

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