sharing economy and its impact - executive m.b.l.-hsg · benjamin, robert i., malone, thomas w. and...

Executive Master of European and

International Business Law of the

University of St.Gallen M.B.L.-HSG

Sharing Economy and Its Impact

Nils Noelle

Supervisor: Christine Schmid

Triesen, 18.07.2017




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Table of Content

Table of Content ...................................................................................................................1

Sources ..................................................................................................................................4

Introduction ...........................................................................................................................8

I. The Rise of the Sharing Economy ...................................................................................9

A. Definition ...............................................................................................................................9

B. Why do we share? ............................................................................................................... 10

C. Sharing in the 21st Century ................................................................................................... 11

D. Gift Economy ....................................................................................................................... 14

E. Micro-Entrepreneurs ........................................................................................................... 15

II. Main Drivers and Key Players .......................................................................................17

A. 6 Main Drivers of the Sharing Economy ............................................................................... 17

1. Technology: ..................................................................................................................... 17

2. Limited Resources ............................................................................................................ 17

3. Social Media ..................................................................................................................... 18

4. Customization .................................................................................................................. 18

5. Low Barriers to Entry ........................................................................................................ 19

6. Urbanization .................................................................................................................... 20

B. 3 Key Players in the Sharing Economy ................................................................................. 20

1. Kiva .................................................................................................................................. 20

2. Airbnb .............................................................................................................................. 21

3. Uber ................................................................................................................................. 22

III. The Economy of the Future ..........................................................................................23

A. Trust .................................................................................................................................... 23

1. Measuring Trust ............................................................................................................... 24

2. Shift of Consumer Trust .................................................................................................... 26

3. Online Trust ..................................................................................................................... 28

B. Rating Mechanisms.............................................................................................................. 29




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C. Interaction ........................................................................................................................... 34

D. Social Belonging ................................................................................................................... 35

E. Branding .............................................................................................................................. 36

IV. Socioeconomic Impacts ............................................................................................39

A. Efficiency ............................................................................................................................. 39

1. Workforce ........................................................................................................................ 39

2. Resources ........................................................................................................................ 41

B. Environmental Consciousness ............................................................................................. 42

C. Competition ......................................................................................................................... 43

D. Increased Standard of Living ................................................................................................ 45

1. Income  ............................................................................................................................ 45

2. Quality and Availability of Employment  ........................................................................... 45

3. Poverty Rate .................................................................................................................... 46

4. Hours of Work Required to Purchase Necessities ............................................................. 47

5. Environmental Quality  ..................................................................................................... 47

6. Trust ................................................................................................................................ 47

V. Challenges of the Sharing Economy .............................................................................49

A. Regulation ........................................................................................................................... 49

B. Micro-entrepreneur vs. Employee ....................................................................................... 52

C. Employment and Social Benefits ......................................................................................... 53

1. Is a Universal Basic Income a Solution? ............................................................................ 55

VI. Sharing Economy 2030 .............................................................................................56

A. Lasting Products .................................................................................................................. 56

B. Personalization .................................................................................................................... 57

C. Improvements in Transparency and Credibility ................................................................... 57

D. Increase in Variety of Products and Services ....................................................................... 58

E. Crowd Regulation ................................................................................................................ 58

F. Social Safety Net .................................................................................................................. 59

VII. Summary and Conclusions .......................................................................................60




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VIII. Appendix ..................................................................................................................61

1. Appendix 1. ...................................................................................................................... 61

Resume ................................................................................................................................67

Statement ............................................................................................................................67




4

Sources

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About Us, Airbnb, https://www.airbnb.com/about/about-us (Retrieved 15.05.2017).

About Us, Kiva, https://www.kiva.org/about (Retrieved 15.07.2017).

Arrow, Kenneth, J., Gifts and Exchanges, ISO 4, 1972, 357.

Benjamin, Robert I., Malone, Thomas W. and Yates, JoAnne Electronic Markets And

Electronic Hierarchies - Effects of Information Technology on Market Structures and

Corporate Strategies, CISR, 1986, 23.

Botsman, Rachel, Evolution of Theories, http://rachelbotsman.com/thinking/ (Retrieved

14.05.2017).

Brown, John S., Byler, Daniel, Hagel, John and Ranjan, Alok, Passion At Work - Cultivating

worker passion as a cornerstone of talent development, Deloitte University Press,

https://dupress.deloitte.com/dup-us-en/topics/talent/worker-passion-employee-

behavior.html (Retrieved 17.06.2017).

Brown, Morgan, The Making of Airbnb, BHR, 2016, 1.

Brown, Morgan, The Making of Airbnb, BHR, 2016, 7.

Bughin, Jacques, Doogan, Jonathan and Vetvik, Ole J., A New Way To Measure Word-Of-

Mouth Marketing, McKinsey Quarterly, 2010, http://www.mckinsey.com/business-

functions/marketing-and-sales/our-insights/a-new-way-to-measure-word-of-mouth-

marketing (Retrieved 16.05.2017).

Crepaldi, Chiara, et al., Minimum Income Policies in EU Member States, European

Parliament, 2017, 42.

Crepaldi, Chiara, et al., Minimum Income Policies in EU Member States, European

Parliament, 2017, 43.




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Davidson, Nestor M. and Infranca, John J., The Sharing Economy as an Urban Phenomenon,

Yale L. & Pol'y Rev., 2016, 218.

Davies, James B., Koutsoukis, Antonios, Lluberas, Rodrigo and Shorrocks, Anthony, The

Global Wealth Report 2016, Credit Suisse AG, 2016, 2.

Dogru, Tarik and Pekin, Osman, What do guests value most in Airbnb accomodations? An

application of the hedonic pricing approach, BHR, 2017, 2.

European Environment Agency, Occupancy Rates Of Passenger Vehicles, 2015,

https://www.eea.europa.eu/data-and-maps/indicators/occupancy-rates-of-passenger-

vehicles/occupancy-rates-of-passenger-vehicles-1 (Retrieved 25.06.2017).

Gansky, Lisa, The Mesh: Why the Future of Business is Sharing, New York, N.Y. 2012.

General Social Survey (GSS), Can people be trusted, NORC At The University Of Chicago,

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Horton, John, Kerr, William R. and Stanton, Christopher, Digital Labor Markets and Global

Talent Flows, Harvard Business School Working Paper, 2017, 16.

Kramer, Bryan, Shareology: how sharing is powering the human economy, New York, N.Y.

2016.

Mencinger, Jože, The Revenue Side of a Universal Basic Income in the EU and Euro Area,

danb, 2015, 159 - 174.

Miller, Fred D., Nature, Justice, and Rights in Aristotle's Politics, New York, N.Y. 1995.

Millward Brown, Environment Research 2015, Tetra Pak, 07.2015,

http://assets.tetrapak.com/static/documents/environment-research-2015-summary.pdf

(Retrieved 30.06.2017).

Murphy, Julia and Roser, Max, Internet, Our World In Data, 2017,

https://ourworldindata.org/internet/ (Retrieved 15.07.2017).




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NationMaster, Motor vehicles per 1000 people: Countries Compared,

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1000-people (Retrieved 15.06.2017).

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http://www.gallup.com/poll/192581/americans-confidence-institutions-stays-low.aspx

(Retrieved 17.05.2017).

Ortiz-Ospina, Esteban and Roser, Max, Trust, Our World in Data, 2016,

https://ourworldindata.org/trust (Retrieved 06.05.2017).

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2017).

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18.06.2017).

Roberts, Jeff J., As “Sharing Economy” Fades, These 2 Phrases Are Likely To Replace It,

Fortune.com, 29.07.2015, http://fortune.com/2015/07/29/sharing-economy-chart/

(Retrieved 12.05.2017).

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Pricing?, UCTC, 1993, 14.

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(Retrieved 10.07.2017).

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(Retrieved 15.07.2017).

Sundararajan, Arun, The Sharing Economy: The End of Employment and the Rise of Crowd-

Based Capitalism, Cambridge M.A. 2016.




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There's a ride for every price and any occasion, Uber Technologies Inc.,

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Wall Street Journal, 28.01.2015, https://www.wsj.com/articles/what-if-there-were-a-

new-type-of-worker-dependent-contractor-1422405831 (Retrieved 20.05.2017).




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Introduction

We are currently witnessing the biggest economic shift since the industrial revolution.

Technology-enabled marketplaces, are allowing for customers to become providers, and

providers to become self-employed micro-businesses, on which the entire connected world can

participate. The advancements in technological capabilities are bringing us back to long

forgotten sharing behaviours within communities. These communities are no longer constraint

by geographical proximity and are becoming more and more global. The apparent need to share

resources is moving people from an ownership oriented society to an on-demand society. This

economic shift to a sharing economy is accelerated by a growing distrust in large corporate

structures, a consumer demand for transparency and personal interaction to one’s business

transactions.

In this paper it will be outlined, how the sharing economy is changing corporate structures away

from hierarchical systems to micro-entrepreneurship. Transactions are moving back to a

personal interaction between seller and buyer with the addition that today, seller and buyer can

rate, share and comment on every step of the transaction. These two sided (seller and buyer)

real-time reviews will ultimately increase the efficiency of all transactions and lead to a higher

standard of products and services. The renewed trust in people rather than corporations will

increase the standard of living and allow people to contribute to the sharing economy from

anywhere in the world.

As the sharing economy is creating a generation of high performing, self-branding micro-

entrepreneurs, it is increasing the standard of living by fostering a renewed sense of trust

in the global community.




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I. The Rise of the Sharing Economy

A. Definition

Many names have been given to the economic phenomenon which we are witnessing today and

which is widely referred to as the sharing economy. Depending on personal preference and

understanding, the terms vary from peer economy, gig economy, on-demand economy, rental

economy to collaborative economy. In 2015, Fortune magazine conducted a study of the most

frequently used terms for the sharing economy in the Washington Post, New York Times and

the Wall Street Journal. It was concluded, that sharing economy is still by far the most

frequently used term. However, the research showed that the terms on-demand economy and

gig-economy are catching up and may one day replace the term sharing economy.1 The term

sharing has been categorized by many as misleading, as the word sharing normally implies an

act without a financial transaction. For reasons of a clear understanding of the terminology, this

paper will only refer to the sharing economy.

