Does money taint the sharing economy?

By Erin Griffith , written on March 14, 2013

From The News Desk

There is a lot to like about the sharing economy. "Un-jobs" are being created! People are able to scrape together a boss-free living as part of the new distributed workforce. And companies like TaskRabbit, RelayRides and Airbnb are taking previously idle resources and recycling them back into the economy.

But there is a larger, more philosophical rub to all this feel-good sharing economy fun.

And that is the fact that these startups didn't invent sharing. They've merely tacked a dollar amount onto actions that other, more underground networks of people have been doing for free for a very long time. The free, or at least, non-capitalist sharing economy has been trucking long, unaware that this shiny new venture capital-fueled trend has taken the rest of the world by storm.

For example Skillshare, which takes its name from a loosely organized, sometimes anarchist, always free and community-focused group of classes. Or Airbnb, which basically took the model of Couchsurfing and turned it into a for-profit enterprise. TaskRabbit is just a twist on old-fashioned bartering. Car sharing is a more organized car pooling. How do the people behind these actual sharing-based non-economies feel about flashy new tech startups injecting a shot of capitalism into their markets?

Put another way, does money taint the real sharing economy?

The short answer is that yes, it probably does. A transaction that involves money is not actually sharing, its renting or selling. It's still good, because people have new forms of income available to them, but it is not based on the otherwise honest intentions of actual sharing. It is not a revolution, either.

The flip of that argument is that money makes these services better in a crucial way. Without professionalism, along with the willingness to secure users against major risks, and frankly the marketing dollars, many sharing economy sites would not have gotten to the size they are today. The sites required money to offer services that are effective and, as a result, their services have impacted more people than they might have otherwise. That's how, in most cases, for-profit sharing economy companies have outgrown their free counterparts.

The question was raised earlier this year at our PandoMonthly featuring Brian Chesky of Airbnb.

His answer was pretty straightforward -- he simply didn't know any better. He started the company as a way to supplement his own rent. Free was never an option for Airbnb, out of early necessity. Chesky didn't realize there was another way. "When we launched … a lot of the people from Couchsurfing community said, 'This is like Couchsurfing for money, and its like prostitution, and its like you're whoring your time out to people to be friends, and its not actually genuine,'" he said. "I didn't believe it because I created genuine friendships even when those people paid me."

Arguing that sharing is not bastardized by money, he closed with a statement that goes against every press story I've seen about the rise of the so-called sharing economy -- that Airbnb users aren't in it for the money. "Most of our hosts aren't actually trying to make a profit," he said. "Some are making a business out of it but most of them aren't. It's just a way to help each other." I'm not sure I buy that, but then again, Chesky is obsessed with talking to his customers. If anyone knows the motivations of Airbnb-ers, it's him.

But if that's the case, then why does Airbnb charge at all? Couchsurfing, which launched in 2003, has never charged and never will. Surfers repay their hosts with intangible experiences -- they share stories, or perhaps cook a meal, or offer a gift from their home country. They aren't required to do these things but it is part of the Couchsurfing ethos. The company's stated mission is to connect travelers and locals to share cultures, hospitality and adventures -- it has nothing to do with money. In fact, many of the connections Couchsurfing makes do not involve a person surfing on a couch. Couchsurfing CEO Tony Espinoza says the experiences people share via Couchsurfing can't be bought with money. Counter that with Airbnb's self-description, "a community marketplace for unique spaces."

Espinoza insists -- and I had to ask several times to confirm -- that Couchsurfing has zero plans to monetize. With low overhead and no marketing costs, the site is making enough money on its background check service to survive healthily with 40 employees. Around 7 percent of its users pay for that service. That doesn't explain what will happen in several years from now when Benchmark, General Catalyst, Menlo Ventures and Omidyar Network want a return on the $22 million they invested in 2011 and 2012. In the meantime, the site is focused on improving its web offering to users. The company is a bit of an anomaly that straddles the line between highly unorganized free service and the slick capitalist enterprises we now categorize as "sharing economy."

Skillshare touts that paid is actually more effective than free for its learning platform of amateur teachers and students. Paid classes have a higher attendance, engagement and completion than free classes, says Helena Price, a spokesperson for the company. The site has determined $20 is the sweet spot for people to get valuable content for their money while being driven to make up for their investment of paying for the class. She argues that Skillshare's classes are still cheaper than the alternatives. "You'll see Ruby on Rails courses on Skillshare for $20 … that would be over $1000 somewhere else (or even more in a traditional university), and people are coming out having built full apps," she wrote in an email

Creators of free skillshares see it differently. "I feel the community aspect is the largest part of what I help facilitate," says Meg Wachter, organizer of the Brooklyn Skillshare. A skillshare can't be fully inclusive if it's not free or donation-based, which is one of the most important tenets of the project, she says. (Disclosure - Watcher and I were roommates several years ago.)

