What is the sharing economy?

Sharing Economy: shift of paradigm and insertion in the current model of market

«Rights in rem´´ are those rights that link individuals with goods, regardless of whether they are tangible or intangible. The right of usufruct, use, easement or domain are some rights in rem that govern our relationships with our assets. However, in the legal systems of continental Europe there is a one that is clearly more important than the others: the right of property. Throughout the centuries the fullest and most fruitful relationship that a person could have with a good was the property of it. Nevertheless, since approximately ten years ago a new way in which the human being relates to his assets has become more popular. It seems that the property of a good is no longer the objective of the consumer. The sharing economy is born.

The first appearance of this concept takes place around 2010. However, there is no clear consensus on the first use of this term nor on its meaning. We could define the sharing economy as the activity in which one party makes its property available to the other party in exchange for a remuneration, which is not always an amount of money. But the complexity of this phenomenon goes much further. The sharing economy is also called «Collaborative economy´´ and its forms of manifestation are very varied. The common core of all of them is that the owner of a good cedes its possession, or sometimes even its property, to other party in exchange for a remuneration. Another key point is that sharing economy does not only seek the profit of the buyer and the seller, but also an optimization of the resources used.

How and why has society reached this level of disregard to the right of property?

The causes are political, social, economic and technological. Digital platforms are the meeting place for users who want to share and receive, as we know them today. Therefore, these platforms could not exist practically without the technological advance experienced since the beginning of the 1990s. The sharing economy is a global phenomenon and the reasons that gave it life too.

It is necessary to tackle the collaborative economy as a «phenomenon´´ because it is a global trend with roots in the encounter of many reasons. One of the most powerful causes of the sharing economy is the sustainability of natural resources and the increase of pollution. Every morning more than seven and a half million car seats remain empty on the way from home to work in the Autonomous Community of Madrid because the owners of those vehicles drive alone to their job centres, according to Andrea García Torrijos, one of the co-founders of Hoop Carpool. This Madrilenian collaborative economy company has created a mobile application for people to share the empty seats of their cars on the way to their workplace daily. The main source of inspiration for this company is to improve the sustainability of the environment but also the «sustainability of mobility» in Madrid. Therefore, making a global judgment of the collaborative economy, its participants somehow agree to optimize the use of natural and monetary resources. Returning to the case of Hoop Carpool, saving money for the passenger and the driver is one of the main driving forces behind their business.

The sharing economy was born as a global response to a system of excessive consumption. Today certain characteristics of the collaborative economy between individuals have already been exploited by large companies, but individuals, natural persons, are the ones who have promoted this phenomenon.

In some collaborative business models, the confidence between the users or community members is essential. Vinted is a mobile app which acts as a virtual marketplace for second-hand clothing and household goods. Users post photos of the items they want to sell on their profile and, once they have agreed on a price with the potential buyer, they send the product by mail. Although the payment does not take place until it is verified that the product sent is the agreed one and it fulfils the proper conditions, there is a principle of trust and mutual help that governs the relationships of the users of Vinted. The buyer assumes that the product he is interested in is in the conditions announced by the seller. In other non-collaborative markets, distrust, cheekiness, and caution are prevalent, but in collaborative economy platforms there is a change in pattern. In my opinion this change of paradigm of behaviour is very interesting and we should even think about if this presumption of honesty could arise, in the future, in commercial spaces outside the collaborative economy. 

This network of people who trust the good intentions of others reminds me to the functioning of certain societies in Europe. In 2019 several universities around the world jointly, including the University of Michigan and Zurich, conducted an experiment: they abandoned several wallets containing money and a contact address of the alleged owner in cities of the seven continents to study the behaviour of its citizens and compare the degree of honesty. The study found that people in the Netherlands and Switzerland had returned more wallets than in other countries. This pattern of behaviour largely reminds me to the proceeding on many sharing economy platforms. Users do not cheat others, in part, because they trust they are not going to be cheated either. Eventually, it creates a very positive virtuous circle which encourages the creation of new collaborative economy platforms attending to this pattern of behaviour. This leads me to ask myself: Do I necessarily need to download collaborative applications to buy in an environment of trust or in a climate of positive sustainability? I do not think so. In my opinion, many of the values ​​of the sharing economy are beginning to exceed the limits of these platforms and large companies are already promoting the reuse of certain products and a sustainable life model in all its aspects.

It is possible to see how young people are more likely to make use of sharing economy platforms compared to older ones. In part, this is explained by the change in mindset it requires. The concept of property rights is deeply rooted in the West, in some countries more than in others, but the right to own, possess and obtain from «what it is mine» prevails. It is complex to deconstruct ourselves, taking a step back, and see that perhaps the traditional path of the property is not the most optimal. It involves rethinking many things that we previously took for granted for embracing a new way of living that helps us to optimize our own resources, but also to reduce negative externalities for third parties, such as pollution or traffic jams in the city.