Just as there are many different terms for the sharing economy, there is also a variety of different

definitions. Rachel Botsman, a highly renowned expert in the field and co-author of the book

"What's Mine is Yours" defines the sharing economy as:

"an economic system based on sharing underused assets or services, for free or

for a fee, directly from individuals."2

Lisa Gansky, a sharing economy entrepreneur, investor and author of the book "the mesh",

defines the sharing economy businesses (what she refers to as "mesh-businesses") to have the

following four characteristics:

1 Roberts, As “Sharing Economy” Fades, These 2 Phrases Are Likely To Replace It.

2 Botsman, Evolution of Theories.




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"sharing, advanced use of Web and mobile information networks, a focus on

physical goods and materials, and engagement with customers and social

networks."3

Arun Sundararajan, an economics professor and renowned expert of the sharing economy, in

his book "The Sharing Economy" comes to the following five characteristics of a sharing

economy business:

"1. Largely market-based; 2. High-impact capital; 3. Crowd-based "networks"

rather than centralized institutions or "hierarchies"; 4. Blurring lines between

the personal and the professional; Blurring lines between fully employed and

casual labor, between independent and dependent employment, between work

and leisure."4

When referring to the sharing economy businesses in this paper, the following definition is

implied:

"Digital platforms which are providing a marketplace for underused resources

to be shared directly among its members".

B. Why do we share?

Bryan Kramer in his book Shareology emphasises, that "our need to share is based on the

human instinct not only to survive, but to thrive."5 One of the first things a child is taught, is to

share food and toys with others. The sharing of food, information, experiences, jokes and

traditions has always been part of mankind. This is something which can be observed in all

cultures, religions and parts of the world. The first step in establishing a relationship is most

often the act of sharing.

3 Gansky, Mesh, 15.

4 Sundararajan, Sharing Economy, 27.

5 Kramer, Shareology, 5.




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Sharing connects people and gives people a sense of belonging. It shows that one cares for the

other. After all, Aristotle already said "Man is by nature a social animal.”6 Humans share their

information and experiences to build trust in personal relationships. This has and will not

change, only the ways of sharing information and experiences have developed with the

advancements in technology.

Sharing scarce resources within a community has always been part of mankind. Sharing food

from a hunt, lending a tool to a neighbor, sharing one phone line with the neighbor or watching

the world cup final at a someone’s home in the community because the neighbor has color

television, have all been sharing-steps to the ownership-heavy society we live in today. For

many in the developed world, sharing resources has become less significant since the industrial

revolution. This has led to an underutilization of resources, which the sharing economy is going

to reverse. Therefore, sharing cannot be viewed as a new phenomenon. People have always had

the desire to share and with the technological advances, sharing has developed into something

which can be done easier and with a much larger community.

C. Sharing in the 21st Century

With the emergence of social media, sharing emotions, experiences and preferences, has

become digital and can now be broadcasted to anyone in the connected world. According to a

New York Times Customer Insight Group research, the five most frequent reasons for people

to share online are the following:7

1. To bring valuable, enlightening and entertaining content into the lives of

people they care about.

Very much like a real person to person transaction, people want to share content with their

community to educate and to bring joy. People know that sharing a specific content will

establish a closer personal relationship with the members of the community. When sharing on

6 Miller, Aristotle's Politics, 65.

7 New York Times CIG, Why Do People Share Online.




12

social media, people subconsciously ask themselves how they can add value to their community

by either being humorous, educative, critical or supportive.

2. To define themselves

In today’s social media world, what one shares online defines the personal brand. People share

to build their brand in hopes to increase the value of the brand. Personal branding will be

discussed in detail in Chapter III, E - Branding.

3. To grow and nourish their relationships

Social media today is the easiest tool to deepen a relationship. New acquaintances and people

outside of the physical social circle are easily approached. Improved online relationships also

lead to improved relationships in the real world.

4. Self-fulfilment

Being able to transport one’s ideas and interests to other people, gives one a feeling of

satisfaction. People find comfort in the feeling that their story is heard and others

sympathise with them.

5. To get the word out about causes they believe in

Sharing the causes which one feels deeply about and knowing that one’s particular cause

reaches other people which can sympathise, encourages people to share. Social media has given

everyone the opportunity to share their views with the world. This has significant implications

for businesses as well, as people connect and share their experiences in real time. In a survey

conducted for this research paper,8 400 people in the United States were asked: “Do you write

online reviews / share information of your online and offline experiences?” 64.5 percent of all

people answered “Yes”. Individuals living in larger cities appear to be sharing even more

frequently. The research showed, that 73.89 percent of people living in cites with a population

of more than 1 million answered the question with “Yes”. Depending on the age group, the

8 See Appendix 1.




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percentage of people who answered

“Yes” increased even more. From the

people between 25 and 34 years of age,

79.41 percent of people (living in cities

of more than 1 million population)

confirmed that they write reviews or

share information of their online and

offline experience.9 Sharing

experiences with the community on the

internet has become a significant part

of online activity.

One of the first companies to successfully establish a system to quickly and in very basic terms

rate the experiences of a single transaction was eBay. eBay realized that allowing customers to

share information of their experiences will give credibility to their entire platform. When it was

first introduced in 1997, the online marketplace industry was still in its infancy and trust in

online transactions, was still rather low.10 Allowing users to rate their counterparts in a

transaction gave users and especially new potential users the sense of credibility they needed

to "take the risk" and try this new online marketplace.

eBay itself would not fall into the category of a sharing economy business due to the lack of

social interaction as well as the fact that eBay is a platform which facilitates sales rather than

allowing customers to rent out underused resources. Despite the fact that the sharing of goods

or services is not part of eBay’s business plan, eBay was a key door opener to the sharing

economy. It established trust in online marketplaces by introducing a rating system which

provided seller and buyer with instant feedback. Therefore, eBay can be seen as an important

step in the evolution of the sharing economy as it helped people to learn to trust online

transactions and reviews. Whereas on eBay, all transactions and interactions were conducted

9 See Appendix 1.

10 eBay, Our History.

64,50%

73,89%79,10%

0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

70,00%

80,00%

90,00%

Overall Urban Population Aged 25 -34

Sharing Online




14

online and stayed online, the next big step was to bring online transactions to physical

interactions in the real world.

Today, the shared reviews from unknown individuals online establish sufficient trust for people

to consider sleeping on airbeds in stranger’s apartments and gave rise to successful apartment-

sharing marketplaces like Airbnb. The level of “risk” people are taking by staying at a stranger’s

house in comparison to receiving a package from an eBay supplier is much larger. Without

positive previous experiences on online marketplaces, it is unlikely people would be willing to

take the “risk” and stay at stranger’s apartment. Therefore, eBay can be seen as a significant

step for today’s trust in reviews and online marketplaces in general.

D. Gift Economy

The lines between the gift economy and the sharing economy are often blurred as the basic

ideas are very similar. The main distinct ideological difference of the gift economy is to share

without financial compensation within a community. An example of a gift economy

marketplace is Couchsurfing. Comparably to Airbnb, Couchsurfing connects travelers with

individuals who have space to spare that can accommodate travelers. The arrangements are

made through the online marketplace but contrary to Airbnb, there is no financial transaction

involved. The users of the platform can stay at the providing host for free and without a system

tracking on how many nights one is using the platform as the user or provider.

The business model of the gift economy is not to make a financial gain but to benefit from the

social aspects of the online community. Both Airbnb and Couchsurfing providers, share their

personal space with their community. The motivation may differ but the act of sharing scarce

resources with a community is the same. Kiva, is another example of a “hybrid” between

sharing and gift economy. One’s investment on Kiva is not for economic gain but rather to

support others’ personal cause financially, without donating. The investments are typically

small and the investor has no influence of how the money is spent or when it is repaid. The

common denominator in the gift and sharing economy is the personal human interaction within

the community. Given the similarities and the fact that the lines are often blurred between the

sharing and the gift economy, this paper will not make any further distinction of the two.




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E. Micro-Entrepreneurs

Since the industrial revolution, the most common employment structure has been a hierarchical

system in which each employee reports to someone. It is set up like a pyramid, where the CEO

usually stands on top. With the emergence of the sharing economy, this system is going to

change. MIT professors Tom Malone, Joanne Yates and Robert Benjamin already stated in the

year 1987 in their article “Electronic Markets and Electronic Hierarchies”: “information

technology will lead to an overall shift toward proportionately more use of markets - rather

than hierarchies.”11

Analyzing today’s key players in the sharing economy, the prediction of Malone, Yates and

Benjamin appear to become reality. An Uber driver or Airbnb host is functioning similar to a

franchisee of the platform they work with. A share of the revenues from the provider is given

to the platform and in some cases, the platform provides some general education on how to

improve the provider’s micro-business but in general, each provider is working on their own

terms and schedule with the help of the technological infrastructure of the marketplace. The

marketplace does not decide on the intensity of the providers work on the platform, it is fully

up to the provider to decide if they want to host as many people as possible on Airbnb or only

once a year. Uber drivers may only switch on their Uber-app to accept rides when they are in

between other daily tasks or only during rush hour, when the demand is high and the rates are

increased. The micro-entrepreneur decides freely on how they will use the technology the

platforms provide to generate income.

Currently we are still experiencing transactions with rather low complexity but this shift to

micro-entrepreneurship will soon also affect the complex and highly skilled professions. In

recent years, many marketplaces such as the management consulting platform “HourlyNerd”

have sprung up. “HourlyNerd” offers currently over 20,000 independent micro-entrepreneur

consultants to small and large companies. What “HourlyNerd” is in the business consultant

industry, is what “UpCounsel” is in the legal industry; connecting attorneys with potential

11 Benjamin, Malone and Yates, Electronic Markets And Electronic Hierarchies.




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clients through an online marketplace.12 Much like other online marketplaces in the sharing

economy, these online marketplaces provide a transparent view of the individuals which offer

their services. These marketplaces for high complexity tasks are still in its infancy but will

continue to grow and gain in significance.

The barrier into entrepreneurship is significantly reduced due to the online marketplaces. As

the infrastructure is already provided, the costs to get started are minimal and most importantly,

one can start by having their micro-business while remaining employed in the traditional sense,

rather than having to commit fully at the beginning. Moreover, financing has also been affected

by the new online marketplaces which now offer a variety of different crowd-based funding

websites. Often times crowd-based funding is more accessible than bank financing and once a

business is established, the micro-entrepreneur immediately has a global reach and as the

marketing for the newly established business is usually provided by the online marketplace, the

micro-entrepreneur can start operating immediately.

