Will the real "sharing economy" please stand up?

By Erin Griffith , written on March 1, 2013

From The News Desk

Over the last year, every publicationeverywhere has discovered the sharing economy. (Truly, e v e r y o n ee v e r y w h e r e.)

They are correct that there is a new economy on the rise. This new economy -- the sharing economy -- is based on distributed workforces. And some vague notion of "sharing." We have car sharing, skill sharing, stuff sharing, labor sharing, and home sharing. Examples include TaskRabbit, Zaarly, GetAround, Lyft, RelayRides, Etsy, Airbnb, Snapgoods, DogVacay, Liquid, Parking Panda, Skillshare, Uber, Blackjet, Kitchensurfing, Zipcar, and even solar power company Sunrun.

The sharing economy is one of those terms that's so atthisverymoment hot many up-and-coming startups are slapping the term into their boiler plates in the hopes of riding a rising tide. Call it the new "enterprise."

But the term "sharing economy" is a bit of a misnomer. Sharing is by definition free -- how can it have its own economy if there's money involved? Sharing for money is called renting. And in the case of Etsy or even old-school "sharing economy" marketplace eBay, there's no sharing happening at all -- it's just straight-up commerce. I suppose the Renting Economy or the Selling Economy doesn't sound as promising and magical to the media. It's not quite "change the world" enough for the high-minded Valley elite, either.

Semantics and buzzwords aside -- what many tentpole startups classified as "sharing economy" have in common is that they are marketplaces, and they are resourceful. They take a resource -- an open bed, handmade goods, human capital, under-used cars -- and recycle them into the economy. They capitalize on goods that would otherwise be wasted.

Further, they are all venture-backed. This is important because, as the term venture capitalist makes clear, the companies they invest in need to make money. And make money they do. Lots of it, for their users and themselves. Etsy sellers made $895 million in gross sales last year. Airbnb's net revenue for 2012 is estimated at $150 million, according to Forbes, which also estimates, somewhat arbitrarily, that consumers will spend $3.5 billion on the sharing economy this year.

Those are numbers to get excited about in a time of persistently high unemployment. These startups are creating a shadow economy, driven by first-time "entrepreneurs," a bold choice of name for the many freelancers hawking their homes, cars, time, and expertise to strangers for extra cash. Some of them cobble together a solid living across several of the sites, operating as perma-lancers with no need for a corporate nine to five job. Justin Johnson of Late Labs recently pointed to several examples of the reasonable middle class salaries one could make from several of these services.

Taking it a step further, Naval Ravikant of AngelList said at PandoMonthly in December that he believes companies of all kinds will eventually stop scaling their armies of employees -- instead they'll just outsource like crazy. Labor-focused groups like oDesk, Taskus, and Amazon's Mechanical Turk will handle the worker side of things for companies. Workers won't have jobs, they'll just have assignments.

Airbnb's Brian Chesky offered up a vision that sounded just as crazy. He envisioned a day when people won't live in one place for very long, but just travel around from house to house through Airbnb.

Out in the real world, this fantastic new gig-based existence is, well, it's cute. Certainly some talented, resourceful people can hustle their asses off and make it this way, much like the talented, resourceful Sophia Amoruso made a living selling vintage clothes on eBay. But most Americans aren't 1 percent the hustler Amoruso is, or even your average eBay seller. Nor can we live without a house, or wake up each morning ready for a new, random assignment from a new, random company.

Which is why it's worth challenging the idea that the sharing economy could transform the real economy, as so many of the fluffy profiles we've read have suggested. Is it poised to change the way we work forever? Or perhaps Silicon Valley has taken an idea that is good -- not revolutionary, but exciting and good nonetheless -- and done what it does best -- overhyped the hell out of it.

After all, the sharing economy has been around since long before Forbes gave it a magazine cover. But it wasn't as exciting to write about then, because the original sharing economy didn't care so much about money. Free services like Craigslist, Couchsurfing, and loosely organized groups from skillshares to carpools have always existed on a smaller scale. Why did they only explode when the idea of money was introduced?

That introduction of money has also drawn the attention of regulators -- home rentals live in a mushy gray area that's led to legal battles in big cities, and ride sharing has hit a few roadblocks of its own.

With our latest monthly series, starting today, we plan to dig deeper into these questions. Our "Secrets of the Sharing Economy" series will address stakeholders on all sides of the sharing economy, from the companies building these products to the TaskRabbits, Uber Drivers, and Airbnb-ers who provide their inventory to the customers changing the way they procure goods and services.

If you have story tips or angles you'd like to see us explore over the next month email us at [email protected]

[Image courtesy wikimedia]