The Sharing Economy Is A Scam
‘Sharing’ was supposed to save us. Instead, it became a Trojan horse for a precarious economic future…
Founded in 2014, Omni is a startup that offers users the ability to store and rent their lesser-used stuff in the San Francisco Bay Area and Portland. Backed by roughly $40 million in venture capital, Omni proclaims on its website that they “believe in experiences over things, access over ownership, and living lighter rather than being weighed down by our possessions.”
If you’re in the Bay Area, you can currently rent a copy of The Life-Changing Magic of Tidying Up by Marie Kondo from “Lan” for the low price of $1 per day; “charles” is renting a small framed lithograph for $10 a day; and “Tom” is renting a copy of the film Friends With Benefits (68 percent on Rotten Tomatoes) on Blu-ray for just $2 a day. Those prices don’t include delivery and return fees for the Omni trucks traversing the city, which start at $1.99 each way.
In 2016, Omni’s CEO and co-founder Tom McLeod said that “lending enables Omni members to put their ‘dormant’ belongings to good use in their community.” That same year, Fortune said Omni “could create a true ‘sharing economy.’”For a while, the tenets of the sharing economy were front and center in Omni’s model: It promised to activate underutilitized assets in order to sustain a healthier world and build community trust. In 2017, McLeod said, “We want to change behavior around ownership on the planet.”
Just three years later, those promises seem second to the pursuit of profit. In 2019, the Omni pitch can be summed up by the ads emblazoned on its delivery trucks: “Rent things from your neighbors, earn money when they rent from you!”
For years, the sharing economy was pitched as an altruistic form of capitalism — an answer to consumption run amok. Why own your own car or power tools or copies of The Life-Changing Magic of Tidying Up if each sat idle for most of its life? The sharing economy would let strangers around the world maximize the utility of every possession to the benefit of all.
In a 2010 TED Talk, sharing economy champion and author Rachel Botsman argued that the tech-enabled sharing economy could “mimic the ties that used to happen face to face but on a scale and in a way that has never been possible before.” Botsman quoted a New York Times piece in saying, “Sharing is to ownership what the iPod is to the eight track, what solar power is to the coal mine.” In 2013, Thomas Friedman proclaimed that Airbnb’s true innovation wasn’t its platform or its distributed business model: “It’s ‘trust.’” At a 2014 conference, Uber investor Shervin Pishevar said sharing was going to bring us back to a mythical bygone era of low-impact, communal village living.
More than 10 years since the dawn of the sharing economy, these promises sound painfully out of date. Why rent a DVD from your neighbor, or own a DVD at all, when you can stream your movies online? Why use Airbnb for a single room in your home when you can sublease an entire apartment and run a lucrative off-the-books hotel operation? Uber, Lyft, and Airbnb — startups that banked on the promises of the sharing economy — are now worth tens of billions, with plans go public. (Lyft filed for an IPO on March 1.) These companies and the pundits who hyped them have all but abandoned the sharing argument that gave this industry life and allowed it to skirt government regulations for years. Sharing was supposed to transform our world for the better. Instead, the only thing we’re sharing is the mess it left behind.
The first glimpses of the sharing economy emerged years before the term came into popular use. In 1995, Craigslist mainstreamed the direct donation, renting, and sale of everything from pets and furniture to apartments and homes. Starting in 2000, Zipcar let members rent cars for everyday errands and short trips with the express goal of taking more cars off the road. And CouchSurfing, launched as a nonprofit in 2004, suddenly turned every living room into a hostel. This first wave of sharing was eclectic and sometimes even profitable, but before the mass adoption of the smartphone, it failed to capture the public’s imagination.
Though its origin is vague, many credit the introduction of the term “sharing economy” into the broader tech lexicon to Lawrence Lessig, who wrote about sharing in his 2008 book Remix: Making Art and Commerce Thrive in the Hybrid Economy. The Great Recession was just setting in, and the sharing economy was touted as a new DIY social safety net/business model hybrid. The contours of the term were never particularly clear. It was used loosely to describe peer-to-peer projects and tech-enabled rental markets but also included old barter, co-op, and casual carpooling models. The sharing economy was a broad, eclectic movement with ambitious if utopian goals. The online magazine Shareable launched in 2009 to document this “movement of movements.”