12 Horton, Kerr, William and Stanton, Labor Markets and Talent Flows, 16.




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II. Main Drivers and Key Players

A. 6 Main Drivers of the Sharing Economy

The research of this paper has identified 6 drivers which are impacting the continued growth of

sharing economy businesses:

1. Technology:

Without the mobile internet

technology of today, the

sharing economy would not

have been able to develop

into what it is today.

According to a study

conducted by “Our World in

Data”, the number of

internet users, has risen from

1.1 billion in 2005 to 3.2

billion internet users in the

world in 201513. Sharing economy businesses are built on marketplaces, which use online

technology to connect people, therefore, the growth of the sharing economy is closely

associated with the continued increase in internet users.

2. Limited Resources

With a growing global population, the need to share our resources efficiently is becoming more

and more important. The sharing economy realizes this unavoidable factor and combines the

essential need to share with an additional and continued source of new income. In the last

century, the developed world has achieved a substantial increase in material wealth. This

material wealth is often not used to its capacity as most of the items are not essential for all day-

usage. Many of the sharing economy businesses are using today’s technology to utilize the

13 Murphy and Roser, Internet.




18

underused resources to its full potential. This leads to fewer products needed and a higher

quality of products as the usage will increase. Efficiency and resources is discussed in more

detail later in chapter IV.

3. Social Media

Social media enables efficient sharing of information about goods and services within online

communities. The sharing economy business has realized the value of the sharing of

information. As Lisa Gansky put it "when information about goods is shared, the value of these

goods increase, for the business, for the individuals and for the community."14 More

information provides for a better experience for all involved parties. Companies learn of the

reception of their product or service in real time from the consumer and the consumers can learn

from the experiences from their community.

A McKinsey study found that “word of mouth is the primary factor behind 20 to 50 percent of

all purchasing decisions…its influence will probably grow: the digital revolution has amplified

and accelerated its reach to the point where word of mouth is no longer an act of intimate, one-

on-one communication. Today, it also operates on a one-to-many basis: product reviews are

posted online and opinions disseminated through social networks.”15

4. Customization

People have become more individualistic and are demanding customized products and services.

Sharing economy businesses are built on technology based platforms which allow users to

interact with each other or with the platform directly. The information which these platforms

receive allow for a customized and personalized experience. The data can be used to inform

providers of personal preferences of a user in advance and therefore help to make an experience

more enjoyable. Uber for example may know in advance which music one likes and once a user

enters an Uber, this information will be provided to the driver, which can then play the users

favorite music. The driver will know if the user enjoys conversation or prefers a rather quite

14 Gansky, Mesh, 18.

15 Bughin, Doogan, and Vetvik, Word-Of-Mouth Marketing.




19

driver. This will just be the beginning of personalization, once the different platforms start

communicating with each other autonomously, the user may expect to receive exactly the good

or service the user prefers.

In addition to personalization, the sharing of resources will improve the overall quality of

products. Product manufacturers, who in the past were focused on selling their goods once, will

now shift their focus to renting their goods. The frequency of consumer feedback will allow the

producers to improve their products. If for example, a bike shop sells a bicycle, the purchaser

will most likely not be back in the store until they want to purchase a new bike (if ever). Only

at this point, the bike purchaser will be able to provide feedback on the bicycle. Given the time

which has passed between the purchases, the feedback is not relevant anymore. If the same

store now rents out bicycles, the renters will come back to return it every evening and will be

able to provide the store with accurate and relevant feedback for the store operator to improve

the product and service.

5. Low Barriers to Entry

For the most part, sharing economy businesses can rely on existing infrastructure. Uber did not

have to reinvent a payment system or invent phones with a GPS tracking function before it

could launch its operations. The new sharing economy businesses can rely on existing

technology to provide its goods or services. In addition to the existing infrastructure, good ideas

travel extremely fast and have no geographic limitation. Therefore, growing a successful

business can happen much faster than in the past. Contributing to this is that most sharing

economy businesses do not need any assets, as it is usually the providers which supply the assets

to the business.

For the providers, the barriers are also low, as the assets are usually already in the provider’s

possession. The providers start generating income by using their underused assets with a higher

effectiveness. A micro-business can be started by simply using the existing resources. This is

going to lead to many more people being self-employed and will change the traditional

hierarchical employment structures.




20

6. Urbanization

According to the World Health Organization, in 2014, 54 percent of the world’s population

lived in urban areas, an increase of 34 percent from the year 1960.16 The sharing economy has

been able to succeed predominantly in larger cities. This is largely due to the “proximity,

amenities and specialization”17 that is part of the urban life. People in cities are naturally more

accustomed to sharing, as resources and space tend to be more limited. Furthermore, the

proximity and availability to sharable goods facilitates sharing, as a bigger variety of goods can

be offered and shared more efficiently. In the research conducted for this paper, 91.67 percent

of the people living in cities larger than 1 million people have answered the question “Have

you ever used an online marketplace to purchase and/or sell any goods or services?” with

“Yes”.18

B. 3 Key Players in the Sharing Economy

In the last decade, numerous sharing economy businesses have sprung up and became widely

successful. To highlight a few, this paper looked three different success stories from three

different industries: peer to peer lending (Kiva), ride-sharing (Uber), hospitality (Airbnb).

1. Kiva

Kiva is peer to peer lending platform where individuals, mainly from the developed world, give

micro-loans to individuals, mainly from the developing world. The company was founded in

2005 and prides itself on delivering 100% of the loans to the borrower. Kiva and its operations

are financed purely of donations and no commission is taken from the loans. The loans are

typically a few hundred dollars and go to causes such as a clean water source or school supplies

for children of the borrower. A lender has the option to pick between different categories of

borrowers, from single parents to refugees as well as geographic regions. Kiva operates in 83

16 WHO, Urban growth.

17 Davidson and Infranca, Urban Phenomenon, 218.

18 See Appendix 1.




21

countries, has 2.4 million borrowers, 1.6 million lenders and has so far funded over USD 1

billion.19

Lenders are given the personal stories including pictures of the borrowers and the desired

amount of funding, which appeals to the social aspect. The borrowers have to go through a due

diligence process from Kiva's worldwide network. The due diligence, Kiva's reviews and the

personal stories create the trust for lenders to lend and with that, improve the standard of living

of the borrower. The borrowers pay back this trust with an outstanding repayment rate of 97

percent.20

2. Airbnb

Airbnb, an online marketplace where people can rent out their spare space to travelers, is

currently the largest hospitality platform. It has roughly 3 million listings for users to choose

from, which include entire homes, private rooms and shared rooms. With the 3 million listings

worldwide, it has more available sleeping options than the 3 largest hotel chains combined.21

In just 8 years of operating, Airbnb was valued in November 2015 at USD 25.5 billion.22 It

operates in 191 countries, 65,000 cities and has had 150,000,000 guests since it was founded in

2008.23

The story is simple; Airbnb connects travelers with individuals who have spare space to

accommodate the travelers. Brian Chesky, co-founder of Airbnb described the founding of

Airbnb in a conversation with Arun Sundararajan:

“The motivation for starting Airbnb was to be able to pay rent in October 2007.

I remember I had a rent check that was USD 1,150. Our landlord had raised our

rent. This international design convention was coming to San Francisco one

weekend. All the hotels were sold out. And so we had this idea: what if we turned

19 Kiva, About Us.

20 Kiva, About Us.

21 Dogru and Pekin, What do guests value most in Airbnb accommodations?, 2.

22 Brown, Making of Airbnb, 1.

23 Airbnb, About Us.




22

our house into a bed and breakfast for the design conference. Joe (Gabbia, also

an Airbnb co-founder and apartment mate at the the time) had three airbeds. We

pulled them out of the closet. We called it ‘AirBed and Breakfast’.”24

What started out as quick solution to pay one month of rent, has developed into one of the

biggest online marketplaces. The gravity of the idea to use an internet based platform to connect

people which have free resources of a bed, a room, an apartment or a house, with people seeking

these resources, could not have been imagined by the founders at the time.

Today the transactions are conducted online and the established trust between the parties is

transported to the physical world when the two parties meet to exchange the keys. The provider

gets paid (online) by the user and generates extra income from otherwise wasted resources.

Besides the financial aspect, Airbnb users and providers gain from the personal interaction with

each other. After the transaction, the user and provider get to rate each other. The ratings will

affect future transactions on Airbnb as other users or providers may not accept a counterpart

with a poor rating. Due to this immediate effect on someone's future possibility to transact on

the marketplace, it establishes a higher sense of responsibility for the user and a better service

from the provider.

3. Uber

Uber is an online marketplace which offers a variety of ride sharing services. Founded in 2008

by Travis Kalanick and Garett Camp to help obtain a premium black car with a mobile phone

app, it has developed into a company which operates in over 600 cities worldwide.25 Today,

Uber offers a variety of services, all focusing on transporting someone or something from A to

B. “UberPOOL” for example, is the least expensive option of ride sharing services in the Uber

portfolio, where individuals share their ride with other Uber users. “UberX”, is more like a

traditional Taxi where an individual requests a ride and is taken individually to a destination.

In comparison to a taxi, however, the driver must not be a licensed taxi driver and the car is

likely to be the driver’s personal vehicle. Besides this, Uber also offers a variety of other

24 Sundararajan, Sharing Economy, 7

25 Uber, Our trip history.




23

services in specific regions, such as “UberEATS”, where an Uber provider will deliver food

from a participating restaurant to the user.26

Both the provider (driver) and user (rider) can rate their experience with the transacting

counterpart after the ride. A user may also give the provider specific feedback on what they

appreciated the most or disliked the most from their ride. Uber uses the feedback they receive

from the provider and user, to guide future transactions on the marketplace. According to the

Uber Community Guidelines, both the provider and user can lose the right to access the platform

if their ratings go below a minimum rating. The accountability through the data collection of

reviews by the platform is paired with a screening system conducted by Uber of their providers.

