Uber, Craigslist, eBay, Airbnb; you know them, you may use them, they are all part of the shared economy. The concept is simple enough. Market your assets to peers in the informal cyber marketplace.
Maria, a former wedding photographer, has a closet chock full of camera equipment, four small kids and a growing stack of bills. Jo’s got a smartphone, a garage bursting with grandma’s stuff and a free Saturday. Bill has extra time, a car sitting in the driveway most of the day, and a need for fast cash. These people can, with the help of apps and platform websites, find a niche in the sharing economy where their “assets” are valued by clientele seeking more convenient access to services and goods. Maria rents her equipment to local photographers. Jo auctions off Grandma’s antiques to specialty collectors on eBay and Craigslist. And Bill taxis people in his car on nights and weekends as a driver.
Using information from both Forbes and PWC, the estimated revenue flowing through the shared economy directly to everyday people will surpass $335 billion by 2025, with growth exceeding 25 percent per year. “At that rate, peer-to-peer sharing is moving from an income boost in a stagnant wage market into a disruptive economic force,” says Forbes’ Tomio Geron. Technology’s advancements have vastly improved everyone’s access, and eBay’s popular rating system grants individual marketers commercial credibility. Smartphone apps let sharers transact anywhere, see what’s being shared nearby and pay on the spot. For the first time, selling convenience is paying huge dividends — not just to businesses but to individuals.
However, there are also real consequences to individuals and a society when reasonable regulations are eliminated or ignored. What, for example, happens to the independent cabbie in New York City who has just paid $800,000 for a medallion to operate? Will those who have benefitted from sales of a shared economy company stock at the time of their IPO help the cabbie with his debt?
So, while public participation in and popularity of this new marketplace surges, anxious competitors and regulators try to rein in the movement with red tape and litigation. There are many issues that will need to be addressed in the shared economy. What about insurance? Licensing? Background checks? Regulations related to shared economy surely do become cumbersome and overly bureaucratic, but that doesn’t necessarily mean they are not needed.
With all this talk of freeing up the market, we should consider what Hernando de Soto Polar, Peruvian economist, discovered 20 years ago. Reforms in the ’80s and ’90s led by de Soto and his Institute for Liberty and Democracy implemented some 400 initiatives, and helped pass laws and regulations that transformed Peru’s economy. The reforms granted legal titles to more than 1.2 million families and helped some 380,000 small firms, which previously operated in the black market, to enter the formal economy. This latter task was accomplished through the elimination of restrictive registration, licensing and permit laws, which had made the creation of new businesses very time-consuming and costly. The result: greater accessibility to wealth in a nation with many poverty-stricken people.
Could this economic revolution be the door through which other countries’ poverty problems will be addressed? It’s already happening. The beauty of the system is its universal appeal. Admittance to the entrepreneurial world is more widespread than ever. Almost anyone can get on this bandwagon, and the statistics are showing widespread success.
The marketplace is rapidly changing. If we are willing to embrace it, by developing regulations that enable and encourage participation while also ensuring safety and accountability, we may witness the real-time redefinition of equal economic opportunity in many nations.
John Hoffmire is Chairman of the Center on Business and Poverty. He also holds the Carmen Porco Chair of Sustainable Business at the Center.
Greta Crofts, Hoffmire’s colleague at the Center, did the research for this article.