Collaborative consumption is dead, long live the real sharing economy

By Neal Gorenflo , written on March 19, 2013

From The News Desk

A rule of thumb on Wall Street is when national magazines discover a trend, the trend has peaked, and there’s only one way to go: down. Unfortunately, that’s beginning to happen to “collaborative consumption” (or “the sharing economy,” if you wish).

When I first became aware of it in 2009 I saw it as a part of a movement of movements rising from the grassroots to give ordinary people the tools needed to take control of their economic destinies. It fit neatly in with open source software, peer-to-peer networks, the cooperative movement, and crowdfunding, and seemed a natural extension of social media into “meatspace.”

I was also excited about its potential for good. Take car sharing for example -- every shared car replaces up to 13 owned cars, 50 percent of people join to get access to a car who didn’t have access before, and for every 15,000 cars a city takes off the ownership rolls, it could keep an estimated $127 million in the local economy annually. It’s taking things that sit idly by and suddenly making them productive again. I didn’t know of any other social innovation that could reduce consumption, increase access to important physical assets like cars, and grow the local economy simultaneously. I imagined an entire economy based on access versus ownership, which was just what the doctor ordered in an era of economic and environmental crises.

That said, the thing that really spoke to me, as a kid who barely made it out of the suburbs with his sanity, was the potential to transform culture from a toxic “keep up with the Joneses” mentality to more positive “collaborate with the Jones.” For early advocates like me, better relationships and experiences were big reasons we thought it would succeed, and one of the main benefitThat’s right. I’m not your typical PandoDaily guest poster. You won’t hear me wax on about the latest Series A, acqui-hire, or IPO. Instead I want to talk about how money is ruining what started out as a transformative concept. (PandoDaily's own Erin Griffith also recently took on this issue in her post, "Does money taint the sharing economy?")

I’m not surprised that  collaborative consumption is suffering growing pains. This is what happens when a flood of VC money focuses startups on growth at the expense of benefitting humanity. Some changes are symbolic yet telling, like Airbnb ditching their “travel like a human” tag line. Some are substantive, like Zipcar being absorbed by an old line car rental company, Avis. And some are anecdotal, like the fact that my Airbnb rentals of late have been much more impersonal than back in the day, which is totally understandable if you’re adding new properties at the fastest possible rate through every channel, including the fount of all mediocre customers, Google Adwords.

Herein lies the rub. As collaborative consumption goes mainstream, it risks losing the very thing that attracted people in the first place, the unique and even transformative social experiences made possible when you interact with helpful strangers. With this potential loss goes an important part of the positive impact, and a straight-up competitive advantage worthy of any Harvard MBA’s lust.

And what is this competitive advantage? Well, take my first experience renting a car on Getaround. When I met Sarah to pick up her car, DaffodillPickle, we struck up a conversation about aquaponics, she gave me an impromptu tour of her aquaponics setup on her balcony, and then sent me on my way with fresh strawberries she picked for me on the spot. That made my day. That’s never going to happen at Hertz because this kind of intimacy can never be scaled.

So it’s not so much that collaborative consumption is dead, it’s more that it risks dying as it gets absorbed by the “Borg” and its mindless minions of capitalism. Nothing new or special here, of course. As a recent Atlantic Cities feature concluded, collaborative consumption is just more efficient, which isn’t all bad. In a recent Economist cover story, Tim O’Reilly says this loss of revolutionary potential is inevitable. He’s wrong, though. It’s only inevitable if a company takes VC money. It’s really just a decision.

This is where the real sharing economy comes in. It is more than just VC-backed Internet startups. It’s a tectonic shift in how the economy works. As society changes from a top-down factory model of organization to a peer-to-peer network model, how we produce, consume, and interact will be radically transformed. At its simplest, the sharing economy is the decentralization of economic power brought on by new technology, new and revived business models, and massive social change. It’s made up of thousands of innovations, some for profit, some nonprofit, and some that thrive in the commons.

