Rent or own? The new sharing economy values access over ownership
To rent or own, that is the question posed by the burgeoning sharing economy. For a growing population engaged in this high-tech, low-cost 'collaborative economy,' access to cars, clothes, cuisine – or even a cat – is better than ownership.
Lisa Gansky likes to share, and usually with strangers. A typical day for her looks something like this:
•If it's raining, she'll pull up the RelayRides application on her iPhone and see if someone nearby has a car she can rent to get around that day, usually for less than $10 an hour. If there's nothing available, she'll open the mobile app for Uber and book a ride with a nearby town car sitting idle, waiting for a customer.
•Fifteen minutes later she's at her office, a co-working – or shared – space known as the Hatchery, which is open to those in the social innovation industry. There, Ms. Gansky manages Mesh Labs, an incubator she founded focused on "sharing economy" companies and Meshing.it, a global share-economy business community and directory.
•At the Hatchery she pays about $100 a month for access to a desk, quiet spaces, meeting rooms, drinks, and Wi-Fi. There, she meets with her team – two full-timers and colleagues that include investors, new start-up founders, and friends – but also with others who share the same space. Those working there also share knowledge, feedback, connections, and problem-solving ideas.
•If Gansky wants to meet a friend for lunch and the restaurant is too far to walk to, she'll open up the app for SideCar and search for someone driving his or her car – with an empty seat – in the same direction she's going, and coordinate with that person for pickup.
Welcome to the sharing economy – also known as the collaborative economy or the access economy – where tangible things are shared, like power tools or kids' toys, as well as intangibles like space, time, car rides, and knowledge.
At a time when many feel a kind of cyber isolation from so much interaction on social networks, the idea of community and connection through sharing seems both retro and revolutionary.
It's also quite marketable. Research consulting firm Frost & Sullivan projects that car-sharing revenues alone in North America will be $3.3 billion by 2016. The number of car-sharing members in North America is expected to reach 9 million by 2020, according to a forthcoming Frost & Sullivan study, written by industry analyst Ratika Garg.
Investors have shown interest, too. In February, international car-sharing service Zipcar led a $13.7 million investment in Wheelz, a peer-to-peer version of Zipcar (which owns all its vehicles) that is based on college campuses and matches car owners with would-be borrowers. In August, Getaround, another peer-to-peer car-sharing service, closed a $13.9 million round of financing led by Silicon Valley's Menlo Ventures.
Gansky is one of the movement's biggest evangelists. She is author of "The Mesh," a book about the sharing economy. The movement's mantras are "access over ownership" and "value unused is waste," and this rapidly growing economy-within-an-economy represents a shift in cultural consciousness, toward valuing experiences rather than goods.
Gansky and other sharing-economy gurus like Neal Gorenflo, publisher of the website Shareable.net and coeditor of the anthology "Share or Die," say the rise of the sharing economy is partly a reaction to the gluttonous overconsumption of the late 1990s and early 2000s, which led to a bad McMansion hangover in the United States and one of the worst global recessions in modern history. But it wouldn't have been possible without recent advances in mobile technology and the spread of tablets and smart phones.
Gansky also credits its acceleration to demographics – more Americans are moving to urban areas, where sharing becomes easier because there are more people in one place. Sharing-economy companies began appearing about four years ago, and since then they have been spreading through various parts of the economy and among a variety of demographic sectors.
In fact, Gansky says, the collaborative economy has hit an inflection point where sharing is more convenient and less costly than ownership: "That means accessing goods, services, and talent is – and will continue to be – very compelling for businesses and individuals. Last century, ownership was thriving. I believe that is on the wane. We are seeing evidence of that in how quickly these services are being created, funded, supported, and copied – all over the world."
Sharing-economy businesses range from a corporate model, where a corporation owns the item being shared – like Zipcar, Netflix, and sports clubs – to the peer-to-peer model, which includes businesses like Airbnb and RelayRides, for sharing accommodations and cars, respectively.
The third category includes companies with a much looser definition of what constitutes a transaction. For example, there is CouchSurfing, where no money changes hands and travelers are given access to a local host's spare bedroom or a couch, plus their local host's companionship and knowledge; or Trade School, a network of barter-for-knowledge schools, where teachers propose classes and barter, instead of charging money.
