The ‘sharing economy’

YOU MAY have seen that post in social media that says: “The world’s largest transport service company owns no vehicles; the world’s largest accommodation provider owns no real estate…” The “transport company” referred to is Uber, and the “accommodation provider” is Airbnb. Both are also, to Filipinos, the most familiar forms of the so-called “sharing economy,” along with their smaller variants.

It’s the age of smartphones and creative apps (techspeak for application software) that has made all this possible. It’s all about a business model built on the sharing of resources, making it possible for consumers to access goods without the need to own them. The model works for items that are costly to buy and own, and widely owned by people who do not make full use of them. Cars and bedrooms have become the most common examples. One can also rent driveway space (as parking spaces) in Canada, camping spaces in Sweden, and even washing machines in France. It’s all about customer interface, or providing a convenient way to connect people who need a product or service with people who have such products or services to share—or, more accurately, rent out.

Uber, the “ride-sharing” app that has upset the taxi industry wherever it does business, was reported to be operating in 300 cities in 58 countries as of midyear. In Metro Manila, it has become the preferred choice of tech-savvy commuters who see it as a safer and more reliable alternative to taxis. It gained wide attention last year when the Land Transport Franchising and Regulatory Board began cracking down on Uber car drivers, for supposedly providing transport services illegally. The concept behind Uber, as in other “sharing economy” business models, is an appealing one: Anyone who can share the use of his/her car can readily hire it out to someone needing a ride, using the app. Member owners/drivers are screened by Uber, while both users and drivers may rate each other so that they can see who have good or not-so-good records as drivers or passengers.

Airbnb (Air Bed & Breakfast), a platform by which people can rent out space in their homes for short-term stays, now has over 1.5 million listings in 34,000 cities and 190 countries. I know many who are avid users, and are able to save significantly over normally much higher costs of comparable hotel accommodations. There is the added bonus of a wider choice of locations and facilities to suit a traveler’s particular needs and tastes. Like in Uber, renters can rate the facilities they hire, while owners can also rate their customers, helping provide information to both sides that could minimize their risks of dissatisfaction. Founded in August 2008, Airbnb has gone well beyond simply renting out air beds and shared spaces that it started with, on to a wide variety of properties including entire homes and apartments, private rooms, castles, boats, manors, tree houses, tepees, igloos, private islands and other properties.

Uber and Airbnb are but two of a growing field of Internet platforms that have turned the concept of sharing into a profitable business model. Apart from the “sharing economy” tag, other terms are used to describe the arrangement, such as “access economy,” “collaborative consumption” and the more technical “peer-to-peer (P2P) networks.” Such models offer a number of benefits, both to individuals and to society as a whole.

For one thing, it is argued to promote greater inclusiveness through improved access to goods for people who otherwise can’t afford buying them. Proponents also cite increased independence, flexibility and self-reliance for both consumers and providers. For example, it has been cited that homeowners struggling to pay their mortgage after losing their jobs to recession have been able to save their homes with incomes due to Airbnb rentals. Economists recognize how it promotes greater and wider competition through decentralization and removal of entry-barriers. Development advocates like the way it enhances stronger communities and increased participatory democracy. And environmentalists welcome how it helps reduce adverse environmental impacts, save costs through borrowing and recycling, and promote more sustainable consumption and production patterns in cities worldwide.

But there are downsides as well. The taxi and hotel industries are obviously aggrieved by the surge in popularity of Uber and Airbnb, and one must worry about the welfare of workers in these industries as well. In Metro Manila, it is suspected that the “Uber phenomenon” may be contributing to already bad traffic congestion. I’ve heard of an instance when a friend who tapped into the app was surprised to find that more than 200 Uber cars were within reach of his office in Makati. Because it has turned out to be so lucrative (some report earning tens of thousands of pesos a month from one car), enterprising Filipinos have been purchasing fleets of cars with the sole intent of operating them with hired drivers via Uber—a departure from its original concept of ride-sharing.

There is also concern that the dominant firms, while promoting more competition within the products of which they facilitate the sharing, are themselves becoming dominant monopolies as tech platforms in their respective areas. As first movers, they have managed to leverage that advantage into massive financing running into tens of billions of dollars, which in turn can scare away potential competitors. It is thus time for an appropriate legal framework that will maximize and widen the benefits of the sharing economy, while providing necessary safeguards to protect overall public interest.

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