Along with the sharing economy, new practices like «crowdfunding´´ and «crowdsourcing´´ have emerged. Crowdfunding is a practice that consists in obtaining financing or certain resources for the development of a project, generally using the internet to put the funder in contact with the project. Crowdsourcing (mix of the words «crowd» and «sourcing») consists in outsourcing tasks to be carried out by a group of volunteers. The birth of this type of initiatives would have been impossible without the internet. Websites function as a space for people to meet, dialogue, collaborate and work, so it is much easier to find people to collaborate with the same interests.

The internet is the hub of all these initiatives. It is the modern square where some people come to announce their demands and others try to satisfy them. This shortening of distances is an inherent component of globalization. Would a world of sharing economies be possible without the internet? Yes, but it would be much more complex and slower. The internet provides immediacy to the relationships of its users, who can participate in hundreds of initiatives while they are lying in bed at home. From my point of view, this easiness to contact is one of the most striking aspects of crowdfunding, sharing economy and collective actions arranged virtually, like the GameStop case.

This type of economy allows to create great impact changes on the planet. It has a big power to generate and channel the efforts of its members. Large logistical devices and spacious conference rooms are not already required to arrange a meeting of thousands interested collaborators. Instead, they can connect from their respective homes to collaborate on a project, in a simple and comfortable way, but with the capacity to generate profound changes. Despite of GameStop case is not in itself a rigorous example of collaborative economy, it highlights the current capacity of individuals with common interests to mobilize. The simple agreement of several people to go against the short-selling companies which wanted to take advantage of the bad economic situation of Game Stop, has laid the foundation for a possible new world financial order.

On the other hand, I think we should reflect on whether the large sharing economy platforms such as Uber, Airbnb or Cabify still maintain a commitment to this type of economy, or if they have already lost these initial features of collaborative community. The intentions of the sharing economy are positive: optimize resources for all parties. In this way, we might think that these projects only generate positive externalities, but this is not true. 

The tensions between the VTCs platforms (mainly Uber and Cabify) that occurred in countries such as China, Australia, the United States, Germany or France raise doubts about the absolute goodness of the sharing economy platforms. The desired optimization causes other traditional economic agents to lose. We can identify them as losers of the sharing economy, or in wider terms, «the losers of globalization´´, since there would be no collaborative economy without globalization. This is about the Schumpeterian process of creative destruction: there must be certain losers to let the system improve. Which should be the role of the State in this case? Let the losers perish?

In cities like Madrid, a certain balance between Uber and the sector of the taxi seems to be found. Nevertheless, in my opinion it is only a palliative. In addition, the Madrid Auto-Taxi Association recently revealed that the number of trips had been reduced due to Covid-19, so many taxi drivers no longer had work. In a nutshell, the conflict Cabify/Uber Vs taxi drivers shows a collision of the sharing economy with the bases of our market, and betting only for the first ones might bring the disappearance of the seconds. Therefore, how can we make room for new collaborative economy businesses in our market? I reckon this incompatibility becomes even more growing when we talk about «collaborative giants´´ like Airbnb or the big VTCs. I think the great size of those corporations makes them to lose their values ​​of mutual aid, which, however, were their founding bases. 

Conclusions on the collaborative economy

In conclusion, the collaborative economy was born as a response to a model of overconsumption in which there are many losers. The new initiatives seek to reduce the bad externalities of this overconsumption way of living. However, the change in the habits of society is cracking the foundations of the model of market at various points. That makes us realize that many consumer dynamics were unnecessary, which is fine, but we must be aware of the transition costs to a new model will leave losers along the way. In my opinion, we must make the change towards a model of new sustainable consumption, but without neglecting the losers: the taxi driver affected by Cabify, the clothing store that sell less due to the new Vinted market or the small hotelier that loses customers to the detriment of Airbnb. I consider the State itself must promote the change towards a collaborative economy, as a guarantor of economic progress, but it must also take care of the losers of the collaborative economy, as a promoter of the social. How? Favouring the incorporation of the losers to the new business models gradually and training them. 

The sharing economy is here to stay, and personally I hope that for a long time, but the State with the help of the largest collaborative platforms must favour an orderly transition and with the fewest possible losers. The change is in process: the decision to act is ours.

Sharing Economy is bringing a shift of paradigm in consumption and the economy, creating impact at a global level. Now the most important is to act rapidly and efficiently. As Thomas Friedman states: «When the world is flat, whatever can be done will be done. The only question is whether it will be done by you or to you´´. 

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