Access versus ownership
The trend toward having access rather than owning – be it couch, lathe, or hammock – started with cars. Zipcar is usually cited as the first example of an American company founded on the sharing model. It now has more than 730,000 members and 11,000 vehicles in urban markets in the US, Canada, and England. The $300 million company charges $60 annually for its "Occasional Driving Plan" and there's a one-time $25 application fee. Reservation rates vary depending on location, day of the week, and the type of vehicle reserved. In Boston, for example, reservation rates start at $8 an hour and $73 a day, while in San Francisco, it's $8 per hour and $78 a day.
Car sharing is the gateway to the sharing economy, says Mr. Gorenflo: "Automobile ownership is a linchpin of the consumer economy. I think once we change our relationship to cars, we change our relationship to everything. People can get their head around car sharing. When you try it and it works out for you, you're like, 'What else can I share?' "
Generation Y especially, he says, is bailing on owning cars. "First, they can't afford it, and second, they value their freedom. When I grew up, the car was freedom; now it's a ball and chain. Freedom is an iPhone. That's what liberates you and what connects you to your peers," he says. "That's a really huge shift."
Evidence of that is Aubrey Harding, a 24-year-old medical student in Portland, Ore., who saw renting her 2003 Mazda Protégé as a way to help pay for books, school supplies, and high-priced car insurance. She began renting it last April through Getaround.
Each person to whom she rents has a profile and reviews on the site, so she can vet them. Her rates are $7 an hour, $35 a day, and $175 a week. She gets 60 percent of the fee, and Getaround takes 40 percent – which goes toward insuring the vehicles while they are rented. While her car is being used, Ms. Harding and her husband bike to work and school. This is her first experience with sharing, and she says: "I'd like to do more of it. I'm really open to it now."
But for some, it's more than money; it's common sense – a philosophy and a way of life.
Gorenflo, who at 48 teeters at the upper age range of Generation X, once had a traditional corporate marketing career. His entry into the sharing economy was the result of a seismic emotional and philosophical epiphany, he says. While on a business trip to Brussels in 2004 as an executive with DHL, he took an afternoon run, stopped at an abandoned warehouse, and suddenly started crying. At the time, he recalls, DHL's mission statement "said something like 'To be the best box mover in the world.' What is that? I realized I was not doing the work I wanted to do."
Gorenflo had already decided that sharing was an important way to live, both personally and within his community, but didn't feel he could live that life while working for a corporation.
"Money and things are a means to an end," he says, "but not an end in themselves. I went back to my hotel room and sent out a letter of resignation."
Soon he was gathering like-minded individuals into a monthly salon in San Francisco, to talk about living a life that involved sharing. Their brainstorming sessions focused on how a sharing economy might look, tossing around ideas like time banks where hours are the currency or community exchanges.
"People talked about the projects they were working on and where they needed help," says Gorenflo, who even made his career into a shared project. "I began to see it's foolish to live your life and lead your career as if it's an individual project. I open-sourced it. I said this is what I want to do in the world; this is my purpose. And that inspired people to help me. In my old career it was all about competition and struggle.
"This is the total opposite; it's about flow, not competition."
You can even share a dog
It seems the sky is the limit when it comes to the kinds of things that can be shared, individually or on a corporate level. Take Katherine Long's tiny dog-sharing business in New York's Central Park. A Fordham University grad student, she started it in June: For $5, those itching to see what it's like to have their own dog can walk Ms. Long's for 20 minutes. (She is raising money to donate to animal shelters.)
The number of companies like hers muscling their way into the sharing market appears to be increasing exponentially. Although some first-movers like Zipcar and Airbnb have become international success stories, there is a plethora of smaller, unusual companies on the scene, among them: Done, for outsourcing chores; SnapGoods, for renting or borrowing goods in your network or neighborhood; Favortree (formerly NeighborGoods), for trading favors with neighbors; Kitchit, where you can find a chef to cook dinner in your home; Home Exchange, a global home-swapping site; thredUP, a marketplace for gently used children's clothing; and ReDigi, a marketplace for pre-owned digital music.
