What You Need to Know About the Sharing Economy

The basics: A peer-based economic system typically powered by the internet that encourages the sharing of resources and products. 

• For example: UberX and Lyft allow those who own cars to act as cabbies and offer paid rides to strangers.

Also known as: Collaborative consumption.

How’s it transforming real estate: 

• AirBnB: Allows homeowners and renters to loan their places to others online, changing the way people travel and find short-term lodging while undermining—and exasperating—the hotel industry.  
• EBay & Etsy: With the ability to sell used and homemade goods and crafts online, traditional brick and mortar retailers lose a piece of the market—and the ability to pay their rent
• Crowdfunding: Fundrise, RealtyMogul, and other platforms empower accredited investors to invest in real estate projects online and bypass traditional lenders like banks, and equity investors like PE firms.
• LiquidSpace enables office tenants and hotels to rent space by the day or hour to users on demand.

Quick History: 

• 1841: Brook Farm becomes the first secular "utopian community" of the Transcendentalist movement. Members collectively till the land and reap its rewards while pursuing intellectual fulfillment. 
• 1960s: The counterculture movement revives the popularity of communes, with hippies often "dropping out" of mainstream society and going back to the land--or Haight-Ashbury. 
• 1986: Larry Harvey and a few friends burn a 9-foot tall wooden man on a San Francisco beach, inspiring what would become Burning Man, the annual festival rooted in music, art, a gifting economy and radical self-reliance. 
• 1995: Craigslist debuts, popularizing the user-generated digital marketplace for goods running the gamut from furniture to concert tickets to flesh. 
• 1995: EBay founded. It introduces an auction model to e-commerce while inspiring some to resell their belongings for a living. 
• 1999: Napster appears, immediately undermining and unsettling the music industry as it allows users--there were 80 million of them at the site's peak--to freely upload and download songs. 
• 2006: Stockholm police raid popular torrent site The Pirate Bay, shutting it down...for three days. 
• 2009: KickStarter is founded, becomes an internet phenomenon with millions of consumers providing capital to entrepreneurs, artists and filmmakers in exchange for no financial return. Instead, they may receive a credit in a film or get a sneak peek of an album. 
• 2011: Time magazine declares collaborative consumption one of the 10 ideas that could change the world.
• 2012: Congress passes the JOBS Act, which loosens restraints on crowdfunding. Fundrise, the real estate crowdfunding platform, launches in the wake of the legislation. 

Controversies: 

• In 2014, cabbies across Europe blocked city streets in protest of Uber, contending that it unfairly threatens their regulated business model. 
• It’s not only the hotel lobby that opposes Airbnb. Just this week, New York Attorney General Eric Schneiderman said that 72% of New York’s roughly 35,000 Airbnb spaces were run by commercial operators and illegally flew in the face of zoning laws.  

How Big Is This Thing?:

• The World Economic Forum estimated in 2013 that the sharing economy would generate $350 billion in revenue around the globe that year. 
• More than half of Airbnb hosts are dependent on income from the site to pay their rent or mortgages.  
• Before Congress signed the JOBS Act of 2012 into law, there were two real estate crowdfunding platforms: Fundrise and Prodigy. By some accounts over 100 platforms have sprung up in the past 12 months. 

Fringe benefits:

• Growing eco-consciousness is another phenomenon propelling the growth of the sharing economy. Lyft estimates that one of its cars in service takes up to 20 vehicles off the road. 

Going pro?

• Rather than view upstart peer-to-peer platforms as rivals, some big conventional companies are getting in on the action. For example, Avis acquired ZipCar for $431 million in 2012, which also gave the rental car giant a stake in the car-sharing platform Wheelz. 

Bottom line: Technology, spurred by a transitional economy, can now easily connect those seeking a broad range of products and services to people providing them.  Ideally, this fosters a strong sense of community while cutting costs for consumers and providing alternative income streams for providers.