The screening insures that the personal identification of the provider is accurate and that only

Uber-approved vehicles are in use.27

III. The Economy of the Future

A. Trust

Trust is not easily defined; there is a variety of different definitions for trust. When looking at

trust in a business environment, it appears that trust is associated with a likelihood of a positive

outcome. In essence, trusting someone or something, means that a positive outcome is more

likely than not. It is a risk assessment which is conducted by each individual before entering

into a transaction. As Nobel Prize winner Kenneth Arrow pointed out, trust becomes even more

important if it is in a continuous transaction “Virtually every commercial transaction has within

itself an element of trust, certainly any transaction conducted over a period of time.”28

Therefore, trust in the sharing economy is likely to have a bigger impact than in previous

economic systems, due to higher frequency of transactions.

In the sharing economy, trust in the people of one’s community is becoming more relevant

again, as many transactions are conducted on a peer-to-peer level. Similarly to before the

26 Uber, A ride for every price.

27 Uber, Community Guidelines.

28 Arrow, Gifts and Exchanges, 357.




24

industrial revolution, where trust in business transactions was on a local level, mainly based on

reputation within the community one lived in. The communities were small and transactions

happened on a face to face level. Negative experiences in business transactions often led to

social consequences for the individual causing the negative experience. Transacting people

were aware of the accountability of their actions and because of the immediate social

consequences, business transactions and social standing were tightly knitted.

1. Measuring Trust

Measuring trust is equally complicated as defining trust. The “General Social Survey (GSS)”

has attempted to measure trust with a simple question since 1972: “Generally speaking, would

you say that most people can be trusted or that you can't be too careful in dealing with people?”

The statistics clearly show that the number of people which answered this questions with “Can

Trust” has gone down over the last 45 years:

29

For the research of this paper, the questions from GSS was slightly changed to find answers of

how trust is viewed within a communities, as the sharing economy is relying on trust within a

community. 400 People were asked: “Generally speaking, would you say that most people can

be trusted in the community you live in, or that you can’t be too careful in dealing with people

29 GSS, Can people be trusted.

25%

30%

35%

40%

45%

50%

197

2

197

3

197

5

197

6

197

8

198

0

198

3

198

4

198

6

198

7

198

8

198

9

199

0

199

1

1993

1994

1996

199

8

200

0

200

2

200

4

200

6

200

8

201

0

201

2

201

4

201

6

Trust in People




25

from your community?” 56.25 percent of all people asked answered this question with “Most

people can be trusted in my community”. This indicates that the trust in community is larger

than trust in people in general. Furthermore, trust in the community seems to be stronger with

68.24 percent of the male population, answering “Most people can be trusted in my

community”.30

To compare the trust between physical and online communities, the following question was

asked to the same 400 individuals: “Generally speaking, would you say that most people can

be trusted in your online community, or that you can’t be too careful in dealing with people

from your online community?” Out of the 400 individuals, 39.50 percent answered “Most

people can be trusted in my online community”. While there is a difference of roughly 15

percent between trust in online and physical communities, in comparison to trust in people (GSS

study), the community appears to be a significant factor to increase trust. Similarly to the

question of trust in the physical community, the male participants seem to trust the online

community more than the female participants, answering the question “Most people can be

trusted in my online community” 54.12 percent.31

Additionally, education appears to influence the level of trust in both online and physical

communities. Of the participants with a University degree 70.51 percent answered that most

30 See Appendix 1.

31 See Appendix 1.




26

people in their community can be trusted and 53.85 percent answered that most people in their

online community can be trusted. Furthermore, the data shows that trust in online communities

is increased by experience in the online community. People who answered, “Have you ever

used an online marketplace to purchase and/or sell any goods or services?” And “Do you write

online reviews / share information of your online and offline experiences?” with “Yes”,

indicated 44.08 percent that most people in their online community can be trusted. Of the

individuals who answered the two above listed questions negatively, and therefore have less

experience in the online community, 80 percent answered that “You can't be too careful with

people in my online community.”32

2. Shift of Consumer Trust

With the emergence of the industrial revolution, the close association between trustful business

transactions and social standing changed. Many transactions were no longer conducted on a

face to face basis and the source of trust shifted from the individual to a corporation. The

reputation of the corporation started to matter more than the trust in the individual as individuals

were now part of corporations and could no longer easily be held socially accountable with their

reputation. The reputation of a corporation was often associated with size, as it gave the

individuals comfort by knowing that many others transact with this large corporation as well.

In addition, more and more transactions were accompanied with legal contracts to assure

individuals that in case something did not go right, they have a legal document with which they

can try to hold the company accountable.

In the current phase, trust again, is being established within a community. This time, however,

it is a community with global reach, where individuals do not need to meet face to face to

establish trust. People’s personal experiences with a specific service or good, facilitate trust

within others. It may be the social community on social media or the community on a specific

marketplace which enables people which are new to the product or service to trust it. Knowing

that if the risk assessment of trusting was wrong, the individual with whom the transaction was

conducted, can be held liable through reviews and ratings. Personal accountability creates trust

32 See Appendix 1.




27

and reduces the desire for contractual agreements, as all parties involved know the

consequences they might face if one does not hold up one’s end of the bargain.

With the emergence of online technology, the ability for corporations to create their own image

and own reputation with little influence from their customers has been changing. Lisa Gansky

describes this shift of power as:

“Earning and maintaining the customer’s trust has always been important in

business. But social and mobile networks have changed the equation, tipping the

balance of power considerably toward the customer. In our highly connected

world, practically speaking, a brand is defined more by how people experience

it, and what they say about it, than what the company says about itself.”33

People trust their peers more than they trust the corporation and the role in which the

corporations sees itself. Businesses are adapting to this but the businesses which are positioned

in the sharing economy have a distinct advantage in the form of accountability. Once trust is

established, users are more likely and willing to try out new services from the same provider or

marketplace. Trust continues to grow with each positive transaction.

The consumer trust in large, traditional corporations has declining steadily in the last decade.

According to a study on the “Confidence of Institutions” by Gallup in the United States, the

confidence in banks and big businesses remain low (Gallup).34 The consumer trust in elites has

shifted away from large corporations to trust in a community. Being able to relate to the

individual which is establishing one’s trust has proven to be a key facilitator in a time where

consumers seek transparency and accountability for the transactions they make. The sharing

economy is now transferring the trust established online to the physical world in a way where

consumers and providers use the trust established by the community online, to interact

physically in the real world.


34 Norman, Confidence in Institutions Stays Low.




28

3. Online Trust

According to Arun Sundararajan, there are five elements for people to trust online marketplaces:

“(1) from one’s prior interaction; (2) by learning from the experiences of others;

(3) through brand certification; (4) by relying of digitized social capital; and (5)

through validation from external institutions or entities, digital and otherwise,

government and nongovernement.”35

According to Sundararajan, prior transactions may also refer to similar platforms which have

been used in the past. If one has previously transacted on an online marketplace and has had

positive experiences, one is more likely to “risk” trying a new platform if the general feedback

from his online community is positive about the platform. In addition, one needs to be

convinced of the idea behind the marketplace and must feel that being associated with this brand

is positive rather than negative. Today it is as easy as signing up to Uber or Airbnb and become

part of growing and successful business.

Sundararajan also believes that brand recognition remains an important aspect when making a

trust assessment. This brand recognition may no longer come from the number of employees,

the stock market price or the flashy advertisements but more and more from the amount of

reviews and positive feedback people receive from their community. Lastly, according to

Sundararajan, people look for validation that the person they are transacting with really is who

they claim they are and that they are legally allowed to perform the transaction. The successful

sharing economy businesses provide this by requiring ID checks (Airbnb) or driver’s license

and insurance check on Uber. These platforms use digital technology to verify government

issued documents, where users simply have to hold their document into a mobile phone camera

and a program verifies its authenticity. Being transparent about their ways of confirming their

providers, adds additional trust to the community.

35Sundararajan, Sharing Economy, 61.




29

B. Rating Mechanisms

In the sharing economy, the users as well as the providers are rated on their transactions.

Typically, it is not only a general rating of the performance but a specific rating for each step

of the transaction. This generates feedback for both sides and allows one to improve their

performance in the areas where it is lacking. If an Uber driver receives good reviews for the

driving performance but never for the conversation with the user, the driver will know exactly

in which area further improvement can be made. Knowing that reviews are the main driver to

obtain new business, providers will need to take ratings serious in order to become or stay

successful in the sharing economy.

Especially in the early stages of a provider, good reviews are crucial to become established in

the market. Many users will shy away from trying a provider with no reviews, especially on

platforms on which the user will have a very personal interaction, such as on Airbnb. Before

the initial personal rating is established, the provider needs to rely on the reputation of the online

marketplace and the trust that users of this online marketplace have established from previous

transactions. A new user of the marketplace is unlikely to pick a new provider with no reviews

as there are no experiences from others in the community which would facilitate trust.

Therefore, the existing users which fully identify and have established sufficient trust in the

marketplace are vital in helping new providers to establish a rating history. However, if, the

early ratings of a provider are negative, it is likely that they will not be able to recover and

become successful micro-entrepreneur. An early negative rating may hinder the provider to

transact further on the marketplace or will result in the provider having to lower their price. In

comparison, a provider with many positive ratings will not be hurt as much by a negative rating

as the users may question the credibility of the one negative rating or will still come to a positive

risk assessment, as the overall performance is still positive.

To prove the theory of trust based on the amount of reviews, a simple question was asked to

400 individuals:




30

263 out of the 400 individuals asked, picked “Breakroom” because of the rating. The rating of

“Breakroom”, however, is the same as “Trapazzino’s” rating (4.5 stars), the only difference is

the amount of reviews the two have received. The 1138 “Breakroom” reviews appear to

establish more trust than the 42 reviews “Trapizzino” received and consequently, “Trapizzino”

only received 8 percent of the total participants picks (based on ratings). Participants with a

higher level of education (University), picked “Breakroom”, based on the rating, at an even

higher rate of 82.05 percent.36

This research appears to prove that trust is strengthened by the experiences of many people.

The same logic may be applied to micro-entrepreneurs and businesses, the ones with many

reviews appear to have a distinct advantage over micro-entrepreneurs or businesses with a few

reviews. In addition to being able to overcome a few bad reviews, it is in the interest of the

provider to receive as many reviews as possible to establish credibility and trust. Many

businesses have therefore been encouraging their customers to provide feedback through

reviews. The practice of providing reviews has been especially successful in the sharing

economy, as the individual rating the goods or services is aware of the direct consequences for

the provider or user. With traditional businesses, the impact of a rating is often not very

transparent, as it is likely that only a positive result of rating or survey will be published. This

has opened a market for third-party rating platforms, which promise transparency and allow for

a consolidated overview of ratings in a specific industry or geographic region.