Part of the problem with free is the lack of resources and professionalism. Certain parts of the sharing economy require a lot of trust. Letting a stranger into your home or into your car is a big risk. Airbnb had its famous meth-head disaster, which the startup admits it handled poorly.

But it could have been even worse had Airbnb not had the support -- both financial and advisory -- of a venture capital firm. When the outrage over the company's handling of the damaged apartment was at its height, Chesky was about to publish a mea culpa, which included a guarantee of $5000 worth of damage to users. He says Marc Andreessen, an investor and advisor to the company, saw the letter and added a zero to the end of the sum. It was a way to show users exactly how serious Airbnb was about trust and security -- $50,000 serious. That sum has since been increased to $1 million. A not-for-profit company wouldn't have had the financial resources to offer that kind of a guarantee, and it was crucial in Airbnb's keeping its users' trust.

Car sharing apps like Sidecar or Getaround face the same risks. They're new enough that the category has yet to experience its Airbnb meth-head incident. Once they do, regulators will likely salivate at the proof that these services are too dangerous to be legal. Still, I'd rather catch a ride from a stranger attached to a car-sharing service that has some sort of vetting process in place than one of the crazy $1 gypsy vans that careen around my neighborhood in Brooklyn.

It's an unfortunate truth for any fan of free and open sharing, but in almost every category, the capitalist version is often more robust than the free version. Until it raised venture capital and underwent a full-scale redesign, Couchsurfing was pretty hideous. I used it in 2010 and had an incredibly rewarding offline experience, but the online experience was a clunky time-sink, causing me to waste full days of precious travel time in Internet cafes on the site. The same is true of skillshares -- they are loosely organized and vary by city. If you know you want to take a class, you will have more success by going to a slick website offering year-round classes in a wide variety of topics, rather than hunting down the not-regularly-updated websites of local skillshares maintained by volunteers. Same goes for the best example I could find of a free ride-sharing message board.

Free sharing economy sites overlook peoples' inherent capitalist nature. If an Airbnb host truly didn't care about money, he or she would likely use Couchsurfing instead. Most New Yorkers I know use Airbnb to supplement their rent, not to meet new friends. Same goes for Skillshare. Sure, it's nice to teach a bunch of people how to knit in the spirit of sharing. But they could also do it in the spirit of a few hundred dollars. A marketplace requires two sides to work, and the givers in a sharing economy are much more motivated by money.

The one part of the sharing economy where free may actually win out is the sharing economy of physical stuff. Too often, we hold onto things we no longer need because the idea of finding a buyer for them on Craigslist is too annoying. And Craigslist is the most liquid marketplace on the web. The zillions of others, like Krrb, Ketup and Yardsale, are fighting hard to attract both buyers and sellers to their sites. Without liquidity, aka buyers, most of them will fade away.

Stuff-sharing company Yerdle launched to a splash in November, offering a sharing marketplace for rarely-used items. Co-founder Andy Ruben says there is a place for money in certain situations, and a need to eliminate it from others. It's a similar idea with NextDoor, which encourages neighborhoods to buy things like ladders or drills collaboratively. And Freecycle, and Neighborgoods, and SnapGoods, and Sharehood. And Bondsy, a yet-to-launch Techstars company which will to help people give away their items for free, or in exchange for intangible things, like a hang-out, or a dinner, or a beer. Yerdle's Ruben says taking the money out of the equation is important, because in certain cases, money actually can taint the transaction.

"We've seen a lot of people mess it up by not being thoughtful about the right context of money," says Ruben. "When you go to a friends house for dinner, you don't give them a $20 bill. But you might bring over some wine." It's a problem he's thought a lot about, since Yerdle relies a heavily on the social connections to forge the sharing of stuff. "Money is awkward or inappropriate when there is a relationship, and it works really well outside of that … the sites that will be successful will know when to use which."

"There's a place where the capital and getting to know someone is the payment," he says. The more risk involved in the transaction, the more likely that payment is going to be cold hard cash rather than warm squishy feelings. Bottom line? The sharing economy might be strongest when its not sharing at all. But at that point, it's really just the economy.