If we can avert our collective gaze from our latest technology gadgets for a second, we might be able to see the real sharing economy, the one driven by values and tested by time.

Below are some of the most important and overlooked parts of it:


As multinational corporations work feverishly to reduce their reliance on human beings, member-financed, member-owned, and democratically managed cooperative businesses are on the rise. In fact, they employ more people than multinational corporations. They also pay better wages and their fair share of taxes and weather economic crises better. More than 800 million people worldwide are part of a co-op.

There are whole regions in Spain and Italy dominated by cooperatives, and those regions have lower unemployment and a stronger middle class because of co-ops. There’s actually a town in Spain, Mondragon, where virtually everyone is middle class, because the largest co-op in the world is headquartered there, The Mondragon Corporation, and its main goal is full employment, not profit.  The UN declared 2012 the International Year of the Cooperative to recognize coops proven ability to create jobs and alleviate poverty around the world. Co-ops have been growing steadily worldwide for centuries.

Open Source Software

There are more than 200,000 open source software projects that are worth a combined half a trillion dollars. The Internet practically runs on software made for free by programmers all over the world. We wouldn’t have such a robust tech startup scene without it, as startups rely on open source tools to build their services.

Public Banking

Public banks are government-owned banks that lend responsibly at low rates to their citizens and contribute earnings to government treasuries.

There are many public banks in the world, but North Dakota has the only public bank in the US, the Bank of North Dakota (BND). BND has contributed hundreds of millions of dollars to the state treasury while working with private banks to make ample credit available state-wide. It helped stabilize North Dakota during the subprime crisis. John David of the Public Banking Institute says, “Currently, North Dakota – in part due to the BND’s beneficent influence – has the lowest unemployment rate in the nation (just over 4 percent), has no debt to service, has a $1.1 billion surplus, has experienced no bank failures in the state, and is the only state in the last two years to avoid a budget deficit.”

The success of The Bank of North Dakota has inspired other states to follow suit. 20 states have public banking legislation in the works.

Credit Unions

As people get disgusted with Wall Street corruption and high banking fees, customer-owned credit unions are on the rise. They passed an important milestone in 2012. Together they hold more than $1 trillion in assets and would be the fifth largest bank in the US ahead of Goldman Sachs. It’s helped that membership has surged recently – membership growth doubled in 2011.  And overall there are over 7,000 credit unions in the US with more than 92 million members.

Why the growth? They take care of the little guy. Credit Unions typically offer lower fees and higher interest earnings on deposits than private banks. All are focused on serving their immediate community, and many are chartered to serve low income communities.

Participatory Budgeting

Participatory Budgeting (PB) is when citizens decide together how a slice of a city budget is spent in their neighborhood. It’s not strictly an economic thing, but it has economic impacts as urban infrastructure improvements can be an important stimuli.   There’s over 1,500 cities worldwide who use PB.  PB builds social capital through the forums in which spending priorities are decided and better ensure that city money is allocated fairly.  Only four US cities use PB, and each are only in the pilot stage, though several US cities are evaluating thanks to the work of the Participatory Budgeting project.

When I talk to reporters about the real sharing economy, they just don’t want to hear it.  They only want to talk tech even if they’re from Sunset Magazine.

The tragedy is that while billions of people suffer in poverty, the press ignores the very things that will give people what they want most – economic security. They insist on lavishing attention on this tiny, tech-driven sliver of the sharing economy, the one that is most likely to be co-opted because it’s not driven by values, but by growth and profit. The media’s blindness to the real sharing economy is not just my experience, it’s also borne out by research.

The spell that technology casts over us is powerful. Will we ever wake from our technology-induced stupor and save ourselves? Or will we become a post-apocalyptic cargo cult crouching naked in the dust around the last iPad waiting for the next Tweet that will never come?

[Image courtesy flythebirdpath~}~}~}]