Sharing would help reduce over consumption and our impact on the environment. Venture capitalist and tech trend spotter Mary Meeker said Americans were moving from an “asset-heavy lifestyle to an asset-light existence” with the sharing economy leading the charge. Environment and politics researcher Harald Heinrichs suggested the sharing economy was a “potential new pathway to sustainability.” Greenpeace’s Annie Leonard framed sharing in opposition to consuming: The sharing economy, she wrote, would “conserve resources, give people access to stuff they otherwise couldn’t afford, and build community.”
Sharing also promised social benefits. It would be the instrument by which we’d be able to know one another again, a counterbalance to the alienation of a burgeoning tech dystopia. Sharing economy expert April Rinne said sharing would recreate the social fabric of tight-knit communities. “Engaging in collaborative consumption — and getting used to it — lowers the trust barrier over time,” she wrote at Shareable. New startups like TrustCloud would gather all of our disparate platform ratings and social trails from across the web and compile them into a new kind of social credit score that would enable trust and accountability in the sharing economy.
The new opportunities to earn money by freelancing part-time as a handyman, innkeeper, or taxi driver would bridge the wealth gap and ameliorate global inequality. In 2013, CNN contributor Van Jones said that sharing could lead us to “a more sustainable, prosperous future.”
Adam Werbach was president of the Sierra Club and a corporate sustainability consultant before he co-founded the used goods sharing marketplace Yerdle in 2012. A sort of proto-Omni, Yerdle’s original tagline was, “Stop buying. Start sharing.” The site incentivized renters to rent their own things by rewarding them with credits and keeping used goods recycling in the Yerdle community.
“There was a mix of venture-backed companies, social-benefit companies, and nonprofits all in the space, all fighting for it. And all of the companies were small, and all the founders hung out — it was a community,” Werbach says of those heady early times. “I had hoped this would be the taming of capitalism.”
Janelle Orsi, attorney, co-founder, and executive director of the Sustainable Economies Law Center, used to call herself a sharing lawyer, which, she says now, “a lot of people thought was a joke.” Orsi helped set up small workers cooperatives and worked on cottage food legislation to make it possible for people in California to sell food they cooked at home on a small scale both on and off digital platforms.
For Orsi, the sharing pitch had some value in selling an idea that was uncomfortable at the time. “It took a certain kind of community-oriented person willing to take a risk and book an Airbnb or get in an Uber early on,” says Orsi. For her, and likely for many of the early sharing adopters, truly cleaner, lighter living through platform technology was seductive and incredibly promising. But that innocence was short-lived.
“I had a very grassroots community-based vision of it,” she says. “And then all of a sudden, here comes the big tech companies. It was totally hijacked.”
Perhaps no company is as emblematic of the sharing economy sector and its rapid evolution as Lyft. Zimride, Lyft’s original parent company, was a service that focused on college campuses and long-distance rides in areas with few other transit options. Co-founder Logan Green told reporters he was inspired by the slow grind of Los Angeles traffic, thick with single-occupant cars. If he could find a way to entice more people to carpool, Green reasoned, there would be less traffic on the road.
In 2012, Zimride launched Lyft to service shorter rides in cities. Lyft advertised “friendly rides,” encouraging passengers to sit up front alongside the driver and pay a suggested donation if they felt like it. The company argued that because the platform only acted to connect riders and drivers, with payment optional, it couldn’t be regulated as a taxi service provider. But just a year after it was spun out, Lyft instituted set ride fares and had already raised $83 million in financing. It was a sharing economy success story: In 2015, Lyft was recognized by the Circulars economy awards at Davos for “helping to decongest roads.”
Over the first half of the 2010s, the so-called sharing economy evolved into a powerful new multi billion-dollar economic model. At about the same time, the definition of “sharing” began to shift. Sharing still referred to the peer-to-peer model of leveraging underutilized assets — sharing our goods with each other — but it was also increasingly applied to more traditional centralized rental models.