36 See Appendix 1.




31

Ratings often also establish a social profile of a provider on an online marketplace, which helps

the user to identify before transacting, if based on the social profile, the transaction is likely to

be pleasant. As many different steps in a transaction are rated, the user can see exactly where

the provider has high scores and determine if these components match the user’s preferences.

A ride sharing user which is using the service to get from A to B, who also has a strong interest

in meeting new people and establish a relationship beyond the online community is unlikely to

pick a provider which has a record of not interacting much during the car ride. On the other

hand, a user which wants to get some rest on the ride, is likely to look exactly for someone

which keeps to himself during the shared ride. The ratings establish a social profile which

allows the user to find exactly what they are looking for and limits the surprise factor.

To find out whether ratings affect the price a user is willing to pay for a service, a simple price

premium assessment question was put to the participants of the survey conducted for this paper:

The result shows that people are willing to pay more if the previous experiences of users have

been more positive. Only 22 percent of the participants were willing to pick “Tom”, who was

offering the same service as “Adam” for $ 3.00 less expensive.37

To find out at what price the participants which decided to go with “Adam”, were willing to

consider driving with “Tom”, the following follow up question was asked:

37 See Appendix 1.




32

“At what price would you consider taking a ride with Tom instead of with Adam ($ 15)?”38

A If Tom charges $ 11 D If Tom charges $ 6

B If Tom charges $ 10 E Never

C If Tom charges $ 8

39

As shown above, the result indicates that there is a sensitivity to price as the majority of people

asked, would consider taking a ride with Tom if he lowered his price. Nevertheless, almost 30

percent would not consider taking a ride with Tom at all. This proves that a poor rating will

naturally exclude providers from the market, either by having to perform with uneconomical

prices or by simply not getting any business at all.

Therefore, from an economic standpoint, the rating systems lead to a higher economic output

as providers and users suffer consequences or rewards from the ratings. Naturally, this leads to

a higher efficiency and a higher quality product or service. The ratings lead to a natural selection

38 See Appendix 1.

39 See Appendix 1.

9,94%

20,83%

15,38%

25,00%

28,85%

0%

5%

10%

15%

20%

25%

30%

35%

If Tom charges $ 11 If Tom charges $ 10 If Tom charges $ 8 If Tom charges $ 6 Never




33

of the high performers which are pushing out the lower quality providers. In traditional

businesses, without rating systems, the higher performing workers are often rewarded with

promotions or they decide to leave the job as they feel their efficient work is not adequately

rewarded. This leaves the low and average performing workers behind, who are not efficient

and good enough to be promoted or find better paid opportunities elsewhere.

When applying the example of “Tom” and “Adam” to a traditional businesses model, where

the individual performance is not rated, “Tom” and “Adam” would be getting paid the same

amount for the same work they do (bringing people from A to B). Adam is, however,

performing much higher than “Tom”, therefore “Adam” will seek opportunities to be rewarded

for his higher performance. “Adam” may be promoted or decide that his high performance will

be more appreciated in the bus industry and become a bus driver. “Tom” on the other hand will

stay in the taxi business and will continue to drive people with his average service from A to B,

as he feels he is being sufficiently compensated for his average performance and knows that he

has no other opportunities (promotion or leaving the industry like “Adam”). This leads to an

industry of average performers. Therefore, the peer to peer transactions in the sharing economy

will increase the quality and service dramatically.




34

C. Interaction

As illustrated in the graph above, interaction is one of the key elements in the sharing economy,

for the marketplace, the provider and the user. Successful sharing economy businesses

encourage constant feedback to give the consumer a feeling that their opinion is appreciated.

To remain successful, it is crucial to use the collected data from the users and providers to

continue the development of the product or service. A process, which Gansky describes as

“Learn. Test. Play. Engage. Rinse and repeat.”40 The sharing economy businesses are

advantageously positioned to learn from its customers as the business model is largely build on

sharing existing resources more efficiently. This means that transactions happen much more

frequently than in a traditional business, which is based on the selling of a product or service.

Each transaction is a chance for the provider and online marketplace to find out exactly what





35

the customer wants. Technology allows for the online marketplaces to use this data to make

assessments on trends and specific sectors which need improvement.

The many transactions in a sharing economy business also allow for providers and marketplaces

to make up for mistakes immediately. A car sharing platform which receives data that a pickup

took much longer than anticipated, may (automatically) send the user the traffic report and

explain with details why the delay occurred. The platform may offer a discount on the next ride

or other benefits to make the user feel appreciated. The advantage of this pro-active approach

is to speak to the user on a personal level with data which is specifically based on this user’s

experience. To create a feeling that the user and the online marketplace are part of the same

“team”, with the same goals and aspirations rather than a large corporation which is talking to

its “small” consumer. This further establishes a feeling of a personal interaction, similar to an

apology from a friend who was late for an arranged meeting.

As most sharing economy businesses have been “growing up” and benefited extensively from

social media, they are very aware of the power social media has. A negative interaction with a

business before the emergence of social media may have resulted in one informing the local

community of the bad experience and was likely to impact a few people of the inner circle of

the individual. Nowadays, in the social media era, a negative interaction, especially when the

balance of power between customer and business is unequal, may result in breaking news which

spread around the world. The impact is likely to be much larger as it no longer needs to be

someone from one’s close geographic community to break another person’s trust of a business.

Given the awareness of the power of social media, many sharing economy businesses have

developed a sense of community through interactions so that possible issues are more likely be

taken care of “internally” between user, provider and sharing economy business, as it would be

done in a family or other close organization.

D. Social Belonging

The interaction between the sharing economy businesses, the providers and users creates sense

of social belonging. Everyone involved feels like they are an equal part of the success of the

business. This contributes to a different approach in transacting as there is more trust between




36

the parties and a sense of togetherness. Mistakes are forgiven much quicker as people are more

sensitive to the consequences of their actions. Especially since most transactions are conducted

on a person to person level, people have a greater understanding for imperfections. It becomes

more difficult to criticize a person in your community which one has met and transacted with

personally for a minor mistake. In comparison, criticizing a faceless corporation for not

delivering a service or product to perfection is much easier as one cannot empathize with the

consequences.

When belonging to a group of people which has the same ideology, one is likely to be more

sensitive to their behavior in the group. A user of Airbnb might feel the need to clean up after

themselves when staying at a provider’s place because they have met the provider personally

and because they belong to the same community. If the same individual stays in a room at a big

hotel chain, it is likely that the feeling to have the need to clean up after oneself is non-existing

as there is no personal relationship between the hotel and the user. Of course, the fact that a

guest is rated on Airbnb may also play a role but the feeling of belonging and being able to

empathize with the provider is an important aspect for the different behavior.

Today, it is easier than ever to become and belong to a successful community and to participate

actively in the success and growth of the community. As soon as one believes in the ideas of a

specific online marketplace, one can sign up and participate. Whether it is as a user or provider,

one can immediately belong to the community and influence the further development of the

business.

E. Branding

Once someone is part of a community, one tries to establish their position within the

community. This is true for on-and-offline communities and starts as early as primary school,

when children start to develop their identity and make conscious decisions of how they would

like to be seen by their classmates. Children make the decision of the role they want to play

within their community. With the emergence of social media, personal branding has become

even more significant as people always have to ask themselves, do I share this story? do I like

this picture? is the action I take in alignment with the “brand” I am trying to create for myself?




37

Bryan Kramer, in his book Shareology describes the connection between belonging and

branding as follows:

"We [also] care about what others think of us because we need to connect with

them and belong to a tribe, and to do this we need to align ourselves with other

humans. In the marketing world, this is branding. And as humans, because

technology has empowered us to share with our global tribe, it's never been more

important to treat ourselves as a personal brand."41

In the sharing economy, the brand one creates for oneself can make or break the micro-

entrepreneur’s business success. Individuals are brands and these brands need to be marketed

to succeed in a competitive environment. A research conducted for this paper proved the

importance of a successful image online. 400 People were asked:

“Do you make a conscious effort to have your online persona appear in a favorable way?”42

79.75 percent of all participants answered the question with “Yes”. Out of the people who

appear to transact online more frequently (Participants who have answered the following two

questions with “Yes”. 1. Have you ever used an online marketplace to purchase and/or sell any

goods or services? 2. Do you write online reviews / share information of your online and offline

experiences?), 88.16 percent answered the question confirmative.43

To find out exactly of how much importance the online appearance has for the professional life,

an additional question was asked to all 400 participants:

“How would you rate the importance of your online appearance for obtaining / maintaining a

job?”

41 Kramer, Shareology, 9.

42 See Appendix 1.

43 See Appendix 1.




38

44

The result shows that over 80 percent of all participants believe that the online appearance is at

least of average importance. Over 55 percent believe that the online appearance is either

essential or at least very important for maintaining / obtaining a job. The research further

suggests that the education of the individuals contributes in this assessment. The individuals

from the survey with university education rated the importance higher than the average.

45

44 See Appendix 1.

45 See Appendix 1.

8,00% 8,50%

26,75%

38,25%

18,50%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Not Important At All Of Little Importance Of AverageImportance

Very Important Absolutely Essential

8,00% 8,50%

26,75%

38,25%

18,50%

3,23% 4,30%

23,66%

47,31%

21,51%

0%

10%

20%

30%

40%

50%

Not Important At All Of Little Importance Of AverageImportance

Very Important Absolutely Essential

All University Education




39

The online appearance of the personal brand is likely to continue to grow in importance and

become an asset or liability for participating in the market.

IV. Socioeconomic Impacts

A. Efficiency

1. Workforce

In the sharing economy, the user is constantly providing the platform and provider with

feedback and data. This interaction with the user allows the provider and platform to spot trends

and customer preferences which provide information on how to improve the product or service.

