Sharing is the new economy

To some, a sharing economy is a socialist’s promised land, to others it’s a return of the worst form of capitalism. Even though highly controversial, it has many supporters and it looks like it’s here to stay By Matthew Czaja, Jacek Ciesnowski Holiday lodging from Airbnb, transport from Uber or Blablacar. Need financing for your invention or petty cash for holiday presents? Try Kickstarter or Kokos.pl. There are even projects that let you swap your clothes, meals and even employees. To paraphrase the popular ad campaign – there’s a website for that. The recent popularity of the sharing economy comes from a few factors. First and foremost, the recent economy crisis made everyone smarter about their spending. When people have less resources they’re bound to share the ones they have. The internet facilitates exchange by serving as a round-the-clock community (or international) ad board. “I’d characterize the sharing economy trend not as a revolution but as a pursuit of achieving something that could be called an ‘optimization of ownership,’” said Jan Gmurczyk, economist at Instytut Obywatelski. “The crisis that affected the economy not only pushed people to manage their money wiser, but it also affected ideas and concepts behind the modern economy. People became more critical of it. In such conditions, new ideas for the economy are gaining traction,” Gmurczyk added. As resources and environmental capacity continue to be stretched, younger generations choose to live more minimalist lifestyles, opting for money-saving frugality rather than the posh style. On the other hand, it created opportunities for many to earn money from things they already own. Renting a car or a room in their apartment has become easier than ever thanks to the internet and social media sharing. “Solutions such as Uber or Airbnb show that it’s very easy to build simple solutions in the digital world for effective use of existing resources. The global reach of the digital market results in better and more efficient use of resources, and the price of available resources continues to fall, since less and less added value is derived by intermediaries,” said Jerzy Kalinowski, partner, head of information, communications & entertainment industry in KPMG in Poland and CEE. At times, a sharing economy is a matter of survival in a world hit hard by economic austerity. The Spanish version of the community exchange system, a modern day web-based bartering network, has a whopping 213 community exchange networks nationwide. The next country on the list, the United States, has 118 networks. It’s important to remember that youth unemployment in Spain is above 50 percent. Young people are desperate just to make it by without the help of their parents, hence a barter system is a natural remedy for their current ills. The community exchange system is alive and well in Poland’s capital of Warsaw where Wymiennik.org has 3,000 members. Thanks to the internet and easy access to both consumers and providers, sharing economy is growing exponentially. Consultancy PwC estimates that the market is currently worth $15 billion and will reach $335 billion by 2025. Mi casa es su casa Hospitality is one of the staples of the sharing economy. From the apartment sharing website Airbnb to Couchsurfing, which has 9 million members worldwide and is active in 120,000 cities. It’s almost impossible not to find a host. The service is very popular in Poland. The capital city of Warsaw has over 12,000 active members. Couchsurfing, and other websites such as Bewelcome.org, allow willing hosts to offer a bed, a room or just some floor to sleep on. The traveler can respond with hospitality at a different time and place, but doesn’t have to. Couchsurfers exchange not only a place to stay, but also help their guests giving tips on places worth visiting, take them to events, etc. It’s not only a hospitality service but also a social experience. On the other hand, in some circles couchsurfing has been dubbed “sexsurfing.” Furthermore, Couchsurfing has garnered some criticism due to their change from a non-profit model to a business model without the consent of the community. Currently, the company charges an optional $25 verification fee. It’s not entirely clear how the company plans to increase income in the future, but it does hold vast amounts of data on user preferences and travel patterns. The San Francisco-based company has raised over $22.5 million in venture capital from the likes of Benchmark Capital, General Catalyst Partners, Menlo Ventures and Omidyar Network. In the carpool lane Another peer-to-peer system that’s on the verge of entering the Polish market is carsharing. In carsharing, social skills are also put to the test. Finding an empty bag of potato chips on a car seat when you’re checking out a vehicle for a nice weekend with a new crush can be very embarrassing. It’s not just the consumption that’s shared, but also the standard of quality needs to be collaboratively taken care of. But what if one is traveling across the country? What the Poles have really caught onto is the ridesharing service Blablacar.pl. The company was launched in France in 2006. The Polish version has been initiated by Michał Pawelec and Piotr Jaś and funded by venture capital fund Accel Partners. Blablacar is by far the most popular ridesharing website in Poland. It includes a profile with a talkativeness rating for users. Shy users can match up with talkative users, if they so wish. The company recently analyzed how much ridesharing participants talk and, lo and behold, Poles were found to be the most talkative, even more so than Italians or Spaniards. The French Blablacar has initiated a fee system, and the Polish version may do the same soon. Since the network is growing quickly, a small fee should not interfere with or hamper the existing process. The other popular vehicle sharing platform in Poland is Germany’s NextBike, which (in cooperation with city governments) is promoting their bike rental systems in all major Polish cities. The company boasts having reached over 4 million rentals in Warsaw since 2012. It has 290,000 users, 202 stations and almost 3,000 bikes in the capital. This makes Warsaw’s bike sharing program the seventh largest such network in Europe. A year ago, USA Today listed the Warsaw system (also known as Veturilo) as the tenth best bike rental system in the world. The company’s mobile IT system is its bread and butter, and besides city patronage, the company does very well by incorporating advertisements on bikes and recruiting commercial partners who sponsor bike stations at key locations. The Bike-sharing World Map shows how popular this service is becoming. According to this website, it seems like Spain and Italy are the most saturated bikesharing countries in the world. [negative]PwC estimates that the market is currently worth $15 billion and will reach $335 billion by 2025.