Seemingly everything was a part of this new economy: bike-sharing sponsored by multinational banks, apps that allowed people to rent parking spaces on public streets, and platforms that allowed for the peer-to-peer sale of used clothes. Sharing was the donor-funded nonprofit Wikipedia, and it was the massive unicorn WeWork. When the Avis Budget Group bought short-term car-rental service ZipCar in 2013, investor Steve Case said it was an indicator of the sharing economy’s growing potential. “Sharing is not a passing fad,” he wrote in the Washington Post. “Fasten your seatbelts: It’s just the beginning.”
Even though the term “sharing” was quickly being drained of any meaning, industry insiders still touted its social benefits. In 2014, Airbnb global head of community Douglas Atkin told a sharing economy conference, “The sharing economy deserves to succeed. There’s a decentralization of wealth and control and power. That’s why this economy is a better economy.”
Bythe mid-2010s, the narrative around the innovative, cure-all sharing economy had started to sour. As platforms banking on “collaborative consumption” edged toward multibillion-dollar valuations, sharing began to feel naive.
“I sort of observed the shift happening beginning in 2016,” says labor attorney Veena Dubal, who was working with freelance taxi drivers in San Francisco before sharing hit the road. “There was a moment of novelty but then a realization that these were the same things. Just much cheaper and unregulated.”
Three years ago, in a piece co-authored with entrepreneur and model Lily Cole, Adam Werbach also suggested that corporations had hijacked sharing. “Whilst modern rental platforms offer enormous value… they do not reflect the sentiment of sharing that has defined communities as communities for thousands of years.” They offered another word instead: rent.
In some instances, the sharing economy appeared to inflame the very problems it purported to solve. The supposed activation of underutilized resources actually led to more, if slightly different, patterns of resource consumption. A number of studies have shown that the ease and subsidized low cost of Uber and Lyft rides are increasing traffic in cities and apparently pulls passengers away from an actual form of sharing: public transportation. Students at UCLA are reportedly taking roughly 11,000 rides each week that never even leave campus.In putting more cars on the road, ride-hail companies have encouraged would-be drivers to consume more by buying cars with subprime loans or renting directly from the platforms themselves.
Alongside making it easy to rent out spare rooms, vacation rental platforms encouraged speculative real estate investment. Whole homes and apartment buildings are taken off the rental market to act as hotels, further squeezinghousing markets in already unaffordable cities.
Early sharing champions were ultimately correct about technology enabling a shift away from an ownership society, but what came next wasn’t sharing. The rise of streaming services, subscription systems, and short-term rentals eclipsed the promise of nonmonetary resource sharing. The power and control wasn’t decentralized; it was even more concentrated in the hands of large and valuable platforms.
Why go through the trouble of swapping your own DVDs for a copy of Friends With Benefits, after all, when you can stream it through Amazon Prime Video for $2.99? The idea of paying for temporary access to albums rather than outright owning them may have been galling at first, but we’re increasingly comfortable with renting all our music, along with our software, and our books. Downloading and sharing the materials that live on these streamed resources is impossible, illegal, or both.
The new trust never materialized. Government regulation typically plays an important role in mediating consumer relationships with corporate firms and for good reason. Peer-to-peer platforms can make discrimination easier, and they often claimed limited or zero liability when things went wrong. New social media reputation tools couldn’t prevent inevitable problems, especially when sharing companies did not institute background checks for their freelance workers or inspect homes and vehicles for safety.
Sharing didn’t deliver broad financial stability either. The jobs eventually created by the sharing economy were poorly regulated and hastened the broader growth of contract labor, pushing down already low wages for freelancers and employees alike. A few frequently quoted studies have claimed that soon, most of us will be freelancers. But most of that freelance work appears to be extremely part-time and merely supplemental income, and ride-hail driver turnover in particular is high.
Sharing doesn’t have the positive market power it wielded 10 years ago. Since 2016, tech entrepreneurs and their promoters in the press seem to have largely ditched the language of sharing. It’s now about “platforms,” “on-demand services,” or, most recently, “the gig economy.”
Labor attorney Dubal is not thrilled with the new “gig” language either. The term may seem honest — it places the precarious nature of the contract labor front and center — but it doesn’t assuage broader structural concerns. “Even people who’ve stopped using the ‘sharing economy’ haven’t necessarily seen the light in terms of what kinds of work the company has propagated more broadly,” Dubal says. “They’venormalized unregulated business.”