Besides the competitive advantages this brings over traditional businesses, this leads to a more

productive interaction with the users in the future. The providers have the information and data

to conduct transactions exactly how the counterpart desires. The collected data from continued

interactions also allows for the marketplace to analyze the performance of the provider and the

user, which allows for a selection of the high performing, efficient users and providers. The

platform can then impose “sanctions” and “rewards” for their categories of providers and users

to push out the low performing and incentivize their high performing. For instance, a ride

sharing platform can delegate more work to drivers with positive reviews and a clean driving

record and therefore, slowly push out the lower performing drivers. Similarly, platforms may

give users a faster access to a ride or costs incentives if they have a good track record. The

collection of data through continued interactions encourages provider as well as users to

become more efficient, as the performance is measured and may result in rewards or

consequences.

As established, a micro-entrepreneur in the sharing economy requires less capital to start their

own business as in a traditional business environment. The sharing economy allows for people

to follow their passions without having to commit to large investments, as micro-entrepreneurs

usually build on existing resources. According to a study by Deloitte, 87.7 percent of the US-

workforce does not contribute to their full potential, as they are lacking the passion for what




40

they do.46 Following one’s passion in the hospitality sector no longer requires investing in a

property, which can be rented out as a hotel; one can start with renting out the existing spare

bedroom to see if the passion is strong enough to pursue it full time. Etsy, a retailing platform

is allowing providers to follow their passions by providing online stores for handmade goods.

Etsy connects 1.8 million sellers with 29.7 million buyers’ worldwide with their mission to

“reimagine commerce in ways that build a more fulfilling and lasting world, and we're

committed to using the power of business to strengthen communities and empower people.”47

It provides the tool for people to follow their passions and increase their standard of living at

the same time. The provider creating handmade sweaters on Etsy is unlikely to be able to

compete with a large clothing-manufacturing factory on price and efficiency, however, this

individual is likely to be more efficient in their new occupation as than working in a job, for

which they do not feel passionate.

Additionally, we are currently witnessing a shift away from the regular “nine to five job” in a

manufacturing facility or office. Already today, many jobs offer the flexibility to work away

from the office and the manufacturing jobs are decreasing steadily due to the improvements in

automation and technology. It appears that the future work will be project specific, where one

product or service is split up in many different steps, which will be outsourced to individuals

participating in the market. More and more complex tasks will be distributed through online

marketplaces to specialized micro-entrepreneurs. “Spare5”, a marketplace that allows users to

literally “spare five minutes” to complete small and simple tasks via their smartphone, in return,

the user will be paid for the five minutes they could spare. These platforms will continue to

grow and tasks will become more complex as it is helping companies to outsource tasks for

which they would traditionally had to hire staff. .

46 Brown, Byler, Hagel and Ranjan, Passion At Work.

47 Etsy, About Etsy.




41

2. Resources

A vital part of the sharing economy is to use existing resources more efficiently. According to

Lisa Gansky, “Waste represents the underutilization of existing resources” and with “the

density of consumer information they marketplace receive enables them to manage resources

(and waste) efficiently, regularly and well.”48 Gansky sees underused resources as waste and

believes that the sharing economy will be able to reduce the current waste of resources. With a

growing worldwide population, using resources efficiently will soon become vital for the

continued prospering of mankind. An example of the need to use resources more efficiently is

the motor vehicle industry. Currently there are over 1 billion vehicles in use in the world.49 In

many places in the world, this has the consequence of over congested streets and pollution,

especially in larger metropolitan areas. When looking at the percentage of vehicle ownership

per person around the world, it quickly becomes evident that it will not be sustainable for

developing nations to achieve the same high ownership percentages as we currently have in the

developed world.

50

To analyze this, a comparison of the ten largest countries by population was made. The United

States stand out with almost 800 vehicles per 1000 people. Most of the other countries on this


49 Statista, Number of vehicles in use worldwide.

50 NationMaster, Motor vehicles per 1000 people.

0 100 200 300 400 500 600 700 800 900

China

India

United States

Indonesia

Brazil

Pakistan

Nigeria

Bangladesh

Russia

Mexico

Vehicles per 1000 people




42

list can be considered developing countries with a growing population and appetite for

improvements to their standard of living. If these countries strive to achieve a similar density

of vehicles as the United States, even with improvements in road infrastructures, it would most

certainly not be sustainable.

Considering that the average vehicle in the United States is parked 95 percent of the time, there

is also no necessity to achieve the same density.51 Sharing economy platforms will provide

users with efficient tools, which decrease the convenience of ownership for vehicles.

Furthermore, the most recent research of the European Environment Agency shows that the

occupancy rate per vehicle is only 1.45, including the passenger (survey conducted in the United

Kingdom, Germany and the Netherlands).52 This additional “waste” of empty seats will also be

tackled by the continued emergence of the sharing economy. Already today there are sharing

economy applications which try to solve these insufficiencies. “Lyft” allows users to see if there

are any other people traveling the same route and “Getaround” allows users to see which

vehicles are currently unused in the area.

B. Environmental Consciousness

According to a study conducted by market research company Millward Brown for Tetra Pak in

2015, there has been a steady increase of consumers looking at environmental information of

products they purchase. Similar increases are observed for consumers avoiding a specific

product or brand because of environmental concerns. Two-thirds of the 6000 people, which

were asked across 12 different countries, stated that they purchase environmental friendly

goods, even if they are more expensive.53 The environmental consciousness is influencing the

consumers purchasing decisions as people are seeking a lifestyle which is more sustainable.

The sharing economy is ideally positioned to benefit from this change in consumer behavior as

it is built on reusing resources over and over and sharing them with the community, decreasing

the need for ownership. Ideal products for today’s sharing economy are durable with a long

51 Shoup, Cashing out Employer-Paid Parking, 14.

52 European Environment Agency, Occupancy Rates Of Passenger Vehicles.

53 Millward Brown, Environment Research.




43

life-span and therefore can be used longer and more efficient before having to be replaced. This

is a change to the recent past, where many products were produced to be inexpensive and with

a shorter life span to be consumed and replaced within a rather short period of time. This of

course causes a variety of different negative consequences for the environment, as more needs

to be produced, shipped and disposed of.

As people are demanding a more environmental friendly product, the criticism of brands which

do not contribute to this has risen. More and more people are feeling the direct effects of climate

change and do not want to be associated with a company that due to its environmental policies,

contributes to it. This leads to an increased reputational risk for companies, which appears to

be more significant in non-sharing economy businesses due to the lack of community and

belonging to an organization. Additionally, the transparency that sharing economy businesses

provide to its users and providers leaves little room for negative surprises on environmental

issues. Especially considering that many sharing economy businesses have popped up to tackle

underused resources and therefore diminish waste production.

C. Competition

The sharing economy is increasing competition. Micro-entrepreneurs are competing with

established companies through their goods and services. A common misconception is that this

competition will drive down the wages of all workers in the industry. A study

by Arun Sundararajan, in which he compared the wage rates of providers on labor platforms

with wages which have been observed by the United States Bureau of Labor Statistics, conclude

that his:

“findings have consistently suggested that workers can generally expect to earn

more per hour getting their freelance assignment through a digital labor market

than by seeking it through traditional channels, even after they pay the platform

its commission.”54

54 Sundararajan, Sharing Economy, 168.




44

However, there are certain jobs which show a lower hourly wage. All these jobs do not require

the provider to be “on site” to perform the task (e.g. web design, computer support, writing and

editing). With these jobs, the local providers are now competing with professionals

from anywhere in the world. The local web designers (in Sundararajan’s study from San

Francisco) are experiencing a (small) decline in hourly wage. The small decrease in hourly

wage in San Francisco, in return means an increase in other parts of the world. This sets a global

standard for this specific task and providers from the developing world, with the same

skillset and experience, will now be able to make the same hourly wage as the web designer

located in San Francisco.

In most of the sharing economy businesses, the competition is still local as usually expensive

physical assets are shared within a community. Slowly, however, we are experiencing more and

more micro-tasks which are shared with a community. Just as in Sundararajan’s study, web

design is one of the tasks, which does not require a physical presence. People from all over the

world can participate in these micro-tasks and therefore be able to contribute to a global

competition. This will lead to worldwide standards for certain tasks and to less exploitation of

labor in less developed regions of the world. Including parts of the world which before were

excluded from participating in the economy due to the geographical constraints, will lead to the

emergence of new ideas and approaches, which will benefit the overall economy.




45

D. Increased Standard of Living

The sharing economy is going to increase the

overall standard of living worldwide. An increase

in standard of living can be achieved by many

different factors. The research of this paper shows

that particularly the following drivers will increase

through the rise of the sharing economy.  

1. Income 

The research by Sundararajan has proven that

competition from sharing economy businesses will

increase the hourly wage. In sectors where physical

presence is not necessary for producing a service or

good, a worldwide standard will be set. This may

lead to a wage reduction in some parts of the

developed world, but significant increases in

others. Furthermore, people will use their "wasted"

resources to generate additional cash flow from

existing assets.

2. Quality and Availability of

Employment 

The sharing economy will open up the economy to

individuals who may have been unable to

participate before. People from all parts of the

world will be able to participate in projects and

offer their services and goods to individuals around the world. The sharing economy is lowering

the barriers to entry significantly which will empower more people to start their own micro-

businesses. With ease, an unemployed person can sign up to Uber and / or Airbnb and start

offering their services. Individuals from the developing world may use a loan from Kiva to start




46

their business or fund their education for improved working opportunities later

on. Furthermore, the sharing economy offers employment possibilities for individuals who are

not specialists in the specific profession. It is oftentimes not the prior experience or education

which counts in the sharing economy but the response from the users. Therefore, a coal miner

that lost the job due to the reduction in coal mining is now not excluded from the workforce.

This individual now has the opportunity to offer their handcrafted items on Etsy, drive an Uber

or become a landlord with Airbnb with no significant prior skills needed.

3. Poverty Rate 

According to the Credit Suisse Wealth Report of 2016, the inequality of wealth continues to

grow. The wealthiest top 10 percent own 89 percent of all global assets.55 The sharing economy

will narrow the gap between the rich and the poor as the poor are becoming less dependent on

the rich. Due to the disappearance of the hierarchical structure to a peer to peer transaction

structure with fixed marketplace-platform fees, the less fortunate can now obtain a fair price for

their goods and services. Only very little requirements need to be fulfilled to participate in the

sharing economy and with continued growth of high speed internet, less fortunate

people around the world will be able to participate as users and providers.