Erica Swallow, director of community at the publishing start-up Contently and a contributor at Mashable and Forbes who writes about the sharing economy, says, "I like the fact that these businesses empower you to consume what you want and you're not pushed to own everything." Such as, say, your office. Rather than renting space and buying furniture for it, you could simply become part of a community like Loosecubes, a Brooklyn-based office-sharing group.
The idea for Loosecubes came to founder Campbell McKellar when the real estate market declined. She had been working in commercial real estate in New York City and noticed a lot of empty desks and a lot of people working in coffee shops. In 2010 she decided to pair up the two, matching freelancers with vacant offices. It's a model that fits with the basic tenets of the sharing economy: wasted assets put to use and resources conserved. "We always say if the lights are on at Loosecubes, they are off somewhere else," says Ms. McKellar.
All generations can share
Demographically, the sharing economy started with Gen-Y, mostly those in their 20s and early 30s who participated in it to save or earn money in response to the recession.
But there is a "cool factor," too, says Gansky: "If you're traveling to Chicago and your first reaction is to stay at a Hyatt, that's not cool. If your first reaction is to stay somewhere through Airbnb, you're clearly paying attention to trends."
Sharing and collaboration have spread to the consumption habits of Gen-X and baby boomers, too. Gansky herself, for instance, is 53.
Jamie Wong, founder of Vayable, a community marketplace for tours, activities, and experiences, says when she launched her company in 2011 she was sure it would be for young travelers, college-age and into their 20s. "But the majority of our users are actually in their 30s and 40s," she says. "We've had several seniors use it, and boomers are our fastest-growing traffic right now."
Kepa Askenasy, who rents out her Potrero Hill Garden Cabana – as it's listed on Airbnb – is 56. She has been renting out rooms on her San Francisco property since June 2010. "My first renter was 19, my second was 90; and that's when I thought, 'OK, I can do this.' It's been a huge mix of people, all ages," she says.
The dividends of sharing
The income it provides for many is significant. Ms. Swallow earned $8,000 last year renting out her New York City apartment on Airbnb during periods when she was traveling. Ms. Askenasy used the money she earned to pay for out-of-pocket medical expenses, the result of accidents. She couldn't do her work as an architect and lost income; now Airbnb revenue accounts for half her total earnings.
Nicholas Crawford, who moved with his wife and 3-year-old son to San Francisco from Milwaukee in April, makes a living now by offering his services on TaskRabbit, an online marketplace where people can access the time and skills of those in their community.
Mr. Crawford, 30, has a degree in urban forestry and an MBA and had run his own company, the 25-person Crawford Tree and Landscape Services, before he moved. His wife, Esther, is working on a start-up, Lifebook, which connects foster families to adoption agencies (the couple adopted a daughter in March). Mr. Crawford needed to start earning money, so he answered ads for yardwork on TaskRabbit. His work got good reviews and his ranking on the site increased; now he is the family's breadwinner.
"It's become the way I'm living my life, in the broader economic sense," he says. "I'm part of Sidecar and Zimride, and I'm a Zipcar member."
When Crawford took a TaskRabbit job driving furniture out to Reno, Nev., for $275, he went to the Zimride site and posted his trip, saying he had extra seats in the car. A man who works as a ski instructor drove with him (sharing his knowledge of the mountains around them with Crawford), and on the way back to San Francisco he gave two women rides. He charged $25 a seat. "They paid for the gas and we had great conversations. It was fun," he says, noting that, in total, he made $350 for the task.
Kendra Wiig, social marketing manager for Closely, a promotions marketing start-up in Denver, is a fan of CouchSurfing; she's been a member since 2007. When she uses CouchSurfing for traveling, she gets more than a bed; she gets an insider's perspective on the area she's visiting.
"That's very valuable," she says. "When I visited Los Angeles for the first time I stayed with a guy living with a houseful of film students who took me to a weird little sushi place, and I stayed with someone else who was a personal chef to celebrities."