Some of sharing’s earliest, most outspoken champions have distanced themselves from the term. Originally launched in 2013 as “a grassroots organization to support the sharing economy movement,” the nonprofit Peers purported to “grow, mainstream, and protect the sharing economy,” essentially acting as a corporate lobby firm for sharing, on-demand, and gig startups. Peers’ partners included Lyft, Airbnb, TaskRabbit, Getaround, and dozens of other mostly for-profit companies. The organization said the bulk of its funding came from “mission-aligned independent donors” and foundations, but it also had investment from Airbnb.
By 2016, Peers had pivoted to portable benefits — an infrastructure to sustain gig workers as they labored without an employment safety net. Peers became “an organization for people working in new ways,” and it merged with the newly created Indy Worker Guild. Peers co-founder Natalie Foster went on to co-found the Economic Security Project, which lobbies for a new solution to help struggling gig workers and job-havers alike: universal basic income.
In 2018, April Rinne, who previously pushed the sharing economy’s promise of a “tighter social fabric,” acknowledged “the dark side” of the sharing economy but wrote that “the challenges faced by the sharing economy today are largely a result of its success.” Rachel Botsman, who argued that sharing would allow us to trust one another again, now writes about how technologyand the concentration of power on large centralized platforms has led to“an erosion of trust.”
The demand for Botsman’s mythical community-shared power drill never seemed to materialize. Neighborly goods-sharing platforms Crowd Rent, ThingLoop, and SnapGoods are all many years dead, and meal-sharing Josephine ended long ago. CouchSurfing has gone for-profit, with venture capital investment.
It turns out sharing “is not really a mass-market idea, which is sort of depressing,” says Werbach, who’s pivoted Yerdle into a logistics firm for large brands interested in re-selling their used goods. “Kindergarten teachers are interested in that, but consumers are really interested in what’s in it for them.”
Some of the early, true sharing believers have decamped for the growing platform cooperative movement. “Now there’s a whole consortium of platform cooperatives,” says Orsi of the Sustainable Economies Law Center.
And these companies don’t bank on sharing. Organizations like Loconomics, Fairbnb, and Stocksy see their efforts at cooperative consumption and production less as altruism and more as collectively owning the means of production.
Sharing tapped into economic anxiety, isolation, and frustration with contemporary U.S. middle-class life in a unique and ultimately profitable way. It was another iteration of Silicon Valley’s excruciating trope of changing the world by way of disruption, wrapped in a soft packaging of eco-friendly, feel-good liberalism. We were encouraged to give companies like Lyft and Airbnb a chance, to nurture them and help them along for the greater good. If we didn’t believe in sharing, we weren’t just cynics but enemies of progress.
Many of the corporations and the pundits who sold us on the promises of sharing stopped using the term because consumers no longer found it believable or attractive. But it was consumers who really did sharing in. A true sharing economy is full of friction and discomfort, and the margins — if there are any to speak of — are paper thin. Real sharing is time-consuming and not particularly profitable for anyone.
In order to make money, especially the kind of money that tech investors expect, venture-backed companies couldn’t just activate underutilized resources — they had to make more. For-profit businesses demand growth, and platforms demand scale. More than a decade into the sharing experiment, we’ve been able to fully assess the costs. Capitalism wasn’t tamed, as Werbach had hoped — it was stoked.
“Now it’s just a transaction,” Werbach says. “It doesn’t need to be dressed up in any language about changing the world or whatever.”
And though sharing is largely dead, other tech-driven models have taken its place: VC-backed enterprises that still skate on the promise of solving inequality, promoting justice, fixing broken systems, and doing what regulators and big, old businesses have failed to do for decades.
These days, it’s not a shared drill that’s redefining trust and supplanting institutional intermediaries; it’s the blockchain. Botsman now says that the blockchain is the next step in shifting trust from institutions to strangers.
“Even though most people barely know what the blockchain is, a decade or so from now, it will be like the internet,” she writes. “We’ll wonder how society ever functioned without it.”
This article was originally published by OneZero.Medium.com.