The sharing economy allows for less wealthy, to compete with the wealthy and become

investors themselves. With very little capital, anyone can now buy shares or give loans to

companies in which they see potential, something which used to be the privilege of the wealthy,

similarly to the housing market, where the less wealthy traditionally rent from the wealthy.

With Platforms like Airbnb, a tenant can now easily become a landlord. Sharing in general is

more likely to occur between the lower income sector as the wealthy may not want to sacrifice

ownership and immediate access to all their belongings. Therefore, especially the lower income

people will benefit from the continued growth of the sharing economy.

55 Davies, Koutsoukis, Lluberas and Shorrocks, Global Wealth Report.




47

4. Hours of Work Required to Purchase Necessities 

The sharing economy will set global standards for goods and services. This will especially

benefit people in regions with lower income standards as they may now compete for the same

price as people in higher income regions. Additionally, sharing economy businesses allow for

income on already existing resources. Being able to share assets that are not used to its full

potential in an easy, efficient and non-time consuming way, will increase income

disproportionally to the time spend working.

5. Environmental Quality 

Sharing resources will dramatically increase the environmental quality. As illustrated in chapter

IV, 2 "Resources", the growing population forces us to use our resources more efficiently.

Many nations need to drastically counter the low environmental quality in order to see

continued growth, especially in developing nations; we see the need to come up with solutions

to reduce pollution as it has a significant impact on the health and standard of living of the

population. The sharing economy will contribute to counter the problem with poor

environmental quality, as it gives the participants a financial reason to be

more environmentally friendly.

6. Trust

In general, trust in the community and in people has a positive effect on the GDP per capita. A

study conducted by the World Value Survey showed a correlation between the GDP per capita

of a country and the people who agreed with the sentence "most people can be trusted".




48

56

As established by the research for this paper, trust in the online community appears to increase

with more online experience. This suggests that with an increasing availability of sharing

economy platforms, the trust will increase in the online community, which will in return have

a positive effect on the GDP per capita.

56 Ortiz-Ospina and Roser, Trust.




49

V. Challenges of the Sharing Economy

A. Regulation

Many sharing economy businesses have faced legal struggles for a variety of reasons over the

last few years. As many of these platforms operate globally, the law may be different from

country to country or even city to city. Airbnb, for example, has been facing legislative issues

from different governments and special interest groups as well as a variety of different problems

with users and providers. Part of Airbnb’s success is that they have managed to proactively

respond and therefore overcome many of the issues, especially with their users and providers.57

Similarly to Airbnb, Uber has also faced a variety of different legal challenges around the world.

Recently, the platform was even forced to shut down their operations in Denmark. Despite

efforts by Uber, they did not manage to convince the majority of the government to do the

necessary amendments to the law which would have provided for Uber and other ride-sharing

applications to operate.58

Throughout the legal struggles in the sharing economy, one aspect appears to be most

significant; the current legal system is not equipped to accommodate micro-entrepreneurs. The

employment status of the providers appears to be the most significant regulatory problem the

sharing economy is facing today. The lines of the employment status of providers are

increasingly blurred and legal systems around the world are struggling with questions of where

to place providers in their existing employment structure. Does the platform need to pay the

provider the minimum hourly wage? Provide health insurance and pay into retirement funds? If

this is the case, what happens if someone spends two hours on “spare5” a day, rents out a room

in his or her apartment for profit 60 percent of the year and occasionally drives on Uber?

It is apparent that most of the world’s employment laws do not provide an answer to these

questions, as they are built for traditional part time or full time employment. Most sharing

economy platforms are designed to facilitate independent micro-entrepreneurs in using the

57 Brown, Making of Airbnb, 7.

58 Skydsgaard, Uber to end service in Denmark.




50

platforms technology to provide their services or goods. However, these providers receive

support from the platforms for their economic activity, which raises the questions, where does

employment start and how distant do the micro-entrepreneurs need to be from the platform to

qualify as micro-entrepreneurs? A common point of criticism of sharing economy platforms is

that they use their providers as employees but forego the obligations employers have for their

employees. This may be true when trying to fit the providers into the current, traditional

employment structure where one employer has many employees working for him, however, the

sharing economy providers cannot be forced into the traditional system and need to be

considered for a new employment structure. As this is one of the key threats to the sharing

economy, many businesses try to distance themselves as much as possible from the providers

to avoid being legally considered as an employer, which in return decreases the effectiveness

of the providers.

Another issue that results from the rise of the sharing economy, are the obligations of the micro-

entrepreneur. Does someone who rents out his spare bedroom from time to time on Airbnb and

drives an Uber after work, have the same regulatory obligations as a taxi company or be held

to the same rules and laws that apply to a hotel? Because of the lack of interaction, feedback

and accountability for companies, governments around the world had to implement laws and

regulations for safety standards. In the sharing economy, a lot of this government supervision

is replaced with customer feedback and accountability within a community. An Uber driver

may not have taken an extensive exam to become a taxi driver but in comparison to a taxi driver,

reckless driving, not having a clean vehicle or simply poor service will lead to consequences

and ultimately will prohibit the Uber driver to participate on the platform. A taxi driver may

not suffer the same immediate consequences as there is a lack of consumer supervision and

consequences of poor driving are likely only to come from the police, which cannot control or

regulate the service aspect of a taxi ride at all. Platforms can analyze their data and see if their

providers are discriminating against a certain ethnicity or sex, which is another area where

government institutions have a clear disadvantage in successfully sanctioning companies or

individuals.




51

For that reason, in certain industries, the crowd in combination with the platform appear to be

the better regulator than a government institution. In addition to the crowd regulating providers,

the platforms have a strong interest in highly rated providers and therefore take measures to

prohibit bad providers to continue transacting. For the sharing economy businesses to continue

to grow, the micro-entrepreneur cannot be considered as an entrepreneur in the traditional sense,

which must do a lot of research on regulations and may even have to seek legal advice before

starting a business. Today’s micro-entrepreneur can be anyone and it should not require any

advanced education or financial means to afford the research and external advice before

operating. Considering that most providers in the sharing economy operate on a small scale and

cannot be compared with large manufacturers or service providers, they should not fall under

the same regulations. The new standards will be set by the “people” rather than by the

governments. The enforcement of these standards can then be backed up by data analysis of the

marketplaces as they themselves have the aspiration to have quality providers. This can be done

by decreasing the amount of transactions a “bad provider” receives, by lowering the financial

compensation for the provider or even excluding the provider to participate on the platform.

Applying the same regulatory standards to providers as to traditional business would be

contradictory to what the sharing economy is trying to achieve, an easy access to (additional)

cash flow for everyone, by using existing resources more efficiently. Additionally, it needs to

be considered, that too much regulation will hinder innovation and economic growth.

Technology is evolving so fast that regulators should step back and let the market make its

decision before reacting. Reviews and experiences of actual users of a product or service can

be used as good indications of where additional government regulatory action may be

necessary.

Heavy regulation will lead to platforms operating in a grey area and will make it much more

problematic for governments to collect taxes and contribute to ensuring safety regulation. A

better approach would be for the government regulator to have a data exchange with the sharing

economy businesses where for example criminal action can be reported to authorities from the

marketplace and vis–à–vis. The police would inform Uber if one of their drivers lost their

driver’s license and Airbnb would inform the police if reviews indicate that a host or guest has




52

record of being accused of stealing. The sharing economy business will inform the tax

authorities of the income their providers made or even withhold a tax to ensure that all income

taxes are paid to the tax authorities.

B. Micro-entrepreneur vs. Employee

The sharing economy is giving rise to the new micro-entrepreneur. For the research of this

paper, 400 people living in the United States were asked, “what is the percentage of income

you generate from freelancing (self-employment)?”

The vast majority of these randomly selected people indicated that they generate less than 20

percent of their total income from being a micro-entrepreneur (279 people).59 Everyone, except

for the 6.5 percent of people which indicated that they make more than 75 percent of their

income from freelancing, were asked the following follow up question: Do you desire to

achieve 100% of your income from freelancing (no other form of employment)? 50.52 percent

of people answered the question with “Yes” and 49.48 percent answered the question with

“No”. Especially male participants appear to have a strong desire to achieve 100 percent of

their income from freelancing, answering “Yes” 65.38 percent.60

59 See Appendix 1.

60 See Appendix 1.

69,75%

18,00%

5,75% 6,50%

0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

70,00%

80,00%

Less than 20% Less than 50% Less than 75% More than 75%

Income From Freelancing




53

Nevertheless, it appears that when it comes to benefits of micro-entrepreneurship, the views are

divided. 61.54 percent of the people, who currently make more than 75 percent of their income

from freelancing, indicated that they desire to have a full-time or part-time employment

(again).61 To find out, what people considered being most valuable of traditional part time or

full time employment, the following question was asked to all the participants which desired to

achieve 100 percent of their income from freelancing: “What do you value most from full-time

or part-time employment?”

Almost 60 percent see the biggest benefit of a traditional employment in receiving a stable

income.62 The need of a stable income will be further discussed later in this chapter.

C. Employment and Social Benefits

Over 20 percent of the people indicated that the benefits such as health care, unemployment

insurance and retirement funds are the main advantages of traditional employment.63 This

shows that micro-entrepreneurship brings with it many challenges when it comes to the

employment benefits. The online marketplace facilitates tasks but does not employ the

61 See Appendix 1.

62 See Appendix 1.

63 See Appendix 1.

22,16%

57,73%

11,86%8,25%

0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

70,00%

Benefits (health care /unemployment insurance

/ retirement fund etc.)

Stable income Fixed working hours Other

Benefits of Traditional Employment




54

providers. In a system where the employer usually contributes to health insurance and

retirement benefits, the social safety net is no longer in place. The social safety net may be

considered one of the biggest accomplishments in the developed world, where people do not

immediately fall through the cracks if they lose their job, get sick or otherwise. Furthermore,

employees are entitled to paid holidays and maternity leave. For a full-time micro- entrepreneur,

these benefits do not exist. To accomplish a thriving sharing economy, where innovation and

creativity is encouraged and goes hand in hand with the flexibility of choosing how much, when

and where one wants to work to achieve the desired standard of living, the policymakers as well

as the key players in the sharing economy need to come up with solutions to keep the current

social safety net in place.