Jeff Orlick offers ethnic foods tours in his Queens, N.Y., neighborhood through Vayable for about $59 a person. One is a 2-1/2-hour midnight tour of Roosevelt Avenue food trucks that cater to the immigrant population of night-shift workers in the area. By day, Mr. Orlick works in TV production. His Vayable earnings aren't substantial, but he enjoys meeting new people and sharing his knowledge of the neighborhood.
Lynn Tao used Vayable to learn more about her home – San Francisco – where she has lived for three years. She and some friends bought a sailing trip with a local sailor on his boat.
"I don't know anyone that owns a sailboat, and I didn't want to take a tour with a lot of people," says Ms. Tao. "This was like six people on this guy's small yacht."
She also did an architectural walking tour of San Francisco, offered by a city planner there, for about $10. Tao says a business like Vayable allows her access to experiences she wouldn't otherwise have.
"It's not really about the price, although that makes it a lot more appealing to me, but it's the experience. It almost feels invaluable, to get a peek into a different life or lifestyle," she says.
Getting past pepper spray precaution
Early adopters brim with confidence about this combination of technology, philosophy, and economics, but the sharing model – which requires a certain leap of faith in dealing with strangers – has had a few growing pains.
The two women who hitched a ride with Crawford from Reno using Zimride warned him up front that they had pepper spray in their bags. Although he understood they took the precaution because they were driving with a man they had never met, Crawford says, "I thought to myself that I was glad to have prescription glasses and that I better keep them on."
Julie Sue Auslander, who lives in Montvale, N.J., says she's a "big believer in this sort of thing," but when she tried to use SpareRoom (based in London), Airbnb, and RelayRides on several occasions, she was disappointed by the lack of participants.
"There were no takers for my apartment on SpareRoom, and I couldn't find the car I needed on RelayRides," she says. Airbnb didn't "feel as safe to use as I would like. And there wasn't inventory where I needed it," she adds. But Ms. Auslander also believes that as the market matures and awareness increases, there will be plenty of good matches made.
Last July, a home rented through Airbnb was ransacked; the owner, who went by the initials EJ, blogged about it and was critical of Airbnb's response. Later, another Airbnb client told the website TechCrunch his house had been burglarized and damaged by a renter. Airbnb now covers loss or damage from theft or vandalizing for up to $1 million. And it doesn't seem to have been hurt by the isolated incidents. In the past five months alone, the company has booked 5 million guest nights and has 230,000 available properties, most of them someone's primary residence. Airbnb makes money by taking 10 percent of every transaction. Cofounder and chief technology officer Nathan Blecharczyk says, "A couple of weeks ago, we had 60,000 people staying on the service. And that's just a single night."
On the whole, experiences gained through these sharing-economy companies are positive. And although this is an economy, and as such, is often focused on cash changing hands, just as often it's not. The experience is also important – the ethnic food tour with a group of people you just met, the stay in an Airbnb treehouse, the coffee you had with the owner of that flat in Edinburgh, the friends you made and the things you learned about people from halfway across the world or just down the street.
The more often people take advantage of sharing-economy companies, the more likely they are to continue to do so, according to a 2010 study by International research firm Latitude and Shareable Magazine. The study surveyed 537 sharing-economy participants and found 78 percent of them felt their online interactions with people had made them more open to the idea of sharing with strangers.
Christopher Kieran, cofounder and chief executive officer of Zokos, which enables friends to fund parties together, says sharing is all about building community. The idea for Zokos, for example, came out of a vegetarian dinner club Mr. Kieran participated in as a graduate student at Yale.
"While the gatherings were centered around food, the real benefit came from the friendships formed within the community," he says.
On Zokos, friends essentially pool money to create and share an experience they couldn't otherwise afford. Although some might say asking your friends to pay for the party you want to throw is a faux pas, Kieran says Zokos users don't see it that way. Instead, the 29-year-old senses they are fighting a profound loneliness – because with all their social networking, they often lack real-life connections.
Sharing, if nothing else, is about community and connection.
"I think what we are doing is building a whole new social infrastructure that radically enhances the amount of connectivity we have," he says, "and promotes wealth and happiness for all of us."