[/negative] Nothing new While the concept of a sharing economy has skyrocketed in recent years it has been around for years. Mitfahrgelegenheit.de, or Carpooling.pl as it’s known in Poland, has been around before the advent of the internet. They used to have local outlets where potential drivers and riders could post announcements about their planned trips. “Offline carpooling was functioning for a long time in Germany (usually in small offices close to the train station) where drivers could leave their offers,” explained Carpooling.pl press secretary Agnieszka Kornas. The online project was started by MBA students from Würzburg, who wanted to transfer the system to an online platform. After a few years of operating on a part-time basis, the founders decided to go full-time and expand internationally. Carpooling hired Markus Barnikel, an internationally experienced internet executive as CEO. “Now in the Munich office we have over 70 people working to make it the best service from the technology and the security point of view,” said Kornas. Carpooling earns money on user fees for successful rides, commission from transport companies who use the service for announcements and income from commuter platforms for bigger companies. Carpooling boasts of having helped reduce CO2 emissions from cars by 630,000 tons since the inception of the company. [negative]“in all those situations where you have a small loss and a big gain, the sharing economy makes sense.[/negative] A variation of carpooling could have huge potential in Poland. This was acknowledged by Uber, which launched its service in Warsaw in 2014. Creating giants The idea of collaborative consumption started, just like most concepts, as a way to make the world a better place. One of the first entrepreneurs to dabble in a sharing economy, was Martin Varsavsky, who in 2005 set up Fon, a service that shares home wifi networks. “My general thinking at the time was that we live in a world in which benefits are only accrued through economic growth and the endless consumption of resources, and that there have to be other ways that are of more benefit to people. … Why should everyone have their own car when most of the time they are not using it? Think of a marina full of boats. How frequently do those boats go out?” said Varsavsky in the British daily The Guardian. “In the case of wifi, we came up with the concept that if you share a little wifi at home, you can roam the world for free,” he explained. “That’s a small loss and a huge gain. And now [years later] we see that in all those situations where you have a small loss and a big gain, the sharing economy makes sense,” Varsavsky added. But like with everything, the market had its own way to reshape the sharing economy concept and adapt it into free market reality. “The market has the tendency to turn everything into a product. That includes ideas as well. Every day, entrepreneurs are looking for new niches. Besides, exchanging resources has been moving the economy forward for ages. If it wasn’t for the banks, the current Western civilization wouldn’t be at the levels it is right now,” Gmurczyk explained. With such huge growth potential, many companies are trying to get in on the sharing economy action. Telecommunication giant Verizon is working on a platform that will allow its users to share virtually everything thanks to the use of QR codes. Retail behemoth Walmart has its own game trading platform, BMW has its own car sharing platform. On the other hand, companies that were at the forefront of the sharing economy movement are now becoming giants themselves. Airbnb is now worth more than $10 billion while Uber is currently valued at $18 billion. And this is where perhaps the biggest complaints against sharing economies come to mind. Under the guise of progress and making the world a better place, companies are actually reaping huge profits with low fixed costs, shifting risk to participants, while pushing down wages at the same time. The news has been flooded with such stories. Uber drivers held protests around the US, complaining about low fares and long hours and a hostile working environment. “Drivers are subject to hostile environments and sexual harassment, assault, and being involved with people who are potentially dangerous, like extremely intoxicated people,” Joseph De Wolf Sandoval, president California App-Based Drivers Association, told Business Insider. [negative]Airbnb is now worth more than $10 billion while Uber is currently valued at $18 billion.[/negative] No control Other charges include the lack of regulations. Companies usually don’t have to follow the same rules as their competitors. Uber drivers don’t need permits like taxi drivers, Airbnb hosts don’t follow local housing laws and don’t pay hotel or tourist taxes. Crowdfunding and social lending sites do not fall under the same supervision as banks. All of this can lead to some horror stories. Airbnb apartments are occasionally rented to host sex parties or to use drugs, Kickstarter can be used by fraudsters to cadge money from unsuspecting supporters. There is also a matter of how the sharing economy will affect the world in the long term. After all, increased consumption leads to bigger economic growth. Factories which increase production, need to hire more employees who will spend their wages buying even more products. Will the sharing economy decrease the demand for goods and services and cause the economy to crash? “I don’t expect such a thing to happen. For example there are many goods, that people buy to show their social status, such things can’t be shared. There are also many products and services that simply cannot be shared, like getting a haircut,” Gmurczyk explained saying that the standard economy shouldn’t be affected. “The problem which the West has to tackle is not how to ensure economic growth but how to share it with others so everyone will have better lives,” Gmurczyk added. On the other hand, it can help many launch their own businesses. Good magazine wrote: “Technology and peer communities are enabling old market behaviors including bartering, swapping, trading, renting, lending, and sharing to be reinvented in ways and on a scale never possible before.” Indeed, the simplicity of some of the systems is laughably mundane. In a world of increasing legal loopholes and administrative red tape, sharing could be the remedy for a limping European economy. But will the traditional business community embrace, incorporate or engulf the idea? It’s important to stress that the sharing phenomenon lowers the cost of entry into the market for many participants and hence could be a fantastic bottom-up jump-starter for the economy. Thanks to the free-flow of information that is the backbone of a sharing economy, people are participating in investing, traveling or consumption that otherwise would have been unattainable.