Hence, one of the key questions for the further development of the sharing economy will be

whether or not, a provider of a sharing economy marketplace can be seen as an independent or

dependent worker. In most of the developed world, this definition will justify which benefits

the provider is entitled to. The issue in the current legal environment is not only that people

want to be considered a dependent full time employee of a company because it may give a sense

of security, it is also the stability which the legal systems provides to employees. Minimum

wage, unemployment insurance, health insurance, paid vacation are all attributes full time

employees in most of the developed world are entitled to.

This may be one of the reasons why today, many sharing economy providers are participating

only on the marketplaces as an extra source of income next to their "regular" employment (only

6.5 percent of the people asked, make more than 75 percent of their income from micro-

enterpreneurship).64 If the labor laws are not adjusted to accommodate the micro-

entrpreneurs fairly, it will be difficult for the providers to take the next step and only depend on

the online marketplaces as their source of income. Not because of the income itself, but because

of the benefits and legal security that go along with being fully employed. In the United States,

where the sharing economy is arguably finding the strongest support from individuals, calls for

a third category of (micro-entrepreneur) employment are growing in the hopes of being able to

64 See Appendix 1.




55

accompany this new and growing form of employment.65 Despite the need for government

lawmakers to tackle this problem, sharing economy platforms tend to compete with other

sharing economy platforms or traditional businesses for the most qualified providers. Therefore,

incentives establishing a social safety net for their providers, may be expected by the platforms

in the future, if the legal system allows for this without considering the provider to be an

employee of the marketplace or once the employment laws have been amended in a way to

accommodate it.

1. Is a Universal Basic Income a Solution?

In the survey conducted for the paper, a stable income was named as the most important benefit

from traditional employment. A guaranteed paycheck gives people the ability to plan their lives

and their expenses. Many developed nations, especially in northern Europe have social safety

nets, which provide every citizen with the basic needs to live. This system, however, only kicks

in if the individual is unemployed or makes less than what is considered the minimum to

provide for oneself. In the sharing economy, this system does not appear to be practical, as the

income from providers flactuates, which could mean that providers need to switch from micro-

entrepreneurship to being on social benefits depending on the earnings of the previous month.

This buerocratic effort for the providers as well as the governemnt is extremely high and costly,

which leads to less people making the choice to become micro-entrepreneurs.

A basic income could be a solution to this problem, a system in which every resident is provided

with a basic income by the government. The amount is designed to cover each resident’s

financial necesities, independent of the employment status and income of the person. This

would give people the financial stability to plan their lives and commit to what they are

passionate for, without having the risk to be inbetween the lines of micro-entrepreneuerhip and

social benefits. As discussed earlier in this paper, efficiency is higher if people are passionate

for what they do and with the basic income, people have the financial freedom to choose to

follow their passion.

65 Weber, New Type of Worker.




56

The idea of a universal basic income is not new but because of automatization and the growing

sharing economy, this topic has gained in popularity in recent years. A study done by the policy

department of the European Parliament, found that:

“Automation, digital revolution, globalisation and the ongoing economic crisis

have led to higher unemployment, more job insecurity and weakened social

standards in many countries. In order to cope with increased inequality and

poverty, the topic of (unconditional) basic income has been attracting attention

in Europe.”66

A recent study by Jože Mencinger, a renowned Slovenian economist and politician, councluded

that universal basic income “on the European level is an economically feasible and socially

desirable solution which would enhance the long-term stability and persistence of European

associations.”67 However, the views on basic income continue to be devided and more long term

research needs to be done to get definate answers on the social and economic impacts. In June

of 2016, Switzerland held a referendum for a basic income of CHF 2’500.00 for each resident.68

The referendum was tunred by the Swiss voters, nevetheless, having a vote at all, shows that

the topic is gaining support and significance.

VI. Sharing Economy 2030

From the research of this paper, six key trends have been established which will shape the

sharing economy of 2030.

A. Lasting Products

It is expected that the consumer demand for quality, environmentally friendly, long lasting

products will continue to grow. For the most part in human history, the producers of high quality

products were the most successful. However, in the recent past and with the industrial

66 Crepaldi, Chiara, et al., Minimum Income Policies, 42.

67 Mencinger, Universal Basic Income, 167.

68 Crepaldi, Chiara, et al., Minimum Income Policies, 43.




57

advancements, quality has become less significant to consumers. Instead, the desire for the

newest and most fashionable item became more popular. With the continued increase in

environmental consciousness and the possibilities to easily generate additional income from

one’s existing resources, we will see a shift to higher quality goods.

B. Personalization

Products and services will continue to become more personalized through the sharing economy.

The data which the sharing economy businesses collect, will enable them to provide the users

with a service or good that is tailored exactly for the user. With the emergence and further

development of 3D-Printing technologies, it is to be expected that providers will be able to

create unique goods for their users. We will also witness an increase in information sharing

between platforms to personalize the experience of the users. A ride sharing platform may share

information with a music streaming application, so that when the users gets in the vehicle, his

favorite playlist will already be playing. At the same time, the ride sharing platform registers

how many pieces of luggage the traveler has and automatically sends this information to the

airline on which the traveler is booked to guarantee a swift check in. The possibilities of

information sharing are endless and will all be designed to improve the personalization of the

product or good for the user.

C. Improvements in Transparency and Credibility

The demand for a complete transparency in transactions will continue to increase. Given the

valuable and personal data sharing economy businesses collect, being transparent for what the

data is used for will be crucial. Using and sharing personal data while at the same time

protecting the privacy of the users will be a challenge the sharing economy will have to

overcome by 2030. In very transparent and straight forward steps, users and providers will have

to be provided with choices of how their data will be used.

The marketplaces will have to focus on transparency to achieve the trust which is necessary for

success, whereas the providers must focus on credibility. It is to be expected that people will

soon have an online credibility record where people can link their different accounts to carry

over established credibility form one community to the next. A new Airbnb provider may then




58

not start off with zero reviews, but with five star ratings from Uber and Lyft. The credibility

will become a resume of the persons prior experience and therefore increases the importance of

high performance even more.

D. Increase in Variety of Products and Services

In the sharing economy today, most goods are expensive goods, which are not used to its full

capacity. Mainly because today the cost of sharing a physical good, does not justify sharing an

inexpensive good. With further advancements in technology, the cost of sharing will decrease

and open the market to a larger variety of products which can be shared. It is to be expected

that underused items can find “use” by themselves by communicating with the marketplace

directly and without the involvement of the provider of the product. With further advancements

of drones, goods can be brought from the provider to the user much more efficiently and with

no human involvement. This will also increase the geographic area in which goods can be

shared.

Furthermore, there will be a significant increase in purely online services which are offered via

marketplaces. Time will become a resource which will be shared much more efficiently. It is to

be expected that time can be ordered on demand for any activity needed. If one is running out

of time on a project, there will be an easy and fast way to acquire time from providers who will

be able to help finish the project in time. People will use their time more efficiently, to generate

income at any time they desire and from anywhere.

E. Crowd Regulation

The sharing economy will lead to more industries being regulated by the crowd rather than by

government institutions. It is to be expected that governments will demand data from sharing

economy platforms in order to supervise activity and step in when they believe it is necessary.

Overall, governement institutions will be able to take a step back and only act once data

indicates that despite the concerns of the crowd, safety and health concerns continue. This will

only be possible with a better cooperation between sharing economy platfroms and government

institutions. In order to achieve this and pass laws on data sharing, data protection will need to




59

be addressed to insure that only relevant data of providers and users is passed on from the

platform to governement institutions.

F. Social Safety Net

It is to be anticipated that changes to the current social system will need to be made to

accommodate the micro-entrepreneur. It remains to be seen if the universal basic income can

continue to gain traction and become a system which is implementable. The current long term

studies will bring more information on the plausibility. It is likely that a middle way between

the current social system and the basic income will be achieved, which will give people more

flexibility and security to choose their form of employment.




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VII. Summary and Conclusions

The economy is changing. Steered by technology, a lack of trust in traditional corporations and

the growing need to share, transactions are moving back to a personal level. The sharing

economy is changing the employment structure away from fixed employment to project related

work on-demand. The structures are shifting from a hierarchical system to a flat system where

people transact directly with each other. Micro-entrepreneurs are using online marketplaces to

offer their on-demand services or goods to others within their online communities. Within these

communities, success is determined by the transaction histories of the providers, as in the new

economy, every step of a transaction will be reviewed and rated. These direct consequences of

one’s action, lead to a higher efficiency, better service and higher quality of goods.

This new economy offers equal opportunities to everyone. Advancements in technology allow

for everyone to participate economically as well as actively in shaping the regulation, by

providing feedback and reviews of their experiences. Sharing will replace ownership in a

variety of industries, as the cost of sharing will continue to decrease with further technological

advancements. However, the sharing economy will not stop at physical goods; soon the

resource, which will be shared the most, will be time. People will be able to offer their expertise

and time, on demand in almost every industry.

The sharing economy is changing our views on ownership and employment. Owning will be

replaced with availability within a community and employment will be seen as project related

matter without a fixed location or employer. The new system will be based on trust which is

established by a positive review history. Trust will continue to gain in importance, in an

economy where online arrangements lead to physical transactions in the real world.




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VIII. Appendix

1. Appendix 1.

For the research of this paper, a survey was conducted via “Pollfish”. Pollfish is a survey

platform which reaches respondents through add-ons on mobile applications. The data of the

survey is extensive, therefore, only the answers of all participants are listed below. For the full

data with the audience demographics of each individual, an Excel spreadsheet was made

available under the following link:

https://1drv.ms/x/s!Aj9G4QTR8z_Pggd--MQRZIDPjbr0




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Resume

Nils Noelle

29.01.1988

International Business

Bachelor of Arts

Insurance

Course 2016 / 2017 Executive Master of European and International Business Law M.B.L. –

HSG at the University of St. Gallen.

Statement

I hereby declare

- that I have written this paper without any help from others and without the use of documents

and aids other than those stated above,

- that I have mentioned all the sources used and that I have cited them correctly according to

established academic citation rules,

- that I am aware that my work can be electronically checked for plagiarism and that I hereby

grant the University of St.Gallen copyright in accordance with the Examination Regulations in

so far as this is required for administrative action.

Triesen, 18.07.2017

sharing economy and its impact - executive m.b.l.-hsg · benjamin, robert i., malone, thomas w. and...

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